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TMI Blog2010 (9) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. A.O. was of the view that the payments were made in violation of section 113/139 of the Motor Vehicle Act, 1986 and the payments were made for compounding of offences under section 113 of the Motor Vehicle Act, which in common parlance is known as overloading charges, stating to be an offence under that Act. Even though section 194 of the Motor Vehicle Act prescribes fine for contravention of provisions of section 113 AO was of the view that the expenses claimed were penalties for offences and not allowable as per section 37(1) of the IT Act. Accordingly he disallowed the same. Before the CIT(A) it was submitted that these expenses were necessary business expenses and as the assessee had to overload in view of the goods which are being transported, being coils and rolls manufactured by M/s. Steelco Gujarat Ltd. having units at Palej District in Bharuch and generally these overloading charges were paid in the RTO Check Post, Bharuch regularly as coils and other material cannot be cut to small size and the entire pack was being loaded on to the trucks/trailers which generally exceeds the carrying capacity. Therefore, fines on overloading are regularly being paid at the Check Pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate order in earlier years. It was further submitted that overloading charges paid by the agents of the assessee is not an infraction of law and this amount is an eligible allowance. The learned counsel not only relied on the orders of the ITAT (supra) in earlier years but also in the case of ITO vs. Ramesh Stone Wares 62 TTJ (Asr) 93. 5. The learned D.R., however, submitted that the issue in earlier two years was different from the issue in this year as the A.O. has mainly disallowed the amount under section 37(1) Explanation as the same contravenes provision of the law of Motor Vehicle Act. He relied on the order of the CIT(A) in distinguishing various case laws. 6. The learned counsel in reply submitted that the nature of payment in all the years is same. He has no objection if the amount is restricted to 5% for any omission in furnishing vouchers as was done in earlier years. 7. We have considered the issue. As seen from the orders of the ITAT in earlier years, the issue in A.Y. 2003-04 was with reference to 5% disallowance made on overloading charges of ₹ 23,30,118/- amounting to ₹ 1,16,505/- made by the A.O. which are accepted by the assessee and has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isibility or heaviness of the goods loaded on the trailers. During the year under consideration total weight allowed per trailer was only 20 tonnes while each coil was worth more than 25 to 30 tonnes. Coil cannot be divided or cut into pieces to suit the requirement of over weighing. As can be seen from this procedure, overloading charges paid by the said client cannot be termed as penalty. These charges are paid to RTO authorities at Bhilad. A few memos for checking and receipts of the RTO are enclosed herewith [Exhibit -1]. On the perusal of the said memos and receipts will be abundantly prove that no payment is made to any individual RTO." 13.1 The learned AR has relied upon various decisions including the decision of ITO Vs. Ramesh Stone Wares, [1998] 62 TTJ(Asr.) 93 wherein it has been held that additional freight charges arising on account of overloading of coal by assessee's agent is not penal in nature and, therefore, the same is allowable expenses. On perusal of order of CIT(A), we notice that the CIT(A) has enhanced the addition without appreciating the facts on record and the nature of expenses. In our considered view, the overloading charges paid by the assessee is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract is called penalty freight. This liability was not considered as penal nature and allowed. In assessee's case also the overloading charges are to be incurred regularly in view of the nature of goods transported for the said steel company and since the nature of the goods is indivisible and generally more than the minimum limit prescribed under the Motor Vehicle Act, the assessee has to necessarily pay compounding charges for transporting goods as part of the business expenses. These are not in contravention of law and the RTO authorities neither seized the vehicle nor booked any offence but are generally collecting as a routine amount at the check post itself while allowing the goods to be transported. In view of the nature of collection and payment which are necessary for transporting the goods in the business of the assessee, we are of the opinion that it does not contravene the M V Act as stated by the A.O. and the CIT(A). 11. Similar issue also arose with reference to fine and penalty paid on account of violation of National Stock Exchange Regulations in the case of Master Capital Services Ltd. vs. DCIT and the Hon'ble ITAT Chandigarh "A" Bench in ITA No. 346/Chd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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