9911796707
TMI Blog1993 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... 1952, is an admissible deduction in computing the income of the assessee ?" The controversy in this case pertains to the assessment year 1977-78 relevant to the previous year ended on March 31, 1977. During the previous year in question the assessee committed certain defaults in payment of the provident fund contributions under the Employees' Provident Funds and Family Pension Act, 1952 (hereinafter "the Act"). For the said default, the Regional Provident Fund Commissioner, Maharashtra and Goa, levied damages under section 14B of the Act to the tune of Rs. 28,489. This amount was claimed by the assessee as a deduction in computation of its income as business expenditure. The claim was rejected by the Income-tax Officer on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s" under section 14B of the Provident Funds Act was neither purely compensatory nor penal. There is an element of compensation as well as penalty in damages under section 14B of the Provident Funds Act. It was held that the question whether any impost is in essence compensatory or it is by way of penalty will have to be decided having regard to the relevant provisions of the law under which it is imposed and the circumstances under which it has been imposed. The mere nomenclature as interest, penalty or damages in the Act may not be conclusive. It was further held that the levy of damages under section 14B comprised both an element of penal levy as well as compensatory payment. The Supreme Court clearly held that the levy of damages under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The authority has to allow deduction under section 37(1) of the Income-tax Act, wherever such examination reveals the concerned impost to be purely compensatory in nature. Wherever such impost is found to be of a composite nature, that is, partly of compensatory nature and partly of penal nature, the authorities are obligated to bifurcate the two components of the impost and give deduction to that component which is compensation in nature and refuse to give deduction to that component which is penal in nature." (emphasis supplied). The above decision of the Supreme Court is a complete answer to the controversy involved in the present case. The Supreme Court has clearly laid down that wherever an impost is found to be of a composite na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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