PILOT INDUSTRIES LTD,DELHI V. DCIT, CENTRAL CIRCLE - 1, DELHI

ITA 877/DEL/2024

AI Insights

Pilot Industries Ltd. appealed against the order of the Ld. CIT(A)-23, New Delhi, which partly allowed their appeal concerning the assessment year 2018-19. The primary contention was regarding the disallowance under section 37 of the Income Tax Act, amounting to Rs. 23,55,051, which included interest on customs duty and service tax. The CIT(A) had treated these as fines, thus not allowable under section 37. The Tribunal, referencing a similar case (Akshay Khetterpal vs. ACIT), found that such fines, being compensatory, are allowable as business expenditures. Furthermore, the Tribunal also addressed the disallowance of Rs. 6,80,732 related to employees' contribution to the PF fund, which was initially disallowed due to late deposit. The Tribunal directed the Assessing Officer to re-examine this issue to confirm if any payments were made within the due dates.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126407 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2018-2019
• Other Referred Cases: Akshay Khetterpal vs. ACIT, Usha Micro Process Control Ltd. Versus Commissioner of Income Tax, CIT Vs. Parthasmarathy, Prakash Cotton Mills Pvt. Ltd. Vs Commissioner of Income Tax
• Laws Referred To: Income Tax Act, Customs Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: PRANAV YADAV; WAY OF DAMAGES OR PENALTY OR INTEREST; IS; WAY OF DAMAGES OR PENALTY OR
• Keywords: Set aside; Difference of opinion; Opportunity of being heard; Business expenditure; Question of law; Depreciation
• Section: 143(3); 201; 143(1); 13; 37; 28; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA NO. 877/Del/2024 A.YR. : 2018-19 Pilot Industries Ltd., Khasra No. 340, Village Sultanpur, Mehrauli, Gadaipur, New Delhi – 30 (PAN: AAACP)655R) VS. DCIT, Central Circle-1, Delhi ARA Centre, Jhandewalan Delhi (APPELLANT) (RESPONDENT) Appellant by : Shri Pranav Yadav, Adv. Respondent by : Shri Harpreet Kaur Hansra, Sr. DR Date of hearing : 22.04.2025 Date of pronouncement : 24.04.2025 ORDER PER SHAMIM YAHYA, AM: The Assessee has filed the instant Appeal against the Order of the Ld. CIT(A)- 23, New Delhi dated 27.12.2023, relating to assessment year 2018-19. 2. Brief facts of the case are that return of income was filed declaring income of Rs. 16,63,33,320/- and the assessment u/s. 143(3) has been completed by the Assessing Officer/National e-Assessment Centre at income of Rs. 16,93,69,110/- by adopting the income as per intimation u/s. 143(1) of the Act. Against the above, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 2 | P a g e 27.12.2023 has partly allowed the appeal of the assessee. Aggrieved with the aforesaid, assessee is in appeal before the tribunal. 3. Apropos issue relating to disallowance u/s. 37 of the Act amounting to Rs. 23,55,051/- is concerned, in the intimation u/s 143(1) addition / adjustment of Rs. 23,55,051/- has been made, which represent the following:- - Interest on custom Duty on import of material Rs. 23,43,327/- - Int. on service tax Rs. 11,724/- Total Rs. 23,55,051/- 3.1 Before the Ld. CIT(A), it was submitted that interest is compensatory in nature and not being penal in nature. However, Ld. CIT(A) was not convinced, and after going through the details, challan etc. submitted by the assessee, he was of the opinion that these are fines and thus, he held that the amount of Rs. 23,25,000/- were fines and hence, not allowable deduction u/s. 37 of the Act. He further observed that these fines were said to be in violation of provisions of Custom Act. Against the above, action of the Ld. CIT(A), assessee is in appeal before us. 4. We have heard both the parties and perused the records. At the time of hearing, Ld. Counsel for the assessee submitted the payments are not in the penal nature as and they are not penalty. He submitted that they are fines and thus he referred the decision of the tribunal in the case of Akshay Khetterpal vs. ACIT decided in ITA No. 129/Del/2019 vide order dated 31.5.2019 by which the instant issue is squarely covered. Therefore, he prayed that this ground of appeal may be allowed in view of the aforesaid decision. Ld. DR could not controvert the aforesaid proposition. 3 | P a g e 5. We find that the tribunal in the case of Akshay Khetterpal vs. ACIT decided in ITA No. 129/Del/2019 vide order dated 31.5.2019 has held as under:- “5 Heard the parties and perused the material available on record. In the instant case the Assessee during the year under consideration imported old and digital multifunction printers and copying machines classified as electronic and electronic assembled machines for direct use and not for recalling or final disposal as Page | 8 claimed by the Assessee. The goods of the Assessee wereconfiscated for violation of provisions of customs Act, 1962 by the Joint Commissioner of Customs, Group-V, NahavaSheva I, TalukaUran, District Raigarh, Maharashtra 400707, vide various orders, including order dated 14.03.2015(we are quoting for reference only) andconsequently the Assessee was given an option to redeem the goods on payment of fine of Rs. 2,15,000/-. Further, the Joint Commissioner of Customs also imposed penalty of Rs. 68,000/-. For ready reference the relevant part of the order is reproduced herein below:- NHAVA-SHEVA-I TALUKA-URAN,DISTRICT-RAIGAH, MAHARASHTRA 400 007 F. NO. s/26-MISC-3584/2014-15 Gr.-V S/10- ADJ-226/2014-15 Gr. V Date of Order: 13.03.2015 Date of issue: 14.03.2015 Passed By : Shri N. N. Shelka Joint Commissioner of Customs, NhavaSheva-I Order No. 4276/2014-15 Name of the Party/ Notice: M/s. Asian Copiers Order in Original 1.................................. 2..................................... 3. I have carefully gone through the records of the case, since the importer has requested for waiver of SCN & PH, the case is put up to me for adjudication on the basis of records / facts available. I find that the import of old and used photocopier is restricted for import in terms of Para 2.17 of the Foreign Trade Policy 2009-14 read with Para 2.33 of Handbook of Procedure Vol. I (2009-14). As the goods under import are old and used Multifunction Device Copying Machine (Photocopying Machine), the importer was required to produce specific license issued by DGFT in terms of Foreign Trade Policy 2009-14 read with ITC (HS) classification of Import & Export items, but they failed to produce the 4 | P a g e same. I find that Importer did not produce any license from DGFT, hence 1 hold that the goods are liable for Page | 9 confiscated under section 111(d) & (m) of the Customs Act, 1962 and the importer is liable to pay penalty under Section 112 (a) of the Customs Act, 1962. 4. I find that import of these goods \"Used digital multifunction print and copying machine (Photocopier) of Schedule III-.of Hazardous Wastes Management, Handling and Transbounday Movement) Rules, 2008 read with Environment Protection) Act, 1986. Importer has produced the Certificate No. 23-85/2012- HSMD dated 22/08/2013 issued from Ministry of Environment & Forest for import of these goods. The said Certificate specified the conditions as below. (i) MFDs must have residual life of 5 years as certified by chartered engineer, or surveyors empanelled by Custom/DGFT. (ii) the importer has license from DGFT, ,if applicable; (iii) the importer have to provide a copy of invoice and contract relating to sale and/or transfer of ownership of the equipment ensuring that the equipment is destined for direct re-use and is fully functional. As per condition (i) in this case the Chartered Engineer has certified that the impugned goods have a residual life of at least eight years. The importer has submitted an undertaking letter dated 13/03/2015 that the imported goods are old and used photocopier machine; that they will provide a copy of invoice and contract relating to sale or transfer of ownership of the equipment to the Ministry of Environment and forest and that the sale/transfer will be for re-use and not for recycling in view of condition (iii) as referred above. The goods are imported without a valid License from DGFT as discussed above. However, the goods are not of prohibit goods. 5. However as the goods were imported without valid License, there are reasons to believe that the value declared is not correct The Chartered Engineer has examined the imported goods and found that the goods are old and used photocopying machine and actual value was higher than the declared value. The importers have also failed to submit contract, purchase order, dismantling cost details and payment details. The value declared thus, cannot be accepted as transaction value, under Section 14 of the Customs Act, 1962 for charging duty. The value declared is 5 | P a g e liable to be rejected under Rule 12 of the Customs Valuation (Determination of Value of the imported goods) Rules, 2007. The value required to be re-determined under Rule 3 of the Customs Valuation (Determination of Value of the imported goods) Rules, 2007. The value cannot be re-determined by following Rules 4/5 of CVR 2007 as import data of identical goods/similar goods is Page | 10 not available. The Rule 7 & 8 too cannot be applied for re- determination for want of sufficient data. The value is therefore required to be determined under Rule 9 of CVR, 2007. Asper Hon'ble Supreme Court decision in the case of Gajra Bevel Gears [2000 (115) ELT 612 (S.C.), in case transaction value is rejected under Rule 3 of CVR 2007, valuation of second-hand goods can be done under Rule 9 of CVR 2007, on the basis of value of new machine, as certified by the Chartered Engineer, and scaled down by the allowing depreciation commensurate with the period of usage. The value suggested by the Chartered Engineer should be the value for assessment under Rule 9 of Customs Valuation (Determined of Value of Imported Goods) Rules, 2007. The importer has waived SCN and PH. The Importer accepts the value suggested by the Charter Engineer. Therefore, I find that the assessable value of the goods imported vide Bill of entry No. 8554297 DT 10/03/2015 be re-determined as Rs. 1348479/- (Rs. THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.) under Rule 9 of CVR, 2007. 6. In view of the above, the goods imported vide BILL OF ENTRY No. 8554297 DT 10)03/2015 is liable for confiscation u/s 111(d) & 111 (m) of Custom Act 1962.The importer is also liable for penalty u/s 112(a) of the Custom Act 1962. The goods are covered under the certificate Issued from ministry of environment and forest as discussed above; hence I pass the following order: ORDER 7. (i) I order that the assessable value of goods, Imported vide Bill of entry No 8554297 DT 10/03/2015 be re-determined as Rs. 1348479/- (Rs, THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.),under Rule 9 of the Customs Valuation (Determination of Value of the imported goods) Rule 2007. (is) I confiscate the goods, imported vide Bill of entry No. 8554297 DT 10/03/2015 having re-determined value of Rs. 1348479/- (Rs. THIRTEEN LAKH FOURTY EIGHT THOUSAND FOUR HUNDRED SEVENTY NINE ONLY.) under Section 111(d) & (m) of the Customs Act, 1962.However, I give the importer an option to redeem the goods on payment of fine of Rs. 2,15,000/- (Rupees Two Lakh Fifteen Thousand Only) under Section 125(1) of the Customs Act, 1962. The 6 | P a g e option to redeem the goods on payment of fine of Rs. 2,15,500) (Rupees Two Lakh Fifteen thousand only) under section 125(1) of the Customs Act, 1962. The Option to redeem the goods shall be exercised within 15 days of receipt of this order and on payment of appropriate duty and other due as applicable. (iii) I impose a penalty of Rs. 68,000/- (Rupees: Sixty Eight Thousand Only) on the importer M/s. ASIAN COPIERS, under Section 112(a) of the Customs Act, 1962. (Underlined and highlighted by us for ready reference) 8. This order is issued without prejudice to any other action may be taken in respect of the goods in question and/or against the persons concerned or any other person, if found involved under the provisions of the Customs Act, 1962, and/or other law for the time being in force in the Republic of India. (NILKANTH N SHELKE) Jt. Commissioner of Customs, Group-V, NhavaSheva I To, M/s. Asican Copiers, BG-6/54A, PaschimVihar, New Delhi-110063 Copy to:- 1. Commissioner of Customs, NhavaSheva 1. 2. The DC/Review Cell NhavaSheva I). 3. The Dy. Commissioner of Customs, Adjudication Cell, NhavaSheva I 4. M/s. MDS Logistics Pvt Ltd.(ll/218) 5. Guard file 6 The Assessee claimed the expenditure of Rs. 65,61,700/- which includes Rs. 48,42,900/- as fine u/s 125(1) and Rs. 17,18,800/- on account of penalty u/s 112(a) of the Customs Act 1962. The Assessee contended that fine and penalty referred above are in compensatory in nature and for the purpose of getting the goods released from Custom Authorities and thus, liable to be allowed as expenditure u/s 37(1) of the Act. Whereas the revenue has claimed that the said fine and penalty levied upon the Assessee are penal in nature and are levied for the violation of law, therefore, the same areinadmissible expenditure as per Explanation 1 to section 37(1) of the Act. 7 | P a g e 7 On the rival claims of the parties, the question emerge as to whether the Assessee as per Explanation 1 to section 37(1) of the Act, is entitled to claim expenditure incurred in respect of fine and penalty as imposed u/s 125(1) and 112(a) of the Customs Act 1962 respectively. 8 At the outset it was claimed by the Assessee that the Ld. Commissioner wrongly held that the Assessee do not have any permission under Environment Protection Act, 1986 whereas the Assessee had the same. We are in agreement with the aforesaid facts,however in our view it is probable that the Ld. Commissioner may be due to oversight could not have noticed the said permission. Even otherwise permission under Environment Protection Act, 1986 cannot regularize the acts which are in derogation to the specific provisions specified in particular Act, which the Customs Act in this case. 9 The Assessee also claimed that CBDT Circular No. 722 dated 23.12.1998 (supra) has clarified qua disallowances of the illegal expenses as per section 37 of the Act, which relates to payments made on accounts of protection money, extortion, hafta, bribes etc. only, but does not include fine and penalty, therefore the fine and penalty paid by the Assessee can be allowed. We are not impressed by the contention of the Assessee because the instant CBDT circular cannot be considered as exhaustive in nature as every case has its own facts and is requiresadjudication as per its peculiar facts and circumstances and the laws of the land. Even otherwise explanation 1 of section 37(1) of the Act, clearly express that any expenditure incurred by an Assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction Page | 13 or allowances shall be made in respect of such expenses therefore the claim of the Assessee qua CBDT circular, is misplaced. 10 The Assessee further relied upon various judgments which we are referring for just decision of the case. 11 We observe that the jurisdictional High Court in the case of Usha Micro Process Control Ltd. Versus Commissioner of Income Tax {2013} 86CCH 0007 Del HC, dealt with issue wherein fine was imposed for redemption of goods u/s 125(1) of the Customs Act 1962 and held as under:- 1. ....................... 2. This Court had by order dated 09.1.2001 framed the following question of law: 8 | P a g e \"Whether Tribunal was justified in holding that the levy of Rs. 4 lakhs in respect of redemption fine and personal penalty was in the nature of fine and penalty and are not to be allowed as deductible business expenditure while computing total income of the assessee?\" 3. Briefly, the facts are that the petitioner had imported some software during the relevant Assessment Year i.e. 1985-86. It had sought to re- export the software after making some declarations. The customs authorities were of the opinion that the appellant's action was not legal and directed it to pay differential duties. In addition its Managing Director was made personally liable to penalty. The goods were sought to be confiscated. The matter was carried in appeal. Eventually the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) decided the matter on 30.5.1999. The Tribunal directed the deletion of personal penalty but proceeded to uphold the order in so far as the fine in lieu of confiscation is concerned--to Rs. 4,00,000/-; the original amount was Rs. 10,00,000/-. 4............................................. 5............................. 6........................................ 7....................... 8........................................... 9. In Prakash Cotton Mills Pvt. Ltd.'s case (supra), the Supreme Court pertinently observed that whenever an Page | 14 authority has to decide whether to grant or refuse deduction under section 37(1) of the Income Tax Act, the governing test would be whether the amount payable is compensatory in nature. In N.M. Parthasarathy's case (supra), the identical situation where redemption fine under the Customs Act was in issue, the Court after examining the scheme of the enactment held as follows: \"22. Coming to the facts of the case on hand, the goods belonging to the assessee had been confiscated under section 111(d) of the Customs Act, 1962, read with section 3 of the Imports and Exports (Control) Act, 1947. However, under section 125 of the Customs Act, 1962, an option had been given to the owner assessee to pay, in lieu of such confiscation, a fine of Rs. 1,84,000 which had been reduced on appeal to Rs. 84,000 and the goods had been cleared exercising the option. If the seized goods, 9 | P a g e without the exercise of option, had been confiscated once and for all, it goes without saying that the property in the goods shall vest in the Government, in the sense of the Government becoming the absolute owner thereof. The fine amount, whatever be its quantification, that is to say, whether it is equivalent to or below the value of the goods seized, cannot at all, in such a situation, be stated to be penal in nature, notwithstanding its nomenclature, but it is reparatory or compensatory in nature. Once it is compensatory in nature, its goes without saying that the authority has to allow deduction ITA 101/2000 Page 3 under section 37(1) of the Income Tax Act as laid down by the apex court in the two latest decisions aforecited. Further, the expenses incurred by way of payment of fees to advocates in defending penalty proceedings must also be construed as an allowable deduction. We, therefore, answer questions Nos. 1 and 4 in the affirmative and against the Revenue.\" 10. In the present case, this Court notices that originally the penalty which the appellant had been directed to pay was deleted by the CEGAT. What remained was the confiscation; the appellant was given the choice of redeeming the goods by depositing redemption fine as is evident from combined reading of paragraph Nos. 18 and 19 of CEGAT order. The Tribunal went so far as to say that valuation of goods in question was on the basis of difference of opinion. Nevertheless, that being the rationale for deletion of penalty, the Tribunal felt that the order of confiscation did not require to be upset, instead redemption fine was reduced to Rs. 4,00,000/-. On a proper application of the ruling in M/s. Prakash Cotton Mills Pvt. Ltd.'s case (supra), this Court is of the opinion that the amount of redemption fine in the present case was compensatory and therefore, fell outside the mischief of explanation of Section 37(1) of the Income Tax Act.\" {Highlighted by us } 12 The Hon'ble Madras High Court in the case of CITVs. Parthasmarathy (1995) 212 ITRT 0105 (Mad HC) also dealt with issue related to imposition of fine and held as under:- 5. Coming to the facts of the case on hand, the goods belonging to the assessee had been confiscated under s. 111 d) of the Customs Act, 1962, r/w s. 3 of the Imports and Exports (Control) Act, 1947. However, under s. 125 of the Customs Act, 1962, an option had been given to the owner-assessee to pay, in lieu of such confiscation, a fine of Rs. 1,84,000 which had been reduced on appeal to Rs. 84,000 and the goods had been cleared exercising the option. If the seized goods, without the 10 | P a g e exercise of option, had been confiscated once and for all, it goes without saying that the property in the goods shall vest in the Government, in the sense of the Government becoming the absolute owner thereof. The fine amount, whatever be its quantification, that is to say, whether it is equivalent to or below the value of the goods seized, cannot at all, in such a situation, be stated to be penal in nature, notwithstanding its nomenclature, but it is reparatory or compensatory in nature. Once it is compensatory in nature, it goes without saying that the authority has to allow deduction under s. 37(1) of the IT Act as laid down by the apex Court in the two latest decisions aforecited. Further, the expenses incurred by way of payment of fees to advocates in defending penalty proceedings must also be construed as an allowable deduction. We, therefore, answer questions Nos. 1 and 4 in the affirmative and against the Revenue. For the reasons given for answering questions Nos. 1 and 4, we concur with the conclusion reached by the Tribunal as being correct, though not for the reasons assigned by it. 6. We may now refer to one of the erroneous or fallacious reasonings, namely, that the redemption fine levied by the customs authorities is an additional duty and, therefore, there was no infraction of law, which gave rise to second question, which in the circumstances of the case, cannot at all commend acceptance at our hands and this question is answered accordingly. 7. No doubt true it is that the third question involving on the liability for legal expenses, for defending cases before the customs authorities against the levy of redemption fine had not at all been adverted to and considered by the Tribunal. The non-consideration of such a question, involving a minimal amount of Rs. 2,005, we feel, in the circumstances, is an inadvertent slip, which cannot be taken serious note of, especially, when the Tribunal, in the ultimate analysis, dismissed the appeal, affirming the conclusions arrived at by the AAC, who had, however, considered such a question and rendered a finding in favour of the assessee. Accordingly, this question is answered.\" 11 | P a g e 13 The Hon'ble Apex Court in the case of Prakash Cotton Mills Pvt. Ltd.VsCommissioner of Income Tax (1993) 201 ITR 0684 has held as under:- \"When an amount paid by an assessee as interest or damages or penalty could regarded as compensatory (reparatory) in character as would entitle 'such assessee to claim it as an allowable expenditure under Section 37(1) of the I.T. Act. Therefore, whenever any statutory impost paid by an assessee by way of damages or penalty or interest, is claimed as an allowable expenditure under section 37(1) of the I.T. Act, the assessing authority is required to examine the Scheme of the provisions of the relevant statute providing for payment of such impost notwithstanding the nomenclature of the impost as given by the statute, to find whether it is compensatory or penal, in nature. The authority has to allow deduction under Section 37(1) of the I.T. Act, whereever such examination reveals the concerned impost to be purely compensatory in nature. Wherever such impost is found to be of a composite nature, that is, partly of compensatory nature and partly of penal nature, the authorities are obligated to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature.\" 13.1 The Hon'ble Apex Court in the case of Prakash Cotton Mills Pvt. Ltd (Supra) has clearly held that when an amount paid as interest or damages or penalty as would regard as compensatory (reparatory in character), the Assessee would entitled to claim it as Page | 17 an allowable expenses u/s 37(1) of the Act . Therefore, whenever any statutory impost paid by an Assessee by way of damages or penalty or interest, is claimed as an allowable expenditure u/s 37(1) of IT Act, the AO is required to examine the scheme of relevant statuteproviding of such impostnot-withstanding the nomenclature of the impost as given by the statute, to find whether it is compensatory or penal in nature. The authority has to allow deduction u/s 37(1) of the IT Act, wherever such examination reveals the concern impost to be purely compensatory in nature. 13.2 The Hon'ble Apex Court further held wherever impost is found to be composite nature i.e. partly compensatory nature and partly of penal in nature, the authorities are obligated to bifurcate the two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature. 14 Coming to the instant case, the goods i.e. 'used digital multifunction printer and copying machines' were imported by the Assessee without 12 | P a g e getting license from the DGFT and therefore, the same wereconfiscated by the Custom Authorities{we are referring only one order in original passed by the Ld. Joint Commissioner of Custom, Group-V, Nhava, Sheva-I, Maharashtra u/s 111(d) of the Custom Act, 1962} and consequently,determined the value of the goods imported at Rs. 13,48,479/- and gave an option to the Assessee to redeem the goods on payment of fine of Rs. 2,15,000/- u/s 125(1) of the Custom Act, 1962 on the condition that option to redeem the goods shall be exercised within 15 days on receipt of the order and on payment of appropriate duty as other dues as applicable. Page | 18 15 Section 125 of the Custom Act, 1962 prescribes the imposition of fine and option to pay fine in lieu of confiscation. For ready reference the provisions of section 125 of the Custom Act 1962 are reproduced below : 125. Option to pay fine in lieu of confiscation.-- (1) Whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized,] an option to pay in lieu of confiscation such fine as the said officer thinks fit: [Provided that where the proceedings are deemed to be concluded under the proviso to sub-section (2) of section 28 or under clause (i) of sub-section (6) of that section in respect of the goods which are not prohibited or restricted, the provisions of this section shall not apply: Provided further that], without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. (2) Where any fine in lieu of confiscation of goods is imposed under sub- section (1), the owner of such goods or the person referred to in sub- 13 | P a g e section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. Explanation.--For removal of doubts, it is hereby declared that in cases where an order under sub-section (1) has been passed before the date on which the Finance Bill, 2018 receives the assent of the President and no appeal is pending against such order as on that date, the option under said sub-section may be exercised within a period of one hundred and twenty days from the date on which such assent is received. 15.1 The provisions speaks clearly that whenever confiscation of the goods is authorized by the Customs Act, the Custom Act, the Custom Authority/Officer Adjudgingis empowered to give an option to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized] to pay in lieu of confiscation 'such fine' as the said officer thinks fit. 15.2 From the order passed by the Custom Authority it is clear that the said authority while exercising powers entrusted u/s 125 of the Act, imposed the 'FINE' under challenge to redeem the goods and therefore, the said fine amounts to compensatory in nature and is an allowable expenditure u/s 37(1) of the Act, as also held by the Hon'ble Delhi High Court in the case of Usha Micro Process Control Ltd (supra) and Hon'ble Madras high Court in the case of CIT Vs. Parthasmarathy (supra) in the identical facts. Consequently the 'FINE'paid by the Assessee is allowed as expenditure u/s 37(1) of the Act and resultantly the addition made and sustained on account of fine paid by the Assessee to the Custom Authorities, stands deleted.” 5.1 Respectfully following the aforesaid precedent, we set aside the order of the Ld. CIT(A) and delete the addition in dispute and accordingly, allow the ground raised by the assessee. 6. Apropos ground relating to disallowance u/s. 36(1)(va) of the Act amounting to Rs. 6,80,732/- is concerned. In the intimation u/s. 143(1), the income from business / 14 | P a g e total income has been wrongly increased by Rs. 6,80,732/- on account of disallowance of employees contribution to PF fund. The disallowance was made on the ground that there has been delay in deposit of aforesaid amounts beyond the due date of deposit prescribed under the law. Ld. CIT(A) went by the Tax Audit Report and confirmed the order by referring the Apex Court decision in the case of Checkmate Services Pvt. Ltd. [2022] 143 taxman.com 178 (SC). Against this action of the Ld. CIT(A), assessee is in appeal before the tribunal. 7. We have heard both the parties and perused the records. Ld. Counsel for the assesee submitted that some of the payments were made before the due date and some mistakes are there in Tax Audit Report. Hence, he prayed that this issue may be remitted back to the file of the AO to allow this issue where payments were made before the due date. 8. Upon hearing both the parties and careful consideration, we find that law is quite settled by Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) for the proposition that payment made beyond the due date in PF Act is not allowable. However, in the interest of justice, on the plea of the ld. Counsel for the assessee that some payments were wrongly shown as made beyond the due date, however, the same were made before the due date and on this aspect, this issue needs to be remitted back to the AO with the directions to consider the issue afresh and allow only those payments which are actually made before the due date, as specified in the respective Acts. Needless to add that the assessee should be given adequate opportunity of being heard. We hold and direct accordingly. 15 | P a g e 9. In the result, the Appeal filed by the Assessee is partly allowed. Order pronounced on 24/04/2025. Sd/- (SUDHIR KUMAR) Sd/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SR Bhatnagar Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "