ASHOKA INDUSTRIES v. INCOME TAX OFFICER
[Citation -1986-LL-0206-2]

Citation 1986-LL-0206-2
Appellant Name ASHOKA INDUSTRIES
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 06/02/1986
Assessment Year 1981-82
Judgment View Judgment
Keyword Tags unauthorised occupation • business premises • registered firm
Bot Summary: The assessee which is a registered firm is engaged in the manufacture of rolling shutters, rolling grills and collapsible gates etc. The question involved relates to the claim of Rs. 54,920 relating to damages paid to DDA. The case of the assessee was that these damages were realised by the DDA for the use and occupation of the business premises in Block-B, Jhandewala Extention, near T. B. Clinic. The ITO disallowed the assessee s claim on two grounds. Firstly, he noticed that the damages related to the period 1st Jan., 1979 to 31st March, 1980 and not to the accounting period relevant to the asst. Secondly, he took the view that the amount of damages in question represented penalty/fine imposed by the DDA. For the same reasons, the appeal filed by the assessee before the ld. The IT authorities were not justified in taking the view that this amount represented the amount of penalty of fine. In the case of Mahalaxmi Sugar Mills Co. Ltd. vs. CIT 16 CTR 198: 123 ITR 429 the test laid down by the Supreme Court was that if the payment is made by way of compensation, the amount would be allowable if the expenditure was laid down wholly and exclusively for purpose of the business.


This is appeal filed by assessee. assessee which is registered firm is engaged in manufacture of rolling shutters, rolling grills and collapsible gates etc. question involved relates to claim of Rs. 54,920 relating to damages paid to DDA. case of assessee was that these damages were realised by DDA for use and occupation of business premises in Block-B, Jhandewala Extention, near T. B. Clinic. M. M. Road, New Delhi. However, ITO disallowed assessee s claim on two grounds. Firstly, he noticed that damages related to period 1st Jan., 1979 to 31st March, 1980 and not to accounting period relevant to asst. yr. 1981-82 in question. Secondly, he took view that amount of damages in question represented penalty/fine imposed by DDA. For same reasons, appeal filed by assessee before ld. AAC failed. That is now assessee has come up in appeal before us. We have considered rival submissions of both sides. We find that amount in question represents damages in respect of which order was passed by Estate Officer of DDA under s. 7(2) of public premises (Eviction of Unauthorised Occupation Act, 1971) for use and occupation of property i n question. IT authorities were not justified in taking view that this amount represented amount of penalty of fine. In terms of provisions referred to above, it only represented compensation for wrongful use and occupation of property. This payment was made by assessee in interests of its business. Secondly, order of Estate Officer was passed on 27th June, 1980 i.e. in accounting period relevant to asst. yr. 1981-82 in question. Therefore, fact that compensation related to period for 1st Jan., 1961 to 31st March, 1980 would to come in way of assessee. nomenclature of payment is not determinative of nature of payment. In case of Mahalaxmi Sugar Mills Co. Ltd. vs. CIT (1980) 16 CTR (SC) 198: (1980) 123 ITR 429 (SC) test laid down by Supreme Court was that if payment is made by way of compensation, amount would be allowable if expenditure was laid down wholly and exclusively for purpose of business. Applying this test, we have no doubt in our minds that amount was allowable. We hold accordingly. In result, appeal is allowed. *** ASHOKA INDUSTRIES v. INCOME TAX OFFICER
Report Error