The Rajkot bench of Income Tax Appellate Tribunal (ITAT) recently held that overloading charges paid under Motor Vehicles Act Compensatory in nature .
The assessee Kiran Roadlines is a registered firm in the business of transportation has paid Rs.6, 09,100/- as overloading challan. The same has been considered to be an offense committed with the knowledge or under the orders of the owner as per Motor Vehicles Act, 1988 and the said overloading charges/challans are penal charges and levied for infringement of law and rules of the State specifying the permissible capacity. After the assessment, the assessing officer disallowed the overloading expense incurred by the assessee and held that any expenditure incurred by an assessee for any purpose which is an offense or prohibited by law shall not be deemed to have been incurred for the purpose of business. Against the order assessee filed an appeal before ITAT.
Mehul Ranpura counsel for the assessee submitted that in another matter of assessee case the additional commissioner of income tax confirmed that the overload expense amount was paid as penalty could not be disallowed under Section 37 of the Income Tax Act 1961.
B. D. Gupta counsel for the revenue contented that as per provision of explanation to Section 37 of the Income Tax Act 1961,, any expenditure incurred by an assessee for any purpose which is an offense or prohibited by law should not be deemed to have been incurred for the purpose of business and no deduction should be allowed.
Section 37 of Income Tax Act 1961 provides that any expenditure spent for the progress of business and profession shall be considered for calculating income under the profits and gains of business or profession.
After considering the contentions of the both parties the division bench of ITAT comprising Waseem Ahmed, (Accountant) and. Madhumita Roy, (Judicial Member) allowed the appeal filed by the assessee
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