INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Contingent liability - Provision for liquidated damages and retention of money

Assessee had executed certain turnkey projects made provision for liquidated damages and retention of money on the event of delay in such project(s). The same was disallowed on the ground that same was contingent liability. Held: The controversy had been decided in the case of the Assessee itself by a Co-ordinate Bench of this Court for assessment year 1998-1999 on 13-8-2018 in FFE Minerals India (P) Ltd. v. Jt. CIT, (2018) 98 Taxmann.com 170 (Madras), in which, it was held that when a provision was made for liquidated damages to be paid by the Assessee to the companies with which it executed certain turnkey projects and delay occurred in execution of such turnkey projects, the liability for liquidated damages made by the assessee had not crystallized during the previous year in question and, therefore, the same was not allowable towards business expenditure under section 37(1).

Followed: FFE Minerals India (P) Ltd. v. Jt. CIT (2018) 98 Taxmann.com 170 (Madras), Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 62 (SC) : 2009 TaxPub(DT) 1730 (SC)

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2002-03

INCOME TAX ACT, 1961

Section 40(a)(i)

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