Law:

Section:

Section 10(2)(xv) of the indian income-tax act, 1922 [corresponding to section 37(1) of the income-tax act, 1961] business expenditure goods unauthorisedly imported by assessee-firm confiscated by customs authorities-option to assessee to get import regularised on paying Rs. 22,000 as fine-matter unsuccessfully agitated before higher authorities for four years assessee finally took delivery of goods after paying fine and substantial demurrage charges for use of port facilities beyond permissible free period-whether tribunal was justified in law in disallowing demurrage charges as admissible deduction under section 10(2)(xv) Held, on Facts, No Facts The assessee-firm ran a rolling mill where iron bars were manufactured out of billets and plate cuttings, etc. Certain goods imported by it were confiscated by customs authorities, by an order dated 10-02-1959, on finding that these were not covered by its import licence. The assessee, however, had the option to pay Rs. 22,000 as fine and clear the goods for home consumption subject to adjustment there- of against the licence held by him. After unsuccessfully agitating the matter before various authorities for four years, it finally cleared the goods by paying not only the fine but also a sum of Rs. 19,119 as demurrage charges for use of the port facilities beyond the permissible free period during the litigation period. The assessee claimed the deduction of these demurrage charges as business expenses under section 10(2)(xv) but the same was disallowed by the ITO. Its appeal before the AAC and the Tribunal were unsuccessful. The Tribunal held (i) that the demurrage was paid not for business reasons but for breach of the Import Control Order, and (ii ) that there was no essential difference between the "fine" paid and the "demurrage" paid. On reference : Held 1. Demurrage charged by port authorities is in the nature of compensation for delay in clearing the goods from the godowns of the port authorities. It includes amount chargeable for storage and safe custody of the goods by the port authorities beyond the free period allowed under port rules. In the instant case, the demurrage paid by the assessee was not a fine…

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