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Issues involved: Challenge to addition of overloading charges as penalty in assessment year 2005-06.
Facts: Assessee, in transport business, paid overload charges to RTO, contending it's not penalty but collected from clients. AO disallowed charges as penalty, citing violation of statutory norms. Assessee argued it's permissible and not fine. Arguments: Assessee cited precedents where similar charges were allowed as business expenditure. CIT(A) upheld AO's decision, stating overloading is a breach of law, hence not deductible. Assessee appealed against this decision. Legal Analysis: Tribunal considered whether overload charges are penalty or compensation. Referenced a case where similar charges were allowed as deduction. Tribunal held overload charges are compensation, not penalty for breach of law. Ruled in favor of assessee, setting aside CIT(A)'s decision. Conclusion: Tribunal allowed the appeal, stating overload charges paid to RTO are compensation, not penalty. Decision based on precedents and nature of charges. Addition made by AO and upheld by CIT(A) deemed unsustainable. Assessee's ground allowed, appeal granted.
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