1970 (2) TMI 27

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n framed by the assessee asking for reference. They are : " 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the amount recovered by the Government as penalty for non-supply of paddy according to specification was not deductible as expenditure under the Indian Income-tax Act, 1922 ? 2. Whether, on the facts and circumstances of the case, the Trib .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... paddy and rice. All the assessing authorities rejected the claim of the assessee to deduct the penalty from the income, and accordingly the aforesaid question was framed. The assessing authorities were of opinion that the penalty paid by the assessee was wholly dissociated from the income accrued to him and cannot, therefore, be deducted under section 10(2)(xv) of the Income-tax Act, 1922, which .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... place the real point before the assessing authorities. The real point to be answered is whether the penalty, while assessing the income, should be deducted therefrom as coming within the ambit of section 10(1) which lays down that : " The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocation' in respect of the profits or gains of any business, .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... as in violation of the terms of agreement under which the business was carried on. The assessing authorities in support of their conclusion relied on a Bench decision of this court in Commissioner of Income-tax v. Prafulla Kumar, which was reversed by the Supreme Court in Prafulla Kumar Mallik v. Commissioner of Income-tax. Their Lordships observed thus : " The word 'deduction' appears to have be .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ssee. The real question which requires to be answered is whether the deduction claimed could come under section 10(1) of the Income-tax Act, 1922. We would answer the question by saying that the assessee is entitled to relief under section 10(1) of the Act and not by way of deduction under section 10(2)(xv). In the result, the reference is accepted but, in the circumstances, there will be no ord .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X