TaxTMI 
TaxTMI 
2017 (8) TMI 444
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reasons is in the nature of application of income not deductible under section 37 of the income Tax Act, 1961." 3. Briefly stated facts are that the assessee company is in the business of sub-sea diving, job work and equipment hiring. The AO after seeking details noted that the payment of compensation for an accident claimed as business expenditure/loss is not allowable because there is no specific clause in the agreement with free-lance divers to provide for compensation in the event of damage or loss of life because of such marine accident. The AO recorded the following reasons for making disallowance: - "a) The divers who lost their lives were free-lance divers who entered into a contract with the assessee company. These divers were recruited on a contractual basis on a day rate. From the perusal of the contract entered with these divers, it is seen that as per clause 13 of the said contract, the following has been stated "The freelancer will not be entitled to any other benefits except for those as stated in the agreement" There is no specific clause in the agreement with free-lance divers to provide for compensation in the event of damages or los....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A) by mistake has deleted this disallowance of Rs. 1,16,460/-. We have noticed from the order of CIT(A) that this addition was confirmed by CIT(A) at para 6.1.2 page 8. Further, the CIT(A) in view of rectification application of the assessee dated 16-09-2016, passed an order dated 19-10-2016 whereby the disallowance was deleted at Rs. 94.50 lakhs and for this he passed an corrigendum stating as under: - "Since the expenditure was incurred by the appellant with a intention to protect its business interest it was purely a commercial decision to avoid further litigation in the international court where the legal cost must have exceeded the compensation paid. Therefore, respectfully following judgments of Hon'ble jurisdictional High Court in the case of CIT vs. Sinnar Bidi Udyog Ltd. (supra) and Gujarat High Court in the case of CIT vs. UTI Bank Ltd. (supra), appeal of the appeals is allowed and disallowance of Rs. 94,50,000/- made by the AO is deleted." Aggrieved Revenue is in second appeal before Tribunal. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee during the yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....worked for their group company Adsun Middle East and also assessee and hence keeping in mind the availability of the funds, it was decided to pay the compensation partly from the assessee and partly from their company in UAE. In fact major part of compensation was paid from UAE company and only small part of the compensation was paid from assessee, even though the mishap had happened while the job was being executed by the assessee. 7. Accordingly, the assessee Paid Rs. 94.50 lakhs immediately to families of these such Divers. The said expenditure was debited to "Compensation for Accident" under Project Expenses. Balance of the compensation amount was paid from the other group company. The assessee had entered in to settlement agreement with the family members of the deceased whereby the compensation amount was decided. The expenditure was incurred wholly or exclusively for the purpose of the business for smooth continuity of its business operations. The expenditure was incurred for commercial considerations and for facilitating smooth business operations from point of view of business prudence. It was claimed that all the conditions of the Section 37(l) are fulfilled to claim t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Co. Ltd vs. DCIT (2013) 60 SOT 2 (Mumbai) wherein the assessee claimed allowance of a sum being compensation paid to local fishermen in connection with construction of a temporary Jetty. The Assessing Officer was of view that the said expenditure was prohibited. The ITAT held that the payments were definitely not contractual, the fishermen having no vested or secured rights in the coastal line, so as to permit the assessee to build a temporary jetty thereat. At the same time, the commercial expediency of the payments is manifest inasmuch as the cooperation of the local fishermen had necessarily to be secured if the Jetty had to be constructed. It is not necessary that a payment to be allowable under section 37(l) has necessarily to be contractual, and neither do we consider it as opposed to public policy, which could be so said only if the construction of the jetty was either prohibited by law or if the required permission for the same had not been obtained. 11. The assessee further relies on the decision of Hon‟ble Bombay High Court in the case of CIT vs. Sinnar Bidi Udyog Ltd. (2001) 257 ITR 216 (Bom). Wherein the assessee, a beedi manufacturing company, claimed deductio....