9911796707
TMI Blog2016 (5) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... dent-assessee, for delay in supply of a boiler, was in the nature of a capital receipt. Sri B.Narasimha Sarma, learned Senior Standing Counsel for the Income Tax Department, while drawing attention of this Court to the order passed by the Assessing Authority, would submit that the delay in supply of the boiler had resulted in loss of profits to the assessee, and the liquidated damages received by them is a compensation for such loss; and, consequently, the amount received towards liquidated damages constitutes a revenue receipt, and not a capital receipt. In the assessment order, the Assessing Authority observed that the assessee had entered into an agreement with M/s.IBIL Technical Limited for supply of boiler at a cost of Rs. 843 lacs; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in Commissioner of Income Tax, Gujarat vs. Saurashtra Cement Limited. Relying on the said judgment of the Supreme Court, the Tribunal, in the order under appeal, held that the liquidates damages received by the assessee constituted capital receipts; they were not received towards the cost of acquisition of the capital asset, but were in the nature of penalties for non-performance of the contract by the supplier; they could not be considered as a reduction of the cost of acquisition of the asset; and, consequently, liquidated damages received by the assessee was a capital receipt not taxable in the hands of the assessee. In Saurashtra Cement Limited2, liquidates damages were received by the assessee for failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s compensation for sterilization of the profit earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the assessee......" In the present case also, determination of liquidated damages was not based upon the calculation made in respect of loss of profit on account of supply of the boiler, but was directly linked with the procurement of a capital asset. Delay in supply would result in delay in the coming into existence of a profit making apparatus, rather than a receipt in the course of profit earning process. The law declared by the Supreme Court in Saurashtra Cement Limited2 binds the High Court. As we are satisfied that the said judgment squarely applies to the facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
