Liquidated damages provision was disallowed as it was based on ...

Liquidated damages disallowed. Warranty provision upheld. TPO's income enhancement void. AE services not stewardship. Re-notification due.

Case Laws Income Tax

July 30, 2024

Liquidated damages provision was disallowed as it was based on unascertained liability without probability of outflow of resources. ITAT deleted addition, holding provision arose from contractual obligation and estimation basis was reasonable based on past experience. Warranty provision at 2% of turnover based on past experience was appropriate, fulfilling accrual and matching concepts, unlike accounting expense in year incurred or on claim by customer. TPO's rectification enhancing income was void ab initio for lack of opportunity to assessee before enhancement u/s 154(3). ITAT's conclusion that services provided by AE were not stewardship services upheld. Questions 2.5 and 2.6 to be re-notified on 07.03.2024 for submissions.

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Liquidated damages provision was disallowed as it was based on ...

Liquidated damages disallowed. Warranty provision upheld. TPO's income enhancement void. AE services not stewardship. Re-notification due.

Case Laws Income Tax

July 30, 2024

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