Assessee-company was engaged in activities of operating and maintenance of roads. It claimed deduction on account of damages paid to NHAI as business expenditure. Assessing Officer held that said expenditure was representing penalty and held that such a penalty could not be allowed as deduction under Explanation to section 37(1).\u00a0 Assessing Officer also found that such damage charges were pertaining to earlier year and, therefore, same could not be allowed as deduction on this count as well, being prior period expenses.\u00a0 CIT(A) deleted the disallowances. On appeal the Tribunal held that\u00a0 since provision of Explanation 1 to section 37(1) excludes allowing deduction of expenditure incurred for purpose which is an offence or prohibited by law and however penalty had been paid by assessee on account of breach of contract which could not be equated with offence, or something prohibited by law, assessee was entitled to deduction under section 37(1). Further, since amount of damage crystallized in year under consideration, it could not be said that such damages were prior period expenses. (AY. 2018-19)\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 37(1) : Business expenditure-Penalty-Prior period expenses-Crystallized in year under consideration-Breach of contract-Can not be equated with offence, or something prohibited by law-Entitle to deduction. [Explanation to section 37, S. 145] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-47890","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-csq","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/47890","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=47890"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/47890\/revisions"}],"predecessor-version":[{"id":47891,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/47890\/revisions\/47891"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=47890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=47890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=47890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}