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2010 DIGILAW 200 (KAR)

Commissioner of Income Tax v. Neelavathi

2010-02-16

B.V.NAGARATHNA, K.L.MANJUNATH

body2010
Judgment :- 1. The revenue has come up in this appeal challenging the order passed by the Income-tax Appellate Tribunal. Bangalore, in C.O.NO.53/Bang/1995 in ITA. No. 364/Bang/95 dated 13.10.2003. 2. The facts leading to the case are hereunder: The respondent-assessee filed the return of income for the assessment year 1992-93 and thereafter he filed revised return. The case was taken up for scrutiny assessment. During the course of scrutiny, it is noticed that a sum of Rs. 86.000/- was claimed as expenditure for having paid money to local police and local gundas towards the maintenance of theatre run by the assessee viz., Vinayaka Touring Talkies and Sri Krishna Theatre. The expenditure of Rs.86.000/- claimed spent on the above heads by the assessee is disallowed by an order dated 31.3.1994. 3. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Incom-tax (Appeals)-II who concurred with the view expressed by the Assessing Officer dismissed the appeal. Aggrieved by the same, the assessee filed the second appeal before the Income Tax Appellate Tribunal who allowed the appeal in part allowing deduction of Rs.50.000/- as against Rs.86.000/-. Being aggrieved by the same, the present appeal is filed. 4. The only question that arises for our consideration in this appeal is, whether the payment made to local police and local rowdies can be an allowable expenditure as a business expenditure? 5. We have heard the learned counsel for the parties. 6. If any payment is made towards the security, towards the business of the assess, such amount is an allowable deduction, any amount spent for the maintenance of peace and law and order in the business premises of the assessee as he was running two cinema theatres. But the amount spent in the instant case claimed by the assessee is towards payment made to the police and rowdies. If any payment made to the police illegally, it amounts to bribe and such illegal gratification cannot be considered as an allowable deduction and similarly, if any amount is paid to a rowdy as a precautionary measure to see that he shall not cause any disturbance in the theatre run by the assessee, the same is also an amount paid illegally for which no deduction can be allowed by the department. If the assessee had spent the money for the purpose of security, we would have to concur with the view of the tribunal. However, in the instant case, the payment has been made to the police and rowdies to deep them away from the business premises which payment to be held as illegal and such illegal payment cannot be an allowable deduction. 7. In the circumstances, we answer the question of law in favour of the revenue and against the assessee. Accordingly, we set aside the order passed by the Income-tax Appellate Tribunal dated 13.10.2003 passed in I.T.A. No. 364/Bang/95 and the order passed by the Assessing Officer and the Commissioner of Income-tax (Appeals) are restored.