Breach of Contract Compensation not Speculative Transaction under Income-tax Act

The High Court of Bombay held in favor of the assessee, determining that compensation for breach of contract was not a speculative transaction under section 43(5) of the Income-tax Act, 1961, following a precedent set by the Supreme Court in CIT v. Shantilal P. Ltd. [1983] 144 ITR 57, which established that damages for breach of contract are not considered speculative transactions.

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The High Court of Bombay ruled in favor of the assessee, stating that the compensation paid for breach of contract did not amount to a speculative transaction under section 43(5) of the Income-tax Act, 1961. The judgment was based on a previous Supreme Court ruling in CIT v. Shantilal P. Ltd. [1983] 144 ITR 57, which clarified that damages awarded for breach of contract do not constitute a speculative transaction.

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