sec.37
This query is : Resolved
07 December 2009
please tell me how to judge that whether a payment is penal or compensatory in nature w.r.t sec.37 of income tax which disallows certain payment which are incurred but prohibited by any law.
PHARMA CO. HAS MADE PAYMENT WITH INTEREST SINCE PHARMA CO. WAS SELLING GOODS ABOVE GOVT. PRESCRIBED M.R.P
PHARMA CO. HAS MADE PAYMENT WITH INTEREST SINCE PHARMA CO. WAS SELLING GOODS ABOVE GOVT. PRESCRIBED M.R.P
07 December 2009
A penalty imposed for breach of any law during the course of trade, etc., cannot be described as a commercial loss.
If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner which has rendered him liable to penalty, it cannot be claimed as a deductible expenses.
Infraction of the law is not a normal incident of business and, therefore, no expense which is paid by way of penalty for a breach of law can be said to be an amount wholly and exclusively laid for the purpose of the business.
Haji Aziz & Abdul Shakoor Bros. v. CIT (1961) 41 ITR 350, 359 SC
Ca Surendra Rakhecha
Surat
If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner which has rendered him liable to penalty, it cannot be claimed as a deductible expenses.
Infraction of the law is not a normal incident of business and, therefore, no expense which is paid by way of penalty for a breach of law can be said to be an amount wholly and exclusively laid for the purpose of the business.
Haji Aziz & Abdul Shakoor Bros. v. CIT (1961) 41 ITR 350, 359 SC
Ca Surendra Rakhecha
Surat
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- TDS Challan - change of FY 2025-26 to TY 2026-27
- Gst registered proprietorship firm
- AUDITOR APPOINTMENT FOR THE YEAR ENDING MARCH 27
- TDS on Fixed Assets purchased
- Non filing of I T Returns
- GST Intimation due to Government took possession of Business Premises under PPE Act
- UDIN ISSUE
- TDS on purchase of under construction property from a reseller
- SALARY CAN BE CAPITALIZE
- How to Handle Active E-Invoices in GST Portal Deleted from Tally?
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Starting trading business
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
