TaxTMI 
TaxTMI 
2012 (2) TMI 404
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....s of the assessee. 2. The facts relating to the same are stated in brief. The assessee-company was formed with the business objective of manufacturing wheat products. It was noted that the assessee has not commenced commercial production during the year under consideration. However, the assessee indulged in the activity of trading in wheat during the year by procuring wheat from a company named M/s. Cargill India Pvt. Ltd. From the perusal of the accounts, the Assessing officer noticed that the assessee has claimed a sum of Rs.23,19,547/- as expenditure towards payment of penal charges to one of its sister concerns named M/s. Parisons Estate and Industries Pvt. Ltd.(PEIPL). The facts relating to the said payment are narrated in brief. M/s.....
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.... with the impugned purchase transaction.. Accordingly, the AO concluded that the impugned penal charges of Rs.23.19 lakhs was not a liability relatable to the business of the assessee and accordingly, disallowed the same. The ld. CIT(A) also upheld the view of the assessing officer. Hence, the assessee is in appeal before us. 4. We have heard the rival contentions, and perused the record. The ld. Counsel for the assessee, carried us to the various documents filed in the paper book to drive the point that the impugned expenditure was a genuine one and was properly accounted for by the assessee. He relied upon the following case law to submit that any expenditure incurred wholly and exclusively on the ground of commercial expediency is maint....
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.... any dispute that the trading transaction is an independent transaction. The liability to pay penal charges, if any, is governed by the agreement entered into between two parties. There is no dispute that M/s PEIPL was having a contractual obligation to pay the penal charges in view of the agreement; however no such agreement existed between M/s PEIPL and the assessee. The transaction entered into between the assessee and M/s. PEIPL is an independent trading transaction and it was not shown that it was attached with any such liability clause. As submitted by the Revenue, the assessee has failed to furnish any documentary evidence to show that it was under a binding contractual obligation to pay the proportionate penal charges imposed upon M....