Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2017 (9) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 1038 - HC - Income TaxDisallowance of liquidated damage - allowable business expenditure u/s 37 - nature of expenses - Held that:- Section 37 of the Act is the residuary provision granting deduction of an expenditure not being expenditure of the nature of capital expenditure or personal expenses of the assessee, which is laid out or expended wholly and exclusively for the purposes of business or profession and not specified in the preceding sections 30 to 36 of the Act. Explanation to section 37(1) would clarify that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Where an assessee has to pay damages to other party to fulfill the contract entered into by him in the ordinary course of his business, the amount of damages to be paid is allowable deduction if it is in the ordinary course of business and is not opposed to public policy. See Jamna Auto Industries vs. Commissioner of Income Tax reported [2008 (1) TMI 62 - PUNJAB & HARYANA HIGH COURT] As noted, the expenditure in question was purely in relation to the assessee's normal business activity and was inherent part of its business transactions. The expenditure was certainly not incurred for any purpose which is an offence or which is prohibited by law. The Tribunal therefore was perfectly justified in granting such expenditure. - Decided in favour of the assessee
|