TMI Blog2020 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd. vs. CIT (Supra) decided the issue in favour of the assessee - ITA No.933/Ind/2019 - - - Dated:- 26-8-2020 - Shri Kul Bharat, Judicial Member For the Appellant : Shri Gagan Tiwari, Adv. For the Revenue : Shri Ashish Porwal, Sr. DR ORDER This appeal by the assessee is directed against order of the Commissioner of Income Tax Appeals [CIT(A)]-3, Bhopal dated 29.08.2019 pertaining to the assessment year 2017-18. The assessee has raised following grounds of appeal: 1. That on the facts and in the circumstances of the case, the decision is contrary to law materially incurred and unsustainable in law, hence the same may kindly be quashed. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred and was not justified in disallowing interest on Entry Tax amounting to ₹ 2220/- u/s 37(1) of the Income Tax Act 1961 and therefore, the same be allowed and addition made be deleted. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred and was not justified in disallowing charges for delay in supply amounting to ₹ 50256/- u/s 37(1) of the Income Tax Act,1961 and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Ld subordinate authorities has made disallowance u/s 37 of the Act :- Nature of disallowance Amount Interest on delayed payment of entry tax 2,220 Charges on delayed supply of books to M.P. Text Book Corporation Ltd 50,256 5. In Ground No. (1), the objection raised is in respect to delayed payment of entry tax. 5.1 It is submitted that in view of the judgment of Hon ble Supreme Court in the case of Laxmi Sugar Mills Co Ltd Vs. CIT reported in 123 ITR 429 (SC), this is a deductible expenditure u/s. 37(1) of the Act. the Hon ble Supreme Court has held as under : 5.2 In our opinion, the interest paid under s. 3(3) of the Cess Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under s. 10(2)(xv) of the Indian I.T. Act, 1922, the assessee is entitled to succeed. There is no dispute that the payment of interest represents expenditure laid out wholly or exclusively for the purpose of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld. C1 T(A) and we uphold the same. Hence, this ground of Revenue is dismissed. Respectfully following the aforesaid decision, we confirm the order of Ld. CIT(A) and dismiss the ground no. 5 of revenue s appeal for AY 2012-13 and thus the appeal of Revenue for AY 2012-13 also stands dismissed. 5.4 In light of above it is submitted that the Ld lower authorities was not at all justified in making disallowance of Interest on delayed payment of entry tax as it is a settled law that payment of interest represents expenditure laid out wholly or exclusively for the purpose of the business. 6. In Ground No. (2) the objection raised is in respect to Charges on delayed supply of books to M.P. Text Book Corporation Ltd. 6.1 It is also submitted that the charges paid for delayed supply of books to M.P. Text Book Corporation Ltd. In the profit loss account the assessee has claimed deduction of ₹ 50,256 for the charges for delay supply of text books. This amount was paid as per the tender agreement Clause Nos. 29 33. The ledger account is also shows on different dates the debits were made. The copy of the payment released bills of M.P. Text Book Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhary Hammer Works Ltd. vs. ACIT (ITANo.4332/Del/2011). The Coordinate Bench in para 5 of this order decided this issue by observing as under: 5.We have heard the rival submissions and perused the material available on record. On a careful consideration of the same considering the judgements relied upon by the assessee and taken into consideration by CIT(A), and referred to before us, we are of the view that the claim of assessee has rightly been allowed by the CIT(A).There is a distinction between the penalty imposed for breach of law and the liquidated damages/compensation paid on account of late delivery. The clause pertaining to cost reduction in the eventuality of late delivery is an accepted fact and such conditions are inherent risks and incidental to the running of business. The factum of the occurrence of the event for which cost reduction has occurred has not been doubted by the A.O. The challenge posed by the department is only on the legal principle that a breach of contract of this nature is not an allowable expense. On consideration of facts and judicial principles, we are of the view that the department's ground deserves to be dismissed. 7. I find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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