2013 (7) TMI 853 - HC - Income Tax

Deduction u/s 37(1) - Nature of payment - Whether shaman shulk paid to Excise Department is penal in nature - Held that - By way of settlement or compromise entered into with the department to be relevant provisions of law to avoid assessment for payment of the duty. The amount cannot be treated to be penalty, which can be disallowed - no adjustment should be made on book profit as computed by assessee except those provided under that section. No exception can be taken to this position of law, which has been upheld by this Court in several cases - Decided against Revenue.

Summary

Issues Involved:
1. Justification of setting aside the case for verifying compensation received by the assessee.
2. Appreciation of settled compensation and interest.
3. Disallowance of amount transferred to molasses reserve fund.
4. Disallowance of lease rent.
5. Deletion of addition paid on account of shaman shulk to Excise Department.
6. Exclusion of compensation received from Book Profit.

Analysis:
1. The appeal was made against the ITAT's order directing the AO to verify if the assessee received compensation, despite it being declared as 'other income'. The ITAT clarified the taxability of compensation under different scenarios and directed the AO to verify the actual receipt of compensation. The Court found no substantial question of law in this issue and dismissed the appeal.

2. The ITAT's decision regarding the settled compensation and interest was upheld, stating that the AO should verify if the assessee received any compensation during the relevant year for tax purposes. The Court found no error in this decision and dismissed the appeal.

3. The ITAT's deletion of the disallowance of the amount transferred to the molasses reserve fund was affirmed, as it could not have been disallowed during assessment. The Court found no substantial question of law in this regard and dismissed the appeal.

4. The ITAT's decision to delete the disallowance of lease rent was based on previous judgments in favor of the assessee. The Court upheld this decision and dismissed the appeal.

5. The ITAT's deletion of the addition paid on account of shaman shulk to the Excise Department was justified, as it was not akin to a penalty but a payment required by the Excise Rules. The Court found no error in this decision and dismissed the appeal.

6. The ITAT's direction to exclude compensation received from the Book Profit was based on established law, and the Court found no exception to this position. The appeal was dismissed as none of the questions raised were substantial questions of law to be decided by the Court.