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Tax Publishers
Liquidated damages paid for non-performance of
contract obligations whether allowable expenditure?
Facts:
Assessee paid liquidated damages due to delayed project
implementation. These did not arise out of any infraction of law. The damages
were not allowable expenditure, thus held lower authorities. On higher appeal -
Held in favour of the assessee that since the
expenditure was paid not arising out of any infraction of law the liquidated
damages were an allowable expenditure under section 37(1).
Ed. Note: If arising
out of infraction of law, explanation in Section 37(1) does not permit such
LD's. Then a stand may also be taken that these were business losses under
section 28 and the rider that Section 37(1) cannot curb Section 28 is also a
possible argument.
Case: Himenviro
Environmental Engineering Co. (P) Ltd. v. ACIT 2024 TaxPub(DT) 452 (Del-Trib)
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