Compounding Fees for Unauthorized Construction not allowable: ITAT Bangalore

Nirman Sonestaa Developers Vs DCIT (ITAT Bangalore) Compounding Fee for Plan Deviations Not Allowable – ITAT Bangalore Upholds Disallowance Under Explanation 1 to 37(1) Assessee, a partnership firm engaged in construction of flats, paid Rs.76,05,613/- as compounding fee to BBMP for regularising deviations from the sanctioned building plan. AO held the payment to be penal in nature, being compounding of an offence under municipal law, & disallowed it by invoking Explanation 1 to s.37(1). CIT(A) confirmed the disallowance. Before Tribunal, no one appeared for Assessee. Tribunal examined th...