1970 (2) TMI 27

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....x Act, 1961. Two questions have been framed by the assessee asking for reference. They are : " 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the amount recovered by the Government as penalty for non-supply of paddy according to specification was not deductible as expenditure under the Indian Income-tax Act, 1922 ? 2. Whether, on the facts ....

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....f Orissa for supply of inferior quality of paddy and rice. All the assessing authorities rejected the claim of the assessee to deduct the penalty from the income, and accordingly the aforesaid question was framed. The assessing authorities were of opinion that the penalty paid by the assessee was wholly dissociated from the income accrued to him and cannot, therefore, be deducted under section ....

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.... The assessee by advancing a wrong argument did not place the real point before the assessing authorities. The real point to be answered is whether the penalty, while assessing the income, should be deducted therefrom as coming within the ambit of section 10(1) which lays down that : " The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocatio....

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.... action of the assessee is not one contrary to law but was in violation of the terms of agreement under which the business was carried on. The assessing authorities in support of their conclusion relied on a Bench decision of this court in Commissioner of Income-tax v. Prafulla Kumar, which was reversed by the Supreme Court in Prafulla Kumar Mallik v. Commissioner of Income-tax. Their Lordships ob....