TMI Blog1985 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year is the accounting year March 25, 1961, to March 31, 1962. The assessee is a registered firm doing business mainly in cloth. The assessee secured a licence for importing automobile spare parts. The assessee then entered into a contract to import and sell to M/s. Bipin Automobiles 3,100 capacitors at a profit of 50 per cent. on C.I.F. value. There was a further condition in the contract that the purchaser was to bear all the expenses, including customs duty, etc. Pursuant to this agreement, the assessee placed an order for capacitors with a foreign exporter and the goods, namely, capacitors, were eventually imported. But it was found that the goods did not conform to some of the specifications in the licence and the customs authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's claim in respect of penalty was not one which could be allowed under section 28 of the Income-tax Act, 1961. The assessee then preferred a second appeal to the Income-tax Appellate Tribunal. The Tribunal came to the conclusion that the assessee had contravened some of the conditions or specifications of the licence and the penalty was levied upon the assessee and not the purchaser. The assessee had rightly debited the penalty to the trading account and the assessee was not right in contending that the debit in respect of the penalty in the trading account was wrongfully made by the assessee. What the purchasers, M/s. Bipin Automobiles, had paid to the assessee was not the penalty but the sale price of the goods purchased by them w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee itself and not on the ground of any other person's default. Nor is this a case in which the assessee can be regarded in any sense as a nominal licence-holder. It is not as if the assessee gave its licence to M/s. Bipin Automobiles for importing the goods in question and M/s. Bipin Automobiles imported the goods. The licence was utilised by the assessee-firm itself and that fact cannot be altered by the circumstance that they had agreed to sell the goods to be imported by them to M/s. Bipin Automobiles. It is well settled that if an assessee has to pay a penalty to the customs authorities in respect of goods imported by the assessee on account of its own default, the amount of that penalty cannot be deducted in the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations of the Division Bench set out at page 672 of the aforesaid report show that the Division Bench clearly took the view that in cases where penalty had to be incurred because of the fault of the assessee himself, as for instance, by 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 thereof could not be regarded as wholly laid out for the purpose of the business, and, in support of this conclusion, the decision of the Supreme Court in Haji Aziz Abdul Shakoor Bros. v. CIT[1961] 41 ITR 350, was cited. This decision, in our view, does not advance the argument of Mrs. Jagtiani, and, in fact, the aforesaid observati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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