Law:

Section:

Section 37(1), read with section 256(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Whether question as to whether penalty imposed under M.P. General Sales Tax Act, was allowable as business expenditure depended on fact whether it was merely additional sales tax being difference between tax payable at full rate and tax payable at concessional rate or it was an amount in excess thereof imposed for infraction of law - Held, yes - Whether where statement of case drawn up by Trial Court did not take into account this distinction and correct factual position had not been stated, reference could not be decided, and therefore, Tribunal was to be directed to submit supplementary statement of case - Held, yes FACTS The Tribunal accepted the assessee's claim that the penalty imposed under M.P. General Sales Tax Act, was merely additional sales tax which was required to be paid by the assessee being the difference between the tax payable at the full rate and the tax payable at the concessional rate, and therefore, allowed deduction under section 37(1). On reference : HELD The question whether amount in question could be allowed as deduction as business expenditure depended on the fact whether it was sales tax which ought to have been paid by the assessee at the time of purchase of goods or it was an amount in excess thereof imposed for infraction of law. In the reference, the statement of case drawn up by the Trial Court did not take into account this distinction and apparently, for this reason, the factual position in the instant case had not been stated. Since the reference was required to be decided on the basis of the facts stated in the statement of case, it was not possible to answer the question referred on the basis of the incomplete statement of case which did not set-out this significant fact. It was, therefore, necessary to require the Tribunal to submit a further and supplementary statement of case stating these material facts to enable the decision of this reference. CASES REFERRED TO CIT v. Malwa Vanaspati and Chemical Co. Ltd. [1982] 135 ITR 221 (MP) and Simplex Structural Works v. CIT [1983] 140 ITR 782(MP). B.K. Rawat for the…

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