TMI Blog1992 (10) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... nting years ? " The brief facts of the case are that the assessee is a dealer in Tata motor parts. Certain motor parts were purchased by the assessee from within the State of Rajasthan, on which Rajasthan sales tax was paid. While supplying such parts to the Government Departments, the assessee has charged sales tax in addition to the value of the goods. The amount of sales tax so collected was not deposited in the Government Treasury and the entire amount of sales tax was credited in mal khata along with the sale price of the goods. The Sales Tax Department levied penalties of Rs. 50,000 and Rs. 75,075 in respect of the assessment years 1978-79 and 1979-80 under section 16(1)0) of the Rajasthan Sales Tax Act, 1954. The assessee claimed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods in respect of which no tax is payable by him or tax at a rate higher than that payable under this Act or having charged such tax retains such tax knowing it to be not due or higher, then he is liable for penalty in a sum not exceeding double the amount of unauthorised tax so demanded, charged or retained. The provisions of section 16(1)j) have subsequently been amended which are not relevant for the purpose of determination of this dispute. A distinction has been made by a subsequent amendment between the tax amount and the quantum of penalty to be levied, but in so far as the present case is concerned, the assessee is liable for payment of penalty in respect of the unauthorised tax demanded, charged or retained. The question for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent of business and, therefore, only such disbursements can be deducted as are really incidential to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore, where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader, the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business. The Allahabad High Court in Cawnpore Sugar Works Ltd. v. CIT [1992] 196 ITR 274, has also taken the view that expenditure incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law does not expect the infringement thereof and infringements are not incidental or ancillary to business which is carried on by a businessman. The requirement of section 37 of the Income-tax Act is that the expenditure must be laid out or expended wholly and exclusively for the purposes of business to be allowed as a deduction. The expenditure in respect of a penalty cannot be considered to be laid out or expended wholly and exclusively for the purposes of business. In these circumstances, we are of the view that the Tribunal was correct in law in holding that the entire amount paid by the assessee to the Sales Tax Department cannot be allowed as a deduction in respect of penalty under section 16(1)j) of the Rajasthan Sales Tax Act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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