Breach of contract compensation is not an offence under Income Tax Act; deduction claim for current year damages allowed.

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Restriction on deduction of expenditure u/s 37(1) - compensation paid for breach of contract - enalty has been paid by the assessee on account of breach of contract which cannot be equated with the offence, or something prohibited by law. - Further, the amount of damage crystallized in the year under consideration as evident from the various letters written by NHAL - Thus, it cannot be said that such damages are prior period expenses. - Claim allowed - AT....