Case Law Details
CIT (International Taxation) Vs UT Starcom Inc. (Delhi High Court)
Introduction: The recent judgment by the Delhi High Court in the case of Commissioner of Income Tax (International Taxation)-3 Vs UT Starcom Inc. (ITA 719/2023) revolves around the deduction of liquidated damages concerning the Assessment Year 2008-09. The appeal seeks to challenge the order of the Income Tax Appellate Tribunal (ITAT) dated 28.07.2021.
Detailed Analysis: The core issue examined by the statutory authorities and subsequently appealed is whether UT Starcom Inc., the respondent/assessee, rightfully claimed a deduction for liquidated damages. The respondent had provisioned for liquidated damages in the preceding Financial Year (FY) 2006-07 (AY 2007-08), amounting to Rs. 3,87,12,148/-. In the relevant Assessment Year 2008-09, UT Starcom Inc. claimed a deduction based on the actual damages incurred, totaling Rs. 4,37,36,387/-.
The Assessing Officer (AO) allowed a deduction of Rs. 50,24,239/- but disputed the remaining amount, asserting that UT Starcom Inc. failed to prove damages amounting to Rs. 3,87,12,148/- provisioned in the preceding AY. The respondent appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who, after examining the material, affirmed that damages were suffered.
The CIT(A) found that UT Starcom Inc. faced delays in supplying services to BSNL and MTNL, leading to liquidated damages. BSNL and MTNL adjusted these damages against the invoices raised by the respondent. Detailed information, including purchase orders, invoice values, and deducted liquidated damages, was provided in the CIT(A)’s order.
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