TaxTMI 
TaxTMI 
2018 (1) TMI 597
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 56,08,447/- which was paid by the assessee as 'Railway Punitive Charges'. According to the AO these charges were in the nature of expenses incurred for any purpose which is an offence or which is prohibited by law and therefore ought not to be allowed as a deduction while computing the income from business as per the provision of Explanation to Section 37(1) of the Act. Section 37(1) of the Act provides that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed as a deduction in computing income chargeable under the head "Profits and gains of business or profession". Explanation to Sec.37(1) lays down as follows: "For the removal of doubts, it is hereby declared that 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8-wheeled wagon, the railway administration shall recover punitive charges as provided in parts I, II and III of the situation 'A' & 'B' of the Schedule, from the consignor, the consignee or the endorsee as the case may be, for the entire weight of the commodities loaded beyond the permissible carrying capacity for the entire distance to be travelled by the train hauling the wagon from the originating station to the destination point, irrespective of the point of detection of overloading : provided that no punitive charges will be levied if the customer carries out load adjustment at the originating station itself in case of detection of overloading at originating point." 6. The Assessee thus argued that the very heading of para 3 of the said Notification 'issued by the Ministry of Railways namely "punitive charges for overloading" makes it amply clear that such charges were actually in the nature of additional freight for overloading beyond the permissible carrying capacity and were not in the nature of penalty for any offence or infringement of law. The charges were in fact compensatory in nature for transportation of goods loaded beyond the permissible car....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eved by the order of CIT(A) the revenue has raised ground no.1 before the Tribunal. 11. The ld. DR placed reliance on the order of AO. It was submitted by him that the act of the assessee in overloading the wagon was an act which was against public policy for which punitive charges are levied. He drew our attention to section 73 of the Railway Act, 1989 which reads as follows :- " 73. Punitive charge for overloading a wagon.-Where a person loads goods in a wagon beyond its permissible carrying capacity as exhibited under sub-section (2) or sub- section (3), or notified under sub-section (4), of section 72, a railway administration may, in addition to the freight and other charges, recover from the consignor, the consignee or the endorsee, as the case may be, charges by way of penalty at such rates, as may be prescribed, before the delivery of the goods: Provided that it shall be lawful for the railway administration to unload the goods loaded beyond the capacity of the wagon, if detected at the forwarding station or at any place before the destination station and to recover the cost of such unloading and any charge for the detention of any wagon on this account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal is squarely covered in favour of the assessee by the decision of ITAT Mumbai bench in the case of Taurian Iron & Steel Co.(P)Ltd (supra). In the aforesaid decision the Hon'ble ITAT after considering the decision of the Hon'ble Supreme Court in the case of Prakash Cotton Mills P.Ltd. 201 ITR 684 (SC) and also the nature of railway punitive charges held that the payments made to the railways for overloading of the wagons is compensatory in nature and cannot be disallowed under Explanation to Section 37(1) of the Act. The other decisions relied upon by the assessee supports the plea of the assessee and where the decisions rendered in the context of overloading charges paid to railways. In view of the above we do not find any merits in ground no.1 raised by the revenue. Consequently the same is dismissed." 15. In the case of M/s Taurian Iron & Steel Co (supra) ITAT Mumbai Bench dealt with an identical issue and came to the following conclusion :- " The overloading charges paid by the appellant to the Railways are paid in the regular course of business in accordance with the notification issued by Ministry of Railways doted 23.12.2005. The notification of Ministry of R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court in the case of Time Incorporated (supra) cited by the ld. DR before us is concerned that was the case of a suit for permanent injunction and damages, filed against the defendant for a passing off action and in the course of it's judgement the Hon'ble court made a reference regarding purpose of awarding punitive damages. The said decision is not of any application whatsoever be the present case. The decision of the Hon'ble Karnataka High Court in the case of Mamta Enterprises(supra) is again a case where the criminal offence was compounded and the compounding fees was claimed as deduction. In the present case there is no offence whatsoever and there is no compounding fee paid and claimed as deduction. As far as the decision of the Hon'ble Supreme Court in the case of Haji Aziz and Abdul Brothers (supra) is concerned it was again the case of breach of penal provisions of Customs Act for which fine was paid. Under these circumstances, the expenses were not allowed as deduction. We are of the view that in the facts and circumstances of the present case the claim of the assessee for deduction was rightly allowed by CIT(A). We therefore uphold the order of CIT(A) and d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the order in the case of Vijayshree Ltd., (supra), the Hon'ble Calcutta High Court held as follows : "The only issue involved in this appeal is as to whether the deletion of the addition by the Assessing Officer on account of Employees'Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in View of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nat.ure and is required to be applied retrospectively with effect from 1 st April, 1988. Such being ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal, a presumption can be made that investment in shares have been made from own funds. Relevant extract of the decision is as follows : 'In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities and Power Ltd. (supra), it would have to be presumed that the investment made by the ass see would be out of the interest free funds available with the assessee. ' The assesee thus pleaded that the disallowance of interest expenses made by the AO in terms of Rule 8D(2)(ii) of the Rules be deleted. 25. As far as disallowance of other expenses under Rule 8D(2)(iii) viz. other expenses are concerned, the plea of the assessee was to exclude investments which did not yield dividend exempt income during the previous year while working out the average value of investments for application of Rule 8D(2)(iii) of the Rules. In this regard the assessee placed reliance on the decision of ITAT, Kolkata Bench in the case of REL Agro Ltd vs DCIT 144 ITD 141 (Ko....