ACIT 5(1), Bhopal, Bhopal V. Mohd Tahi Khan, Bhopal

ITA 87/Ind/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6645 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V J BORICHA
• Assessee Lawyers: YASHWANT SHARMA
• Keywords: Business expenditure
• Section: 147; 148; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.87/IND/2018 ASSESSMENT YEAR: 2009-10 ACIT - 5(1), BHOPAL / VS. MOHD. TAHIR KHAN,KK PLOT NO.12, SEEMA ENTERPRISES, INDUSTRIAL ARIA, GOVINDPURA BHOPAL ( REVENUE ) ( RE SPONDENT ) PAN: ABLPK3457H REVENUE BY SHRI V.J. BORICHA SR. DR RESPONDENT BY SHRI YASHWANT SHARMA, CA DATE OF HEARING: 01.05.2019 DATE OF PRONOUNCEMENT: 07.05.2019 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF REVENUE PERTAINING TO A.Y. 2009-10 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-2,BHOPAL, (IN SHO RT CIT(A)), DATED 29.11.2017 WHICH IS ARISING OUT OF T HE ORDER U/S 147 R.W.S 143(3)OF THE INCOME TAX ACT 1961(HERE INAFTER MOHD. TAHIR KHAN ITANO.87/IND/2018 2 CALLED AS THE ACT) FRAMED ON 28.06.2016 BY DCIT,5(1) BHOPAL. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEAL-II), HAS ERRED I N:- I. DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWAN CE OF EXPENDITURE U/S 37 OF THE INCOME TAX ACT, 1961. II. LAW AND ON FACTS THE RELEVANT EXPENDITURE IN THIS C ASE IS INCURRED IN CONTRAVENTION OF CONTRACTUAL AGREEMENT. III. THE DEMURRAGE SO PAID COMES UNDER THE CATEGORY OF PENALTY U/S 37 OF THE I.T. ACT, 1961 AND PENALTY CA NNOT BE ALLOWED AS AN EXPENSE UNDER SECTION.37. 2. THE REVENUE HAS RAISED THREE GROUNDS BUT THE SOLE GRIEVANCE IS AGAINST THE FINDING OF LD. CIT(A) DELETIN G THE DISALLOWANCE OF RS. 38,75,145/- MADE U/S 37 OF THE AC T BY THE LEARNED ASSESSING OFFICER (IN SHORT LD. AO) D ENYING DEDUCTION FOR PENALTY PAID FOR LATE DELIVERY OF CONSI GNMENT TO BHARAT HEAVY ELECTRICALS LIMITED (IN SHORT BHEL) AND INDIAN RAILWAYS. 3. BRIEF FACTS OF THE CASE PERTAINING TO THE ISSUE RAIS ED BEFORE US ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN MANUFACTURING OF STEEL FABRICATION. HE FILED RETURN OF INCOME FOR A.Y. 2009-10 ON 30.09.2009 DECLARING TOTAL INCOME OF RS.40,15,150/-. CASE WAS PROCESSED U/S 143(1)(A) OF THE ACT. SUBSEQUENTLY, CASE WAS REOPENED U /S 148 OF THE ACT AND REASSESSMENT PROCEEDING WAS CARRIED MOHD. TAHIR KHAN ITANO.87/IND/2018 3 OUT AFTER DULY SERVING NOTICE TO THE ASSESSEE. REASONS WERE RECORDED FOR REOPENING OF THE CASE WHICH WAS WITH REG ARD TO THE DEDUCTION CLAIMED U/S 37 OF THE ACT AT RS.38,75,1 45/-. DURING THE COURSE OF HEARING ASSESSEE FILED VARIOUS DE TAILS INCLUDING FINANCIAL STATEMENT, COPY OF AGREEMENT BUT FAI LED TO SATISFY LD. AO. LD. AO COMPLETED ASSESSMENT U/S 14 3(3) R.W.S 148 OF THE ACT, ASSESSING INCOME OF RS.78,90,2 95/- AFTER DISALLOWING THE EXPENDITURE U/S 37 OF THE ACT C LAIMED FOR PENALTY PAID TO BHEL AND INDIAN RAILWAYS FOR LATE DELIVERY OF CONSIGNMENT OF GOODS. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE L D. CIT(A)AND SUCCEEDED. AS LD. CIT(A) RELYING ON THE VAR IOUS JUDGMENTS OF HON'BLE COURTS GAVE A FINDING THAT THE ALL EGED PENALTY WAS NOT IN VIOLATION OF ANY LAW OR AN OFFENCE PROHIBITED BY ANY LAW. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE DELETION OF DISALLOWANCE OF EXPENDITURE OF RS.38,75,145/- GIVEN BY THE ASSESSEE TOWARDS PENALTY/DEMURRAGE FOR LATE DELIVERY OF BOOKS. 6. PER CONTRA LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LD. ASSESSING OFFICER AND LD. COUNSEL FOR T HE ASSESSEE SUPPORTED THE FINDING OF THE LD. CIT(A). MOHD. TAHIR KHAN ITANO.87/IND/2018 4 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORD PLACED BEFORE US. THE REVENUES SOLE GRIEVANCE IS AGAIN ST THE FINDING OF THE LD. CIT(A) DELETING THE DISALLOWAN CE OF PENALTY/DEMURRAGE OF RS.38,75,145/- MADE BY THE LD. AO . THE ALLEGED PENALTY OF RS. 38,75,145/- WAS PAID BY THE ASSESSEE TO BHEL AND INDIAN RAILWAYS FOR LATE DELIVERY O F CONSIGNMENT OF GOODS FOR MAKING CONTRAVENTIONS OF CONTRACTUAL AGREEMENT WITH THESE TWO PARTIES. IT IS NOT THE CASE OF REVENUE AUTHORITIES THAT THE PENALTY HAS BEEN PAI D FOR ANY OFFENCE BY THE ASSESSEE WHICH IS PROHIBITED B Y ANY LAW. 8. HON'BLE DELHI HIGH COURT IN THE CASE OF MAHALAKSHMI SUGAR MILLS CO. LTD. VS. CIT (1984) 19 TAXMAN 447(DEL HI) HAS HELD THAT PAYMENT OF DEMURRAGE IS NOT IN THE NATURE OF DAMAGE OR PENALTY AND IT IS MERELY A CHARGE MADE BY THE RAILWAY ADMINISTRATION TO COMPENSATE ITSELF FOR KEE PING THE GOODS OF THE ASSESSEE IN ITS CUSTODY BEYOND A PARTI CULAR TIME. PAYMENT OF DEMURRAGE IS INCIDENTAL TO BUSINES S AND ITS IMPACT IS TO INCREASE THE COST TO THE ASSESSEE OF T HE GOODS TRANSPORTED. THEREFORE, THE EXPENDITURE ON THIS ACC OUNT CAN BE SAID TO BE LAID OUT WHOLLY AND EXCLUSIVELY FOR T HE ASSESSEES BUSINESS . MOHD. TAHIR KHAN ITANO.87/IND/2018 5 9. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAMUNA AUTO INDUSTRIES V. CIT (2008) 167 TAXMAN 192 WAS ALSO HELD THAT WHENEVER CERTAIN DAMAGES ARE TO BE PAID BY AN ASSESSEE FOR THE BREACH OF A CONTRACT, S UCH DAMAGES ARE TREATED TO BE NORMAL INCIDENCES OF BUSI NESS. 10. WE THEREFORE, RESPECTFULLY FOLLOWING ABOVE JUDG MENTS AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, FI ND NO REASON TO INTERFERE IN THE FINDING OF THE LD. CIT (A) DELETING THE DISALLOWANCE OF RS.38,75,145/- CLAIMED BY THE ASSESSEE U/S 37 OF THE ACT, AS THE ALLEGED AMOUNT IS N OT A PENALTY FOR ANY OFFENCE PROHIBITED BY LAW BUT IT IS M ERELY NORMAL BUSINESS EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE FOR NON-FULFILLMENT OF THE CONTRACTUAL AGREEME NT WITH THE PARTIES FOR NOT DELIVERING GOODS ON TIME. 11 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISS ED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 07 .05 .2019. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 07/05/2019 CTX? P.S/. . . MOHD. TAHIR KHAN ITANO.87/IND/2018 6 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR