Case Law Details
Pr. CIT Vs Sushil Gupta (Bombay High Court)
Conclusion: Assessee was not entitled to claim redemption fine as business expenditure under Section 37 as the same was for the infraction of law committed by assessee.
Held: Assessee was using import license of M/s. R Bros. which was an export house. For using the license, assessee would pay service charges equivalent to 25% of CIF value of the goods. It was pointed that the consignment of almond was imported by M/s. R and assessee had merely acted as an agent in the transaction. It was pointed out that upon confiscation of the goods, redemption fine and penalty were imposed on M/s. R Bros. AO however, held that assessee had paid the customs fine and it could not shown the legitimate source of this amount, therefore, the amount was treated as assessee’s unexplained expenditure. Assessee had raised additional contention that when the expenditure towards redemption fine was attributed to assessee, the same should be considered as business expenditure. In the present case, Tribunal, without proper justification or detailed examination of material on record, followed the line of logic adopted by this Court in the case of Pannalal whereas the facts was squarely fallen within the parameters of the decision of the Supreme Court in the case of Hazi Aziz. AO had summoned the import licence holder M/s. R whose representative had stated before AO that assessee had imported almond by using the licence and that redemption fine of Rs. 75 lacs paid to the Madras Custom House was done by assessee. All transactions were made by him and he was responsible for the fine. He stated clearly that as per the agreement, M/s. R Brothers were only entitled to the service charges. Thus, there was ample evidence on record suggesting that assessee had made imports through his direct involvement by using the import licence of M/s. R and that M/s. R merely received an agreed commission. Assessee could not disassociate or divest himself from the irregularities or illegalities committed in the process of importing the goods. Thus, the penalty was for the infraction of law committed by assessee. Hence, deduction under section 37 was not allowable. The very dispute with respect to the source of this amount was pending in suit before the Single Judge.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
1. This appeal was admitted for consideration of following substantial question of law:-
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