1989 (11) TMI 5

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....und dues in time was not in the nature of penalty and that was in the nature of compensation paid to the Government ?" The assessment year involved in this reference is the assessment year 1975-76, for which the relevant period of account is the financial year ending on December 31, 1974. The Tribunal, following the decision of this court in the case of Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227, held that damages levied and payable under section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, were not in the nature of penalty but in the nature of compensation paid to the Government. In the case of Balrampur Sugar Co. Ltd.'s case [1982] 135 ITR 227 (Cal), this court held that the liability to pay-....

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....r delayed payment. Section 14B of the said Act provides that, where an employer makes default in the payment of any contribution to the fund or charges payable under any other provision of the said Act or any scheme or insurance scheme or under any of the conditions specified under section 17, the Provident Fund Commissioner or such other officer as may be authorised by the Central Government may recover from the employer such damages, not exceeding the amount of arrears. Section 14 provides for imposition of penalty for avoiding payment of the provident fund by the employer in the form of imprisonment or fine. On behalf of the Revenue, reliance was placed on the decision of the Supreme Court in the case of Organo Chemical Industries v. ....

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....s suffered by them. The defaulter under section 14B is, therefore, liable to pay damages which represent the loss but not anything more, as such recovery would amount to penalty and that is not permitted under that section. It is, therefore, held by some of the High Courts that the damages to be imposed under section 14B should have correlation with the loss suffered and that damages under section 14B are intended to compensate the loss to the beneficiaries of the scheme. The Supreme Court held that (at page 304 of 55 FJR and page 1816 of AIR 1979 SC) : "The expression 'damages' occurring in section 14B is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty unde....