Penalty paid to govt. department

This query is : Resolved

Keshav Pandey (Querist)
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12 June 2012 Dear Sir,
We have paid some amt as penalty to govt. department Like to sale tax Department on self assessment cases, is that allowed as exp in P&L a/c or disallowed ?.

If we get Same problem with Service Tax and Income tax then what to consider allow or disallow ?.

Waiting ans.
Regards
Keshav

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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12 June 2012 Penalty for non payment of sales tax is not a business expenditure.
Citation :- CIT Vs. Bharat Steel Tubes Ltd (1996) 86 Taxman 358 (Del)
But supreme court in Malwa Vanaspati's case said if the payment is embedded with a compensatory characteristic,then it is a business expenditure.
To have a better understanding the concerned act and the reason of payment has to be analysed.

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