SRI. GANESH SHIPPING AGENCY,MANGALORE vs. ASST.C.I.T., MANGALORE

Per INTURI RAMA RAO, AM :

5.1 Learned AR of the assessee vehemently submitted that the nature of speed money was considered Hon’ble jurisdictional High Court in the case of CIT vs. Konkan Marine Agencies (313 ITR 308) wherein the Hon’ble High Court opined that this expenditure does not involve any breach of any statute or law and therefore the entire expenditure is allowable. He further submitted that this decision was followed by the Hon’ble co-ordinate bench of the Tribunal in dated 30/06/2010. Therefore, according to the Learned AR of the assessee, latter decision of this Tribunal is to be preferred to the decision in the case of the appellant.

5.2 On the other hand, learned DR placed reliance on the order of the co-ordinate bench of Tribunal in the assessee’s own case for assessment year 2010-11 in and ITA No.1677/Bang/2013 dated 23/03/2015. & 546/Bang/2016 Page 4 of 5 6. We heard rival submissions and perused material on record. The issue of allowability of speed money had come for consideration before the Hon’ble High Court in the case of CIT vs. Konkan Marine Agencies (313 ITR 308) wherein the Hon’ble High Court held that said expenditure was incurred only in the course of business and is neither prohibited by law and is wholly allowable. The relevant para is as under:

“7. We have perused the orders passed by the authorities below and taking into consideration the assessee's business and the prevailing practice in the trade, whereby payments have to be made by the firms such as the assessee in order to ensure that work of handling goods are done within a reasonable time and to handle emergency operations of cargo handling beyond the working hours, such payments are made either through labour or workers' union, cannot be considered to be either prohibited by law and further the assessee cannot be expected to take the receipt from individual workers or make payment by way of cheques. In our opinion, the payment is clearly for business consideration and cannot be considered to be illegal in nature and have been incurred in the ordinary course of business and, therefore, the said amount ought to be allowed as deduction by way of business expenditure.”

Thus, the Hon'ble High Court, after examining the nature of expenditure had come to the conclusion that this expenditure is allowable as business expenditure as it is not prohibited by any provisions of law. Further, we hold that no expenditure can be disallowed merely on the premise that the expenditure is excessive when all other conditions for allowability of expenditure u/s 37(1) are fulfilled. The AO had not invoked the provisions of sections of 40A(3) to disallow the payments, if any, made in cash & 546/Bang/2016 Page 5 of 5 exceeding Rs.20,000/-. Merely because expenditure was incurred in cash, it cannot be presumed that the expenditure is not genuine. No disallowance can be made merely based on surmises and conjectures.