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TMI Blog2016 (5) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal correctly held that the liquidated damages received by the respondent-assessee, for delay in supply of a boiler, was in the nature of a capital receipt. - I.T.T.A.No.428 of 2015 - - - Dated:- 25-11-2015 - SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. FOR THE PETITIONER : NARASIMHA SARMA FOR THE RESPONDENT : RAMANA RAO JUDGMENT : (per Hon ble Sri Justice Ramesh Ranganathan) This appeal under Section 260-A of the Income Tax Act, 1961 is preferred against the order passed by the Income Tax Appellate Tribunal, Hyderabad in I.T.A.No.1060/Hyd/2004 dated 16.11.2012. The Revenue is aggrieved by the order of the Tribunal to the limited extent it held that the liquidated damages received by the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad resulted in the assessee losing profits because of the delay on the part of the supplier to instal the boiler; the amount received towards liquidated damages was nothing but a revenue receipt; the payment of liquidated damage did not result in reduction in the cost of the asset; the liquidates damages did not have any impact on the depreciation worked out; and, consequently, it was a revenue receipt. The order of the Assessing Authority was affirmed in appeal by the Commissioner of Income Tax. Aggrieved thereby, the respondentassessee carried the matter in appeal to the Tribunal. By the time the appeal came to be heard by the Tribunal, the judgment of the Gujarat High Court in Saurashtra Cements and Chemicals India Limited 1 was af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a particular part of the plant. It is evident that the damages to the assessee was directly and intimately linked with the procurement of a capital asset i.e. the cement plant, which would obviously lead to delay in coming into existence of the profit making apparatus, rather than a receipt in the course of profit earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement and clause No.6 thereof came into play. The afore-stated amount rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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