1991 (3) TMI 30

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.....-The questions that are referred to us under the provisions of the Income-tax Act, 1961, read thus : " 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in coming to the conclusion that the assessee has paid compensation for loss of interest to the trust arising on account of late remittance of funds and the late remittance of funds was not d....

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....me-tax Act, 1961, as if it is an expenditure. The contention of the Revenue is that the payment by way of interest was actually a penalty not deductible and that the payment was to penalise the assessee for the delayed payment. This contention was not accepted by the Appellate Tribunal. Hence, this reference. There is no serious dispute that the payment in question by the assessee was as intere....

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....d separate. The compensatory payment has been held to be deductible, because it is an accretion to the main payment as observed by the Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429. The above decision of the Supreme Court was followed by the Appellate Tribunal. In the said case, there was certain delay in the payment of sugarcane cess. The payer had to pay interest for the....