TMI Blog2023 (12) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement with M/s. JK Tyre Industries Limited for carrying out the manufacturing activity of J.K. Tyres on job work basis. It failed to produce the end product qualitatively according to the parameters of J.K. Tyres and dispute arose between the parties. In order to resolve the dispute, the assessee has to pay something to M/s. JK Tyre Industries Limited so that it can continue to work on behalf of M/s. JK Tyre Industries Limited for job work basis. Therefore, the expenditure was not incurred for any infringement of law rather, it is a by- product of commercial activity. For example, the assessee was required to manufacture a tyre by using 10Kg. of rubber, but it had used 11 Kg. or 9 Kg., tyre will not be to the specification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income on 30.09.2013 declaring income of Rs. (-)2,32,09,879/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) dated 05.09.2014 was issued and served upon the assessee. 4. On scrutiny of the accounts, it revealed that the assessee-company has paid an amount of Rs. 1 crore as compensation to principal for non-fulfilment of contractual obligation. The ld. Assessing Officer has invited explanation of assessee as to why this expenditure be not disallowed to the assessee. In response to the query of ld. Assessing Officer, it was contended that the assessee has been carrying out job work at the instance of M/s. JK Tyre Industries Limited. The principal had made a surprise visit to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld indicate that it is a residuary provision for permitting the assessee to claim expenditure but such expenditure should not be in the nature described in Sections 30 to 36 and it should not be in the nature of capital expenditure. The expenditure ought to have been incurred wholly and exclusively for the purpose of the business. The expression wholly represents quantitatively and expression exclusively represents only for business. In other words, there cannot be any implied confusion. Thus any expenditure which is not a capital expenditure and which does not fall within the ambit of Sections 30 to 36 but incurred for the purpose of the business would be allowed to an assessee under this residuary provision. By way of Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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