TMI Blog1955 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... 1947 read with notifications their import by steamers was prohibited. The Imports and Exports Control Act, 1947, is co-related to the Sea Customs Act, 1878. Under section 167, item 8, of the Imports and Exports Control Act, the dates which came to India by steamers were liable to be confiscated and any person concerned in any such offence was liable to a penalty. Section 183 of the Sea Customs Act provides that whenever confiscation is authorised, the officer adjudging it shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit. As would appear from the correspondence, copy of which is annexure ' C ' and forms part of the case, the assessee imported dates of the value of several lakhs. These goods arrived partly by steamers and partly by country crafts. In respect of goods which arrived by steamers the Collector of Customs gave the assessee an option to pay in lieu of confiscation a fine aggregating to ₹ 1,63,950. The assessee availed of this option and paid the fine of ₹ 1,63,950. This fine, on appeal, was reduced to ₹ 82,250 by the Central Board of Revenue. 3. Before the Income-tax Officer the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Sea Customs Act confiscated the dates which had been imported by steamers and they gave him the option, under section 183, of paying a fine of ₹ 82,250 in lieu of confiscation. The assessee paid the fine and released the goods from the Customs authorities. In the relevant assessment year he claimed ₹ 82,250 as a permissible deduction under section 10(2)(xv). Now, under section 10(2)(xv) what is a permissible deduction is an expenditure laid out or expended wholly and exclusively for the purpose of the assessee's business, profession or vocation. Although the legislature has not so stated it in express terms, we must read into section 10(2)(xv) by necessary intendment that the expenditure contemplated by this sub-section is an expenditure which is laid out or expended for the purpose of carrying out the business of the assessee lawfully. In our opinion it is impossible to suggest that if an assessee spends money in order to carry out the business unlawfully, he would be entitled to deduction under section 10(2)(xv). If certain expenses become necessary not because the assessee wants to carry out his business lawfully, but they become necessary because he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate this very fine distinction. If the penalty was imposed upon the assessee, undoubtedly he would have had to pay from his pocket or the necessary coercive measures would have been taken against him. But why is it not equally a penalty upon the assessee when his goods are confiscated ? The goods which can be confiscated are only the goods of the owner, and whether the penalty takes the shape of cash being paid by the assessee or takes the shape of the assessee losing his goods, it is difficult to understand what distinction exists between penalty of one kind and penalty of a different kind. In our opinion, both are penalties prescribed by the Sea Customs Act and it is left to the discretion of the Customs authorities which penalty in the particular circumstances of the case to impose upon the assessee. In support of this distinction Mr. Palkhivala has relied on one English decision and two decisions of the Supreme Court. The first is Commissioners of Inland Revenue v. Alexander Von Glehn Co., Ltd. ((1920) 12 T. C. 232) That case is very similar to the case before us and, in our opinion, with respect, Lord Sterndale, Master of the Rolls, has laid down the correct princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law, and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. Now, this observation was made in order to repell the argument that wide powers were conferred upon the Customs authorities and therefore their order must be looked upon as a conviction and the learned Judge points out that even the extent of the fine was only ₹ 1,000 and with regard to the goods the action was confined to the goods only. We do not understand how this decision can be of any assistance in deciding the point that has arisen before us. The next decision on which Mr. Palkhivala relies is the decision of the Supreme Court in Commissioner of Income-tax v. H. Hirjee ([1953] 23 I. T. R. 427). In that case the assessee company was prosecuted under the Hoarding and Profiteering Ordinance on a charge of selling goods at prices higher than were reasonable, in contravention of the provisions of section 6. The prosecution ended in an acquittal and the company claimed the expenses of legal defence as permissible deduction under section 10(2) (xv). The Calcutta High Court, agreeing with the Tribunal, allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is prohibited and an expenditure which is not prohibited but which is permissible, and he concedes and even that with some reluctance that if an assessee paid a bribe in order to get the goods which are the stock-in-trade of his business and which yields profits, it may be that that expenditure being a prohibited expenditure it would not be a permissible deduction under section 10(2)(xv). But, says Mr. Palkhivala, whereas in this case the law permits him to pay a fine in lieu of confiscation, the expenditure should not be looked upon as of the same character or nature as the other expenditure which is itself prohibited. In our opinion no distinction can be drawn between a case where an assessee makes an unlawful expenditure and claims it as a deduction under section 10(2)(xv) and a case where an assessee commits a breach of the law, incurs an expenditure as a result of that breach of the law, and then claims that expenditure under section 10(2)(xv). The two cases are identical and no distinction can be drawn between them. Mr. Palkhivala then suggests that what the Court must look at for the purpose of section 10(2)(xv) is the expenditure itself. The only relevant factor a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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