TaxTMI 
TaxTMI 
2020 (5) TMI 478
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....ed by the assessee reads as follows; " 2.(a) The ld.CIT(A) as well a the authorities below failed to appreciate the fact that disallowance of contract benevolent fund (CBF) expenses amounting to Rs. 2,51,397/- was an expenditure allowable u/s 37(1) of the Act. b) The CIT(A) as well as authorities below failed to appreciate the fact that CBF is mandatory deduction by State Government and not voluntary in nature. 4. The assessee is an individual. He carries on business as Class-I Contractor executing major portion of contract works for the State Government. In the course of assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (Act) for assessment year 2013-14, the A|O noticed that in computing income from busines....
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....wable expenditure. Hence, the appeal filed by the assessee is dismissed. The ground no.1 is dismissed". 6. Aggrieved by the order of CIT(A) the assessee has raised ground no.2 before the Tribunal. 7. The ld. Counsel for the assessee brought to our notice a decision of the ITAT, Bangalore Bench in the case of Shri S.Basavaraja Vs ACIT in ITA No.1888(Bang)/2017 dated 20-07-2018. The Tribunal in the aforesaid case was dealing with a case of individual who was also a Civil Contractor and whose case also contribution to CBF was disallowed by the revenue authorities. The Tribunal held that the contribution to CBF was for the purpose of business of the assessee and was of revenue in nature and had to be allowed as deduction subject to verifi....
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....rder of the Tribunal referred to above. The relevant ground is treated as allowed. 9. Ground no.3 raised by the assessee reads as follows; " 3. (a) The learned CIT(A) as well as authorities below failed to appreciate the fact that disallowance of Reserve for NOC amounting to Rs. 6,09,351/- was purely on business expenditure allowable u/s 37(1) of the Act. (b) The learned CIT(A) as well as authorities below failed to appreciate the fact that "Reserve for NOC" is a third party inspection charge which is mandatory deduction and purely business expenditure. As far as ground no.3 is concerned, the facts are that the assessee had debited a sum of Rs. 6,09,531/- under the head 'Reserve for NOC". The AO held that the said ex....
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....nce, we are of the view that this issue should be remanded to the AO for fresh consideration and the assessee should demonstrate before the AO that the contribution towards 'Reserve for NOC' is based on contract between parties or is a contribution which is payable under statute or is a matter of practice while executing the Civil work for State Government. The assessee shall also establish that the sum so contributed will not be refunded to the assessee at any point of time or as to how the sum so refunded would be offered to tax as income as and when the same is received. Accordingly, the issue raised in ground no.3 is set aside for denovo consideration in the light of the direction given above. 11. Ground no.4 raised by the assessee r....
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.... the Assessee as also the contracts in respect of which such penalty was imposed. He brought to our notice the invoices raised by the PWD Deptt. wherein the nature of the sum deducted as reflected as penalty. The said chart is given below: CHART FOR RESERVE FOR NOC AND PENALTY FOR DELAY IN COMPLETION WORK SL. No Date Invoice Particulars Reserve for NOCOnR0 Penalty (in Rs) Paper Book Pane No 5 - 7 1. 03/01/2012 KSWC Holealur 5,000 2. 12/04/2012 KSWC Muddebihal 50,000 20,000 8 - 10 3. 19/04/2012 KSWC Jewargi 50,000 10,000 11 - 13 4. 19/04/2012 KSWC Shorapura 20,000 14 - 16 5. 10/06/2012 KSWC Belgum 20....
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....given above, it is not possible to link the penalties levied under various bills by the PWD as a payment made by way of damages for dealy in execution of contract. In other words, the assessee was not able to link the penalty reflected in the bills as penalty for delayed implementation or delayed execution of the contract. This aspect needs detailed verification and the assessee is directed to establish this fact before the AO and for this purpose the issue is remanded to the AO for consideration fresh after due opportunity to the assessee. If the payment is established as for payment for breach of contract and then the same cannot be said to be a payment falling within the ambit of Explanation to Sec.37(1) of the Act. In this regard, the l....