TaxTMI 
TaxTMI 
1995 (3) TMI 140
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...." as under :--- Rs. (i) Ganga-Nagar Co.-op. Oil Seeds Processing Mills 1,53,847 (ii) Shri Dashmesh Academy, Anandpur Sahib 2,15,690 (iii) Ganganagar Co-op. Sahkari Spinning Mil....
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.... of contract. Similarly, the amount of compensation paid by the assessee at Rs. 3,21,000 was also not allowed as a deduction on the ground that this compensation was paid for the delay in the execution of certain works. The Assessing Officer (for short, the AO) was also of the view that these deductions had actually been claimed by the assessee as a provision and not as any ascertained liability. 5. The assessee went in appeal with the plea that certain contracts had been cancelled for different reasons. Since delay in the execution of work was an incidence of the business of contract, the forfeiture of security as well as payment of compensation were only incidental to the assessee's nature of business. The forfeiture as well as payment o....
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....y 6 months'extension was given by the Mill on an ad hoc basis. Further extension of time was sought by the assessee but it was refused. Since the work could not be completed and the assessee's demand for increase in the rates was rejected, the aforesaid spinning mill withdrew the work and the sum of Rs. 1 lakh as security and Rs. 50,000 as earnest-money given by the assessee at the time of filing tender was deducted from the running bills @ 50%. Here also, the assessee went before the Arbitrator as per the provisions of the contract. In the case of Food Corporation of India, it was submitted by the assessee that award was given by the Sole Arbitrator, Hon'ble Mr. Justice Jaswant Singh (Retd.), on 2-9-1994. As per the award, the assessee had....
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....s at lower rates. In a suit for damages for breach of contract instituted by other parties, a decree was passed for Rs. 5,000 and cost. We, however, find that the case before the Madras High Court was entirely on different set of facts inasmuch as there the assessee had committed a breach with an element of dishonest actions. The ld. D.R. has also placed reliance on a decision of the Punjab High Court (at Shimla) in the case of CIT v. Himalaya RosinTurpentine Mfg. Co. [1953]24 ITR 132 for the proposition that where a fine was paid under a penalty clause for transgressing the terms of agreement, that could not be allowed as a deduction. There, the assessee was carrying on the business of extracting rosin from forest leased for that purpose. ....
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....uncements but we find that the facts in each case have to be examined looking to the nature of the payment as well as the background. In the case of the present assessee, we do not find any violation of rules or the by-laws but a breach of contract only. In all the cases, forfeiture of security took place because the assessee could not complete the work in time. The assessee also raised certain demands for increase in the rates but that was refused. 9. The, ld. counsel for the assessee has argued, in reply, that the assessee had to pay compensation simply because of delay in the execution of the works. When the matter went to the arbitrators, the assessee had no choice but to claim deduction in respect of the forfeiture of security as wel....