TMI Blog2019 (1) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... ility thus, had crystallized and cannot be said to be a contingent liability. The objection of the Counsel for the Revenue on the basis of Sections 73 and 74 of the Contract Act also is not valid. Section 74 of the Contract Act does not limit its applicability to a penalty stipulated in the contract but covers the case where any amount is agreed to be paid in case of breach of contract. In that view of the matter, reference to Section 73 of the Contract Act would not be necessary at all. In any case, what Section 73 provides is that when a contract has been broken, the party who suffers by such breach, is entitled to receive compensation for any loss or damages caused to him which naturally arose in the usual course of things from such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Tribunal ( the Tribunal for short), raising following questions for our consideration : (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in law in holding that project risk expenses amounting to ₹ 2,38,83,772 debited on the profit and loss account for the year under consideration is in the nature of liquidated damages and is allowable deduction in the A.Y. 2007-08? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in holding that while computing income under Section 10A of the Act the expenses incurred in foreign exchange towards technical services provided outside India if reduces from the export turnover should also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Counsel for the Revenue argued that the liability was contingent in nature and further that in terms of Section 73 of the Contract Act, 1972, liquidated damages can be claimed only on the basis of the actual loss and this cannot be a matter of pre-decided agreement between the parties. 6. At the outset, we may notice that the Assessing Officer had raised only one objection to the claim being contingent in nature. The facts on record would show that the agreement contained a clause under which, the assessee would have to pay 0.5% of the total contract value for every week or part thereof for the delay in execution of the work subject to ceiling of maximum 5% of the total contract value. The fact that there had been delay in execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of applicability of Section 73 of the Act in the present case in view of the situation being covered by Section 74, would not apply. In any case, the provision of Section 73 would come into play if in case of breach of the contract, any party were to resile from the terms of the Contract envisaging payment of liquidated damages as agreed in the contract. In the present case, the assessee who was liable to pay the said amount, had neither disputed nor refuted its liability. This question, therefore, does not require consideration. 8. Question no.(ii) is squarely covered by the judgment of this Court in case of CIT Vs. Gems Plus Jewellery India Ltd. (2011) 330 ITR 175 in which the Court held that the amount of freight and ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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