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TMI Blog2017 (10) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent : Shri Atiq Ahmad, Sr. DR ORDER PER SUDHANSHU SRIVASTAVA, J.M. This appeal has been preferred by the assessee against the order dated 23.04.2010 passed by the ld. CIT(A)-XVII, New Delhi for assessment year 2006-07 wherein the sole ground of dispute is against the action of the ld. CIT(A) upholding the disallowance of deduction of excise duty amounting to ₹ 50 lakh. 2. Brief facts of the case are that for the year under consideration, the assessee company filed the return of income declaring income of ₹ 1,05,429/-. The AO noticed that the assessee had paid excise duty of ₹ 50,00,000/- during the year under consideration. He, therefore, asked to file details of excise duty paid amounting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted sales and issued a show cause notice asking the details of the investment made in manufacturing the goods sold outside the books and also to provide year wise/month wise break-up of sales made during the period covered under the search made by Central Excise Department. The assessee filed letter dated 22.12.2008 and surrendered the sum of ₹ 35 lacs on account of investment and profit earned in respect of unaccounted sales for A.Y. 2003-04 to 2005-06 with the condition that the department will not reopen the case for 2004-05 and 2005-06 and no penal action will be initiated. The assessee also submitted a chart of year wise sales made along with his letter dated 22.12.2008. The details of sales turnover and comparative profit and lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting the same against unaccounted sale for the year under consideration. On appeal before the Ld. CIT(A), the Ld. CIT(A) dismissed the assessee s appeal on this issue and now, the assessee has approached the ITAT and has challenged the upholding of disallowance by the Assessing Officer. 4. At the outset, Ld. Authorised Representative submitted that the assessee s case was covered by the order of the ITAT in assessee s own case for Assessment Year 2010-11 in I.T.A. No. 5895/Del/2014 wherein the ITAT had set aside identical issue to the file of the Assessing Officer for the purpose of determining as to what portion of excise duty demand was penal in nature and what portion was compensatory in nature. Ld. Authorised Representative submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer disallowed the sales tax paid which was claimed u/s 37 read with section 43B of the Income Tax Act to the extent of ₹ 41,80,520/-. He also disallowed u/s 43B of the Act the bonus paid to the extent of ₹ 96,929/-. The same was questioned before the Ld. CIT (A) in the first appeal by the assessee but it could not succeed. The relevant provisions of section 37(1) and Explanation thereto of the Income Tax applicable in the present case are being reproduced hereunder:- (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 not being in the nature of capital expenditure of personal expenses of the assessee), laid out of expended wholly and exclusively for the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclature of the impost as given by the statute, to find out whether it is compensatory or penal in nature. The authorities have to allow deduction u/s 37(1) of the Act whenever such examination reveals a concern impost to be purely compensatory in nature. Whenever such impost found to be of a compensatory in nature i.e. partly of compensatory nature and partly of penal nature, the authorities are obliged to bifurcate two components of the impost and give deduction to that component which is compensatory in nature and refuse to give deduction to that The contention of the assessee in the present case before us, remained that the entire amount except ₹ 1,87,126/- is compensatory in nature and only ₹ 1,87,126/- was penal in n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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