https://www.taxtmi.com/highlights?id=97464 Allowability of contractual damages claimed as expenses under section 37 was decided by ITAT: the Tribunal held that sums deducted by the government for late supply were compensatory damages for breach of contract and not payments for an "offence" or activity prohibited by law, so Explanation to section 37 did not apply. The Tribunal reasoned that mere failure to meet contractual timelines does not constitute a crime; the payments were incurred wholly and exclusively for business and therefore deductible as business expenditure, allowing the appeal and setting aside the disallowance. en-us Sat, 07 Mar 2026 08:39:18 +0530 Sat, 07 Mar 2026 08:39:20 +0530 TaxTMI RSS Generator https://www.taxtmi.com/highlights?id=97464 Allowability of contractual damages claimed as expenses under section 37 was decided by ITAT: the Tribunal held that sums deducted by the government for late supply were compensatory damages for breach of contract and not payments for an "offence" or activity prohibited by law, so Explanation to section 37 did not apply. The Tribunal reasoned that mere failure to meet contractual timelines does not constitute a crime; the payments were incurred wholly and exclusively for business and therefore deductible as business expenditure, allowing the appeal and setting aside the disallowance. Highlights Income Tax Sat, 07 Mar 2026 08:39:18 +0530 https://www.taxtmi.com/highlights?id=97464