2000 (11) TMI 15

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....ABU J.-The question referred to us is as to whether the Tribunal was right in holding that the penalty paid under rule 173Q of the Central Excise Rules, 1944, and the amount paid in lieu of confiscation of goods, could be allowed as a deduction in computing the income of the assessee. The assessee is a manufacturer of excisable goods and is required to comply with the Central Excise Act and the....

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.... of any deliberate violation of law was accepted by the Tribunal, as affording sufficient basis to hold that these penalties should be treated as business expenditure. The expenditure which can be deducted in connection with the business carried on by the assessee is the expenditure which can properly be regarded as such. Penalties paid for violating the law in the course of the conduct of the ....

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....would have had to be surrendered to the authorities. The fine was paid in order to avoid confiscation. The fine so paid cannot be regarded as compensatory as the fine levied was not for recovery of duty which ought to have been, but had not been paid. This court in the case of CIT v. Chemical Constructions [2000] 243 ITR 858, has held that it is only compensatory element in a levy termed penalt....