Bhanvi Agro Pvt. Ltd v. The Commissioner Of Income Tax, Jodhpur

-1- DB Income Tax Appeal No.75/2012 Bhanvi Agro Pvt. Ltd.v. The Commissioner of Income Tax, Jodhpur Date of Order :: 22[nd] April, 2014 HON'BLE MR.JUSTICE GOVIND MATHURHON'BLE MR.JUSTICE ATUL KUMAR JAIN Mr. Sajjan Singh, for the appellant. .... This appeal is preferred to challenge the orderdated 30.3.2012 passed by the Income Tax AppellateTribunal, Jodhpur Bench, Jodhpur. The facts necessary to be noticed foradjudication of this appeal are that the Anti Evasion Wingof the Sales Tax Department found that the assessee(appellant) was transferring goods from its factorysituated in the State of Rajasthan to its godown situatedin the State of Gujarat. The transfer of goods wasessentially inter State sale. It was also found that apurchase entry for Rs.1,97,035/- relating to the financialyear 2002-03 was not accounted for in the regular books ofaccount. On being calling upon by the Sales Tax Departmentthe assessee considered the default and get theinfringement of law compounded by depositing a sum ofRs.12.15 lacs besides the tax and interest thereon. A claimwas made by the assessee for having deduction as per Section 37(1) of the Income Tax Act against the amount paidto the Sales Tax Department for compounding theinfringement of law. As per the assessee the amountaforesaid was a trading loss, thus, is deductible asbusiness expenditure. The claim made by the assessee wasnot accepted, thus, he preferred an appeal before theCommissioner of Income Tax (Appeals) and that came to beallowed in part vide order dated 24.4.2008. To challengethe order dated 24.4.2008 revenue preferred an appealbefore the Income Tax Appellate Tribunal, Jodhpur Bench,Jodhpur and that came to be accepted under the orderimpugned. While questioning correctness of the orderaforesaid the submission of counsel for the assessee isthat the assessee acted bonafidely in transfer of goods toGujarat as inter-branch transfers, but that was technicallytermed as inter-State sales. The assessee on knowing aboutthe same satisfied his liability by getting infringement oflaw compounded. Such compounding amount deserves to bededucted in view of Section 37(1) of the Act. Having considered the argument advanced, we donot find any merit in the same. It is well settled thatonly those disbursements as made for the purpose ofbusiness, i.e., that enable a person to carry on thebusiness and to earn profit in that business, would form apermissible deduction. An amount paid to get infraction oflaw compounded cannot be treated as disbursement to carryon the business and to earn profit in that. The findingsarrived by the learned Income Tax Appellate Tribunal, thus, does not suffer from any error and no substantial questionof law exists in the instant appeal. Accordingly, the appeal stands dismissed. (ATUL KUMAR JAIN),J. (GOVIND MATHUR),J. kkm/ps