Case Law Details
DCIT Vs M/s Hindustan Urban Infrastructure Ltd. (ITAT Kolkata)
Conclusion: Liquidated damages which were in nature of contractual liability on account of non-compliance of business obligations to customers were allowable expenditure.
Held: AO disallowed assessee’s claim of liquidated damages as the same were in the nature of penal liability not allowable as expenditure incurred wholly and exclusively for the purpose of its business. It was undisputed that liquidated damages were in the nature of contractual liability only than arising from violation of any penal provision. In the present case, assessee had made the impugned provision as per its contractual liability on account of non compliance / non-fulfilment of its business obligations to only its customer parties. Therefore, the same was allowable as expenditure.
FULL TEXT OF THE ITAT JUDGMENT
All these three cases pertain to single assessee M/s Hindustan Urban Infrastructure Ltd. Former assessment year 2011-12 involves Revenue’s appeal ITA No.1615/Kol/2017 along with taxpayer’s Cross Objection CO No.87/Kol/2017 arising against the Commissioner of Income Tax (Appeals)-39, New Delhi’s order dated 15.03.2017 in case No.314/16-17. Latter assessment year 2012-13 contains Revenue’s appeal against the very CIT(A)’s order of the even date in case No.312/16-17. Relevant proceedings in both assessment year(s) are u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’.
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