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The P & H High Court in 311ITR336 held that a penalty or fine paid under any law would not always be in the nature of punishment for breach of law. It may be of the nature of compensatory liability irrespective of the nomenclature used. In this case, the Court allowed a deduction of payment of fine paid to the Excise department for belated payment of excise duty installment.


A fine/penalty paid for the redemption of goods ordered to be confiscated for breach of import conditions is held not an allowable deduction vide 411ITR678. Penalty charges paid to the Pollution Control Board for non-installation of pollution control equipment is held admissible vide 386ITR492. Compensation paid for extra/illegal mining as per directions of the Supreme Court to resume mining is held admissible vide 68ITR (Trib) 532. Payment under the settlement for violation of the patent right of the American company is held compensatory in nature vide 347ITR32

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