M/S. GEM ELECTRO MECHANICALS PVT. LTD, JAIPUR V. ACIT, CIRCLE-4, JAIPUR

ITA 2/JPR/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6511 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 02-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAUL
• Keywords: Business expenditure
• Section: 37; 143(3); 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,B JAIPUR JH ,U-DS-LSUH] MIK/;{K ,O LAANHI XKSLKBZ] U;KF;D LNL; DS LE{K BEFORE: SHRI N.K. SAINI, V.P. & SHRI SANDEEP G OSAIN, JM VK;DJ VIHY LA-@ ITA NO. 02/JP/2020 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 M/S. GEM ELECTRO MECHANICALS PVT. LTD. E-155, ROAD NO. 11, VKI AREA JAIPUR CUKE VS. THE ACIT CIRCLE-4 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACG 6256 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPOND ENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ROHAN SOGANI, CA JKTLO DH VKSJ LS@ REVENUE BY: SMT. RUNI PAUL , ADDL. CIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/09/2020 MN?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT: 15 /09/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT (A)- 2, JAIPUR DATED 08.11.2019 FOR THE ASSESSMENT YEAR 2016- 17 PASSED UNDER 143(3) OF THE INCOME TAX ACT, 1961 ON THE GROUNDS MENTIONED HEREINBELOW. 1. IN THE CIRCUMSTANCES OF THE CASE AND IN LAW TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING THE CLAIM OF THE ASSESSEE COMPANY OF RS. 2,74,978/- INCURRED ON DELAYED PAYMENT OF CERTAIN GOVT. DUES. THE ACTION O F THE LD. CIT(A) IS ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 2 ILLEGAL, UNJUSTIFIED AND ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALLOWANCE OF RS. 2,74,978/-. 2. IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE CLAIM OF THE ASSESSEE COMPANY OF RS. 1,82,756/- INC URRED ON ACCOUNT OF NON-SUBMISSION OF CERTAIN FORMS. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED AND ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALLOWANCE OF RS. 1,82,756/-. DUE TO PREVAILING COVID-19 PANDEMIC CONDITION, THE HEARING OF THE APPEALS ARE CONCLUDED THROUGH VIDEO CONFERENCE. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY FILED ITS E-ITR FOR THE ASSESSMENT YEAR 2016-17 ON 27-09-2014 DECLA RING TOTAL INCOME OF RS. 85,37,500/-. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 01-12-2018 AT A TOTAL INCOME O F RS. 1,08,80,140/- RESULTING INTO ADDITION OF RS. 23,42,640/-. 2.2 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 8-11-201 9 HAS SUSTAINED THE ADDITION OF RS. 4,57,734/- BY OBSERVING AS UNDER:- 3.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. ASSESSEE CLAIMED INTEREST OF RS.2,74,978/- PAID ON VARIOUS DELAY IN PAYMENT WHICH INCLUDES DELAYED PAYMENT OF SALES TAX DEMAND AND INTEREST, SERVICE TAX AND CUSTOM DUT Y WHICH ARE ALL GOVT. DUES. SIMILARLY PAYMENT OF RS. 1,82,7 56/- IS ON ACCOUNT OF NON-SUBMISSION OF REQUIRED FORMS. ASSESS EE ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 3 CLAIMS THAT THEY ARE BUSINESS EXPENDITURE INCURRED IN COURSE OF BUSINESS AND ALLOWABLE U/S 37. I FIND THAT INTER EST ON STATUTORY DUES IS CONTRAVENTION OF RESPECTIVE LAW. SIMILARLY THE SALES TAX DEMAND RAISED IS ALSO FOR CONTRAVENTI ON. THEREFORE, THEY ARE NOT ALLOWABLE UNDER SECTION 37( 1) ALSO. ACCORDINGLY, THE SAME IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 2.3 NOW BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US ON THE GROUN DS MENTIONED HEREINABOVE. 2.4 THE GROUNDS NOS. 1 AND 2 RAISED BY THE ASSESSE E ARE INTERRELATED AND INTERCONNECTED AND RELATE TO CHALLENGING THE OR DERS OF THE LD. CIT(A) IN DELETING THE ADDITION. 2.5 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE TH E LD. CIT(A). HE HAS ALSO FILED THE FOLLOWING WRITTEN SUBMISSIONS FOR OU R CONSIDERATION. 1. BRIEF FACTS 1.1. THE ASSESSEE COMPANY IN THE PRECEDING YEARS, H AD MADE CERTAIN INTER-STATE SALES, AT CONCESSIONAL RATE OF SALES TAX, AGAINST C ERTAIN FORMS PRESCRIBED UNDER THE CENTRAL SALES TAX ACT, 1956. THE ASSESSEE COMPANY, IN SUCH AN ARRANGEMENT, WAS REQUIRED TO COLLECT THE REQUISITE FORMS FROM THE BU YER OF THE GOODS, SITUATED IN A DIFFERENT STATE, AND THEREAFTER DEPOSIT THE SAME WI TH THE SALES TAX AUTHORITIES IN THE STATE OF RAJASTHAN. ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 4 1.2 THE CONCESSIONAL RATE OF TAX WAS ONLY APPLICABL E WHEN THE ASSESSEE COMPANY AFTER SELLING THE GOODS COULD DEPOSIT THE REQUISITE FORMS, AS OBTAINED FROM THE BUYERS, WITH THE SALES TAX AUTHORITIES. THIS WAS IN ACCORDA NCE WITH SECTION 8(1) OF CENTRAL SALES TAX ACT, 1956.. 1.3. HOWEVER, FOR CERTAIN SALE TRANSACTIONS UNDERTA KEN BY THE ASSESSEE COMPANY, BUYERS DID NOT PROVIDE THE DESIRED FORMS TO THE ASS ESSEE COMPANY, RESULTANTLY,THOSE FORMS COULD NOT ULTIMATELY BE DEPOSITED, BY THE ASS ESSEE COMPANY, WITH THE SALES TAX AUTHORITIES. 1.4. DURING THE RELEVANT PREVIOUS YEAR, ASSESSMENT WAS CONDUCTED BY THE SALES TAX DEPARTMENT ON THE TRANSACTIONS UNDERTAKEN BY THE AS SESSEE COMPANY IN THE PRECEDING YEARS. DURING SUCH ASSESSMENT, IT WAS FOUND THAT FO R CERTAIN TRANSACTIONS, SINCE, THE ASSESSEE COMPANY HAD NOT DEPOSITED THE REQUISITE FO RMS, IT WAS NOT ENTITLED TO THE SALES TAX AT CONCESSIONAL RATE AND NORMAL RATE OF T AX WAS MADE APPLICABLE ON SUCH TRANSACTIONS. 1.5. RESULTANTLY, PURSUANT TO SUCH ASSESSMENT, CARR IED OUT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE COMPANY WAS REQUIRED TO DEPOSIT THE DIFFERENTIAL AMOUNT OF SALES TAX ON THE TRANSACTIONS FOR WHICH THE REQUISITE FOR MS COULD NOT BE SUBMITTED. THEREAFTER, THE ASSESSEE COMPANY DEPOSITED RS. 1,82 ,756 AS PART OF THE SALES TAX AMOUNT. 1.6. SINCE THERE WAS DELAY IN DEPOSITION OF THE AFO REMENTIONED AMOUNT OF SALES TAX, THE ASSESSEE COMPANY ALONG WITH THE TAX, HAD TO DEPOSIT INTEREST, AMOUNTING TO RS. 2,71,826 ON SUCH DELAYED DEPOSITION OF SALES TAX AM OUNT, IN ACCORDANCE WITH THE SECTION 9 OF CENTRAL SALES TAX ACT, 1956 R.W. SECTI ON 55 OF RAJASTHAN VALUE ADDED TAX ACT, 2003. ALSO, RS. 3,152 WAS DEPOSITED ON ACC OUNT OF INTEREST DUE TO DELAY IN DEPOSITION OF CUSTOM DUTY AND SERVICE TAX. 1.7. THUS, THE TOTAL AMOUNT OF RS. 4,57,734 (RS. 1, 82,756 + RS. 2,71,826 + RS. 3,152), WAS CLAIMED BY THE ASSESSEE COMPANY, DURING THE REL EVANT PREVIOUS YEAR, AS PART OF THE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS, U/S 37(1) OF THE INCOME TAX ACT, 1961 ('ITA'). 2. ASSESSING OFFICER 2.1 LD. AO, DURING THE COURSE OF ASSESSMENT PROCEED INGS, DISALLOWED THE AFOREMENTIONED CLAIM MADE BY THE ASSESSEE COMPANY, FOR THE SOLE REASON OF THE SAME HAVING BEEN INCURRED ON ACCOUNT OF VIOLATION OF LAW FOR THE TIME BEING IN FORCE. 2.2. LD. AO HELD THAT INTEREST, ADDITIONAL TAX, ETC . WERE SURELY DUE TO THE VIOLATION OF DUE DATES FOR DEPOSIT OF THE SAME UNDER THE RESPECT IVE ACT. ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 5 3. COMMISSIONER OF INCOME TAX (APPEALS) 3.1 BEFORE THE ID. CIT(A), SUBMISSIONS WERE MADE BY THE ASSESSEE COMPANY WHICH HAS ALSO BEEN REPRODUCED BY ID. CIT(A) ON PAGE 15 AND 16 OF HER ORDER. 3.2. LD. CIT(A), WITHOUT ANY COGENT BASIS, UPHELD T HE DISALLOWANCES MADE BY THE ID. AO, BY SIMPLY MENTIONING THAT THEY WERE ON ACCOUNT OF CONTRAVENTION OF THE RESPECTIVE LAW. LD. CIT(A) DID NOT APPRECIATE THE N ATURE OF THE EXPENSES INCURRED AND THE PROVISIONS OF THE RELEVANT STATUTE. 4. SUBMISSIONS 4.1 FOLLOWING FACTS ARE UNDISPUTED 4.1.1 THE LIABILITY ON ACCOUNT OF SALES TAX WAS DUE TO TH E NON-DEPOSITION OF THE REQUISITE FORMS THROUGH WHICH THE ASSESSEE WAS ENTI TLED TO COLLECTION OF SALES TAX AT CONCESSIONAL RATE. 4.1.II THE LIABILITY ON ACCOUNT OF INTEREST WAS DUE TO THE REASON OF DELAY IN DEPOSITION OF THE AFOREMENTIONED SALES TAX AND ALSO CUSTOM DUT Y AND SERVICE TAX. 4.2. SINCE THE REQUISITE FORMS COULD NOT BE DEPOSIT ED BY THE ASSESSEE COMPANY WITH THE SALES TAX AUTHORITIES, THE ASSESSEE COMPANY WAS REQUIRED TO DEPOSIT THE SALES TAX AMOUNT AT NORMAL RATE, AS AGAINST THE CONCESSIONAL RATES OF TAX. 4.3. RESULTANTLY, THE DIFFERENTIAL AMOUNT OF TAX (N ORMAL RATE CONCESSIONAL RATE), OF RS. 1,82,756, WAS DEPOSITED BY THE ASSESSEE COMP ANY. 4.4. SUCH AMOUNT OF TAX DEPOSITED BY THE ASSESSEE C OMPANY IS CERTAINLY NOT IN THE NATURE OF PENALTY FOR CONTRAVENTION OF ANY LAW. IF THE ASSESSEE COMPANY HAD NOT TAKEN THE ROUTE OF CONCESSIONAL RATE OF TAX, IT WAS, EVEN OTHERWISE, REQUIRED TO PAY SUCH TAX AT NORMAL RATES ONLY, BEING OBLIGATED TO DO SO UNDE R THE RELEVANT ACT. IN SUCH A SCENARIO THE ENTIRE SALES TAX DEPOSITED BY THE ASSE SSEE, AT NORMAL RATE OF TAX WOULD HAVE BEEN ALLOWED U/S 37(1), AS HAVING BEEN INCURRE D FOR THE PURPOSE OF BUSINESS. 4.5. IT IS ONLY A TAX WHICH WAS PAID BY THE ASSESSE E COMPANY AS THE ROUTE OF CONCESSIONAL RATE OF TAX WAS BLOCKED FOR THE REASON OF ASSESSEE COMPANY HAVING NOT BEEN ABLE TO DEPOSIT THE REQUISITE FORM WITH THE SA LES TAX AUTHORITIES. 4.6. IT IS AKIN TO A CASE, IF THE ASSESSEE COMPANY HAD NOT COLLECTED ANY SALES TAX AMOUNT FROM THE BUYER, IN SUCH A SCENARIO, ASSESSEE COMPANY WOULD HAVE BEEN RESPONSIBLE FOR PAYMENT OF SALES TAX OUT OF ITS OWN POCKET AND WOULD HAVE GOT DEDUCTION OF ENTIRE SUCH AMOUNT UNDER SECTION 37(1) . 4.7. HON'BLE SUPREME COURT IN MALWA VANASPATI & CHEMICAL CO. [1997] 92 TAXMAN 537 (SC) (ENCLOSED PAGE 3), WITH REFERENCE TO MADHYA PRADESH GENERAL ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 6 SALES TAX ACT, 1958, THAT, WHEREIN, THE ASSESSEE HA D TO PAY THE AMOUNT OF TAX AT ACTUAL RATES AND SOMETHING MORE (UP TO 25% OF THE TAX AMOU NT), INSTEAD OF CONCESSIONAL RATES, THEN, IT COMPRISES BOTH THE ELEMENTS OF COMP ENSATION AND PENALTY. COMPENSATION INSOFAR AS PAYMENT OF TAX AT THE FULL RATE IS OBLIGATORY, AND SOMETHING MORE (I.E. UP TO 25 % OF THE TAX AMOUNT), IS IN THE CHARACTER OF A PENALTY. THE ASSESSEE SHALL BE ENTITLED TO THE DEDUCTION UNDER SECTION 37 (1) INSOFAR AS THE PAYMENTS PARTAKE THE ELEMENT OF COMPENSATION, I.E. UP TO 100% OF THE SALES TAX RATE ACTUALLY PAYABLE. 4.8. RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE MP HIGH COURT IN THE CASE OF SIMPLEX STRUCTURAL WORKS [1983] 12 TAXMAN 176 (ENCL OSED PAGE 6-7), WHEREIN, IT HAS BEEN HELD THAT THE DIFFERENTIAL AMOUNT OF TAX ( NORMAL RATE CONCESSIONAL RATE) SUBSEQUENTLY DEPOSITED SHOULD BE ALLOWED UNDER SECT ION 37(1). 4.9. INTEREST OF RS. 2,71,826 WAS PAID BY THE ASSES SEE COMPANY, IN ACCORDANCE WITH SECTION 9 OF CENTRAL SALES TAX ACT, 1956 R.W. SECTI ON 55 OF RAJASTHAN VALUE ADDED TAX ACT, 2003, FOR DELAY IN DEPOSITION OF THE SALES TAX AMOUNT AS STATED HEREINBEFORE. 4.10. IT IS A TRITE LAW THAT INTEREST ON DELAY IN D EPOSITION OF SALES TAX IS COMPENSATORY IN NATURE AND NOT PENAL. 4.11. RELIANCE IS PLACED ON THE BELOW MENTIONED JUD ICIAL PRONOUNCEMENTS: - SUPREME COURT 4.11.I LACHMANDAS MATHURADAS [2002] 122 TAXMAN 828 (SC) ENCLOSED PAGE 8) 4.11.II MAHALAKSHMI SUGAR MILLS CO. V. CIT [1980] 1 23 ITR 429 (SC) JURISDICTIONAL HIGH COURT 4.11.III UDAIPUR DISTILLERY [1986] 24 TAXMAN 282 (R AJ HC) (ENCLOSED PAGE 12) 4.11.IV RAJASTHAN CENTRAL STORES (P.) LTD. [1984] 1 9 TAXMAN 163(RAJASTHAN HC) 4.11.V C.G. SANGHI [1984] 18 TAXMAN 380 (RAJASTHAN HC) 4.11.VI WESTERN INDIAN STATE MOTORS [1987] 163 ITR 194 (RAJASTHAN HC) 4.12. HON'BLE JURISDICTIONAL HIGH COURT IN UDAIPUR DISTIL LERY [1986] 24 TAXMAN 282 HELD THAT, 'THE LIABILITY OF INTEREST ON DELAYED PAYMENT OF SA LES TAX IS A STATUTORY OBLIGATION OF THE DEALER AND IS AUTO MATIC AS NO SPECIFIC ORDER IS REQUIRED. THUS, IT IS A PART OF SALES TAX AND AS TH E SALES TAX IS PAID BY A DEALER FOR THE PURPOSE OF CARRYING ON BUSINESS, THE AMOUNT OF INTEREST WILL FOR ALL PURPOSES BE CONSIDERED TO BE AN AMOUNT SPENT WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. IT MAY BE STATED THAT IT IS WELL SETTLED THAT NEITHER NECESSITY NOR MOTIVE NOR REASONABLENESS IS THE TEST FOR ALLOWING DEDUCTION O F EXPENDITURE SPENT WHOLLY AND ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 7 EXCLUSIVELY FOR THE PURPOSE OF BUSINESS UNDER SECTI ON 37. IT FOLLOWS, THEREFORE, THAT THE AMOUNT OF INTEREST PAID BY THE ASSESSEE ON THE SALES TAX IS AN ALLOWABLE DEDUCTION UNDER SECTION 37.' 4.13. SIMILARLY INTEREST OF RS. 3,152, DEPOSITED ON ACCOUNT OF INTEREST DUE TO DELAY IN DEPOSITION OF CUSTOM DUTY AND SERVICE TAX SHOULD BE ALLOWED AS EXPENDITURE U/S 37(1). IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION, ADDITIONS MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) DESERVES TO BE DELE TED. 2.6 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDERS OF THE LOWER AUTHORITIES AND ALSO RELIED ON THE FOLLOW ING DECISIONS. 1. SWADESHI COTTON MILLS LTD. VS CIT 233 ITR 199 ( SC) 2. BOKARO POWER SUPPLY CO. VS DCIT , CIRCLE 3(1), NEW DELHI (ITA NO.3405/DEL/2014 (ASSESSEE ) AND ITA NO.3692/DEL/2014 (REVENUE ) DATE OF ORDER 31-10-201 7, ITAT DELHI BENCH 2.7 WE HAVE HEARD THE LD. COUNSELS FOR BOTH THE PAR TIES AND WE HAVE ALSO PERUSED THE MATERIALS PLACED ON RECORD, DELIBE RATED UPON JUDGEMENTS CITED BY THE PARTIES AS WELL AS THE ORDERS OF THE R EVENUE AUTHORITIES. FROM THE FACTS, WE NOTICED THAT THE ASSESSEE HAD MADE CE RTAIN INTER-STATE SALES AT CONCESSIONAL RATES OF SALES TAX, AGAINST C FORM S PRESCRIBED UNDER THE CENTRAL SALES TAX ACT, 1956. THE ASSESSEE COMPANY W AS REQUIRED TO COLLECT REQUISITE FORMS FROM THE BUYERS OF THE GOOD S SITUATED IN DIFFERENT STATES AND THEREAFTER DEPOSIT THE SAME WITH THE SAL ES TAX AUTHORITIES IN THE STATE OF RAJASTHAN. HOWEVER, FOR CERTAIN SALES TRANSACTIONS, THE ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 8 ASSESSEE COMPANY COULD NOT OBTAIN THE REQUIRED FORM S FROM THE BUYERS; RESULTANTLY, THOSE FORMS COULD NOT ULTIMATELY BE DE POSITED WITH THE SALES TAX DEPARTMENT. THEREFORE, IN THE ABOVE CIRCUMSTANC ES, THE ASSESSEE WAS NOT FOUND ENTITLED TO THE SALES TAX AT CONCESSIONAL RATE AND THUS NORMAL RATE OF TAX WAS MADE APPLICABLE ON SUCH TRANSACTION S. HENCE, THE ASSESSEE WAS REQUIRED TO DEPOSIT THE DIFFERENTIAL AMOUNT OF SALES TAX AMOUNTING TO RS. 1,82,756/-ON THE TRANSACTIONS FOR WHICH REQUISI TE FORMS COULD NOT BE SUBMITTED BY THE ASSESSEE COMPANY. 2.8 SINCE THERE WAS DELAY IN DEPOSITING THE AFORESA ID AMOUNT OF SALES TAX, THEREFORE, THE ASSESSEE WAS MADE TO DEPOSIT IN TEREST AMOUNTING TO RS. 2,71,826/- ON SUCH DELAYED PAYMENT OF SALES TAX AMO UNT AND RS. 3,152/- ON DELAYED PAYMENT OF EXCISE/CUSTOM DUTY & SERVICE TAX. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING DISALLOW ED THE CLAIM OF THE ASSESSEE FOR THE SOLE REASON THAT SAME HAD BEEN INC URRED ON ACCOUNT OF VIOLATION OF LAW. 2.9 AFTER HAVING HEARD THE LD. COUNSELS FOR BOTH TH E PARTIES AT LENGTH AND ALSO APPRECIATING THE FACTS OF THE PRESENT CASE , WE FOUND THAT SINCE THE REQUISITE FORMS COULD NOT BE DEPOSITED BY THE ASSES SEE TO THE SALES TAX DEPARTMENT, THEREFORE, THE ASSESSEE COMPANY WAS REQ UIRED TO DEPOSIT THE SALES TAX AMOUNT AT NORMAL RATE AS AGAINST CONCESSI ONAL RATE OF TAX, ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 9 RESULTANTLY, THE DIFFERENTIAL AMOUNT WAS DEPOSITED BY THE ASSESSEE COMPANY. IN OUR VIEW, SUCH AMOUNT OF TAX DEPOSITED BY THE ASSESSEE COMPANY IS CERTAINLY NOT IN THE NATURE OF PENALTY F OR CONTRAVENTION OF ANY LAW. IT WAS ONLY A TAX WHICH WAS PAID BY THE ASSESS EE COMPANY AS ROUTE OF CONCESSIONAL RATE OF TAX WAS BLOCKED AS THE ASSE SSEE WAS NOT ABLE TO DEPOSIT THE REQUISITE FORMS WITH THE SALES TAX DEPA RTMENT. ON SIMILAR CIRCUMSTANCES, THE HON'BLE SUPREME COURT IN THE CASE OF MALWA VANASPATI & CHEMICALS CO. (1972) 92 TAXMAN 537 (SC) HAD HELD THAT WHERE THE ASSESSEE HAD TO PAY THE AMOUNT OF TAX AT ACTUAL RATES INSTEAD OF CONCESSIONAL RATES AND SOMETHING MORE, THEN IT COMP RISES BOTH THE ELEMENTS OF COMPENSATION AND PENALTY. THEREFORE, CO MPENSATION INSOFAR AS PAYMENT OF TAX AT FULL RATE IS OBLIGATORY AND SO METHING MORE, IS IN THE CHARACTER OF A PENALTY. HENCE, THE ASSESSEE SHALL B E ENTITLED TO THE DEDUCTION U/S 37(1) OF THE ACT INSOFAR AS THE PAYME NTS PARTAKE THE ELEMENT OF COMPENSATION I.E. UPTO 100% OF THE SALES TAX RATE ACTUALLY PAYABLE. SIMILARLY, THE HON'BLE M.P. HIGH COURT IN THE CASE OF SIMPLEX STRUCTURAL WORKS [1983] 12 TAXMAN 176 HAD HELD THAT THE DIFFERENTIAL AMOUNT OF TAX (NORMAL RATE CONCESSIONAL RATE) SUB SEQUENTLY DEPOSITED SHOULD BE ALLOWED UNDER SECTION 37(1). TH E HON'BLE JURISDICTIONAL HIGH COURT IN UDAIPUR DISTILLERY [19 86] 24 TAXMAN ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 10 282 HELD THAT, 'THE LIABILITY OF INTEREST ON DELAYED PAYMENT OF SA LES TAX IS A STATUTORY OBLIGATION OF THE DEALER AND IS AUTOMAT IC AS NO SPECIFIC ORDER IS REQUIRED. THUS, IT IS A PART OF SALES TAX AND AS THE SALES TAX IS PAID BY A DEALER FOR THE PURPOSE OF CARRYING ON BUSINESS, THE AMOUNT OF INTEREST WILL FOR ALL PURPOSES BE CONSIDERED TO BE AN AMOUNT SPEN T WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT MAY BE STATED THAT IT IS WELL SETTLED THAT NEITHER NECESSITY NOR MOTIVE NOR REASO NABLENESS IS THE TEST FOR ALLOWING DEDUCTION OF EXPENDITURE SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS UNDER SECTION 37. IT FOLLOWS, T HEREFORE, THAT THE AMOUNT OF INTEREST PAID BY THE ASSESSEE ON THE SALE S TAX IS AN ALLOWABLE DEDUCTION UNDER SECTION 37. THE BENCH HAS ALSO TAKEN INTO CONSIDERATION THE CASE LAWS RELIED ON BY THE LD. DR BUT IT DID NO T FIND APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, TAKING INTO CONSIDERATION THE PRESENT FACTS, CIRCUMSTANCES OF T HE CASE AND THE CASE LAWS DISCUSSED HEREINABOVE, WE DO NOT CONCUR WITH T HE FINDINGS OF THE LD. CIT(A) AND WE ARE OF THE CONSIDERED VIEW THAT THE DIFFERENTIAL AMOUNT OF TAX (NORMAL RATE CONCESSIONAL RATE) AMOUNTING TO RS. 1,82,756/- AND INTEREST ON DELAYED PAYMENT OF SALES TAX AMOUNTING TO RS. 2,74,978/- (RS. 2,71,826/- PLUS RS. 3,152/-) DEPOSITED BY THE ASSESSEE IS NOT IN THE NATURE OF PENALTY FOR CONTRAVENTION OF ANY LAW. THE REFORE, THE ASSESSEE IS ITA NO. 02/JP/2020 M/S. GEM ELECTRO MECHANICALS PVT; LTD. VS ACIT, CIRC LE-4, ,JAIPUR 11 ENTITLED FOR DEDUCTION OF SUCH AMOUNT U/S 37(1) OF THE ACT. THUS THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 3.0 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 /09/202 0. SD/- SD/- ,U-DS-LSUH LANHI XKSLKBZ (N.K. SAINI) (SANDEEP GOSAIN) MIK/;{K@ VICE PRESIDENT U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 /09/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - M/S. GEM ELECTRO MECHANICALS PVT. LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT, CIRCLE-4, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 02/JP/2020} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR