TMI Blog1984 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the I.T. Act, 1961. The question referred is: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that an amount of Rs. 52,944 paid by the assessee as penalty for non-payment of sales tax is an allowable deduction in computing its business income ?" The assessee is a public limited company. The assessment year is 1972-73, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. That contention was accepted by the Tribunal and it directed the deletion of the addition of Rs. 52,944 from the taxable income. The answer to the question raised turns on the nature of the penalty leviable under s. 13(2) of the Karnataka Sales Tax Act, 1957. In Sterling Construction Trading Co. v. Commercial Tax Officer [1973] 32 STC 235, a Bench of this court held that under s. 13(2) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1957. The ratio of the decision of the Supreme Court is, therefore, applicable to the facts of the case on hand. In view of this enunciation, it must be held that the penalty paid under s. 13(2) of the Karnataka Sales Tax Act, 1957, was not a penalty in the real sense of the term and it is only a compensation for delay, in payment of the tax due. Clearly, therefore, it must be allowed as a de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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