JAMNA AUTO INDUSTRIES Vs. COMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question that falls for judicial consideration before the Full Bench is, as to which of the two divergent views of two co -ordinate Division Benches of this Court has legal acceptability. Even more pointedly, the correctness of judgments reported in Commissioner of Income Tax v. Indo Asian Switch Gears (P) Ltd. and Baldev Singh Kanwar, Barishad, Hoshiarpur v. The Commissioner of Income Tax, Jalandhar (1997) ITR 640 is at issue in this Reference.

(2.) IN the first instance, it deserves to be noticed as to how this controversy has arisen. Before delving on the issue involved, it would be apposite for proper appreciation of the bone of contention between the parties to put a brief look on the factual matrix. A partner of the assessee - firm visited Germany where he entered into a contract for supply of certain goods of a particular value. The agreement so arrived at, however, could not be acted upon by the assessee as it did not have the requisite import licence for the material intended to be imported. The dispute was referred to an arbitrator. In terms of the award of the Arbitration Tribunal, rendered on 29.7.1974, the assessee paid a sum of Rs. 50,000/ -to the German -firm, M/s. Duestsche Strahil Metail of Berlin, for failure to perform its part of the contract. Accordingly, the assessee in its return for the assessment year 1975 -76, claimed deductions of the aforesaid amount as business expenses on account of damages for breach of contract.

(3.) IT is in this manner the appellant preferred the instant Reference and raised the following question of law for opinion of this Court: Whether on the facts and in the circumstances of the case, the Tribunal was right in applying the decision of the Punjab and Haryana High Court in while confirming the disallowance of Rs. 50,000/ -payable to M/s. Duestsche Stahil Metail of Berlin for non -performance of the contract?