2010 (8) TMI 1075

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.... D E R PER VIJAY PAL RAO,JM This appeal by the assessee is directed against the order dated 23.12.2008 of CIT(A)-III for the assessment year 2003-04. 2. Only ground raised by the assessee is reproduced below: "1. The ld. CIT(A) erred in confirming the disallowance of demurrage paid amounting to Rs. 81,84,925/- made by the AO on the ground that it is in the nature of penalty paid ....

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....ation 1 to section 37(1) of the Income Tax act, 1961. According to which any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. 4. On appeal, the CIT(A) confirmed the disallowance made b....

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....ssessee and Peter Cremer GMBH on sale of Molasses the minimum loading rate is 150 MT per hour was granted and in case failure to do so demurrage charges were payable to Peter Cremer GMBH. Therefore, the assessee had to pay demurrage charges which is contractual and not a penalty for any offence which is prohibited by law. He has relied upon the decision of the Hon'ble Allahabad High Court in the c....

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....in loading and unloading of the goods and not for infraction of law. In the case of Nanhoomal Jyoti Prasad. v. Commissioner of Income-tax. (supra), the Hon. Allahabad High Court had an opportunity to consider and decide an identical issue. The Hon. Allahabad High Court has held that the demurrage charges paid to release the goods from the port authorities is not fine for infraction of law, it is b....