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Commissioner of Income Tax v/s National Steel and General Mills Private Limited

    ITC No. 6 of 1986

    Decided On, 22 August 1990

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE B.N. KIRPAL & THE HONOURABLE MS. JUSTICE SANTHOSH DUGGAL

    For the Appearing Parties : -----



Judgment Text

B.N. KIRPAL, J.


The petitioner is seeking reference of the following question to this court,



"Whether, on the facts and in the circum

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stances of the case, the Tribunal was correct in law in holding that the assessee's claim for Rs. 2, 86, 596 was allowable being incidental to the carrying on of business ?"


There is a dispute between the assessee and the BHEL. The said BHEL was to be supplied some material within a stipulated period which was not done. On account of this, the said BHEL claimed damages amounting to Rs. 2, 86, 596 by its letter dated March 27, 1976. Representations were made against the demand by the assessee-company but without any success. The sum of Rs. 2, 86, 596 was debited to the profit and loss account and deduction was claimed. Admittedly, the transaction between the assessee and BHEL was a business transaction and when the assessee failed to meet with its commitment, it became liable to pay the damages.


The question which is sought by the Department is only whether this claim was allowable as being incidental to the carrying on of the business. The answer to this is self-evident because it is only out of the business activities that the claim arose. It was a business contract which was entered into between the assessee and the BHEL and the assessee had to make supplies which it did not make within the stipulated period. Therefore, a claim arising therefrom can only be regarded as incidental to the carrying on of the business.


It is sought to be contended that the claim cannot arise in this year, but that is not the question sought to be raised.


The application is, accordingly, dismissed
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