Deduction Allowed for Storage Charges Despite Prohibition

The Appellate Tribunal ITAT CHENNAI allowed the deduction for storage charges paid by the assessee company under section 37 of the Income-tax Act, 1961. Despite the inability to utilize the storage facility due to government prohibition on kerosene oil import, the Tribunal considered the payment as a revenue expenditure incurred in the course of business activities. The Tribunal held that the loss incurred by the assessee was a normal business risk and deductible, directing the assessing authority to revise the taxable income computation by deducting the sum of Rs. 20,36,160 for the assessment year 2004-05.

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Issues Involved:
- Allowability of deduction for storage charges paid by the assessee company.

The judgment of the Appellate Tribunal ITAT CHENNAI in 2012 (1) TMI 101 addressed the issue of deduction for storage charges paid by the assessee company u/s 37 of the Income-tax Act, 1961. The assessee, engaged in importing petroleum products, entered into a contract with M/s. Konkan Storage Systems P. Ltd. for storing kerosene oil. However, due to a government prohibition on kerosene oil import, the assessee could not utilize the storage facility and claimed the amount paid as a deduction in its taxable income for the assessment year 2004-05.

The Tribunal observed that the payment made by the assessee towards storage charges was a revenue expenditure incurred in the course of its business activities. Despite the inability to import kerosene oil and utilize the storage facility, the nature of the expenditure remained unchanged. The Tribunal held that the loss incurred by the assessee due to government intervention and non-utilization of the storage facility was a normal business risk and deductible u/s 37 of the Income-tax Act, 1961. Therefore, the Tribunal allowed the appeal filed by the assessee, directing the assessing authority to revise the computation of taxable income by deducting the sum of Rs. 20,36,160.

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