2017 (3) TMI 141

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....urnish vouchers in support of the expenses. Since the vouchers in support of the claim was voluminous, the assessee produced vouchers to the extent of Rs. 75,000/- which was verified on a test check basis by the AO. On such test checking, the AO found the following discrepancy in four of the vouchers produced by the assessee :- Sl.No. Amount (in Rs.) Date Discrepancies 1. 3,000/- 21.04.2009 The payments were made to the Govt. Of West Bengal for violation of Law, which is not an allowable expenditure. 2. 13,680/- 07.04.2009 No information about who received the amount. 3. 1,500/- 30.03.2010 No information about who received the amount. 4. 14,000/- 30.03.2010 No information about who received the amount. Total 32,180       4. The AO was of the view that out of the vouchers produced evidencing expenditure of Rs. 75,000/-, Rs. 32,180/- was liable to be allowed for the reasons given in the chart given above. According to the AO, the remaining expenditure under this head would also be of the same pattern as the expenditure whose vouchers were verified on a test check basis. According to the AO th....

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....ture. The authority has to allow deduction under section 37(1) of the Income-tax Act, whenever such examination reveals the concerned impost to the purely compensatory in nature. Whenever such impost is found to be of composite nature, that is, partly of compensatory nature and partly of penal nature, the authorities are obliged to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature. 6. With regard to the other three vouchers of Rs. 13,680/-, Rs. 1,500/- and Rs. 14,000/- which, according to the AO did not contain any information as to who received the amount, it was submitted that these vouchers pertained to payments in respect of hire charges paid for the carriage of goods to the outside vehicles taken on hire when Assessee's own vehicles were not sufficient due to pressure of work. The Vehicles were summoned from the road side parking in such emergent situations. The vehicles in question operate in the unorganized sector and do not have any office address. It was pointed out that the vehicle number are duly mentioned in the vouchers and the recipi....

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....t in question was made by the Assessee. Some of the Sections of the MV Act which have been quoted in the bills evidencing payment of the aforesaid sums reads thus: "119. Duty to obey traffic signs.- (1) Every driver of a motor vehicle shall drive the vehicle in conformity with any indication given by mandatory traffic sign and in conformity with the driving regulations made by the Central Government, and shall comply with all directions given to him by any police officer for the time being engaged in the regulation of traffic in any public place. (2) In this section "mandatory traffic sign" means a traffic sign included in Part A of the First Schedule, or any traffic sign of similar form (that is to say, consisting of or including a circular disc displaying a device, word or figure and having a red ground or border) placed or erected for the purpose of regulating motor vehicle traffic under sub-section (1) of section 116." "Section 177 in The Motor Vehicles Act, 1988 177. General provision for punishment of offences.-Whoever contravenes any provision of this Act or of any rule, regulation or notification made thereunder shall, if no penalty is provided for the offenc....

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....ur opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business'. 11. It is clear from the statutory provisions of the MV Act as well as the law laid down in judicial pronouncements that payments made for any purpose which is an offence or which is prohibited by law and which are not compensatory in nature cannot be allowed as a deduction u/s.37(1) read with Explanation thereto. Perusal of the various statutory provisions of the MV Act under which the payment in question were made were for offences committed by the employees of the Assessee for which the Assessee was vicariously liable. These payments were not compensatory in nature. Therefore these sums cannot be allowed as a deduction. We up....

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....- was liable to be disallowed. 15. The AO issued a show cause notice and called upon the Assessee to explain how loss due to alleged destruction of cash was allowable as deduction. The Assessee submitted that in the letter dated 16.02.2010 addressed by the Assessee to the Directorate of Fire Service, there is reference to loss of stock and market credit bills amounting to about Rs. 5 crores but no reference about the cash loss due to the simple reason that only the stock was insured with the National Insurance Co. Ltd. and the rules of the insurance co. require reports from the Fire Department and the Police Department. The Assessee brought to the notice of the AO that it had in support of the claim for loss of cash on account of fire, all the relevant pages of Cash Book and that entry in Cash Book dt. 15.2.10 wherein the entry reflects that the Assessee collected cash against dues from customer, as detailed below: Customer of Amount (Rs) i) Reckitt Benckiser Product 1,72,413.00 ii) Glaxo Smithline Product 3,44,662.00     5,17,093.00   The Assessee also brought to the notice of the AO that it had filed a writ petition in the ....

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....r making entry in cash book only on 31.03.2010 was also not known. The AO therefore held that the claim of the Assessee for deduction of the sum in question was as afterthought only and not acceptable. Therefore, a sum of Rs. 5,17,093/- was disallowed and added back to the total income of the assessee. 17. On appeal by the assessee the CIT(A) confirmed the order of AO observing as follows :- "I have carefully considered the submission of the appellant along with the supporting evidences furnished, perused the facts of the case including the observation /finding of the AO in the assessment order and the other materials brought on record. I do not find any merit in the argument put forth by the appellant. It is noted that in the documentary evidences filed by the appellant, no where it was mentioned that cash was destroyed by fire in the case of the appellant. I also find force in the contention of the AO. that if the cash was destroyed by fire on 13.02.2010, then the entry passed on 31.03.2010 on account of such loss did not reflect the correct position of cash. Further, it is not the case of the appellant that a separate cash book was maintained in respect of the said premises. ....