Transport business overloading charges treated as business expenditure, with only limited disallowance for verification.

Overloading charges paid at RTO check posts in the ordinary course of a transport business were treated as business expenditure under section 37(1), because the payments were routine, no vehicle was seized, no separate offence was booked, and the outgoings were not shown to be bribes or personal illegal payments. The charges were therefore regarded as business-related and not penal in nature. However, the relief was not granted in full, as the assessment required verification and the disallowance was restricted to 5% of the claim.

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Issues: Whether overloading charges paid to the RTO in the course of the assessee's transport business were allowable as business expenditure under section 37(1), or were hit as penal payments made for infraction of law.

Analysis: The assessee carried indivisible and heavy goods, and the payments were regularly made at the check post in the ordinary course of transportation. The Court noted that the collection was routine, no vehicle was seized, no offence was separately booked, and the payments were not shown to be bribes or personal illegal payments. On the facts, the charges were treated as business-related outgoings incurred for carrying on the transport business and not as penalties for unlawful conduct. At the same time, the Court accepted the need for some verification and followed the earlier approach of limiting the relief to 5% of the claimed amount.

Conclusion: The overloading charges were held to be allowable business expenditure and not penal in nature, but the disallowance was restricted to 5% of the claim.

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