2022 (10) TMI 825

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....3,97,96,875/- under the head punitive charges in the profit and loss account. It was submitted that on verification it was noticed by the AO that the punitive charges was the charges levied by the East Coast Railway for transport of the excess material as prescribed by the railways. It was submitted by the ld. CIT-DR that as the punitive charges were crystal clear violation of the rules of railways, the levy has been made on the assessee and in view of the Explanation 1 to Section 37 of the Act the said expenses had been disallowed by the AO. It was further submitted that the ld. CIT(A) following the decision of the Nagpur Bench of the Tribunal in the case of Western Coalfields Ltd. Vs. ACIT, in ITA Nos.289 & 290/Nag/2006 and also the decis....

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....d to the railways authorities, which is a branch of Government of India, the punitive charges is not allowable as a deduction in view of the provisions of Explanation 1 to Section 37(1) of the Act. 3. In reply, ld. AR drew our attention to page 13 of the order of Mumbai Bench of the Tribunal in the case of M/s Taurian Iron & Steel Co. Pvt. Ltd., passed in ITA No.847&1613/Mum/2010, dated 14.12.2011, wherein in para 10.4, it has been held as under :- 10.4 Based on the arguments advanced by the assessee, the ld. CIT(A) deleted the addition made by the A.O. by observing as under:- "The overloading charges paid by the appellant to the Railways are paid in the regular course of business in accordance with the notification iss....

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....harges are computed as 2 times or 3 times of the freight rates. The punitive charges levied by Railways, in accordance with the notification of Ministry of Railways dated 23.12.2005, for carrying goods in its rakes are not "for any purpose which is an offense or which is prohibited by law‟. As a matter of fact, the Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. Though the words are "punitive charges‟, they are payment which are neither an offense nor is prohibited by the law rather the payment is in accordance with the law as provided in the notification of Ministry of Railways dated 23.12.2005. It is, therefore, hel....