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TMI Blog2004 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to rectify such mistakes as held in[ 1997 (7) TMI 53 - HIMACHAL PRADESH HIGH COURT] , Mrs. K.T.M.S. Umma Salma vs. CIT [ 1981 (12) TMI 12 - MADRAS HIGH COURT] as well as the decision of the Delhi D Bench reported in [ 2003 (12) TMI 287 - ITAT DELHI-D] . The Tribunal rectified its order dated 12th Dec., 2002, by deleting paras 11 to 16 and substituting them with new paragraphs that aligned with the Supreme Court's decisions. The Tribunal acknowledged the binding nature of contractual liabilities and allowed the claims for liquidated damages, thereby rectifying the earlier mistake and preventing a miscarriage of justice. - HON'BLE A. KALYANASUNDHARAM, SENIOR VICE PRESIDENT AND P. MOHANARAJAN, J.M. For the Appellant : K.R. Pradeep, Adv. For the Respondent : C.R. Janardhanan, Adv. ORDER P. Mohanarajan, J.M. 1. By this miscellaneous petition, the assessee seeks rectification of the error in the order of this Tribunal dt. 12th Dec., 2002, read with order dt. 24th Sept., 2003, in the aforesaid appeals. 2. The petition of the assessee is that the above two appeals were disposed of by the common order dt. 12th Dec., 2002, by the Tribunal. The assessee was in appeal against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 1 (SC) as well as (2000) 162 CTR (SC) 325 : (2000) 245 ITR 428 (SC), we find that the ratio of the Supreme Court decisions is that a contractual liability is usually in the nature of a binding liability and liquidated damages need to be deducted in computing an assessee s income or loss. We have no quarrel with the above decisions pronounced by the Hon ble apex Court. From the above, it is clear that the Tribunal though explained the position of law based on the decisions of the Supreme Court, yet overlooked to follow the decisions which is clearly a mistake of law. Correction of mistake of law does not amount to review as held by the Himachal Pradesh High Court in Himachal Pradesh Financial Corporation vs. CIT (1999) 152 CTR (HP) 146 : (1998) 233 ITR 450 (HP) which is extracted herein. I, When the Supreme Court has decided a matter on a question of law, it is the law of the land and it has to be followed by all the Tribunals and the Courts in this country vide Art. 141 of the Constitution of India. Hence, if the Tribunal had decided a matter overlooking the judgment of the Supreme Court on a question of law, it is certainly a mistake apparent from the record. Such mistake can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal dt. 12th Dec., 2002, read with order dt. 24th Sept., 2003, be modified to allow the claim of the assessee, or in the alternate, the order be recalled for a fresh hearing in the interest of justice. 3. At the time of hearing, Shri K.P. Pradeep, FCA, learned counsel for the assessee, argued that the facts as found in (1992) 43 ITD 527 (Mad) and 35 ITD 18 [sic (1990) 34 ITD 50 (Hyd)(SB)] is similar to the case on hand as could be found in para 46 of the decision in (1992) 43 ITD 527 (Mad) that: (a) the assessee, in some instances, did delay the delivery of the goods which it had contracted to supply. The assessee did not deny the said factum of delay. (b) As a direct consequence of its failure to stick to the stipulated delivery schedule, the assessee rendered itself liable to penal pecuniary consequences stipulated in the delayed delivery clauses. The assessee did not dispute this factum also. (c) It should, therefore, follow that as regards the liquidated damages stipulated in the delayed delivery clauses, the assessee incurred a liability in praesenti with the customers simultaneously getting a right to receive the stipulated amount. (d) The fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lands in question, whether it was an accrued liability or was one which was contingent on the happening of a certain event in the future. There is no doubt that the undertaking to carry out the developments within six months from the dates of the deeds of sale was incorporated therein and that undertaking was unconditional, the appellant binding itself absolutely to carry out the same. It was not dependent on any condition being fulfilled or the happening of any event, the only condition being that it was to be carried out within six months which in view of the fact that the time was not of the essence of the contract meant a reasonable time. Whatever may be considered a reasonable time under the circumstances of the case, the setting up of that time-limit did not prescribe any condition for the carrying out of that undertaking and the undertaking was absolute in terms. If that undertaking imported any liability on the appellant the liability had already accrued on the dates of the deeds of sale, though that liability was to discharged at a future date. It was thus an accrued liability and the estimated expenditure which would be incurred in discharging the same could very well be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warranty clause, whether the Tribunal was right in law in holding that the provisions made by the assessee thereon is an allowable business expenditure? 4. It is fairly stated by Mrs. Pushya Sithraman, learned senior standing counsel appearing for the Revenue, that this issue raised in this case is covered against the Revenue by the judgment of this Court in TC No. 85 of 1997 dt. 9th Sept., 2002. 5. Following the said judgment and for the reasons stated therein we answer the questions of law referred to us in favour of the assessee and against the Revenue. 8. The above decision fully covers the issue on hand and the decision binds the Tribunal to hold the issue in favour of the assessee. It was further brought to our notice that when the assessee had approached for stay of collection of demand in these appeals, the stay was granted by the Tribunal in its order dt. 12th July, 2002, by holding that the issue was fully covered in favour of the assessee by the Special Bench decision reported in 35 ITD 18 [sic (1990) 34 ITD 50 (Hyd)(SB)]. He, thus submitted that the decision of the Tribunal suffers from non-conformity with the decisions of the Hon ble Supreme Court, Hon ble jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion incurred by the assessee is binding in nature. There have been any number of cases in support of this proposition. The issue of allowability of a liability is laid to rest by the decision of the Hon ble Supreme Court has not been applied in deciding the appeal by the Tribunal. 12. Similar issue decided by the Special Bench and co-ordinate Bench is already in favour of the assessee and must be relied on in deciding the issue. We find that this has not been done as can be found in the findings given in its order in para 14 which is extracted hereunder: 14. In these two cases the assessee-company has claimed for damages as a deduction in computing its income as soon as the delay in the supply are noticed and the case of under-performance so made out. The case of delay as well as the case of under-performance remained at the end of the respective previous years with a large contour of provisional liability. The delay has not been discussed and settled between the parties and under-performance has not been evaluated between the parties. Discussions and negotiations have not been completed. The final amount of breach and the final amount of damages have not been ascertained. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITD 527 (Mad) and as conceded by the Department before the jurisdictional High Court in (2003) 130 Taxman 400 (Mad). We further hold that allowability of the claim need not be postponed till the plea for waiver is considered or rejected by the customer. We also hold that in view of the decisions of the Hon ble Supreme Court reported in (1959) 37 ITR 1 (SC), (2000) 162 CTR (SC) 325 : (2000) 245 ITR 428 (SC), (20003) 182 CTR (SC) 291 : (2003) 261 ITR 275 (SC) and (1999) 156 CTR (SC) 380 : (1999) 240 ITR 355 (SC) extracted above, the decisions of the Kerala High Court in N. Sunderswaran vs. CIT (1996) 136 CTR (Ker) 506 : (1997) 226 ITR 142 (Ker) and Asuma Cashew Co. vs. CIT (1990) 84 CTR (Ker) 198 : (1990) 182 ITR 175 (Ker) are not relevant in deciding the issue. Accordingly, we hold that the claim for liability arising on account of liquidated damages amounting to Rs. 74,43,308 and Rs. 3,14,77,555 is allowable in computing the income of the assessee. Hence, we direct the AO to allow the same. Accordingly, the original order dt. 12th Dec., 2002, stands rectified. The assessee succeeds on this issue and the appeal is allowed. 14. Before we part with the matter, we hasten to add that t ..... 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