AI Drafter 
TaxTMI 
TaxTMI 
2026 (2) TMI 700
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.... Order of the Commissioner of Income Tax (Appeals) NFAC dismissing the appeal is contrary to law, erroneous and unsustainable on the facts of the case. 2. The CIT(A) NFAC erred in confirming the addition of Rs. 20,00,000/-by holding that the claim of expenditure is not allowable under sec. 37 of the Act 3. The CITIA) NFAC failed to appreciate that the amount was paid to Chettinad Cements for loss of certain quantity of goods in the process of transportation of their goods is compensatory in nature and the payment also confirmed the party is a genuine claim and hence allowable as business expenditure. 4. The CITIA) NFAC further failed to appreciate that the shortage of goods on delivery arises from the mishandling ....
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....ead 'penalty / fine' paid to M/s.Chettinad Cements Ltd, on account of shortage of goods during the transportation. The assessee furnished the ledger account, bank statements evidencing payment and a screen shot of the email correspondence from Chettinad Cements confirming the transaction. Since, Chettinad cements did not respond to the notice u/s. 133(6) issued by the revenue and no confirmation also submitted by the assessee, the AO disallowed the expenditure u/s. 37 of the Act holding that the payment was in the nature of penalty and thus not allowance as business expenditure to the tune of Rs. 20.00 Lakhs and passed an order u/s. 143(3) of the Act dated 31/03/2021. 4. Aggrieved by the order of the AO the assessee preferred an appeal b....
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.... element of infraction of law. 8. In light of the above arguments the ld.AR prayed for deleting the disallowance of the expenditure by setting aside the order of the ld.CIT(A). 9. Per contra the ld.DR filed a paper book containing 1 to 19 pages including her written submissions and case laws. The ld.DR vehemently argued that the expenditure claimed is in the nature of penalty and hence nota allowable u/s. 37(1) of the Act. Further the ld.DR relied on the decision of the Hon'ble Supreme Court in the case Haji Aziz and Abdul Shakoor Bros. v. CIT 91961) 41 ITR 350 (SC) and prayed for confirming the order of the AO which is upheld by the ld.CIT(A). 10. We have carefully considered the rival submissions, perused the material available o....
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....ture was incurred wholly and exclusively for the purpose of business and not whether it resulted in an immediate benefit. 13. In the present case, the assessee has placed on record: * The contract for transportation entered into with M/s. Chettinad Cements Ltd., wherein clause 4 clearly stipulates that the transporter shall be responsible for shortage or loss of goods during transit. * Email correspondence from M/s. Chettinad Cements Ltd. evidencing the claim raised for shortage of cement during transportation. * Ledger account and bank statements evidencing actual payment of Rs. 20,00,000/- through banking channels. 14. These documents cumulatively establish that the payment was made pursuant to contractual....
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....the decision of the Hon'ble Supreme Court in Haji Aziz and Abdul Shakoor Bros. v. CIT (1961) 41 ITR 350 (SC) is misplaced, as that case dealt with penalty paid for contravention of statutory provisions, which is clearly distinguishable from the facts of the present case where no statutory violation has been established. 19. The non-response of M/s.Chettinad Cements Ltd. to the notice issued u/s. 133(6) of the Act, by itself, cannot be a ground to disallow the claim when the assessee has furnished contemporaneous documentary evidence substantiating the transaction and the payment has been made through banking channels. The genuineness of the payment has not been doubted by the authorities below. 20. In view of the above discussion, we ....