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TMI Blog2017 (2) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on 31.10.2002 declaring a total loss of Rs. 2,47,39,169/- under the normal provisions of Act and book profit u/s 115JB at Rs. 2,10,94,397/-. The assessment was completed under section 143(3) of the Act at a loss of Rs. 2,45,74,503/- and book profit at Rs. 3,66,54,151/- and taxed accordingly. Thereafter the assessment was reopened under section 148 of the Act and the loss was re-computed at Rs. 2,17,58,137/- by making the disallowance of Rs. 28,16,366/- on account of freight/transportation charges under explanation to Section 37(1) of the Act. The Economic and Finance Department, Ministry of Oil, Baghdad had awarded a contract to the assessee under Oil for food programme by Iraq Govt. and the assessee had executed the contract accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and subsequently levied penalty of Rs. 9,57,282/- being 100% of the tax sought to be evaded for furnishing inaccurate particulars of income and concealing the particulars of income within the meaning of section 271(1)(c) of the Act read with explanation (1) thereto. The assessee appealed before the First Appellate Authority, who dismissed the appeal of the assessee by considering the submissions of the assesses by observing and holding as under:- "4.2 Decision :- I have considered the facts of the case and the submissions made by the assessee. Basic Issue Is that assessee claimed deduction for commission payments of Rs. 28,16,366/- made to an Iraqi party for a contract awarded by Ministry of Oil, Baghdad, Iraq under 011 for food prog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income as the assessee had complied with the conditions of the terms and conditions of the contract from the Iraq Government which was obtained and executed with the permission of the Govt. of India and the payments were made after obtaining the approval of Govt. of India and the claim for deduction was genuine and logical. It has also been submitted that there Is no revenue loss since the total Income arrived at after the disallowance of Rs. 28,16,366/- was loss and tax was paid on total income arrived at on the basis of book profit calculated under section 115JB of the IT Act at Rs. 3,68,54,151/-" 3. The ld. AR vehemently submitted before us that the assessee has executed the contract awarded by Economic and Finance Department, Minis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made on the basis of letter of CBDT referring to the Volcker Committee report could not be the basis for imposition of penalty. Under various decisions of the Co-ordinate Benches of the Tribunal as referred hereinabove have held that the payment made to Iraq Government by way of expenditures were admissible in computing the income of the assessee and therefore the penalty levied on the disallowance made on the basis of the said letter of CBDT on additional transportation charges was bad in law and should be deleted. 4. On the other hand, the ld. DR relied heavily on the orders of authorities below. 5. Heard both the parties, perused the material placed before us including the orders of authorities below and case laws relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2003-04 - Assessee was a manufacturer and exporter of rice and tea - It exported tea to Iraq under a program called 'Oil for Food Program' framed by United Nations to meet humanitarian crisis of food in war ravaged Iraq - Assessee made certain payments to an Iraqi company, viz., Alia, as commission for receiving services in nature of 'inland transportation' and 'after sales' services - Assessing Officer disallowed claim of such payments as expenditure under section 37(1) on ground that payments so made were illegal in nature being kickbacks received by Iraqi Authorities - Assessing Officer based its finding upon a report of an Inquiry Commission constituted by United Nations, viz., 'Volker Committee', where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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