Income Tax – Liquidated Damages for delay in Supply of plant is Capital receipt:
Supreme Court
THE short question for determination is whether the
liquidated damages received by the assessee from the supplier of the plant and
machinery on account of delay in the supply of plant is a capital or a revenue
receipt? Compensation paid for the delay in procurement of capital asset
amounted to sterilization of the capital asset of the assessee as supplier had
failed to supply the plant within time as stipulated in the agreement. The
afore- stated amount received by the assessee towards compensation for
sterilization of the profit earning source, not in the ordinary course of their
business, was a capital receipt in the hands of the assessee.