Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 120 - AT - Income TaxAllowable business expenditure - Payment for breach of contractual obligation pursuant to an arbitration award in the pending litigation - HELD THAT:- As could be seen from the record that the Ld. CIT(A) referred to the decision of the Hon'ble Apex Court in the case of Navsari Cotton [1981 (3) TMI 48 - GUJARAT HIGH COURT] wherein evolved the tests on principles to claim deduction of an expenditure as business expenditure, and it includes, the expenditure incurred with a view to bring profits or monetary advantages today or tomorrow, to render the assessee immune from impending or reasonably apprehended litigation, in order to save losses in foreseeable future, for affecting economy in working which may pay dividends today or tomorrow, for increasing efficiency and working and for removing inefficiency in the working. When viewed from the angle of the tests formulated by the Hon'ble Gujarat High Court in Navsari Cotton (supra) it is clear that the amounts paid by the assessee to M/s. Atlantic Pharmaceuticals fall in the category of the expenditure incurred by the assessee to make it immune from the impending or reasonably apprehended litigation, and to save losses in foreseeable future in the shape of damage to the brand image in the market. With this view of the matter, we are of the considered opinion that the Ld. CIT(A) is right in his approach. As stated supra, by no stretch of imagination could it be said that the payment for breach of contractual obligation pursuant to an arbitration award in the pending litigation, cannot be said to have been incurred for any purpose which is an offence or which is prohibited by law. With this view of the matter, we uphold the findings of the Ld. CIT(A) and decline to interfere with the same. Appeal of the Revenue is dismissed.
|