1991 (9) TMI 37

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....AT J. -The question referred under the provisions of section 256(2) of the Income-tax Act, 1961, reads as follows : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that amount paid under section 14B of the Employees' Provident Funds Act as damages for default in making payment of provident fund contributions cannot be construed, to ....

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.... for recovery of additional sums in the shape of penalty so as to see that avoidance is obviated. Such a penal levy can take the form of damages because the reparation for the injury suffered by the default is more than the narrow computation of interest on the contribution." Again, Mr. Justice Sen conveyed the same idea at page 1816 (at page 304 of 55 FJR), thus : " 46. The traditional view....

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....he observes (at page 305 of 55 FJR): " The object and purpose of the section is to authorise the Regional Provident Fund Commissioner to impose exemplary or punitive damages and thereby prevent employers from making defaults. The provision for imposition of damages at twenty-five per cent. of the amount of arrear, however, did not prove to he effective. Accordingly, by Act 40 of 1973, the words....

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....n detail. The decision of the Supreme Court in Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350, was referred to and relied upon for the conclusion arrived at by us therein. That was a case of penal levy under the provisions of the Central Sales Tax Act which was held as a non-deductible expenditure. Mr. Raghavendra Rao, learned counsel for the Revenue, brought to our notice that a Fu....