M/S KIRAN ROADLINES,,GANDHIDHAM vs. THE ASSISTANT COMMR. OF INCOME TAX, GANDHIDHAM CIRCLE,, GANDHIDHAM
What did the Tribunal hold?
The Tribunal held that the overloading charges paid by the assessee were compensatory in nature and not a penalty for an offense, thus allowing them as a deductible business expense. This decision was based on previous rulings in the assessee's own cases for earlier assessment years.
What were the facts?
The assessee, a transportation business, paid Rs. 6,09,100/- as overloading charges. The AO disallowed this amount, considering it a penalty for an offense prohibited by law under Section 37 of the Income Tax Act. The CIT(A) upheld this disallowance.
What were the issues?
Whether overloading charges paid by a transportation company are deductible business expenses or non-deductible penalties for offenses prohibited by law.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “RAJKOT” BENCH, RAJKOT
Before: SHRI WASEEM AHMED&
O R D E R
PER Ms. MADHUMITA ROY - JM:
The instant appeal at the instance of the Assessee is directed against the order dated 26.12.2018 passed by the passed by the Commissioner of Income Tax (Appeals) – 3, Rajkot (‘the CIT(A)’), arising out of the (M/s. Kiran Roadlines vs. ACIT) A.Y. 2014-15 - 2- assessment order dated 05.09.2016 passed by the Learned ACIT, Gandhidham Circle, Gandhidham-Kutch, under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2014-15.
The short point involved in this matter is this that as to whether the addition of Rs.6,09,100/- on account of overloading expenses is sustainable in the eye of law.
The assessee has paid Rs.6,09,100/- as overloading challan. The same has been considered to be an offence committed with the knowledge or under the orders of the owner as per Motor Vehicles Act, 1988 and the said overloading charges / challans are penal charges and levied for infringement of law and rules of the State specifying the permissible capacity. Ld. AO further stated that as per provision of explanation to Section 37 of the Act, any expenditure incurred by an assessee for any purpose which is an offence or prohibited by law shall not be deemed to have been incurred for the purpose of business and no deduction shall be allowed. The First Appellate Authority confirmed the said addition. Hence, the instant appeal before us.
At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that the issue is covered in favour of the assessee in assessee’s own case for A.Y. 2003-04, 2004-05 & (M/s. Kiran Roadlines vs. ACIT) A.Y. 2014-15 - 3- 2005-06. In this regard, he has relied upon certain judgments passed by the Co-ordinate Bench in assessee’s own case.
The assessee is a registered firm in the business of transportation. It appears that for A.Y. 2004-05 & 2005-06 identical penalty debited to P&L account has been allowed by he Ld. CIT(A). In appeal preferred before the ITAT by the Revenue dated 06.03.2009, the Hon’ble Bench has been pleased to restore this issue to the file of the Ld. AO to verify the facts whether, if the assessee carried excess load and if the penalty is imposed by the RTO not for payment towards infringement of law but as fine collected by him, the same was directed to be allowed. Upon which, on 09.12.2010, after considering the receipts by the RTO, the Ld. Addl.CIT, Gandhidham Range came to a finding that same was paid as fine and has been debited as penalty in the books of accounts. In that view of the matter, the Ld. Addl.CIT was of the opinion that even if such amount was paid as penalty still the same is clearly a compensatory levy and, therefore, same cannot be disallowed under Section 37 of the Act. Finally, the same was, therefore, decided in favour of the assessee. The copy of each of orders passed by the Co-ordinate Bench dated 06.03.2009, order dated 09.12.2010 passed by the Addl.CIT, Gandhidham Range and the consequential order passed under Section 143(3) r.w.s. 254 of the Act by the Ld. ACIT, Gandhidham Circle, Gandhidham-Kutch has been placed on record before us annexing the same in the paper book, considering which, we do not hesitate to conclude that Rs.6,09,100/- in respect of overloading paid by the appellant is an (M/s. Kiran Roadlines vs. ACIT) A.Y. 2014-15 - 4- allowable expenses under Section 37 of the Act. Therefore, the same is allowed in favour of the assessee.
In the result, the appeal of assessee is allowed.
This Order pronounced on 03/01/2023
Sd/- Sd/- (SHRI WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 03/01/2023 S. K. SINHA True Copy आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. By order/आदेश से,
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