TaxTMI 
TaxTMI 
2012 (6) TMI 482
X X X X Extracts X X X X
X X X X Extracts X X X X
....t at the assessee's premises on 11-12-2003, it was found that the assessee was transferring goods from its factory (in Rajasthan) to its godown in Gujarat by way of branch transfers, while the same were inter-state sales. Also, a purchase entry for Rs. 1,97,035/- relating to the financial year 2002-03, the relevant previous year, was not accounted for in the regular books of account. On being show caused in its respect by the Sales Tax Department; the same being an infringement of law, unearthed by its Anti-Evasion Wing, so that it was liable for penalty under the sales-tax Act, the assessee conceded to the default, paying the compounding fee at the impugned sum of Rs. 12.15 lacs, i.e., besides tax and interest thereon. The assessee's contention that the compounding fee was not penal in nature, but only to avoid litigation, so that it is a deductible as business expenditure, did not find favour with the AO, who disallowed the same, placing heavy reliance on the decision by the hon'ble apex court in the case of Haji Aziz & Abdul Shakoor Bros v. CIT [1961] 41 ITR 350 (SC), also reproducing there-from in his order. In appeal, the same was deleted by the ld. CIT(A) on the basis that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is paid u/s. 72 of the Rajasthan Sales Tax Act, 1994, he admitted to the same, though added that that by itself would not be determinative of the matter, i.e., despite being so, the same is not for is not toward any infraction of law, so as to bear the nature of a penalty. The composition scheme is provided under the sales-tax Act itself, and the assessee had accepted the same in his capacity as a businessman. Further, the same is on trading account and, thus, Explanation to sec. 37(1) would not even otherwise be attracted. This is as the impugned sum is not being claimed as an expense u/s. 37(1) but u/s. 28(i) of the Act itself, citing the example of 'purchases' for a business, which he contended are not claimed as a business expenditure under the residuary provision of s.37(1), but u/s. 28(i) of the Act itself, i.e., as part of the cost of goods sold, so that it had to be given set off against the receipt or the amount accruing on sales. Reliance was placed by him on a host of case laws, making special reference to the decision in the case of Dr. T.A. Quereshi v. CIT [2006] 287 ITR 547/157 Taxman 514 (SC); and Eveready Industries India Ltd. v. Dy. CIT [2001] 78 ITD 175 (Cal.)(T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (3) of Section 78 or the Incharge of a check- post, as the case may be, may accept composition money from such person in lieu of penalty or prosecution, which shall be equal to the amount of four times of the tax leviable on the goods involved or twenty five percent of the value of such goods, whichever is less. (4) The composition of offence in lieu of penalty or prosecution under this Section shall be without prejudice to the liability of the person charged with the offence, to pay tax with interest under this Act. (5) On payment of the amount of composition determined under sub-section (1), no further proceeding under the provisions of this Act for imposition of penalty or launching of prosecution for the same offence, shall be initiated. (6) Notwithstanding anything contained in Section 84, no appeal shall lie or subsist against an order or composition made under this Act. (7) Notwithstanding anything contained in Section 54,no amount of composition accepted and no amount of interest levied under this Section, shall be waived or reduced by the Commissioner.' [emphasis, ours] 4.2 We are, therefore, only called upon to adjudicate on the question of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on in the matter, nor does it dispute the same or the ratio of the said decisions; its only case is that, nevertheless, being paid under the provisions of the sales-tax Act as a composition fee, the impugned payment amount does not assume the character of a penalty. The assessee's contention that the amount under reference, despite the clear provision of sec. 72, clarifying the nature of levy there-under, is not penal in nature, is contrary to the said provision, as well as de hors any material on record. The assessee was show caused only u/s. 65 of the sales-tax Act, and in respect of the impugned transactions. Inter-state sales would, after all, only be amply clarified by law. What, therefore, led the assessee to believe that the impugned transactions are not so in the facts and circumstances of its case, but only inter-branch transfers, has not been clarified by it at any stage. There is no reference to the reply to the said show cause notice, if any, furnished to the authorities. In fact, the applicability of sec 72 of the said Act, being necessarily only on admission of the offence by the assessee-dealer, these questions are even otherwise rendered as of little moment. If paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mined independently in each case, so that the case law cited would even otherwise be of limited assistance. As regards the assessee's contention of the amount under reference being not liable for deduction u/s. 37(1), but only u/s. 28(i), so that the Explanation to the former shall not apply, the same only needs to be stated to be rejected. We have already clarified that impermissibility of the deduction stems from the premise that it is not incurred or suffered for the purpose of the business. As such, the section under which the deduction may fall to be otherwise exigible for deduction does not arise for consideration in the first place. That is, there is no provision where-under the same may fall for deduction, that being the primary condition of each section allowing the deduction in the computation of business income. Also, it may be clarified that payment of the sale-tax is only deductible u/s. 37(1), so that any payment in lieu thereof, where so, would necessarily fall for deduction there-under, and for which each of the three decisions by the apex court referred to in para 3.1 of this order may be adverted to. In fact, the composition fee under reference is not even for or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and final ground of the Revenue's appeal is qua deletion of disallowance of the assessee's claim for additional depreciation in the sum of Rs. 4,76,943/-. The same was on the basis that the assessee had not claimed the same vide its original or revised return of income, but only vide its letter dated 28-09-2006 filed during the course of the assessment proceedings. Further, the claim, as per law, is to be accompanied by or per a Certificate by a Chartered Accountant, certifying the eligibility of the assessee's claim, which is to be furnished along with the return of income, and which is admittedly not the case. The ld. CIT(A) was of the view that non-furnishing of the eligibility certificate from the Chartered Accountant along with the return of income would be of no moment inasmuch as the assessee had filed the same during the course of the assessment proceedings, so that it was available with the AO at the time of assessment. The AO's second plea, i.e., that the said claim was not made per a return of income, was negated by him on the basis that the same is only a statutory allowance, which has to be allowed prima facie. Aggrieved, Revenue is in appeal. 8. We have heard the p....