Law: Income Tax Act, 1922

Section: 10,10(2)(xvi)

Income-tax Act (XI of 1922)---S. 10 (2) (xvi)-Business expenditure-Penalty for contravention of law-Amount of penalty imposed for wrongful export of goods from India to Pakistan in contravention of law-Held, not a business expendi­ture of nature mentioned in S. 10 (2) (xvi). Commissioners of Inland Revenue v. Warnes & Co. Ltd. (1919) 2 K B 444; and Haji Aziz & Abdul Shakoor Bros. v. Commissioner of Income-tax (1961) 41 I T R 350 eel. STATEMENT OF THE CASE By this application the Commissioner of Income-tax, U. P. and V.P requires the Appellate Tribunal to refer to the High Court a question law alleged to arise out of the Tribunal's order in I. T. A. No. 2579 of 1953-54. Inasmuch as in our opinion, a question of law does arise out of the order of the Tribunal, We hereby draw up a statement of the case and refer it to the High Court of Judicature at Allahabad under section 65 (1) of the Indian In-come-tax Act, 1922. 2. Messrs Mathura Prasad Hardwar Prasad, the respondent in this appli­cation, is a firm. The aforesaid appeal concerned the assessment made on the respondent in the status of a registered firm for the assessment year1951-52, the relevant previous year being the year ending with Push Sudi 12, Samvat 2007, corresponding to the period November i8, 1949, to January 19, 1951. The assessee firm dealt in molasses during the previous year. During the previous year the assessee arm exported 1,952 tins of molasses to East Pakistan. The prevalent market rate of molasses at Barharj, where the assessee firm was carrying on the business was Rs. 5-12-0 per maund while the tins exported to Pakistan were sold at the rate of Re. 20 per maund. Molasses was not one of the commodities included in the Indo-Pakistan trade agreement. The assessee firm was not, therefore, entitled to export molasses from India to Pakistan. While these 1,952 tins of molasses were being taken into Pakistan they were seized by the Pakistan Government. As a result of negotiations between the Governments of India and Pakistan, the assessee firm was permitted to take the stock of molasses into Pakistan on condition that the assessee firm should pay a penalty of Rs. 3,110 in addition to the…

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