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TMI Blog2018 (1) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO these charges were in the nature of expenses incurred for any purpose which is an offence or which is prohibited by law and therefore ought not to be allowed as a deduction while computing the income from business as per the provision of Explanation to Section 37(1) of the Act. Section 37(1) of the Act provides that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed as a deduction in computing income chargeable under the head "Profits and gains of business or profession". Explanation to Sec.37(1) lays down as follows: "For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure." 4. The stand of the assessee was that these payments were not in the nature of penalty for infringement of law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e endorsee as the case may be, for the entire weight of the commodities loaded beyond the permissible carrying capacity for the entire distance to be travelled by the train hauling the wagon from the originating station to the destination point, irrespective of the point of detection of overloading : provided that no punitive charges will be levied if the customer carries out load adjustment at the originating station itself in case of detection of overloading at originating point." 6. The Assessee thus argued that the very heading of para 3 of the said Notification 'issued by the Ministry of Railways namely "punitive charges for overloading" makes it amply clear that such charges were actually in the nature of additional freight for overloading beyond the permissible carrying capacity and were not in the nature of penalty for any offence or infringement of law. The charges were in fact compensatory in nature for transportation of goods loaded beyond the permissible carrying capacity and it was only in the terminology of the railways that such charges are called punitive charges but in commercial parlance it is not in the nature of penalty for infraction of law. Therefore Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic policy for which punitive charges are levied. He drew our attention to section 73 of the Railway Act, 1989 which reads as follows :- " 73. Punitive charge for overloading a wagon.-Where a person loads goods in a wagon beyond its permissible carrying capacity as exhibited under sub-section (2) or sub section (3), or notified under sub-section (4), of section 72, a railway administration may, in addition to the freight and other charges, recover from the consignor, the consignee or the endorsee, as the case may be, charges by way of penalty at such rates, as may be prescribed, before the delivery of the goods: Provided that it shall be lawful for the railway administration to unload the goods loaded beyond the capacity of the wagon, if detected at the forwarding station or at any place before the destination station and to recover the cost of such unloading and any charge for the detention of any wagon on this account." 12. He laid emphasis on the fact that the statutory provision makes it clear that the punitive charges are in addition to freight and other charges. He also highlighted that punitive charges are clearly referred to as penalty. It was therefore submitted by him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 ITR 684 (SC) and also the nature of railway punitive charges held that the payments made to the railways for overloading of the wagons is compensatory in nature and cannot be disallowed under Explanation to Section 37(1) of the Act. The other decisions relied upon by the assessee supports the plea of the assessee and where the decisions rendered in the context of overloading charges paid to railways. In view of the above we do not find any merits in ground no.1 raised by the revenue. Consequently the same is dismissed." 15. In the case of M/s Taurian Iron & Steel Co (supra) ITAT Mumbai Bench dealt with an identical issue and came to the following conclusion :- " The overloading charges paid by the appellant to the Railways are paid in the regular course of business in accordance with the notification issued by Ministry of Railways doted 23.12.2005. The notification of Ministry of Railways dated 23.12.2005 provides a Schedule in which 'Situation A' and Situation B provides that f the aggregated payload in a rake exceed the combined permissible carrying capacity of the rake, the punitive charges should be levied as per 'Part - I, 'Part-II, Part-Ill of Situations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive damages. The said decision is not of any application whatsoever be the present case. The decision of the Hon'ble Karnataka High Court in the case of Mamta Enterprises(supra) is again a case where the criminal offence was compounded and the compounding fees was claimed as deduction. In the present case there is no offence whatsoever and there is no compounding fee paid and claimed as deduction. As far as the decision of the Hon'ble Supreme Court in the case of Haji Aziz and Abdul Brothers (supra) is concerned it was again the case of breach of penal provisions of Customs Act for which fine was paid. Under these circumstances, the expenses were not allowed as deduction. We are of the view that in the facts and circumstances of the present case the claim of the assessee for deduction was rightly allowed by CIT(A). We therefore uphold the order of CIT(A) and dismiss ground no.1 raised by the revenue. 17. Ground No.2 raised by the revenue reads as follows :- " (2) In the facts and circumstances and law point of the case, the order of the CIT(A) is erroneous because it relied on the sec.43B(b) of the Act whereas the present issue is involved with Sec.36(1)(va) read with 2(24)(x) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was correct or not. It appears that the Tribunal below, in View of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nat.ure and is required to be applied retrospectively with effect from 1 st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal." 21. In view of the aforesaid decision of the Hon'ble Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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