TaxTMI 
TaxTMI 
1986 (5) TMI 76
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; 22,526 Damages for the belated payment of family pension contribution 45,395 It is the contention of the revenue that the learned Commissioner (Appeals) ought to have confirmed the above addition knowing that the assessee-company has failed to establish by not adducing any evidence to show that the payment was not on account of infraction of law. 3. The assessee is a public limited company. The assessment year involved is 1977-78 for which the previous year ended by 31-7-1976. The assessment for the abovesaid assessment year was completed under section 143(3), read with section 144B of the Income-tax Act, 1961 ('the Act') by means of the assessment order dated 28-7-1979. At para 7 of the assessment order the following is held by the ITO: "Compulsory deposits relating to the employees of the company collected by the company was payable to the appropriate authority within a stipulated period. As such, the company had to pay penal interest to the extent of Rs. 67,8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er section 3 of the Companies Act, 1956, and Government company as defined in section 617 of the Companies Act and any other corporation including a society or body established by or registered under a Central, Provincial or State Act. Under section 5 of the Additional Emoluments Act two accounts are opened, viz., additional wages deposit account and the additional dearness allowance deposit account. Under Section 6 of the Additional Emoluments Act it was the duty of the employer to deduct the additional wages or additional dearness allowance from emoluments and deposit them either in the additional wages deposit account or in the additional dearness allowance deposit account, whichever is appropriate and applicable to the deduction. Under section 7 of the Additional Emoluments Act the deposit was to carry simple interest at a rate of 2 1/2 per cent over and above the bank deposit rate. Section 8 of the Additional Emoluments Act declares that the amount deducted or credited in the ledger account of the employee in the additional wages deposit account or the additional dearness allowance deposit account shall not be included in the total income of the previous year in which it is cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nominated authority, the liability of the employer shall, to the extent of the amount so remitted by the Court, stand discharged." From the above provision it is clear that the magistrate trying the offence may either sentence a person to imprisonment or alternatively may impose a fine. However, the discretion of the magistrate about the quantum of fine to be imposed is divided by the provision extracted above. The fine must be the amount which is defaulted to be credited to the deposit account and pays interest thereon specified under section 7(1). No doubt such a fine may extend to twice the defaulted amount plus interest also. But after realising the fine the company is under no obligation to remit the defaulted amount plus interest to the nominated authority and that discharges the liability the employer to the extent of the amount so remitted by the company. It can easily be seen that imposition of fine is a way by which the defaulted amount is realised plus interest due thereon. Section 23 of the Additional Emoluments Act is another provision designed to recover the arrears. It is as follows: "Without the prejudice to the provisions of section 14, any amount which ough....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y for infraction of law, the revenue relied upon the Andhra Pradesh High Court decision in CIT v. Kodandarama & Co. [1983] 144 ITR 395. In the said decision it is held that for a payment to be entitled to deduction under section 37(1) of the Act it need not necessarily be mandatory or statutory; even a voluntary payment made, so long as it is made in the interest of the assessee's business it is entitled to be deducted as business expenditure. However, the assessee would not be entitled to deduction of contribution or payment made in contravention of law which is opposed to public policy. Infraction of law is not a normal incident of business. Similarly, payments which are opposed to public policy being in the nature of unlawful consideration for discharging an official duty otherwise than according to law, i.e., otherwise than on merits, cannot equally be recognised. 8. On the other hand, the learned counsel for the assessee canvassed for the position that there is no infraction of law involved in this case and the payment of interest is according to the provisions of the Act. It is not even a penalty. Once the time limit for remitting the amount into the deposit account or to ....