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Case Law Details

Case Name : CIT Vs Saurashtra Cement Ltd. (Supreme Court of India)
Appeal Number : Civil Appeal No. 3702 of 2003
Date of Judgement/Order : 09/07/2010
Related Assessment Year :
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Where the damages paid to the assessee was directly and intimately linked with the procurement of a capital asset, compensation paid for the delay in procurement of capital asset amounted to sterilisation of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement and the amount received by the assessee towards compensation for sterilisation of the profit earning source, was a capital receipt.

ORDER

D.K. JAIN, J.:

1. This appeal, by special leave, at the instance of the Revenue is directed against the judgement and order dated 27th June, 2001 delivered by the High Court of Gujarat at Ahmedabad in Income Tax Reference No.44 of 1986. By the impugned judgement, the High Court has answered the following questions, referred to it by the Income Tax Appellate Tribunal, Ahmedabad (for short “the Tribunal”) under Section 256(1) of the Income Tax Act, 1961 (for short “the Act”), in the affirmative and in favour of the assessee.

(i) Whether the Tribunal has not erred in law on facts in holding that the amount of Rs. 8,50,000/- received by the assessee was not taxable as revenue receipt in the hands of the assessee?

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One Comment

  1. Akshay Sharma says:

    I have a doubt with regard to income tax given as below:-

    What would be the income tax treatment of liquidated damages pertaining to delayed supply machinery

    If we consider liquidated damages as capital receipts (CIT vs Saurashtra Cement) then do we need to reduce from actual cost of assets.

    I shall be greatful if you can provide any case law in this regard

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