2007 (5) TMI 182

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....inion of this Court arising out of order dated 9.9.1988 passed by the Income-Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, `the Tribunal') in I.T.A. No.493/Chandi/87 for the assessment year 1983-84:- "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that forfeiture of security deposits amounting to Rs.16.27 lakhs b....

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....another v. Amalgamated Development Ltd., (1967) 65 ITR 395 held that the amount in question, being only on account of compensation for breach of contract and not a penalty for breach of law, was allowable. In further appeal by the revenue, the Tribunal upheld the order passed by the CIT (A) while relying upon an earlier order passed by it in the case of Punjab Wireless Systems Limited. It was obse....

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....ion culled out by various judicial pronouncements in penalty leviable for breach of law and penalty/ compensation arising out of the breach of contract. Whereas the penalty leviable on account of breach of law is not a permissible deduction, however, penalty which is on account of breach of contract is certainly a business loss and has to be allowed. He referred to Commissioner of Income-Tax v. Mu....

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....on to certain mills, settled the deal by I.T.R. No.37 of 1991 -3- paying a sum as compensation, the amount of compensation paid by the assessee was held to be an allowable deduction. Similar view was expressed by a Division Bench of this Court in Indo Asian Switch-Gears' case[1996] 222 ITR 772 where the amount of penalty paid by the assessee therein to Punjab State Electricity Board on account of ....