Commissioner of Income-tax Vs. S.S. Ratanchand Bholanath - Court Judgment

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- indian penal code, 1890.section 306 :[dalveer bhandari & harjit singh bedi,jj] abetment of suicide deceased, a married woman, committed suicide - allegation of abetment of suicide against appellant husband and in-laws - ocular evidence was sketchy - dying declaration recorded by tahsildar completely exonerated all accused in-laws of any misconduct dispelling any suspicion as to their involvement - letter of threat allegedly written by appellant to father of victim was concocted piece of evidence held, though presumption against appellant can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. - the penalty levied under section 17(3) of the madhya pradesh general sales tax act, 1958, for not filing the return within the prescribed period is clearly on account of infraction of law requiring filing of the return within the specified period. cit 1983ecr1942d(sc) it was clearly held that 'infraction of the law is not a normal incident of business 'and if a sum is required to be paid by the assessee as penalty for infraction of the law, it cannot be claimed as a deductible expense as it cannot be called a commercial loss incurred in carrying on his business.j.s. verma, actg. c.j.1. this reference under section 256(1) of the income-tax act, 1961, is at the instance of the revenue for deciding the following questions of law, namely :' (1) whether, on the facts and in the circumstances of the case, the tribunal was justified in law in allowing the deduction of additional sales tax amounting to rs. 2,863 ? (2) whether, on the facts and in the circumstances of the case, the tribunal was correct in holding on strength of its order for the assessment year 1965-66 that the amount of rs. 41,000 paid by the assessee by way of penalty under the sales tax act was allowable deduction as business expenditure ' 2. the relevant assessment year is 1971-72. the assessee is a hindu undivided family earning income from business in cloth, etc. the assessee claimed deduction of rs. 2,863 on account of additional sales tax assessed and a further deduction of rs. 41,000 was also claimed on account of penalty imposed under section 17(3) of the madhya pradesh general sales tax act, 1958, for late filing of the return during the relevant accounting year. the income-tax officer disallowed both these claims for deduction. the commissioner of income-tax (appeals) rejected the assessee's claim on both these counts but on further appeal to the tribunal, both these deductions have been allowed as claimed by the assessee. hence, this reference at the instance of the revenue to answer the above questions of law.3. in view of the decision of the supreme court in kedarnath jute mfg. co. ltd. v. cit : [1971]82itr363(sc) it cannot be disputed that the tribunal was justified in allowing the deduction of additional sales tax assessed at rs. 2,863 during the relevant period. in view of this decision, the learned counsel for the revenue made no attempt to assail the tribunal's conclusion on this point. following this decision of the supreme court, the above-quoted first question is answered in favour of the assessee and against the revenue.4. now remains for consideration the second question referred for our decision. the penalty levied under section 17(3) of the madhya pradesh general sales tax act, 1958, for not filing the return within the prescribed period is clearly on account of infraction of law requiring filing of the return within the specified period. section 17(3) itself describes the penalty levied thereunder as an amount ' in addition to the amount of tax ' payable by the assessee for the default committed by it. this provisionitself indicates that the penalty is not in the nature of an additional tax. the learned counsel for the assessee, however, contended that the penalty levied under section 17(3) is in the nature of an additional tax or interest on the tax payable. he further contended that at any rate it is not levied for any contumacious conduct of the assessee and, therefore, mere infraction of law resulting in the levy of penalty is not sufficient to disallow it as a business expenditure. we are unable to accept this contention since it is contrary not only to the decisions of this court but also to the decisions of the supreme court.5. in haji aziz and abdul shakoor bros. v. cit : 1983ecr1942d(sc) it was clearly held that ' infraction of the law is not a normal incident of business ' and if a sum is required to be paid by the assessee as penalty for infraction of the law, it cannot be claimed as a deductible expense as it cannot be called a commercial loss incurred in carrying on his business. the requirement indicated in this decision of the supreme court is merely infraction of law and not the further requirement that the assessee's conduct should also be contumacious. it would be useful to reproduce the relevant extract of the above decision of the supreme court which is as under (at p. 360):' in our opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. the distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business. '6. a division bench of this court in cit v. malwa vawaspati & chemical co. : [1982]135itr221(mp) following the above supreme court decision held that a penalty imposed under section 17(3) of the madhya pradesh general sales tax act, 1958, cannot be allowed as a deduction. in a later decision of another division bench of this court in simplex structural works v. cit : [1983]140itr782(mp) this decision was distinguished on facts but the principle enunciated was the same following the above decision of the supreme court in haji aziz's case : 1983ecr1942d(sc) . this latter case related to the difference between the tax payable at the full rate and the tax payable at the concessional rate. it was pointed out that the true nature of the difference in tax was not that of a penalty inasmuch as the tax at the full rate was required to be paid as a tax in obedience to the law. both these earlier decisions of this court are also in favour of the revenue.7. learned counsel for the assessee placed reliance on the decision of the supreme court in mahalakshmi sugar mills co. v. c1t : [1980]123itr429(sc) . this case related to the liability for payment of interest on the arrears of cess which was an accretion to the cess resulting in enlargement of the cess liability automatically under the act without the requirement of any specific order. the supreme court decision made a distinction between the penalty leviable under that act and the interest payable on the cess which was described as an accretion to the amount of cess. this decision does not in any manner assist the assessee and in fact supports our conclusions based on haji aziz's case : 1983ecr1942d(sc) . learned counsel for the assessee also referred to the decision of the karnataka high court in cit v. mandya national paper mitts ltd. : [1984]150itr26(kar) . we find that the basis of the decision of the supreme court in haji aziz's case : 1983ecr1942d(sc) was not referred and the conclusion therein relating to the nature of penalty payable under the state's sales tax act for delay in payment of tax was based on the decision in mahalakshmi sugar mills co. v. cit : [1980]123itr429(sc) . as earlier indicated, this case, i. e., mahalakshmi sugar mills' case, was a case relating to interest on cess in which the distinction between interest and penalty was indicated by the supreme court. we are, therefore, with respect, unable to subscribe to this view of the karnataka high court which appears to be in conflict with the decision of the supreme court in haji aziz's case : 1983ecr1942d(sc) and also contrary to the view taken in the earlier decisions of this court by which we are bound.8. consequently, the reference is answered as follows :' (1) the tribunal was justified in allowing the deduction of additional sales tax amounting to rs. 2,863. (2) the tribunal was not justified in holding that the amount of rs. 41,000 paid by the assessee as penalty under section 17(3) of the m. p. general sales tax act, 1958, was an allowable deduction as business expenditure. ' 9. there will be no order as to costs of this reference.