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TMI Blog1967 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ipping documents from certain parties in respect of some consignments of gum imported by them from Africa. When the goods arrived in India and were sought to be cleared through customs by the assessee on the basis of the documents purchased by it, it was found that the imports were unauthorised and the goods were liable to be confiscated and a penalty was liable to be imposed under section 167(8) of the Sea Customs Act. The assessee paid an amount of Rs. 31,302 as and by way of penalty for saving the goods from being confiscated. These penalties were paid by the assessee between the dates October 28, 1944, and January 16, 1945, which fell within the Samvat year 2001, which was the accounting year of the assessee for the assessment year 1946 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Assistant Commissioner did not accept these contentions urged on behalf of the assessee because, in his opinion, the appellant had failed to prove that the penalty was levied for faults of the five parties from whom it had purchased the goods. The Appellate Assistant Commissioner accordingly confirmed the order of the Income-tax Officer in respect of the said amount. In the appeal before the Income-tax Appellate Tribunal, however, it took the view that the assessee was entitled to plead that it had purchased the documents of title in good faith and paid consideration thereon and thereafter it had to pay the penalties in order not to lose the goods which had become its property. In these circumstances, the Tribunal pointed out that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot on an assumption that the purchase of the consignments by the assessee was in good faith but on the basis of its finding to that effect. As we have already pointed out, the Tribunal observed in its order as follows: " So far as the assessee is concerned, he is entitled to plead that he purchased the documents of title in good faith and paid consideration thereon and thereafter it had to pay the additional penalties in order not to lose the goods which had become its property. In the circumstances of the case, we have to hold that the penalties paid form only part of the cost of the goods imported and accordingly a proper deduction under section 10(1) itself. " It would be clear from this order that the conclusion of the Tribunal that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Tribunal that the purchases of the assessee were made in good faith, the question as framed by the Tribunal is the proper and correct question. The notice of motion taken out by the department, therefore, for the purpose of amending the said question or substituting it by a question as proposed by the department, must be rejected. Coming now to the question as framed, we think that it must be answered in the affirmative and in favour of the assessee. Under section 10(1) of the Indian Income-tax Act, tax is made payable in respect of the profits or gains of business. Profits or gains of business would be the excess of the sale price over the cost price and in determining the profits or gains, therefore, the cost has to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities. In the present case, therefore, the expenses incurred by the assessee could be regarded as wholly and exclusively incurred for the purpose of his business. In our opinion, therefore, the conclusion arrived at by the Tribunal that the sum of Rs. 31,302 was allowable to the assessee as proper deduction is correct and the deduction is capable of being allowed under section 10(1) of the Income-tax Act as held by the Tribunal or even under section 10(2)(xv) of the Act. The result, therefore, is that the question referred to us must be answered in the affirmative. We answer accordingly. The department will pay the costs of the assessee. The notice of motion taken out by the department is also dismissed with costs. Question answered in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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