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TMI Blog2012 (6) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay in any case, i.e., even if the impugned transactions were disclosed as inter-state sales in the first place, instead of, and as against, inter-branch transfers - assessee has not clarified this aspect providing for payment of fee at an amount equal to the amount of tax sought to be evaded, and to which his attention was specifically adverted to during hearing - in favour of revenue. Disallowance of freight on raw material - AO disallowed the same as being not verifiable - Held that:- CIT(A)considered the expenditure incurred represented unloading expenses on raw material as the entire amount had been paid to labour, and for which proper vouchers, though self- made, are available - against revenue. Deletion of disallowance of the assessee's claim for additional depreciation - AO contested non-furnishing of the eligibility certificate from the Chartered Accountant - Held that:- The assessee had filed eligibility certificate along with the return of income during the course of the assessment proceedings - the entire depreciation, including additional depreciation u/s. 32(1)(iia), is to be deducted in computing the 'written down value' of the relevant block of assets u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent of penalty in the total amount of sales-tax, interest and compounding fee paid by the assessee, who had only paid what he would have paid initially, so that the same is entitled for deduction u/s. 37(1) of the Act. Aggrieved, the Revenue is in appeal. 3.1 Before us, the ld. DR would submit that the amount paid is only for breach(es) of law, which cannot thus be considered as incurred in the course of carrying on the business, and thus a trading loss or even a normal occurrence of the business, so as to be deductible as a business expenditure on the ground of commercial expediency. The provisions of Chapter VI of the Rajasthan Sales Tax Act, 1994 (also referred to as 'sales tax Act' in this order), forming part of the Department's written submissions dated 07/10/2009, as also the assessee's second paper-book (PB-2, pgs. 29 - 52) were referred to. Section 65 of the said Act provides for penalty for avoidance or evasion of tax, and the show cause issued to the assessee was only there-under. The composition fee paid by the assessee is u/s. 72 of the said Act, which provides for compounding where the same is admitted by the assessee per an application to be made by it, and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ITD 175 (Cal.)(TM). 4. We have heard the parties, and perused the material on record, as well as the case law cited and relied upon by both the sides. 4.1 The first thing that we observe is that the primary facts of the case are not in dispute; the impugned amount (deduction in respect of which is being sought as business expenditure) being paid u/s. 72 o the sales-tax Act, the relevant part of which is reproduced hereunder: The Rajasthan Sales Tax Act, 1994 Chapter VI Interest, Penalties, Composition and Prosecution '58. 65. Penalty for avoidance or evasion of tax. - Where any dealer, whether or not registered, has concealed any particulars from any return furnished by him or has deliberately furnished inaccurate particulars therein or has concealed any transaction of sale of purchase form his accounts, registers and documents required to be maintained under this Act or has avoided or evaded tax in any other manner, the assessing authority may direct that such dealer shall by way of penalty, in addition to the tax payable by him under law, a sum equal to double the amount of tax avoided or evaded. 72. Composition of offences.- (1) Where a person is charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sum as business expenditure in computing the assessee's business income for the relevant year. The law in the matter stands amply clarified by the hon'ble apex court in the case of Haji Aziz Abdul Shakoor Bros. ( supra ); it being held that only those disbursements as made for the purpose of business, i.e. , that enable a person to carry on the business and to earn profit in that business would form a permissible deduction. An amount paid for infraction of law is not allowable, being not a normal incident of business. A contravention of the statutory provision cannot be said to be a commercial loss falling on the assessee as a trader. If a person carries on his business activity in a manner that renders him liable to penalty, it cannot be said to be a commercial loss, which could be claimed as a deductible expense. This decision, rendered in the context of Income-tax Act, 1922, holds the fields to date. This is as the primary condition for any expense to be deductible as business expenditure is that it must be incurred for the purpose of business, the scope of which stands also explained by the apex court in that decision itself. The decision has found approval in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f payment in lieu of penalty (for avoidance/evasion of tax) and prosecution, by whatever name called, is not penal in nature, we wonder what would be? The assessee's argument with regard to levy being not in respect of any offence, being provided for under the sales-tax Act itself, is, again, wholly without merit. Why, even the penalty is levied; rather, can only be so under the provision/s of law. The only question that is relevant is the nature of the levy, and which is clearly penal in nature, being in lieu of penalty and prosecution provided for under the said Act, on admission of the offence by the assessee-dealer, which at the same time curtails his right to appeal against levy of tax and interest thereon. 4.3 The finding/s by the ld. CIT(A), is, again, without any basis either in law or in fact/s. The composition fee being paid in addition to the amount of tax and interest thereon, it is not understood as to how he holds that there is no difference in the amount that the assessee would have been liable to pay in any case, i.e. , even if the impugned transactions were disclosed as inter-state sales in the first place, instead of, and as against, inter-branch transfers. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even for or toward payment of tax or interest under the sales-tax Act, but one which is required to be paid in addition thereto, for having sought to avoid or evade payment of sales-tax under the sales-tax Act, so that it cannot be considered as being either sales-tax or as forming part of the trading account. Further, purchases for business, the example of which was cited by the ld. AR, would also fall for deduction u/s. 37(1) of the Act, as clarified by the apex court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667/59 Taxman 11 (SC). 4.5 We may next take up the two decisions specifically referred to by the ld. AR during hearing. Even as clarified thereat, the payment under reference in the case of Eveready Industries India Ltd. ( supra ) was compensation paid to the individual claimants by way of a comprise arrived at under the aegis of the hon'ble court. How could the same be considered as at par with a statutory impost? No answer to this question, which arises naturally, is forthcoming, or was so, when put to the ld. AR during the hearing itself. Again, in the case of Dr. T.A. Quereshi ( supra ), the amount under reference was qua a commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal. 8. We have heard the parties, and perused the material on record. As regards the non-furnishing of the eligibility certificate, the same would, thus, only make the assessee's claim deficient to that extent. As such, furnishing the same during the course of assessment proceedings would be in substantial compliance of law, so that its non-consideration by the AO on that ground is legally infirm. With regard to the non-raising of the claim per the procedure prescribed under law, i.e. , the original or the revised return of income, we, on a consideration of the matter, are inclined to be in agreement with the final decision by the ld. CIT(A). This is for the reason that even though not made in the manner provided under the law, so that the AO would be in his right not to entertain the claim, even as held by the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 (SC), it is in our considered view not a case of a fresh claim, but only a part of the assessee's claim u/s. 32(1) of the Act. The entire depreciation, including additional depreciation u/s. 32(1)(iia), is to be deducted in computing the 'written down value' of th ..... 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