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TMI Blog2022 (10) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... he object of a statute or is an illegality which goes to the root of the matter, the expenditure in relation to the same is not allowable. If one is to understand the concept of punitive charges, clearly the punitive charges are plain and simple overloading charges. These charges are not levied on account of any act done by an assessee in violation of any law, nor it is a fine levied on the assessee for an infraction of the law much less the doing of a prohibited activity. This being so, we are of the view that the ld. CIT(A) was right in deleting the disallowance as made by the AO. Appeal of the revenue stands dismissed. - ITA No. 440/CTK/2016 - - - Dated:- 10-10-2022 - SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI ARUN KHODPIA , AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorically held that the acceptance of freebies by medical practitioners was punishable by Medical Council of India and consequently, the distribution of such freebies would also fall within purview of prohibited by law and, therefore, the expenditure incurred by the assessee-pharmaceutical company in distribution of such freebies could not be granted as deduction in terms of Explanation 1 to Section 37(1) of the Act. He also placed reliance on the decision of Hon ble Karnataka High Court in the case of Mamta Enterprises, reported in [2004] 135 TAXMAN 393 (KAR.), wherein the assessee had paid a compounding fine to the Town Planning Authority, the same could not be claimed as an expenditure u/s.37 of the Act as the same was a fine paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be levied as per Part -I‟, Part-II, Part-III of Situations A B It provides that in case of overloading upto 1/2 tonnes, punitive charges eligible on the entire weight of loading beyond the permissible carrying capacity shall be nil (as per different tables of Situation A‟ and Situation B‟ and in case the weight of commodity exceeds the permissible carrying capacity of the wagon by more than 1/2 tonnes, the punitive charges eligible on the entire weight loading beyond the permissible carrying capacity would be 2 times the freight rates applicable to that commodity in case of Situation A‟ and 3 times the freight rates applicable to the highest class in case of Situation B‟. (ii) Thus, it is obvious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing but overloading charges and it was not an expenditure prohibited by law. He vehemently supported the order of the CIT(A). 5. We have considered the rival submissions. The term prohibited by law as occurring to Explanation 1 to Section 37(1) of the Act has been explained by the Hon ble Supreme Court in the case of Apex Laboratories (P.) Ltd., reported in [2022] 135 taxmann.com 286 (SC). The Hon ble Supreme Court after considering the term prohibited by law came to the conclusion that such acts which would wholly undermine public policy and which would defeat the object of a statute or is an illegality which goes to the root of the matter, the expenditure in relation to the same is not allowable. With this kept in mind, if one is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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