ADLL CIT RG 13(1), MUMBAI v. BHARAT C. GANDHI, MUMBAI

ITA 4270/MUM/2009 | 2006-2007
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 427019914 RSA 2009
Assessee PAN AAFPG9238F
Bench Mumbai
Appeal Number ITA 4270/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 17 day(s)
Appellant ADLL CIT RG 13(1), MUMBAI
Respondent BHARAT C. GANDHI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-03-2011
Assessment Year 2006-2007
Appeal Filed On 13-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4270/MUM/2009 (ASSESSMENT YEAR: 2006-07) DCIT 13(1) SHRI BHARAT C. GANDHI ROOM NO. 418 4TH FLOOR MARINE HOUSE 93 DR. MAHES HWARI AAYAKAR BHAVAN M.K. ROAD VS. ROAD CHINCHBUNDER DONGRI MUMBAI 400020 MUMBAI 400009 PAN - AAFPG 9238 F APPELLANT RESPONDENT APPELLANT BY: SHRI R.S. SRIVASTAVA RESPONDENT BY: SHRI JIGNESH SHAH O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) XIII MUMBAI DATED 24.05.2009. 2. REVENUE HAS RAISED THREE GROUNDS ON THE ISSUE OF RE LEVANCE OF ALLOWING SETTLEMENT FEES PAID BY THE ASSESSEE UNDER THE MOTO R VEHICLE ACT DISALLOWED BY THE A.O. ON THE PRETEXT THAT IT WAS A PENALTY NO T ALLOWABLE UNDER SECTION 37(1) BUT ALLOWED BY THE CIT(A) AS AN EXPENDITURE. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S. DA RSHAN ROADLINES WHICH SPECIALISES IN TRANSPORTING CARGO OF OVER -DI MENSIONAL CONSIGNMENTS WHERE THE FRONT SIDE AND REAR DIMENSION OF THE CONS IGNMENT AS WELL AS THE WEIGHT OF THE CONSIGNMENT EXCEED THE SAME ALLOWED U NDER THE PERMIT GRANTED BY THE RTO AND THE LIMITS LAID DOWN UNDER T HE MOTOR VEHICLE ACT 1988 AND THE RULES MADE THERE UNDER. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE PAID COMPOUNDING FEES AGGREGATING TO ` 73 45 953/- TO THE RTO AT THE CHECK POST AT BHACHAU GUJARAT ON VARIOUS TRIPS DURING THE YEAR FOR TRANSP ORTATION OF OVER DIMENSIONAL CONSIGNMENTS IN ITS TRAILERS OF M/S. SU ZLON ENERGY LTD. THE A.O. ASKED WHY THE SAME SHOULD NOT BE DISALLOWED AS IT IS IN THE NATURE OF ITA NO. 4270/MUM/2009 SHRI BHARAT C. GANDHI 2 PENALTY AND NOT ALLOWABLE UNDER SECTION 37(1). IT W AS ASSESSEES CONTENTION THAT THE OVER DIMENSIONAL CONSIGNMENT WAS INDIVISIB LE AND CANNOT BE DIVIDED INTO PARTS AND PIECES AND THEREFORE THERE I S NO OTHER POSSIBILITY EXCEPT TO TRANSPORT THEM BY EXCEEDING THE PERMITTED LIMITS. HE SUBMITTED THAT TRANSPORTATION OF THIS IS A BUSINESS NECESSITY AND COMMERCIAL EXIGENCY AND NOT INVOLVED ANY DELIBERATE INTENTION OF VIOLAT ING ANY LAW OR RULES. IT WAS FURTHER SUBMITTED THAT EVENTHOUGH IT IS A COMPOUNDI NG FEES PAID UNDER SECTION 86(5) OF THE MOTOR VEHICLE ACT TO THE RTO IT IS AN OPTION GIVEN TO THE ASSESSEE AND THIS CANNOT BE REFERRED AS PENALTY. IT WAS FURTHER SUBMITTED THAT SUCH OVER DIMENSIONAL CHARGES WERE ALSO PAID T O WESTERN RAILWAYS FOR CROSSING THE RAILWAY TRACKS AND AN AMOUNT OF ` 2 71 380/- WAS ALLOWED BY THE A.O. THE A.O. DID NOT AGREE WITH ASSESSEES CON TENTIONS AND DISALLOWED THE SAME. THE CIT(A) HOWEVER NOTICED THAT THE EXP ENDITURE IS NOT IN VIOLATION OF THE MOTOR VEHICLE ACT AND CANNOT BE TE RMED AS PENALTY AND RELYING ON THE CLARIFICATIONS GIVEN BY THE CENTRAL GOVERNMENT VIDE LETTER DATED 03.08.2008 AND AFTER RELYING ON THE DECISION OF THE ITAT C BENCH IN ITS ORDER DATED 29.01.2001 ALLOWED THE EXPENDITURE AS AN ALLOWABLE DEDUCTION UNDER SECTION 37(1). THE REVENUE IS AGGRI EVED. 4. THE LEARNED COUNSEL AT THE OUTSET SUBMITTED THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT IN THE CASE OF M/S. CHADHA & CHADHA CO. IN ITA NO. 3524/MUM/2007 AND THE FACT S ARE SIMILAR. HE FURTHER SUBMITTED THAT THE CENTRAL GOVERNMENT ITSEL F HAS CLARIFIED VIDE CIRCULAR DATED 3 RD SEPTEMBER 2008 THAT SUCH CONSIGNMENTS MEANT FOR INFRASTRUCTURAL PURPOSE SHOULD BE EXEMPT FROM LEVY OF COMPOUNDING FEES BY RTO AND RELIED ON THE HON'BLE GUJARAT HIGH COURT DE CISION IN THE CASE OF NABROS TRANSPORT P LTD TO SUBMIT THAT THIS LEVY WAS HELD ARBITRARY AND ILLEGAL WHEN IT WAS COLLECTED ONLY AT CHECK POSTS IN GUJARA T. HE FURTHER REFERRED TO SECTION 86(5) OF THE MOTOR VEHICLE ACT AND RELIED O N THE PRECEDENCE ON THE ISSUE IN THE FOLLOWING CASES: - I) CIT VS. AHMEDABAD COTTON MFG CO. LTD. 205 ITR 163 ( SC) II) CIT VS. H.M. PARTHASARATHY 212 ITR 105 (MAD) III) ACIT VS. VIKAS CHEMICALS 122 TAXMAN 59 (DEL) ITA NO. 4270/MUM/2009 SHRI BHARAT C. GANDHI 3 IV) CIT VS. HERO CYCLES LTD. 178 TAXMAN 484 (P&H) V) KAIRA CAN COMPANY LTD. VS. DCIT 31 DTR (MUM) (TRIB) 485 VI) WESTERN COALFIELDS LTD. VS. ACIT 27 DTR (NAG) (TRIB ) 226 5. HE PLACED A PAPER BOOK ON RECORD ABOUT THE ACTIVITI ES OF THE ASSESSEE AND PHOTOES INVOLVING CARRYING OF OVER DIMENSIONAL CONSIGNMENTS UNDERTAKEN BY THE ASSESSEE ROADLINES. 6. THE LEARNED D.R. HOWEVER SUBMITTED THAT THE ISSUE IS NOT OF NOMENCLATURE BUT THE INTENTION OF THE LEGISLATURE I N NOT ALLOWING THE AMOUNTS PAID FOR VIOLATION OF LAW. THE LEARNED D.R. HOWEVER SUBMITTED THAT THE ASSESSEE WAS GIVEN PERMISSION TO TRANSPORT REQU IRED WEIGHT WITH PERMITTED AXILS AS CAN BE SEEN FROM THE CIRCULAR BY THE CENTRAL GOVERNMENT AND NOWHERE IT IS STATED THAT ASSESSEE SATISFIED TH E CONDITIONS. THEREFORE IT IS SUBMITTED THAT THIS IS A PENALTY FOR VIOLATING T HE LAW AND THEREFORE CANNOT BE ALLOWED. 7. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THE ISS UE BEFORE THE A.O. IS NOT THAT OF THE TRAILER CAPACITY BUT THE COMPOUN DING FEES PAID AND IT WAS SUBMITTED THAT ASSESSEE MADE ABOUT 230 TRIPS DURING THE YEAR FROM THE SAME CHECK POST AND KNOWING VERY WELL THAT ASSESSEE IS CARRYING ALWAYS OVER DIMENSIONAL CONSIGNMENTS THE RTO WAS INVARIABL Y LEVYING FEES WHILE ALLOWING THE TRUCKS TO BE TRANSPORTED ON ROAD AND I T IS NOT IN VIOLATION OR CONTRAVENTION OF ANY LAW BUT SIMPLE COMPOUNDING FEE S PAID FOR TRANSPORTING OVER DIMENSIONAL CONSIGNMENTS WHICH IS ASSESSEES B USINESS ITSELF. 8. WE HAVE CONSIDERED THE ISSUE. AS RIGHTLY CONSIDERED BY THE CIT(A) FEES PAID IS NOT IN VIOLATION OF LAW BUT AN OPTION GIVE N TO THE ASSESSEE TO PAY COMPOUNDING FEES FOR TRANSPORTING OVER DIMENSIONAL CONSIGNMENTS GENERALLY TERMED AS OVER LOADING CHARGES. THIS ISSUE WAS ELAB ORATELY DISCUSSED BY THE ITAT IN THE CASE OF M/S. CHADHA & CHADHA CO. IN ITA NO. 6140/MUM/2009 DATED 17.09.2010 RELIED UPON BY THE ASSESSEE WHEREI N THE ITAT IN ITS ORDER HAS CONSIDERED AS UNDER: - 9. THE LIABILITY FOR ADDITIONAL FREIGHT CHARGES WAS CO NSIDERED IN THE CASE OF ITO VS. RAMESH STONE WARES BY THE ITAT AMRI TSAR BENCH IN 62 TTJ (ASR) 93 WHEREIN THE ADDITIONAL FREIGHT CHAR GES PAID TO RAILWAY DEPARTMENT FOR OVERLOADING WAS CONSIDERED A ND HELD THAT ITA NO. 4270/MUM/2009 SHRI BHARAT C. GANDHI 4 THE EXPENSE WAS NOT PENAL IN NATURE BECAUSE IT IS N OT THE INFRINGEMENT OF LAW BUT SAME IS VIOLATION OF CONTRA CT THAT TOO NOT BY THE ASSESSEE BUT BY HIS AGENT I.E. COAL AUTHORITY OF INDIA. IN TERMS OF AN AGREEMENT IF COAL IS FINALLY FOUND BY THE AUTHO RITIES TO BE OVERLOADED THEN THE ASSESSEE HAS TO PAY ADDITIONAL FREIGHT CHARGES WHICH ACCORDING TO THE TERMINOLOGY OF THE CONTRACT IS CALLED PENALTY FREIGHT. THIS LIABILITY WAS NOT CONSIDERED AS PENAL NATURE AND ALLOWED. IN ASSESSEES CASE ALSO THE OVERLOADING CH ARGES ARE TO BE INCURRED REGULARLY IN VIEW OF THE NATURE OF GOODS TRANSPORTED FOR THE SAID STEEL COMPANY AND SINCE THE NATURE OF THE GOOD S IS INDIVISIBLE AND GENERALLY MORE THAN THE MINIMUM LIMIT PRESCRIBE D UNDER THE MOTOR VEHICLE ACT THE ASSESSEE HAS TO NECESSARILY PAY COMPOUNDING CHARGES FOR TRANSPORTING GOODS AS PART OF THE BUSIN ESS EXPENSES. THESE ARE NOT IN CONTRAVENTION OF LAW AND THE RTO A UTHORITIES NEITHER SEIZED THE VEHICLE NOR BOOKED ANY OFFENCE BUT ARE G ENERALLY COLLECTING AS A ROUTINE AMOUNT AT THE CHECK POST ITSELF WHILE ALLOWING THE GOODS TO BE TRANSPORTED. IN VIEW OF THE NATURE OF COLLECT ION AND PAYMENT WHICH ARE NECESSARY FOR TRANSPORTING THE GOODS IN T HE BUSINESS OF THE ASSESSEE WE ARE OF THE OPINION THAT IT DOES NOT CO NTRAVENE THE M V ACT AS STATED BY THE A.O. AND THE CIT(A). 10. SIMILAR ISSUE ALSO AROSE WITH REFERENCE TO FINE AND PENALTY PAID ON ACCOUNT OF VIOLATION OF NATIONAL STOCK EXCHANGE REGULATIONS IN THE CASE OF MASTER CAPITAL SERVICES LTD. VS. DCIT AND THE HON'BLE ITAT CHANDIGARH A BENCH IN ITA NO. 346/CHD/2006 DATED 26 TH FEBRUARY 2007 (108 TTJ (CHD) 389 HAS CONSIDERED THA T FINES AND PENALTIES PAID BY THE ASSESSEE TO NSE FOR TRADING B EYOND EXPOSER LIMIT LATE SUBMISSION OF MARGIN CERTIFICATE DUE TO SOFTWARE PROBLEM AND DELAY IN MAKING DELIVERIES OF SHARES DUE TO DEF ICIENCIES ARE PAYMENTS MADE IN REGULAR COURSE OF BUSINESS AND NOT INFRACTION OF LAW HENCE ALLOWABLE. IN THE ASSESSEES CASE ALSO T HESE FINES ARE PAID REGULARLY IN THE COURSE OF ASSESSEES BUSINESS FOR TRANSPORTATION OF GOODS BEYOND THE PERMISSIBLE LIMIT AND THESE PAY MENTS ARE BEING MADE IN THE REGULAR COURSE OF BUSINESS TO THE SAME RTO AUTHORITIES AT THE CHECK POST EVERY YEAR IN EARLIER YEARS AND IN LATER YEARS ALSO. ACCORDINGLY IT HAS TO BE HELD THAT THESE PAYMENTS A RE NOT FOR ANY INFRACTION OF LAW BUT PAID IN THE COURSE OF ASSESSE ES BUSINESS OF TRANSPORTATION AND THESE ARE ALLOWABLE EXPENSES UND ER SECTION 37(1). 9. IN VIEW OF THE LEGAL PRINCIPLES ESTABLISHED ABOVE A ND ALSO NOTICING THAT THE ASSESSEE HAS MADE ABOUT 230 TRIPS BY PAYING COM POUNDING FEES AS PER THE RULES IN THE MOTOR VEHICLE ACT IT CANNOT BE ST ATED THAT ASSESSEES PAYMENTS OF COMPOUNDING FEES IS IN VIOLATION OF LAW . SINCE ASSESSEE IS ENGAGED IN TRANSPORTING OF OVER DIMENSIONAL CAPACIT IES IN ITS TRANSPORT BUSINESS IT IS NECESSARY BUSINESS EXPENSE WHOLLY F OR THE PURPOSE OF ITA NO. 4270/MUM/2009 SHRI BHARAT C. GANDHI 5 BUSINESS. THEREFORE THE SAME IS ALLOWABLE UNDER SE CTION 37(1). CIT(A)S ORDER ON THIS IS CONFIRMED. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 30 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIII MUMBAI 4. THE CIT XIII MUMBAI CITY 5. THE DR B BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.