TaxTMI 
TaxTMI 
2021 (12) TMI 814
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....of M/s. Weather Crafts Ltd. at UGF 36, Citi Centre, C.G. Road, Navrangpura, Ahmedabad. As per the agreement with the said company, the assessee has to bear fees, taxes and other cost or any other charges. Further, since the assessee was using rented premises, he had paid impact fee of Rs. 5,19,051/- on the property as required by the City Centre Owners Association on behalf of the owner. The assessee has made provision of the above but ultimately he has recovered Rs. 2,40,193/- from the owner and claimed expenditure of Rs. 2,78,858/-. However, the ld. AO did not accept this submission of the assessee. He was of the view that since the assessee was not owner of rental premises and impact fee being penal in nature levied by the municipal authority for regularizing illegal construction, and expenditure being capital in nature, the assessee has no locus to claim benefit of the same. The ld. AO accordingly did not allow the claim of the assessee, and added the same to the total income of the assessee. Dissatisfied with order of the ld. AO, assessee preferred appeal before the ld. first appellate authority, before whom, the assessee filed written submissions, which reads as under: ....
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....nce or Mistake of casting in books vis a vis total of notices 10468 Provision in books of Account 519051 Less: Claimed from Owner of Premises i. e. Weather Crafts Ltd. 240193 Claimed in Profit and Loss Account as Expenses 278858 The Learned AO has disallowed the said expenses observing in Para 7 as follows: Para 7 Impact Fee During the year under consideration on perusal of balance sheet of the Assessee it is observed that the Assessee has credited its balance sheet by an amount of Rs. 519,051/- under the head "Provision of Impact Fee". However on the other side of the balance sheet i.e. is asset the Assessee has not shown any assets owned by the company against which impact fee is to be paid by the Assessee. Therefore the Assessee vide notice dated: 17.12.2018 was issued a Show Cause as to why the provision made under the head of Impact Fee should not be disallowed and be added to your total income. The relevant part is re-produced hereunder; Please find the following and showcause why the same should not be added/disallowed accordingly; 1 Rs. 5,19,051/- Provision of Impact fee The....
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....hat the AO proceeded with a belief the amount has to be disallowed under section 68 as unexplained Credit in the books of account of the Assessee. The Show cause notice is issued to add amount of Impact Fee under section 68 of the Act, as Un-explained in absence of asset in the balance sheet of the Assessee. However vide letter of reply dated: 20/12/2018, the assessee has explained to Learned ITO the nature of expenses alongwith Rent Agreement and Notice of demand from the City Centre Properties Owners Association. The Assessee explained the it was liable to pay expenses related to rented premises under the provisions of Rent Agreement, as tenant. Thus nature of expenses and related Credit is explained, referred to in the Show Cause Notice. Once the nature of credit is explained, the Learned AO, without providing any further opportunity to the Assessee, has passed order presuming and stating that the expenses should be capitalized by the Owner of the Premise and same should be claimed while calculating Capital Gain on Sale/Transfer of the Property. This reasoning and observation of Learned AO for disallowance of expenses claimed by the Assessee, under sec....
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.... the premises are occupied by the assessee- (i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) other-wise than as a tenant, the amount paid by him on account of current repairs to the premises; (b) any sums paid on account of land revenue, local rates or municipal taxes; (c) the amount of any premium paid in respect of insurance against risk of damage or destruction of the premises. Explanation.-For the removal of doubts, it is hereby declared that the amount paid on account of the cost of repairs referred to in sub-clause (i), and the amount paid on account of current repairs referred to in sub-clause (ii), of clause (a), shall not include any expenditure in the nature of capital expenditure. It is submitted that the Assessee is a tenant and amount of Impact Fee and Parking Charges and Administrative expenses are borne in capacity as Tenant. Thus amount is allowable as Rent under Section 30 of the Act. The Learned AO has grossly erred in considering same as Un-explained expenses and further as capital ex....
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....profession". Explanation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business qt profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2 **** (Irrelevant portion of the section is stroked off) However the payment of Impact fee as illegal expenses or an expenses to cover up offence is not correct as concluded by number of Income tax Appellant Tribunals and difference High Courts. The Hon'ble ITAT Surat has decided the matter in favour of Assessee on identical facts, in the matter of Shree Khodiyar Corporation Surat vs ACIT Circle 3 Surat (Appeal ITAT 1901/Ahd/2009) ITAT 25th September 2009. The copy of the Judgment is enclosed as Annexure 6 on Page Number_11 to 13 of Paper Book for your immediate reference. The decision of the Hon'ble ITAT is based on several other judgments mentioned in the decision. The Hon'ble ITAT has passed order allowing impact fee expenses, following decision of various other Judicial Author....
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....r, Room No. 504, 5th floor, Vastrapur, Ahmedabad Respected Sir, Sanjay Shah - PAN: ABVPS 5484J Reg: Assessment Year: 2016-17 Sub: Appeal against Assessment order of under Section 143 (3) of the Act Written Submissions - 2 Respected Sir, Apropos hearing in the above appeal matter, please find enclosed herewith following, as provided by the client, for your kind consideration and perusal; 1. Translation of Notice by Association to the Assesses: English Translation of Notice dated 14/05/2015 issued by the City Centre Property Owners Association, in Gujarati to Members of the Association, for GF 31 and UGF 36 is Annexure 9 (Page Number 20 to 21 of Paper Book). 2. This translation is done by the undersigned and same is true and correct translation of Gujarati Version of the said notices, to the best of my knowledge and belief. These are notices by the Association in Gujarati to the member of the association which was Annexure 2 (Page 5 to 6) of Paper Book of Letter dated: 11th April 2019. Payment of Impact Fee: Audited Annual Report of the Association for the year 2015-16 is enclo....