TaxTMI 
TaxTMI 
2014 (11) TMI 345
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.... of the business. 4. She failed to appreciate that: 1. The appellant has explained source of expenditure and hence cannot be deemed to be income u/s 69C. II. The appellant is carrying on business in a lawful manner. III. The expenditure of Rs. 75,00,000 is wholly and exclusively for the purpose of the business and hence allowable as expenditure. 5. The appellant prays that disallowance of expenditure / deemed income u/s 69C on account of redemption fine of Rs. 75,00,000 be deleted. II. Second Ground of Appeal 1. The Commissioner of Income Tax (Appeals) erred in not considering validity of order passed u/s 143(3) r.w.s. 141. 2. She failed to appreciate that order passed u/s 143(3) r.w.s. 147 and notice u/s 148 are invalid and without jurisdiction. 3. The appellant prays that order passed U/S 143(3) r.w.s. 147 be treated as invalid, without jurisdiction and be quashed.." 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of import and sale of goods. During the year under consideration, the assessee entered into an agreement with Export House M/s Rajnikant Bros. for import of certain goods. The said Export....
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....also reduced the redemption fine by 40%. The assessee made a payment of Rs. 75 lacs to Customs Authorities for releasing the goods and claimed the same as business expenditure. While making assessment of the assessee, the A.O. disallowed the payment of Rs. 75 lacs u/s 69-C of the Income Tax Act, 1961 on the plea that the source of expenditure was not explained. The A.O. also held that the expenditure was in the nature of fine for infraction of law. The ld. CIT(A) confirmed the action of the A.O. In an appeal filed by the assessee before the Tribunal, the Tribunal vide its order dated 6-12-2006 allowed the appeal for statistical purpose and restored the entire issue for reconsideration to the file of the ld. CIT(A). In the second round, again the ld. CIT(A) confirmed the disallowance against which the assessee is in further appeal before us. 4. It was contended by the ld. Sr. counsel for the assessee that the amount so paid was not in the nature of penalty but was in the nature of redemption fine. It was further submitted that other consignments of almonds imported by other export houses were cleared by the Bombay Customs under identical under similar import licences. Copy of the C....
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....preme Court in the case of Prakash Cotton Mills P. Ltd. vs. CIT [1993] 201 ITR 684 (SC) and CIT vs. Ahmedabad Cotton Mfg. Co. Ltd. [1994] 205 ITR 163 (SC) wherein it was held that statutory impost paid as damages, penalty or interest, if compensatory in nature, it is allowable as business expenditure. The ld Sr. Counsel for the assessee also drawn our attention to the order of the ld. CIT(A) wherein reference was made to the cases of T. Khemchand Tejoomal, 161 ITR 492 and Agra Leathers Ltd. 200 ITR 792. The ld. Sr. Counsel for the assessee submitted that these cases pertained to penalties levied by the Customs Authorities for the unlawful act of the assessee, however, in the present case the assessee has not committed any unlawful act, therefore, thease cases are not applicable to the assessee. The ld. Sr. counsel for the assessee further invited our attention to the relevant observation in the case of Agra Leatheries wherein the court has said that the Hon'ble Bombay High Court had correctly allowed the expenditure as a business expenditure as well as allowed to be added towards the cost of goods. 7. Further, reliance was also placed on the decision of Hon'ble Punjab & Haryana Hi....
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..... From the record we found that during the year under consideration the assessee entered into an agreement with an Export House M/s Rajnikant & Bros. As per the terms of the agreement M/s Rajnikan & Bros imported consignment of "Almonds in Shell" at Madras Port. This import was actually for one of the nominee of the assessee M/s Peanut Products of India having factory for processing almonds/nuts in Madras. The assessee and the Export House have bonafide belief that almonds in shell was one of the items allowed for import against the said additional licence granted. When the goods arrived at Madras Port, M/s The Indo Afghan Chamber of Commerce approached the Hon'ble Bombay High Court to block these imports, claiming that such imports would affect their "Fundamental rights". The Hon'ble Bombay High Court dismissed their Writ Petition vide order dated 31-1-1986 on the ground that the petitioners did not have a fundamental right to have monopoly in the trade and that importers M/s Rajnikant & Bros were not in any way blocking the petitioners from doing their business. 11. Thereafter, a Writ Petition was filed before the Hon'ble Supreme Court wherein the Hon'ble Supreme Court ordered t....
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....omenclature was not conclusive. It was concluded that payment, though referred as a penalty, but in fact made in exercise of option available under statutory scheme, in course of assessee's business, is allowable business expenditure. In the instant case also the payment was made to release the goods, therefore, the same can be said to be compensatory as the Customs Authorities were recovering the difference between the market price and import cost. Hon'ble Delhi High Court in the case of M/s Vikas Chemicals (supra) vide order dated 7th August, 2014 have dealt with exactly similar issue wherein the assessee's claim for deduction of Rs. 45 lacs paid to Customs Authorities was allowed. The Hon'ble Delhi High Court observed that payment was in respect of commercial transaction between two unrelated parties. The assessee had applied for clearance of goods in India. Earlier similar goods have cleared by Customs Authorities under REP licence. The fault or defect in the REP licence was not attributable to the assessee. The assessee was not to be blamed who has not indulged in any offence or incurred any expenditure for the purpose which was prohibited by law. The assessee had to pay redem....