TMI Blog2014 (6) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... upon CIT v. Jaya Ram Metal Industries [2006 (7) TMI 135 - KARNATAKA High Court] – the order of the CIT(A) is upheld – Decided against Revenue. - I.T.A. No. 5113/Del/2013 - - - Dated:- 23-5-2014 - Shri I. C. Sudhir And Shri T. S. Kapoor,JJ. For the Appellant : Ms. Y. Kakkar, DR For the Respondent : Shri K. C. Singhal, C.A. ORDER Per TS Kapoor, AM: This is an appeal filed by the revenue against the order of Ld CIT(A) dated 15.7.2013. The only grievance involved in this appeal is the action of Ld CIT(A) by which he had deleted an amount of Rs..16,95,250/- which was disallowed by Assessing Officer being an amount in the nature of penalty. The facts of the case are that assessee is a builder and it had paid an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the project. As regards penalty paid for breach of an agreement, it has been held by the jurisdictional High Court in the case of CIT v. Indo Asian Switch Gears Pvt. Ltd. (1996) 222 ITR 757 (P H) 1997 that the penalty paid by assessee for late delivery of goods being breach of an agreement was incidental to business and therefore allowable u/s 37(1) of the IT Act. While allowing the claim of the assessee, the Hon'ble High Court held as under:- The true test is whether there is a breach of law or the breach of an agreement. If it is in the latter category, then damages paid would be treated to be business or commercial loss and admissible as deduction u/s 37(1). Since it was incidental to business, it could not be disallowed. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,250/- on account of penalty for breach of its contract with allottees regarding timely completion of the project. This ground of appeal is thus allowed. 3. Aggrieved the revenue is in appeal before us. 4. At the outset, the Ld DR submitted that Ld CIT(A) had without going into facts had deleted the addition and she further read para 5.3. of Ld CIT(A) s order with the proposition that Ld CIT(A) himself had referred the amount as penalty. She further submitted that Ld CIT(A) did not give his findings as to whether the payment was compensatory in nature or not. Therefore, without examining the agreement, the Ld CIT(A) has failed to discharge his duty. Reliance in this respect was placed on the following case laws: 1. 286 ITR 403 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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