Sales Tax Penalty not allowable as business expense to the extent it is not compensatory

M/s. Bokaro Power Supply Co. Ltd. Vs. DCIT (ITAT Delhi)

In the case of Swadeshi Cotton Mills Vs. CIT Ltd. (supra) the Hon’ble Supreme Court has held that, ‘where the amount paid is partly penal and partly compensatory, the amount to the extent that it is compensatory could be allowed as deduction’. Further, Hon’ble Jurisdictional High Court in the case of CIT Vs. Bharat Steel Tubes Limited (supra) has held that ‘the penalty for delayed payment of sales tax is not a deductible expenditure.

Penalty levied for default of failure to furnish return under the VAT Act

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