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Allowable or not

gaurav (trainee ca final and cfa student) (80 Points)

20 March 2011

hello guyz,

please suggest:

whether amount paid as redemption fine(i.e amount paid for remove goods from confiscation from EXCISE DEPTT. and that amount paid is not treated as penalty) is allowable expenditue in PGBP or not?? .plz make reference with section?

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9 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 20 March 2011

it means that the excise department has found undisclosed sales, and charged excise on that, if u can book the sales in your accounts then add excise duty there, and claim the excise recovered from buyer,

but if u have paid ONLY excise then its not a valid expenditure, hence not adjustable.

gaurav (trainee ca final and cfa student) (80 Points)
Replied 20 March 2011

sir, i am asking about redemption fine paid to excise deptt. for remove confiscated goods fro, excise deptt. which was confiscated due 2 any reason (may be assessee is evading paymnet of duty or else)

Devendra (Chartered Accountant) (4775 Points)
Replied 21 March 2011

Fine paid cannot be claimed as expenditure.

CA. Santosh Prajapati (Practice) (97 Points)
Replied 21 March 2011

I think it’s a penalty charged by dept. by way of redemption file, so disallowed

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 21 March 2011

Originally posted by : gaurav
	sir, i am asking about redemption fine paid to excise deptt. for remove confiscated goods fro, excise deptt. which was confiscated due 2 any reason (may be assessee is evading paymnet of duty or else)

if they are eveding even then its related to some clearence, so why not make debit note against that sale and show adjust, it can not be allowed as direct expenditure.

CA.Naveen Kailkhuri (CA) (38 Points)
Replied 21 March 2011

Hi,

In your case, the Redemption fine is paid for Release of Goods from Confiscation.

Section 37 of the ITAct, specifies any expense as allowable only if "Not incurred for any purpose which is any offence or Prohibition by ANY Law".

Here, the term ANY is of great significance and hence applies to "Excise" as well.

Now, the "Fine" itself specifies that it is paid for something which is against provisions of Section 37.

Hence, the said fine will not be allowed as deduction for calculating Business Income.

Good Day..

charan guptha (article student) (146 Points)
Replied 21 March 2011

penalties paid in any case can be get exempted according to Income tax act ,1961.......

sonu gupta (sucess ) (95 Points)
Replied 21 March 2011

agree with CA naveen..

penalties are not allowed in pgbp.

gaurav (trainee ca final and cfa student) (80 Points)
Replied 21 March 2011

but my dear friends ,the amount is paid as compensation not as penalty,if assessee will not pay then amount can recover through auction by govt., so now is it allowed or not?