https://www.taxtmi.com/caselaws?id=330350 Compounding fee paid to RBI for contravention of FEMA, in relation to external commercial borrowing regulations, was treated as a compensatory monetary consequence of regulatory non-compliance rather than a penalty for an offence. On that basis, the Explanation to section 37(1) of the Income-tax Act, 1961, was held inapplicable because the expenditure did not arise from an offence or from a purpose prohibited by law. The claim was therefore allowable as a business deduction, and the disallowance was set aside in favour of the assessee. en-us Fri, 13 May 2016 00:00:00 +0530 Sat, 23 Jul 2016 18:58:44 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=330350 Compounding fee paid to RBI for contravention of FEMA, in relation to external commercial borrowing regulations, was treated as a compensatory monetary consequence of regulatory non-compliance rather than a penalty for an offence. On that basis, the Explanation to section 37(1) of the Income-tax Act, 1961, was held inapplicable because the expenditure did not arise from an offence or from a purpose prohibited by law. The claim was therefore allowable as a business deduction, and the disallowance was set aside in favour of the assessee. Case-Laws Income Tax Fri, 13 May 2016 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=330350