Saturday, August 14, 2010

COMPENSATION NOT LIABLE TO I-T

Compensation received for delay in supplying an industrial unit is not liable to income tax as revenue
receipt, the Supreme Court ruled in the case, commissioner of income tax vs.saurashtra cement ltd.
The Company bought cement plant walchandnagar industries under an agreement which specified
damages would have to be paid if there was delay in delivery. There was delay and the amount specified was paid. The revenue authorities assessed the damages as revenue receipt, while the company maintained that it was not a revenue receipt. The dispute started in 1974-75 and ended in the Supreme Court, which ruled that it was capital receipt. The revenue authorities lost their three- decade- old case before the tribunal, the Gujarat high court and the Supreme Court.

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