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2016 (11) TMI 1303 - AT - Income TaxDisallowance of payment of compensation to flat owners - delay in handing over of possession to the flat owners - Held that:- The assessee was justified in compensating the allottees of the flats for delay in handing over of possession. The amount paid by the assessee was certainly on account of business expediency. Another reason for disallowing the payment of compensation was that the amount paid by the assessee was in the nature of penalty for Breach of contract. The Delhi Bench of the Tribunal in the case of DCIT Vs. M/s. Achiever Builders (P) Ltd. ( 2014 (6) TMI 251) where the Department disallowed the amount paid by the assessee to the customers for delay in handing over of possession of properties holding it to be penal in nature held, that the amount paid by the assessee to customers is compensatory in nature and not penal. The compensation was paid for delay in handing over of possession of the property, the liability to pay such compensation arose in the course of business of assessee. In the present case the assessee paid compensation to the assessee under similar circumstances and not out of any liability arising from invoking of penal provisions of any statute. Thus, the compensation paid by the assessee cannot be held to be penal in nature. Thus we hold the expenditure incurred by the assessee on payment of compensation to the flat owners for delay in possession as allowable. - Decided in favour of assessee
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