TMI Blog1978 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... as purchased on November 8, 1969. In connection with this purchase the assessee had to pay on July 11, 1969, a sum of Rs. 61,000 as penalty to the customs authority for import of the petrol engines. According to the ITO, the penalty for an infringement of law was not an admissible expense. The assessee went in appeal before the AAC. Upholding the contention of the assessee-appellant the AAC held that the amount of Rs. 61,000 paid by the assessee as penalty for releasing his goods from the customs authorities should be allowed as a proper deduction in computing the business income of the assessee. The revenue being aggrieved with this order came in appeal before the Tribunal. The facts relevant for our purposes and found by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and that the assessee's case fell squarely within the ratio of the decision of the Bombay High Court in CIT v. Pannalal Narottamdas and Co. [1968] 67 ITR 667. Alternatively, it was contended that the assessee could also claim that the amount was a deductible expense under s. 28(1) of the Act. The Tribunal rejected the contention of the assessee and allowed the departmental appeal. The Tribunal relied upon the decision of the Supreme Court in the case of Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350. It was held therein that no expense which was paid by way of penalty for a breach of the law, even though it might involve no personal liability could be said to be an amount wholly and exclusively laid for the purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gues that this amount is an allowable deduction under s. 28(i) of the Act, for, according to him, it is a commercial loss suffered by the assessee in the course of carrying on his business. But an infraction of the law is not a normal incident of the business and a penalty paid for an infraction of law is not a business loss in the commercial sense and is not a deductible expenditure under s. 28(i) of the I.T. Act, 1961, in view of the aforesaid decisions of this court and the Gujarat High Court including the observation of the Supreme Court in the aforesaid case. In the premises, we answer the question in the negative and in favour of the revenue. There will be no order as to costs. DEB J.--I agree. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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