TMI Blog1970 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 17-2-1970 - Judge(s) : G. K. MISHRA., S. ACHARYA. JUDGMENT G. K. MISRA C.J.-This reference has been made under section 256(1) of the Income-tax Act, 1961. Two questions have been framed by the assessee asking for reference. They are : " 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the amount recovered by the Government as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1955-56 and the accounting year is the year ending March 31, 1955. The assessee claimed deduction of a sum of Rs. 1,233, paid as penalty to the Government of Orissa for supply of inferior quality of paddy and rice. All the assessing authorities rejected the claim of the assessee to deduct the penalty from the income, and accordingly the aforesaid question was framed. The assessing authorities w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the penalty would not come within the ambit of any one of those clauses so as to entitle the assessee to claim deduction under section 10(2)(xv). The assessee by advancing a wrong argument did not place the real point before the assessing authorities. The real point to be answered is whether the penalty, while assessing the income, should be deducted therefrom as coming within the ambit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty was charged. This loss arising out of the imposition of penalty was integrally connected with the carrying on of the business of paddy supply. The action of the assessee is not one contrary to law but was in violation of the terms of agreement under which the business was carried on. The assessing authorities in support of their conclusion relied on a Bench decision of this court in Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the income under section 10(1) of the Act. " The Supreme Court remanded that case and ultimately in Commissioner of Income-tax v. Prafulla Kumar, this court answered the question in favour of the assessee. The real question which requires to be answered is whether the deduction claimed could come under section 10(1) of the Income-tax Act, 1922. We would answer the question by saying tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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