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)