RAGHUBIR PRASAD GUPTA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 256(1) of the I.T. Act, 1961, at the instance of the assessee relates to the assessment year 1970-71. The previous year ended on March 31, 1970.

(2.) In the proceeding for the assessment of tax, the ITO added, inter alia, Rs. 61,000 in the book profit of the assessee. During the year under assessment through an overdraft arrangement with Chartered Bank Ltd. import quota granted in the name M/s. Widge and Co. for 152 Wisconsin engines was purchased on November 8, 1969. In connection with this purchase the assessee had to pay on July 11, 1969, a sum of Rs. 61,000 as penalty to the customs authority for import of the petrol engines. According to the ITO, the penalty for an infringement of law was not an admissible expense.

(3.) The assessee went in appeal before the AAC. Upholding the contention of the assessee-appellant the AAC held that the amount of Rs. 61,000 paid by the assessee as penalty for releasing his goods from the customs authorities should be allowed as a proper deduction in computing the business income of the assessee.