NAMAKKAL SOUTH INDIA TRANSPORTS,NAMAKKAL vs. ACIT, CIRCLE-1,, NAMAKKAL

ITA 1992/CHNY/2025Status: DisposedITAT Chennai11 February 2026AY 2018-19Bench: SHRI MANU KUMAR GIRI (Judicial Member), SHRI S. R. RAGHUNATHA (Accountant Member)1 pages
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What did the Tribunal hold?

The Tribunal held that the payment was compensatory in nature, arising from contractual obligations due to shortage of goods during transit, and not a penalty for violation of law. The payment was incurred wholly and exclusively for the purpose of business and did not fall under the Explanation to Section 37(1) of the Act.

What were the facts?

The assessee, a transport operator, claimed an expenditure of Rs. 20,00,000 as 'penalty/fine' paid to M/s. Chettinad Cements Ltd. for shortage of goods during transportation. The Assessing Officer (AO) disallowed this expenditure, treating it as a penalty for violation of law. The CIT(A) confirmed the AO's decision.

What were the issues?

Whether the payment made for shortage of goods during transportation is a penalty for violation of law or a compensatory business expenditure.

Which sections of the Income-tax Act were involved?

Section 37(1)

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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA

For Respondent: Ms. Gouthami Manivasagam, JCIT
Hearing: 27.11.2025Pronounced: 11.02.2026

PER S. R. RAGHUNATHA, AM:

This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19, dated 06.06.2025. 2. The assessee has raised the following grounds of appeal.

1.

The Order of the Commissioner of Income Tax (Appeals) NFAC dismissing the appeal is contrary to law, erroneous and unsustainable on the facts of the case.

:-2-: ITA. No:199

The order continues below.

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