Penalty for inability to meet contractual obligation cannot be disallowed

CIT Vs Mahavir Multitrade Pvt. Ltd. (ITAT Delhi) The action of the learned Assessing Officer clearly reveals that it is only because the assessee categorised the expenditure/deduction as in respect of the penalty that was levied for not complying to the terms of contract, the learned Assessing Officer jump or to the conclusion that such penalty was paid for infraction of law so as to attract the provisions under Explanation 1 to section 37 (1) of the Act. It seems the assessing officer did not read the submission of the assessee in a holistic manner, because what all the assessee had submitted...