Ogene Systems India Limited, Hyderabad V. Income Tax Officer, Ward-16(4), Hyderabad

ITA 271/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5379 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Business expenditure
• Section: 143(3); 37(1); 201; 64; 113; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 271/HYD/2018 ASSESSMENT YEAR: 2014-15 OGENE SYSTEMS INDIA LIMITED, HYDERABAD [PAN: AAACO7056R] VS INCOME TAX OFFICER, WARD-16(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING : 24-03-2021 DATE OF PRONOUNCEMENT : 06-05-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2014-15 ARISES FROM TH E CIT(A)-4, HYDERABADS ORDER DATED 21-12-2017 PASSED IN CASE NO.0395 / 16-17 / ITO,WD.16(4) / CIT(A)-4, HYD / 17 -18, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. COMING TO THE SOLE SUBSTANTIVE ISSUE RAISED IN ASSE SSEES PLEADINGS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING ITS SECURITY DEPOSIT ENCASHME NT CLAIM OF ITA NO. 271/HYD/2018 :- 2 -: RS.1,10,61,051/- TREATED AS PENAL IN NATURE, WE NOTIC E THAT THE CIT(A)S DETAILED DISCUSSION READS AS UNDER: 5. GROUND NOS. 5 TO 7 AND ADDITIONAL GROUND NOS. 1 0 TO 11 ARE WITH REGARD TO ADDITION OF RS.1,10,61,051/- TOWARDS DISA LLOWANCE OF SECURITY DEPOSIT. DURING THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER SUBMITTED AS UNDER: THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,10,61,05 1/- TOWARDS SECURITY DEPOSIT NON PERFORMANCE. WHEN ASKED ABOUT THE SAME, THE AR OF THE ASSESSEE FILED SUBMISSIONS. THE SUBMISSIO NS OF THE AR IS CAREFULLY CONSIDERED AND IT WAS FOUND THAT THE ASSE SSEE PAID BANK GUARANTEE FOR EXECUTING TURNKEY PROJECT WITH HIGH E XPLOSIVE FACTORY, PUNE. BUT, THE ASSESSEE FAILED TO EXECUTE THE PROJE CT. THE ENCASHMENT OF BANK GUARANTEE IS IN THE NATURE OF PENALTY LEVIE D FOR THE DEFAULT IN EXECUTING THE PROJECT. FURTHER, THE ASSESSEE HAS NO T REALIZED ANY AMOUNT OUT OF THIS PROJECT. AS THE EXPENDITURE CLAI MED BY THE ASSESSEE IS PENAL IN NATURE AND AS THERE WS NO INCO ME OUT OF THIS PROJECT, THE EXPENDITURE OF RS.1,10,61,051/- CLAIME D BY THE APPELLANT WAS DISALLOWED AND ADDED TO THE INCOME. 5.1 IN THIS REGARD, THE APPELLANT CONTENDED AS UNDE R: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF BULK DRUGS, CHEMICALS & & INTERMEDIA TES, ELECTRONIC CHEMICALS, DRUG DEVELOPMENT SERVICES INCLUDING CHEM ISTRY, ANALYTICAL SERVICES AND TRADING OF BULK DRUGS INTERMEDIATES. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS TAKEN UP A TRUNKEY PROJECT FROM 'HIGH EXPLOSIVES FACTORY', KHADKI, PUN E. FOR THE PURPOSE OF EXECUTING THE PROJECT, THE ASSESSEE HAS ENTERED INTO BANK GUARANTEE OF RS.1,10,61,051/- WHICH WAS MADE BY THE STATE BANK OF HYDERABAD. BUT DUE TO THE UNCONTROLLABLE CIRCUMSTAN CES, THE APPELLATE WAS UNABLE TO EXECUTE THE CONTRACT AND HE NCE THE CONTRACT WAS REVOKED. DUE TO THE NON EXECUTION OF THE PROJECT, THE CONTRA CTEE, HIGH EXPLOSIVES FACTORY', AS PER TERMS OF THE CONTRACT E NCASHED THE BANK GUARANTEE. LATER, THE BANK RECOVERED THE AMOUNT FRO M THE ASSESSEE. AS THE ASSESSEE INCURRED A LOSS ON ACCOUNT OF REVOC ATION OF CONTRACT, THE LOSS OF RS.1,10,61,051/- WAS DEBITED BY THE ASS ESSEE AS LOSS TO P & L ACCOUNT. THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT OF LOSS OF RS.1,10,61,051/- ON THE GROUND THAT IT IS P ENAL IN NATURE. (A) LOSS INCURRED BY THE ASSESSEE IS IN THE NATURE OF THE BUSINESS:- IN THIS REGARD, WE WOULD LIKE SUBMIT THAT THE ASSES SEE ACCEPTED THE CONTRACT AS A PART OF ITS NORMAL COURSE OF BUSINESS . BUT DUE TO THE UNCONTROLLABLE CIRCUMSTANCES, THE ASSESSEE WAS UNAB LE TO EXECUTE THE PROJECT AND SUBSEQUENTLY THE PROJECT WAS REVOKED AS THE CONTRACTOR (ASSESSEE) FAILED TO EXECUTE THE TRUNKEY PROJECT FO R DESIGN, SUPPLY ITA NO. 271/HYD/2018 :- 3 -: ERECTION & COMMISSIONING OF SPECIAL CHEMICAL PLANT AS PER TERMS AND CONDITIONS OF CONTRACT. DUE TO THE NON EXECUTION OF THE PROJECT, THE GENERAL MANAGER OF HIGH EXPLOSIVES FACTORY HAS REQU ESTED THE STATE BANK OF HYDERABAD, WHO TO GAVE GUARANTEED THE CONTR ACT TO REMIT BACK THE GUARANTEE AMOUNT OF RS.1,10,61,051/- IN TH E FAVOUR OF HIGH EXPLOSIVES FACTORY PUBLIC FUND ACCOUNT I.E CONTRACT EE. LATER, THE BANK RECOVERED GUARANTEE AMOUNT FROM THE ASSESSEE. THE ASSESSEE HAS DEBITED THE SAME INTO P&L OF THE RELEVANT FY I. E., 2013-14 UNDER THE SUB HEAD 'ADMINISTRATIVE AND SELLING EXPENDITUR E' UNDER THE HEAD 'OTHER EXPENDITURE '(NOTE 25 OF AUDITED FINANC IAL STATEMENTS). THUS, THE ASSESSEE INCURRED THE LOSS IN THE NORMAL COURSE OF THE BUSINESS. THE FORFEITURE OF THE BANK GUARANTEE IS C OMPENSATORY IN NATURE. (B) LOSS INCURRED BY THE ASSESSEE IS IN NATURE OF C OMPENSATORY AND NOT IN THE PENAL NATURE AND SAME SHOULD BE ALLOWED U/S.37 OF THE ACT: IN THIS REGARD, WE WOULD LIKE TO SUBMIT THAT MERELY BECAUSE OF THE AMOUNT PAID ON THE CANCELLATION OF CONTRACT, THE SA ME CANNOT BE CONSIDERED AS PENAL IN NATURE. MERELY BECAUSE AGREE MENT REFERRED TO, IN QUESTION AS A PENAL IN NATURE, ANY SUCH PAYMENT WOULD NOT PERTAKE CHARACTER OF PENALTY. IT IS FURTHER SUBMITT ED THAT THE AMOUNT OF BANK GUARANTEE PAID BY THE ASSESSEE TO THE BANK IS COMPENSATORY IN NATURE AND NOT PENAL IN NATURE AND THE EXPENDITU RE INCURRED WHICH IS IN NATURE OF COMPENSATORY IS ALLOWABLE U/S. 37(1 ) OF THE ACT. IN THIS REGARD, WE WOULD LIKE TO REVIEW THE SECTION 37 OF T HE ACT, SECTION 37(1): CONDITIONS LAID DOWN UNDER THIS SECT ION FOR ALLOWANCE OF A) IT SHOULD NOT BE IN THE NATURE OF EXPENDITURE DE SCRIBED IN SECTION 30 TO 36. B) IT SHOULD NOT BE IN THE NATURE OF CAPITAL OR PER SONAL EXPENDITURE. C) IT MUST BE EXPENDED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF THE BUSINESS. EXPLANATION TO SECTION 37(1) : EXPENDITURE INCURRED FOR ANY PURPOSE WHICH IS AN OF FENCE OR PROHIBITED BY LAW SHALL NOT BE ALLOWED. BRIEF FACTS RELATED TO THE ABOVE DISCUSSION: THERE ARE INSTANCES WHERE THE ASSESSEE INCURS AND P AYS CERTAIN AMOUNT FOR NOT FULFILLING CERTAIN TERMS OF ANY AGRE EMENT. IN THESE CASES, SOME OF THE ASSESSEE'S BOOK THE EXPENDITURE UNDER 'PENALTY' OR 'PENAL CHARGES' IN THE PROFIT AND LOSS ACCOUNT. NOW , THEY CLAIM IT TO BE AN ALLOWABLE DEDUCTION UNDER SECTION 37(1) OF THE A CT. HOWEVER, IF THE CASE IS SELECTED FOR REGULAR ASSESSMENT U/S 143(3) AND THE A.O. ITA NO. 271/HYD/2018 :- 4 -: NOTICES THIS PARTICULAR HEADING IN THE P/L ACCOUNT THEN IT IS MORE LIKELY THAN NOT THAT THE SAME WOULD BE DISALLOWED O N THE GROUND THAT IS IN THE NATURE OF PENALTY [I.E., EXPLANATION TO S EC 37(1)] WHICH IS INCORRECT. IN INSTANT CASE, LIABILITY WAS NOT STATUTORY BUT ON LY CONTRACTUAL. IT WAS COMPENSATION FOR DEPRIVATION OF USE OF MONEY AND WA S PART AND PARCEL OF LIABILITY AND, THEREFORE, IT REPRESENTED EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR PURPOSES OF BUSINESS WHI CH WAS ALLOWABLE AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. (C) IN SUPPORT OF THE ABOVE, THE RELIANCE IS PLACED ON THE FOLLOWING JUDGEMENTS: IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENC H LIB', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT ME MBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1605/HYD /10, ASSESSMENT YEAR: 2006-07, CONSIDERING THE ORDERS OF THE CO-ORDINATE BENCH ON THE ISSUE AND THE FACT THAT AO ALLOWED PRINCIPAL AMOUNT AS DEDUCTION U/S. 37(1), WE SEE NO REASON TO DISALLOW THE INTEREST AS PENAL IN NATURE. THIS INTEREST ARISES NOT AS PENALTY BUT AS COMPENSATORY AMOUNT. T HEREFORE, WE HOLD THAT INTEREST IS ALLOWABLE. GROUND NO.5 IS ALL OWED. HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME- TAX-9. V.REGALIA APPARELS (P.) LTD., [2013] 32 TAXM ANN.COM 237 (BOMBAY) WHEREIN IT WAS HELD THAT :- SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINES S EXPENDITURE - ALLOWABILITY OF [FORFEITURE OF BANK GUARANTEE] - AS SESSMENT YEAR 2004-05 - ASSESSEE WAS A MANUFACTURER OF GARMENTS - APPAREL EXPORT PROMOTION COUNCIL (APEC) GRANTED TO IT ENTITLEMENTS FOR EXPORT OF GARMENTS AND KNITWARES - IN CONSIDERATION THEREOF, ASSESSEE FURNISHED BANK GUARANTEE IN SUPPORT OF ITS COMMITME NT TO ABIDE BY TERMS AND CONDITIONS IN RESPECT OF EXPORT ENTITLEME NTS - HOWEVER, LOSS OCCURRED IN COURSE OF BUSINESS AND ASSESSEE TOOK A BUSINESS DECISION NOT TO HONOUR ITS COMMITMENT OF FULFILLING EXPORT E NTITLEMENT - CONSEQUENTLY, APEC ENCASHED SAID BANK GUARANTEE - A SSESSEE CLAIMED SAID FORFEITURE BUSINESS EXPENDITURE - HOWE VER, ASSESSING OFFICER CONCLUDED THAT FORFEITURE WAS IN NATURE OF PENALTY AND DISALLOWED SAME - WHETHER SINCE ASSESSEE HAD NOT CO NTRAVENED ANY PROVISION OF LAW, FORFEITURE OF BANK GUARANTEE WAS COMPENSATORY IN NATURE AND, THUS, ALLOWABLE AS DEDUCTION UNDER SECT ION 37(1) - HELD, YES [PAM 4] [IN FAVOUR OF ASSESSEE. HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER OF INCOME- TAX -1. V .NEO STRUCTO CONSTRUCTION LTD. WHEREIN IT WAS HELD THAT :- 'SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINE SS EXPENDITURE - ALLOWABILITY OF [COMPENSATION] - ASSESSMENT YEAR 20 06-07 - ASSESSEE, A CONTRACTOR, ENTERED INTO A CONTRACT WIT H A CONTRACTEE 0 - ITA NO. 271/HYD/2018 :- 5 -: AT TIME OF ENTERING INTO CONTRACT, IT HAD GIVEN BAN K GUARANTEE, WHICH WAS FURNISHED AS PERFORMANCE GUARANTEE - SUBSEQUENT LY ASSESSEE HAVING NOTICED THAT IT WOULD NOT BE POSSIBLE FOR IT TO PERFORM CONTRACT TOOK DECISION NOT TO PROCEED FURTHER WITH CONTRACT AND INFORMED CONTRACTEE ACCORDINGLY - DUE TO NON-PERFORMANCE OF CONTRACT, CONTRACTEE ENCASHED BANK GUARANTEE AND RECOVERED AM OUNT - ASSESSEE CLAIMED DEDUCTION OF SAID AMOUNT AS BUSINE SS EXPENDITURE - WHETHER ASSESSEE WOULD BE ENTITLED TO DEDUCTION O F SAID AMOUNT AS BUSINESS EXPENDITURE UNDER SECTION 37(1), AS SAME W AS COMPENSATORY IN NATURE - HELD, YES [PARA 10] [IN FA VOUR OF ASSESSEE]' [2013] 35 TAXMANN.COM 64 (GUJARAT), HIGH COURT OF GUJARAT, COMMISSIONER OF INCOME-TAX-II V. GUJARAT STATE FINA NCIAL CORPORATION, WHEREIN IT HAS BEEN HELD THAT :- 'SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINE SS EXPENDITURE - ALLOWABILITY OF [PENALTY] - ASSESSEE RECEIVED LOANS AND ADVANCES FROM STATE GOVERNMENT - IT PAID CERTAIN AMOUNT TO STATE GOVERNMENT TOWARDS INTEREST AS DELAYED PAYMENT OF INSTALLMENTS OF LOAN - REVENUE AUTHORITIES HELD THAT SUCH PAYMENT OF INTER EST WAS PENAL IN NATURE AND, THUS, IT COULD NOT BE ALLOWED AS DEDUCT ION - TRIBUNAL, HOWEVER, ALLOWED ASSESSEE'S CLAIM IN RESPECT OF PAY MENT OF SAID INTEREST WHETHER, MERELY BECAUSE AGREEMENT REFERRE D TO INTEREST IN QUESTION AS A PENAL INTEREST, ANY SUCH PAYMENT WOUL D NOT PARTAKE CHARACTER OF PENALTY - HELD, YES - WHETHER EVEN OTH ERWISE, SINCE IT WAS NOT CASE OF REVENUE THAT AMOUNT PAID BY ASSESSE E WAS FOR PAYMENT OF PENALTY RATHER IT WAS SIMPLICITOR LIABIL ITY OF INTEREST ON DELAYED PAYMENT OF INSTALMENTS, TRIBUNAL WAS JUSTIF IED IN ALLOWING SAID PAYMENT AS BUSINESS EXPENDITURE - HELD, YES [P ARA 4J] [IN FAVOR OF ASSESSEE]' [2000] 113 TAXMAN 316 (J. & K.), HIGH COURT OF JA MMU & KASHMIR, COMMISSIONER OF INCOME-TAX V, NEW ALPINE F ORESTS, WHERE IN IT HAS BEEN HELD THAT, 'SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINE SS EXPENDITURE - ALLOWABLE AS _ ASSESSMENT YEAR 1972-73 - ASSESSEE, A FOREST CONTRACTOR, TOOK ON LEASE CERTAIN FORESTS FROM GOVE RNMENT FOR WHICH IT WAS REQUIRED TO PAY PENALTY TO FOREST DEPARTMENT - ASSESSEE'S CLAIM DUCTION OF INTEREST ON DELAYED PAYMENT OF ROYALTY W AS DISALLOWED BY ASSESSING OFFICER ON GROUNDS THAT IT WAS IN NATURE OF PENALTY AND THAT NO PROVISION WAS MADE FOR IT IN ACCOUNTS -WHET HER LAW IS WELL- SETTLED THAT IF ANY EXPENDITURE INCURRED BY ASSESSE E IS COMPENSATORS IN NATURE, DEDUCTION HAS TO BE ALLOWED UNDER SECTIO N 37(1) -HELD, YES - WHETHER SINCE IN INSTANT CASE LIABILITY TO PAY IN TEREST WAS NOT STATUTORY BUT ONLY CONTRACTUAL IN TERMS OF LEASE DE ED, IT WAS COMPENSATION FOR DEPRIVATION OF USE OF MONEY AND WA S PART AND PARCEL OF LIABILITY TO PAY ROYALTY AND, THEREFORE, IT REPRESENTED ITA NO. 271/HYD/2018 :- 6 -: EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR PUR POSES OF BUSINESS WHICH WAS ALLOWABLE AS DEDUCTION UNDER SECTION 37(1 ) - HELD, YES' HIGH COURT OF ALLAHABAD IN THE CASE OF DHARAM CHA ND DWARKA DAS ... VS COMMISSIONER, WHEREIN IT WAS HELD THAT :- 1969 CURRENT LAW JOURNAL 290: IT WAS HELD THAT A PE NALTY UNDER S. 18(2) OF THE PUNJAB EXCISE ACT WAS NOT IN THE NATUR E OF PUNISHMENT AND THE OPTION TO PAY THE PENALTY WAS IN THE NATURE OF ENABLING PROVISION WHICH COULD HAVE SOME RELATION WITH THE A PPROXIMATE QUANTUM OF LOSS WHICH THE LICENSEE MIGHT SUFFER IN CASE OF AN ORDER CANCELLING THE LICENCE FOR THE REMAINING PERIOD. FU RTHER, THIS BENCH HAD AN OCCASION TO CONSIDER THIS MATTER IN THE CASE OF SHADI SINGH KASHMIRA SINGH VS. ITO (1983) 15 TLR 485 (CHG-TRIB. ) AND IT WAS HELD THEREIN THAT THE PAYMENT MADE IN RESPECT OF DE FAULT UNDER S. 36B OF THE PUNJAB EXCISE ACT, 1914 WAS INCIDENTAL T O TRADE AND WAS ALLOWABLE AS SUCH. HIGH COURT OF PUNJAB-HARYANA IN THE CASE OF COMMI SSIONER OF INCOME TAX VS HOSHIARI LAL KEWAL KRISHAN ON 18 O CTOBER, 2006 BENCH: A K GOEL, R BINDAL WHEREIN IT WAS HELD THAT :- THE FINE WAS INCURRED BY THE ASSESSEE FOR MAKING BE LATED PAYMENTS OF THE SAID EXCISE DUTY. THOUGH TERMED AS FINE, THE PAYMENT WAS NOT IN THE NATURE OF PUNISHMENT BUT WAS BY WAY OF COMPE NSATION. THE PAYMENT WAS IN EFFECT INTENDED TO COMPENSATE THE LO SS ON ACCOUNT OF DELAY IN MAKING THE PAYMENT AND WAS NOT BY WAY OF P ENALTY FOR BREACH OF LAW. THE AMOUNT PAID CAN BE CONSIDERED TO BE 21 ITA 272/JP/2017 DCIT VS. M/S AGRIBIOTECH INDUSTRIES LTD . LEGITIMATE BUSINESS EXPENSE OF THE ASSESSEE, THOUGH TECHNICALL Y, IT MAY BE CALLED PENALTY. PRAKASH COTTON MILLS PRIVATE LIMITED -VS.- CIT (199 3) 201 ITR 684 (SC) ITO -VS.- VRM SHARE BROKING (P) LTD. (2009) 27 SOT 469 (MUM) MASTER CAPITAL [2008] 23 SOT 60 5.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R, FACTS OF THE CASE, SUBMISSIONS AND CASE LAWS RELIED UPON BY THE APPELLANT. SINCE THE APPELLANT HAS NOT DONE ANY BUSINESS AND NO INCO ME OR LOSS EARNED. AS PER THE AGREEMENT, SINCE THE APPELLANT F AILED TO DO THE SAME AND NOT FULFILLED THE CONDITIONS, HENCE BANK G UARANTEE REVOKED BY THE OTHER PARTY. HENCE, THE SAME IS NOT ALLOWAB LE EXPENDITURE AND THEREFORE, CONFIRMED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIV AL PLEADINGS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. THE REVENUES ONLY CASE IS THAT BOTH TH E LOWER ITA NO. 271/HYD/2018 :- 7 -: AUTHORITIES HAVE RIGHTLY DISALLOWED THE IMPUGNED ENC ASHMENT OF BANK GUARANTEE BEING PENAL IN NATURE ON ACCOUNT OF NON- PERFORMANCE OF CONTRACT AT ASSESSEES BEHEST. 3.1. LEARNED AUTHORISED REPRESENTATIVES CASE ON THE OTHER HAND IS THAT THE IMPUGNED ENCASHMENT OF BANK GUARANTEE IS OUTCOME OF FAILURE TO PERFORM ITS CONTRACTUAL OBLIGATION ONLY WITHOUT INVOLVING ANY OFFENCE OR PENAL COMPONENT U/S. 37(1) OF THE ACT. 3.2. FACED WITH THIS ISSUE, WE FIND THAT A CATENA OF CA SE LAW (2013) 37 TAXMANN.COM 57 (GUJARAT), CIT VS. NEO STRUCTO CONSTRUCTION LTD., (2013) [32 TAXMANN.COM 237] (BOMBAY ), CIT VS. REGALIA APPARELS P. LTD., JAMNA AUTO INDUSTRIES VS. CIT (2008) [299 ITR 92] (PUNJAB & HARYANA) AND GREEN DELHI BQS LTD., VS. ACIT (2018) [170 ITD 738] (DELHI-TRIB ) HOLDS THAT SUCH AN ENCASHMENT OF BANK GUARANTEE IS INCURRED IN THE NORMAL COURSE OF BUSINESS THAN INVOLVING ANY PENALTY ELEMENT AT ALL. WE ADOPT THE VERY REASONING HEREIN AS WELL A ND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE/ADDITION IN ISSUE. 4. THIS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 06-05-2021 TNMM ITA NO. 271/HYD/2018 :- 8 -: COPY TO : 1.OGENE SYSTEMS INDIA LIMITED, C/O. P. MURALI & CO. , CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2.THE INCOME TAX OFFICER, WARD-16(4), HYDERABAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.PR.CIT-4, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.