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TMI Blog2023 (5) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... curred by the assessee, for import of rubber process oil, loss on price fluctuation, freight and retention charges cannot be said that these expenses were incurred for infraction of law. These expenses were incurred in the course of carrying on business of the assessee and they are allowable as deduction u/s 37(1). We direct the AO to delete the following expenses Loss on price fluctuation, Freight and Detention charges. Expenses incurred towards customs joining fee and customs penalty it is evident from the computation of income for the assessment year 2014-15 furnished by the assessee That the assessee itself has disallowed while computing the loss from business and, therefore, the said expenses cannot be disallowed once again. Thus we direct the AO to delete the disallowance u/s 37(1) while computing the income of the assessee. Ground raised by the assessee is allowed. - I.T.A No.5171/Del/2019 - - - Dated:- 4-5-2023 - Shri G. S. Pannu, President And Shri Challa Nagendra Prasad, Judicial Member For the Assessee : Shri M. P. Rastogi, Adv.; And Ms. Priyanka Goel, C. A. For the Department : Shri Sanjay Tripathi; Sr. D. R. ORDER PER C. N. PRASAD, J. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer disallowed Rs.195.77 lakhs as not allowable under section 37(1) of the Act on the ground that assessee had imported the product which is prohibited by law, hence such expenses claimed by the assessee are not allowable. 4. On appeal the ld. CIT (Appeals) sustained the disallowance of expenses to the extent of Rs.138.98 lakhs out of Rs.195.77 lakhs after giving a relief of Rs.56.79 lakhs on account of retention charges on other imports on other goods. The disallowance of expenses sustained by the ld. CIT (Appeals) are as under:- (i) Loss on price fluctuation Rs. 58,18,874 (ii) Freight Rs. 18,62,370 (iii) Detention charges Rs. 47,16,362 (iv) Customs Compounding fees Rs. 10,00,000 (v) Customs penalty Rs. 5,00,000 TOTAL : Rs.1,38,97,606 5. The ld. Counsel for the assessee submits that the assessee is a Joint Venture (JV) Company of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Addl. Commissioner of Customs (Imports), the date of Circular No.12/2013 is 3rd September 2013 (see paragraph number 1.3 of the order of custom official placed at page 70 of paper book). Ld. Counsel submits that though it is a matter which was to be contested before Custom Authorities, it is being mentioned that the company had a good case for the following: (i) The Circular No. 12/2013 is issued under Hazardous Waste (Management Handling and Trans boundary Movement) Rules 2008. The said Rules deal with import of Hazardous Waste while the Rubber Process oil is a virgin material. Thus the matter becomes a debatable matter. (ii) The Circular No. 12/2013 does not specify the chemical composition and their limits which are permissible or beyond which they are not permissible. (iii) Whether an internal circular issued after the dates of placing the order and arrival of goods at Indian port, could be applied retrospectively. 7. Ld. Counsel submits that In case the company had contested the matter before the Custom Authorities (CEGAT) it would have involved considerable time for the decision to be received. This would have resulted in the mounting up of Detention an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ste material -more so a hazardous waste material as alerted in Circular Number 12/2013 issued by Addl. Director- Cl. It is also brought to your kind notice that the very circular of Addl. Director was admittedly issued on 3 September 2013, which is after placing the purchase order in June 2013 and the goods reaching the goods at the port in India on 30 July 2013. In case the imported goods were examined/ tested immediately on arrival there would have been no question of looking and relying on the internal Circular No. 12/2013 issued by the Custom Authorities. 10. Therefore, the ld. Counsel submits that the expenses incurred by the assessee on import of rubber process oil is allowable under section 37(1) of the Act and these expenses cannot be treated as expenses incurred for infraction of law. The ld. Counsel further submits that in the computation of income filed had already disallowed compounding fee and fine and penalty paid for customs amounting to Rs.15,00,000/- [Rs.10,00,000/- plus Rs.5,00,000/-) and, therefore, the same cannot be subjected to disallowance once again. 11. On the other hand, the ld. DR strongly supported the orders of the authorities below. 12. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are allowable as deduction under section 37(1) of the Act. Thus, we direct the Assessing Officer to delete the following expenses incurred by the assessee:- (i) Loss on price fluctuation Rs. 58,18,874 (ii) Freight Rs. 18,62,370 (iii) Detention charges Rs. 47,16,362 TOTAL : Rs.1,23,97,606 13. Coming to expenses incurred towards customs joining fee of Rs.10,00,000/- and customs penalty of Rs.5,00,000/-, it is evident from the computation of income for the assessment year 2014-15 furnished by the assessee which is placed at page 2 of the paper book that the assessee itself has disallowed while computing the loss from business and, therefore, the said expenses cannot be disallowed once again. Thus we direct the Assessing Officer to delete the disallowance of Rs.1,38,97,606/- made under section 37(1) of the Act while computing the income of the assessee. Ground raised by the assessee is allowed. 14. In the result appeal of the assessee is allowed. Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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