VIJAY KUMAR VYAS,J. - (1.) By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the Department confirming the order of CIT (A).
(2.) Counsel for the appellant has framed the following substantial questions of law: (i) Whether in the facts and circumstances of the case and in law the ITAT was justified in upholding the deletion of disallowance made u/s. 37(1) of the Act amounting to Rs.31632000/- on account of penal excise duty debited in P and L Account. (ii) Whether in the facts and circumstances of the case and in law the ITAT was justified in holding that alleged excise demand notice are not penal in nature without appreciating the fact that the same are for penalty demand levied by the Excise Department raised on account of fake export permit.
(3.) Mr. Mathur has contended that the assessee was penalised pursuant to his illegal activities and this will not amount to business expenses. He has relied on Section 37 and explanation thereto of the Income Tax Act which has been introduced in 1998 and reads as under: 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation 1.--For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. ;