1993 (6) TMI 30

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....in manufacturing textiles. It also exports goods manufactured by it. As a result of exports made by it, it became entitled to two licences during the calendar year 1967. The licences were issued on June 25, 1967. In view of the facts now found by the authorities, it can be said that one import licence was of the value of Rs. 12,708 and the other was of the value of Rs. 8,402. But the copies of licences which the assessee got showed figures as Rs. 1,12,708 and Rs. 48,402 instead of Rs. 12,708 and Rs. 8,402. It was on the basis of these two licences that the assessee imported goods. The said goods were seized by the customs authorities as it was found that they were not imported against valid licences inasmuch as the valid licences were for s....

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....e above stated question has been referred to this court. The claim for deduction made during the assessment proceedings for the year 1968-69 was rejected by the Income-tax Officer following the decision of the Supreme Court in Haji Aziz and Abdul Shakoor Bros. v. CIT.[1961] 41 ITR 350. The appeal filed against that order before the Appellate Assistant Commissioner and the Tribunal failed. Then, on reference made to this court, it was held that the amount of penalty paid by the assessee did not represent the loss suffered by it in any commercial transaction. It was a penalty paid by it for committing breach of law. The assessee, therefore, was not entitled to deduct it as business expenditure. This court held that an expenditure is not de....

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....course of business even though the said expenditure was required to be incurred as a result of infraction of law. He submitted that, if the goods were confiscated and in compliance with an order for payment of amount in lieu of confiscation, if the assessee had got the goods released, that would have added to the cost of the goods and the assessee would have got all other benefits on that basis under the Act. He also submitted that, if a smuggler can get deduction while computing his income derived from the business which is illegal, there is no reason why the assessee of this type should not get it. He also relied upon two decisions of the Bombay High Court in CIT v. Pannalal Narottamdas and Co. [1968] 67 ITR 667 and CIT v. P. C. Tangal [1....