TMI Blog2018 (8) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... is more in the nature of compensatory and necessitated by commercial expediency. In the normal incidences of business, certain damages are to be paid by an assessee and the expenses so incurred is an allowable deduction in the ordinary course of the business. The letter of Inspector of Legal Metrology, Nagpur dated 11.7.2012 states that the assessee to make payment of ₹ 20,000/- to avoid any future litigation. The assessee has settled the issue by paying the sum as compensation/damages for the interest of its business, which according to us, cannot be treated as incurred for infraction of any law and therefore to be disallowed. - Expenses allowed - Decided in favor of assessee. - ITA No. 3365/Ahd/2016 - - - Dated:- 13-8-2018 - SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice was issued to the assessee to explain the reason for late payment of PF and ESCI collected from the employees. Assessee submitted a reply dated 7.1.2016, but such reply of the assessee did not find favour from the AO. The AO accordingly disallowed the same and added to the income of the assessee. Dissatisfied with the order of the AO, the assessee went in appeal before the ld.First Appellate Authority. The ld.CIT(A) considering submissions and details furnished by the assessee restricted the disallowance to ₹ 4, 10, 932/-. 4. Before us, the ld.counsel for the assessee reiterated submissions as were made before the Revenue authorities, while ld.DR relied upon the orders of Revenue authorities. 5. We have considered sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B. This being the position, as interpreted by the Hon ble jurisdictional High Court, we are not inclined to interfere in the order of the Revenue authorities on this issue, which is upheld, and this ground of assessee is dismissed. 6. Coming to the next issue of the assessee regarding disallowance of alleged legal expenses of ₹ 26, 000/-, brief facts are that during the assessment proceedings the AO noticed that the assessee debited a sum of ₹ 26, 000/-, which according to the AO was in the nature of penalty for an offence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue authorities. 8. We have considered rival submissions and gone through the record carefully. A short issue before us is, whether compounding fees expended by the assessee is compensatory in nature, and allowable expenditure under section 37(1) or not. We find that Explanation 1 appended to section 37(1) of the Income Tax Act prohibits allowance of any expenditure, if it was incurred for illegal activities or towards infringement of law. The ld.Revenue authorities construed the payment made by the assessee to Inspector of Legal metrology Department as incurred towards violation of law which is penal in nature. On the other hand, the stand of the assessee is that it is a compensatory in nature and not penal nature and acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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