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TMI Blog1968 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1922. The Mahabir Sugar Mills (Private) Ltd. is the assessee. It is a private limited company. It used to run a sugar mill. The assessee used to purchase sugarcane. It had to pay cess to the Government under the Cess Act. Cess was assessed against the company in due course. The company did not pay the cess within the prescribed time. The assessee had, therefore, to pay a sum of Rs. 14,664 as penalty under sub-section (5) of section 3 of the Cess Act. The assessee claimed this sum of Rs. 14,664 as a permissible expense and commercial loss. This claim was disallowed by the Income-tax Officer. The assessee appealed and succeeded. The Appellate Assistant Commissioner held that the sum of Rs. 14,664 ought to be accepted as a permiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult in the payment of cess becomes criminally liable. In Indian Aluminium Company Ltd. v. Commissioner of Income-tax the Indian Aluminum Company Ltd. was the assessee. It carried on the manufacture of aluminium products. It entered into an agreement with a business concern of Canada. The assessee paid a total sum of Rs. 2,50,808 without deducting tax and thereby contravened section 18(3B) of the Indian Income-tax Act, 1922. The Income-tax Officer treated the assessee as a defaulter under section 18(7) of the Indian Income-tax Act, 1922, in respect of the sum of Rs. 1,24,199 which ought to have been deducted. It was held that the payment of income-tax amounting to Rs. 1,24,199 directly arose on the application of sub-section (7) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... War Risks (Goods) Insurance Ordinance to get his full quantity of stock insured. Year after year he used to get his goods insured for an amount far below the actual value of the stock. Ultimately he was caught. The offence under the ordinance was compounded by the assessee upon payment of a sum of Rs. 16,895 to the Central Government. The Appellate Tribunal allowed deduction of the amount which would have been payable as premia for war risks insurance, but disallowed the balance amounting to Rs. 11,265. It was held by this court that the sum of Rs. 11,265 was not money wholly and exclusively expended for the purpose of business. It was not, therefore, deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922. In Sree Meenakshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense which was paid by way of penalty for a breach of law even though it might involve no personal liability could be said to be in amount wholly and exclusively laid for the purpose, of the business of the assessee within the meaning of section 10(2)(xv) of the Indian Income-tax Act, 1922. The fine paid by the assessee was not an allowable deduction under that section. The matter was explained by their Lordships on pages 359 and 360 thus : "...an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot be described as such. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner which has rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The company might have had its difficulties. But the fact remains that penalty has been imposed under sub-section (5) of section 3 of the Cess Act. Sub-section (2) of section 3 of the Cess Act required the company to pay the cess within the prescribed time. Penalty was imposed for its failure to pay cess within the prescribed time. The default also rendered the company liable to prosecution under section 4 of the Cess Act. As explained by the Supreme Court in the case of Haji Aziz and Abdul Shakoor Brothers, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The Tribunal was right in holding that the sum of Rs. 14,664 was not a perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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