9911796707
|
Home
Issues involved: The judgment addresses the following issues: 1. Allowability of interest on arrears of sales tax in computing income, 2. Deductibility of interest on outstanding balance of sales tax, 3. Recognition of liability for damages in the accounting period, and 4. Allowability of deduction for damages in computing income.
Interest on Arrears of Sales Tax: The court relied on a previous decision to conclude that interest on arrears of sales tax was not an allowable deduction, following the principle established in Saraya Sugar Mills P. Ltd. v. CIT [1972] 116 ITR 387 (FB). Interest on Outstanding Balance of Sales Tax: Similar to the first issue, the court determined that interest on the outstanding balance of sales tax was also not an allowable deduction under the Income-tax Act. Liability for Damages: The case involved a contract for the supply of goods where the assessee failed to meet the deadline, resulting in a demand for damages. The court analyzed the contract terms and the subsequent demand for damages, emphasizing that a liability must be an actual liability to be allowed as a deduction. It was noted that the liability for damages did not crystallize in the relevant accounting period, as the waiver of the amount by the Electricity Board indicated that the liability had not yet materialized. Deduction for Damages: The court reiterated that a claim for damages could only be allowed as a deduction if it had arisen in the previous year relevant to the assessment. Since the liability for damages had not crystallized in the relevant accounting period, the claim for damages was not an allowable deduction in computing the assessee's income for the assessment year. The court answered the questions related to interest and damages in the negative, stating that the department was entitled to costs.
|
