ITAT Allows Contract Penalties paid to Govt Authorities as Business Expense

Advertisement G.L. Construction Pvt Ltd Vs ACIT (ITAT Mumbai) In a recent ruling, the Income-tax Appellate Tribunal (ITAT), Mumbai Bench, has allowed a tax appeal filed by M/s G L Construction Pvt Ltd, setting aside the disallowance of certain payments termed as “penalties” by government authorities. The tribunal held that these deductions, made from the assessee’s bills for non-compliance with contractual terms in road construction projects, were in the nature of business expenditure and not penalties for offences or acts prohibited by law. The case involved the assessmen...