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TMI Blog1991 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee under sub-section (1) of section 256 of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that penalties under the U.P. Sugarcane Cess Act, 1956, and the U. P. Sugarcane (Purchase Tax) Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer, however, did not allow the claim of deduction and his action was confirmed in appeal by the appellate authorities including the Income-tax Appellate Tribunal. Now, under the relevant provisions of the Income-tax Act, only such expenditure is a permissible deduction in computing the taxable income which is incidental to and is incurred or expended wholly and exclusively for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n computing taxable income as stated earlier, it must be a commercial loss or its nature must be contemplated as such. There is a catena of authorities right from Haji Aziz and Abdul Shahoor Bros. V. CIT [1961] 41 ITR 350 (SC) that infraction of law is not a normal incident of business and no expense which is paid by way of penalty for a breach, of law can be said to be an amount wholly and exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid out for the purpose of the business." The precise controversy with which we are concerned had been the subject-matter of consideration before this court on earlier occasions also. A Division Bench of this court, in Mahabir Sugar Mills (P.) Ltd. v. CIT [1969] 71 ITR 87, held that penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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