Compounding Fee paid to Legal Metrology Dept is allowable expense

Ocean Agro (India) Ltd. Vs DCIT (ITAT Ahmedabad) A short issue before us is, whether compounding fees expended by the assessee is compensatory in nature, and allowable expenditure under section 37(1) or not. We find that Explanation 1 appended to section 37(1) of the Income Tax Act prohibits allowance of any expenditure, if it was incurred for illegal activities or towards infringement of law. The ld.Revenue authorities construed the payment made by the assessee to Inspector of Legal metrology Department as incurred towards violation of law which is penal in nature. On the other hand, the sta...