TMI Blog1996 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Advocate (Ms. Luxmi Iyengar and S.N. Terdol, Advocates, with him), for the respondent . JUDGMENT These appeals relate to the assessment years 1971-72, 1972-73 and 1973-74. In its income-tax returns for these assessment years the assessee claimed as deduction of expenditure for the purpose of business under section 37(1) of the Income-tax Act, 1961, amounts that it had paid to the Madhya Pradesh sales tax authorities under the provisions of sections 8(2) and 17(3) of the Madhya Pradesh General Sales Tax Act, 1958. The matter was carried by the assessee up to the Income-tax Appellate Tribunal, which held that it was entitled to the deduction. Arising from out of the order of the Tribunal, the following question was referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessee an opportunity of being heard. He is empowered to direct the assessee to pay and the upper limit of such payment is prescribed. Where no tax is found to be payable he can direct the assessee to pay a sum not exceeding Rs. 100. The use of the word penalty in the provision is neither here nor there. Read as a whole, there can be no doubt that the provision is intended to have penal consequences upon an assessee who fails to comply with the provisions of the statute without sufficient cause. There is no element of compensation involved and, therefore, the High Court was right in the view that it took, namely, that the assessee was not entitled to a deduction under section 37(1) of the Income-tax Act in respect of the amounts tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount cannot be less than the difference between the amount of tax on the sale of such raw material at the full rate and the amount at the lesser rate by reason of sub-section (1). That amount also cannot be more than one and one-quarter times the amount of the tax at the full rate. Whether it should be the aforesaid minimum amount or the aforesaid maximum amount or something in between is for the Commissioner to determine, having regard to the circumstances in which such use was made. Clearly, sub-section (2) comprises both the elements of compensation and penalty, compensation in so far as payment of tax at the full rate is obligatory, and something more, up to 25 per cent. thereof, is payable should the Commissioner so deem fit, having r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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