TMI Blog1992 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... itutes an allowable deduction under section 28 or 37(1) of the Income-tax Act ; or in the alternative, could the amount of the aforesaid penalty paid form part of the cost of the goods to be assessed ? " The facts as found in its order dated January 11, 1977, by the Appellate Tribunal in I. T. A. No. 4296 of 1974-75 pertaining to the assessment year 1971-72, briefly, are that the assessee had obtained licences for import from Agra Charen Kala Kendra Pvt. Ltd. and thereunder the assessee imported plastic sponges. The, Customs Authorities held that, under those import licences, the assessee could have imported only natural sponges and not plastic sponges but the latter had been illegally imported without any import licence. The Tribunal fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mething else and whether the assessee could have imported items other than natural sponges under the import licences, these questions are no more open to the assessee, inasmuch as the question referred to this court at the instance of the assessee by the Tribunal, does not raise any factual controversy. If the assessee believed that the sum of Rs. 46,500 was not penalty in nature but something else and that import of other items was also permissible, then the assessee could have sought rectification of the order of the Appellate Tribunal under section 254(2) of the Act of 1961. The facts can no more be agitated before us because the correctness of the facts as found by the Tribunal was never disputed before it after its decision. No rectifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where the penalty has to be incurred because of the fault of the assessee himself, as for instance for the reason of his having carried on his business in an unlawful manner or in contravention of certain rules and regulations, the penalty paid by the assessee for such conduct could not be regarded as wholly laid out for the purpose of the business, because the incurring of the said expenses has not been necessitated by the business but by the conduct of the assessee in trying to carry on the business in unlawful manner. We, therefore, do not see any legal infirmity in the view taken by the Tribunal. Then comes the other submission of the assessee that, if the aforesaid amount is not held to be business expenditure, then the same be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was liable to be imposed under the Sea Customs Act. The assessee paid an amount of Rs. 31,302 by way of penalty for saving the goods from being confiscated. In the course of assessment proceedings, the assessee claimed the aforesaid amount as an allowable deduction under section 10 of the old Indian Income-tax Act, 1922. Whereas the Income-tax Officer and the Appellate Assistant Commissioner rejected the contention of the assessee, the Appellate Tribunal allowed the assessee to add the aforesaid amount towards the cost of the goods. Then the dispute was carried to the High Court of Bombay by the Revenue which held that the said amount was a permissible deduction as business expenditure and that the same could also be added to the cost of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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