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TMI Blog2020 (3) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to the assessee. The basis of disallowance is the fact that the payment is not in assessee s account. However, as rightly pointed out by Ld. AR, the said payment was made by the assessee himself out of his own funds and substantial payment challans were in the name of assessee s proprietorship concern namely M/s M.B.Sales Corporation . The other entities denied their liability and despite legal action, the stated amount could not be recovered from them and the amount eventually became irrecoverable for the assessee. Therefore, the said loss, in our considered opinion, was incurred in the course of business being carried out by the assessee and non-payment of the duty would have resulted into substantial losses for the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed-off by the bench on 14/06/2017. However, upon assessee s miscellaneous application, the said order was recalled vide MA Nos.691- 92/Mum/2017 order dated 02/04/2018 and the appeals were directed to be put up for fresh hearing before the regular bench. Accordingly, the appeals have come up for fresh hearing for adjudication before this bench. First, we take appeal for AY 2006-07. ITA No. 3377/Mum/2012, AY 2006-07 2.1 The Grounds raised by the assessee read as under: - On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax, Appeals-1, Mumbai, hereinafter referred to as the Ld. CIT(A) has erred in not allowing the claim of the appellant towards payment of Custom Duty amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of ₹ 165.82 Lacs primarily on account of the fact that it paid additional import duty amounting to ₹ 197.60 Lacs. The said duty was paid under instructions of Department of revenue intelligence (DRI), Govt. of India based on their beliefs that the import of earlier years was under-valued. The matter of duty was under consideration of Hon ble Settlement Commission. Upon perusal of final order passed by Settlement Commission, it transpired that an additional octroi duty of ₹ 104.47 Lacs was related to the assessee whereas the balance amount of ₹ 93.12 Lacs was related with other parties. The disallowance of this duty of ₹ 93.12 Lacs is the sole subject matter of appeal before us. 2.5 In defense, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pay any duty. Therefore, with a view to settle the dispute, the assessee approached settlement commission and paid duty for himself as well as for 3 other entities also. The said duty was paid by the assessee himself and accordingly, the deduction of the same was claimed during the year. The Ld. AR submitted that as per the provisions of Sec.37(1), any expenditure laid out or expended wholly and exclusively for the purpose of the business shall be allowable and therefore, since the expenditure was incurred during the course of business out of commercial expediency, the deduction of the same would be allowable to the assessee. 5.2 The Ld. AR, explaining the circumstances which led to payment of duty by the assessee, submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied is whether the expenses were incurred for the preservation and protection of the assessee's business from any such process or proceedings which might have resulted in the reduction of its income and profits and whether the same were actually and honestly incurred. It was not possible to understand how the expenditure on the proceedings in respect of the Investigation Commission by the assessee would not fall within the above rule. Even otherwise, the expenditure was incidental to the business and was necessitated or justified by commercial expediency. The earning of profits and the payment of taxes are not isolated and independent activities of a business. These activities are continuous and take place from year to year during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion, was incurred in the course of business being carried out by the assessee and non-payment of the duty would have resulted into substantial losses for the assessee and damaged assessee s reputation in the market. This being the case, the said loss would be allowable to the assessee as a business loss out of commercial expediency. The ratio laid down in the cited judicial pronouncements clearly support the case of the assessee. Therefore, we hold that the said expenditure would be an allowable expenditure. The appeal stands allowed. ITA No.7332/Mum/2012, AY 2008-09 7. Facts are pari-materia the same in this year. The assessee is before us with similar grounds of appeal as well as additional ground of appeal. The assessment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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