Liquidated damages allowable as business expenditure

The impugned amount was not in the nature of penalty on account of disobedience or infraction of any law. In fact, the assessee being in the business of execution of Civil Construction work, therefore under an obligation to complete the contract within a specified time and in case of delay, he is subject to liquidated damages. The impugned amount was nothing but in the nature of liquidated damages, therefore allowable as business expenditure. We hold accordingly. The view taken by the ld.CIT(A) is hereby confirmed and this ground of the Revenue is dismissed.

INCOME TAX APPELLATE TRIBUNAL
“ C ” BENCH, AHMEDABAD

I.T.A. No. 736/Ahd/2010

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