2022 (3) TMI 243 - AT - Income Tax

Allowability of expenditure u/s. 43B - Expenditure incurred under the head customs duty, excise duty, interest and penalty on payment basis - HELD THAT - In the instant case, it is a case of import of a capital asset and that too not by the assessee, hence, the impugned expenditure cannot be claimed as a revenue expenditure. Therefore, the provisions of section 43B of the I.T. Act cannot be applied to the claim of deduction of an amount which otherwise is not allowable as deduction in the hands of the assessee. Further, the impugned amount includes a sum as paid as penalty for infraction of customs duty and central excise duty. This amount being penalty, cannot be allowed as a deduction. Moreover, the payment has been made by the assessee under protest. Therefore, the amount is definitely a disputed liability and cannot be said that the liability has crystallized/accrued to the assessee during the relevant assessment year In the instant case, the import is of capital asset and that too not by the assessee, hence, the impugned expenditure cannot be equated with the expenditure incurred for improvement of a leasehold property. Therefore, the claim of the assessee has been rightly rejected by the CIT(A). - Decided against assessee.

Summary

Issues:
- Allowability of expenditure u/s. 43B of the I.T. Act incurred under customs duty, excise duty, interest, and penalty on payment basis.

Analysis:
1. Facts of the Case:
- The assessee, a chemical manufacturing company, filed a return for the assessment year 2008-2009 declaring 'Nil' income under normal provisions but book profit under section 115JB. The company paid tax under MAT. The Customs and Central Excise Department issued a notice disallowing duty exemption claimed by the assessee, resulting in a payment of &8377; 6,65,34,829 towards customs duty, excise duty, interest, and penalty for importing a turbine generator set.

2. First Appellate Authority's Decision:
- The CIT(A) rejected the deduction claim under section 43B, stating that the expenses were not 'otherwise allowable' under the Act. The authority highlighted that the liability for import duty should have been of the promoter company, not the assessee. The penalty amount paid cannot be allowed as a deduction, especially since it was a disputed liability paid under protest.

3. Tribunal's Analysis:
- The Tribunal observed that the turbine generator set was imported by the promoter company, making the statutory charges their liability. As the expenses were related to a capital asset not imported by the assessee, they couldn't be claimed as revenue expenditure under section 43B. The penalty amount paid under protest was considered a disputed liability, not crystallizing during the relevant assessment year.

4. Judicial Precedent and Conclusion:
- The Tribunal dismissed the appeal, noting that the judgment cited by the assessee did not support their case. The cited case involved revenue expenditure for business improvement, unlike the capital asset import in the present case. Therefore, the Tribunal upheld the CIT(A)'s decision to reject the deduction claim, emphasizing that the impugned expenditure was not allowable under the Act.

This comprehensive analysis of the judgment highlights the key arguments, decisions, and legal interpretations made by the authorities and the Tribunal regarding the allowability of specific expenditures under the I.T. Act.