BALDEV SINGH KANWAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Amritsar Bench, Amritsar, has referred the following question of law to this Court for its opinion at the instance of the assessee:

(2.) ASSESSEE is a resin contractor, who had taken contract for the extraction of resin of Arnas Range during the assessment year. He was called upon to make payment of Rs. 54,638 as penalty on account of damages caused by blazes. It was explained by the assessee that according to the agreement, he was to extract resin by placing blazes of a standard size and shape. In the process of extracting resin, sometimes (frequently) these standards and norms were not scrupulously kept by the contractor. According to the terms of the agreement, assessee was, in such circumstances, called upon to pay damages. Assessee had claimed deduction of the sum of Rs. 54,638. Following the decision of this Court in the case of Cineramas vs. CIT 1977 CTR (P&H) 145 : (1977) 110 ITR 762 (P&H) : TC 17R.939, the ITO held that payment was made for breach of contractual obligations, which could not be considered a business outgoing. Claim of the assessee for deduction was disallowed and the same was added to the profit of the year. This order was confirmed in appeal by the AAC. Before the Tribunal again, the order of the authorities below was confirmed. At the instance of the assessee, the aforesaid question of law has been referred to us for opinion.