1978 (1) TMI 42

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.... J.-The Tribunal has referred the following two questions for the opinion of this court: "1. Whether the Tribunal was justified in holding that Rs. 2,95,394 and Rs. 1,38,098 being penalty on cess and purchase-tax were not allowable expenditure in the facts and circumstances of the case for the assessment years 1963-64 and 1964-65, respectively? 2. Whether the Tribunal was justified in holdin....

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....ion that it was not a permissible deduction under s. 10(2)(xv) of the Indian I.T. Act, 1922. The Bench took the view : "But the fact remains that penalty has been imposed under sub-s. (5) of s. 3 of the Cess Act. Sub-section (2) of s. 3 of the Cess Act required the company to pay the cess within the prescribed time. Penalty was imposed for its failure to pay cess within the prescribed time. The....

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....nt, who was a paddy procuring agent under the Government of Orissa, was required under an agreement to supply paddy and rice of certain standard known as "fair average quality". Under one of the clauses of the agreement, the Collector had power, subject to the approval of the Government, to levy such penalty as he may deem fit for supply of foodgrains not conforming to the fair average quality and....

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....e deduction under s. 10(2)(xv). The amount of penalty having been deducted from the bills, it did not come into his hands as income. This case is clearly distinguishable. In the present case, the assessee paid the penalty out of the business income of the company. He claims that it was an allowable deduction. The first question is liable to be answered in favour of the department. The second qu....