9911796707
TMI Blog1998 (12) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company and the exempted remuneration of the foreign technicians under section 10(6)(viia) of the Income-tax Act should not be taken for computing the quantum of remuneration on which the limit of Rs. 72,000 is to be applied? (2) Whether, on the facts and in the circumstances of the case, the liability to pay the liquidated damages for breach of contract was an accrued liability and properly taken into account in computing the income of the assessee?" At the instance of the assessee, the following question has been referred to us: "Whether, the Tribunal was right in law in holding that the assessee is not entitled for deduction of the sum of Rs, 9,92,945 being the surtax paid by the assessee under the provisions of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious Electricity Boards nor did it indicate such compensation in the sale bills or other records. The bills issued to the Electricity Boards were for the entire sale amount deducted and carried to compensation payable account which amounted to Rs. 12,85,647 in the accounts relating to the assessment year 1983-84. Even the Inspecting Assistant Commissioner observed on examination of evidence and records that while the actual penalty or compensation paid by the assessee to the Electricity Board will be allowed as business expenditure in the year in which it is paid, the proposed compensation not having been actually incurred, such expenditure claim is not allowable. He also ruled that section 41(1) applies to the facts of the case." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that it had as a consequence become liable for payment of damages. As noticed by the Assessing Officer, the assessee had made entries in its books of account but in the bill sent by the other party to the contract, namely, the Electricity Board, it had claimed the entire sale amount. Clearly the assessee did not regard itself as being responsible for the delay that had occurred. The bill sent by it is wholly inconsistent with the entries made by it in its books of account. It is well-settled that it is not the mere entry made in the books of account that is determinative of the nature of a transaction or of the character of the receipt or the payment. The true nature of the same is required to be determined for the purpose of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them in that case, that a claim for damages for breach of contract is not a claim for a sum presently due and payable and even where a purchaser is entitled to deduct the amount of damages from the monies of the other parties, such purchaser could be injuncted from effecting such recovery. Counsel for the Revenue also relied on the decision of the Allahabad High Court in the case of CIT v. Lachhman Das Mathura Das [1980] 124 ITR 411, wherein it was held that before a claim for damages can be allowed even in cases where the assessee follows the mercantile system of accounting, the liability must be in praesenti, and not one which may arise in future and further that a contingent liability which may or may not arise cannot be allowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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