Liquidated damages recd by an assessee from the supplier for delay in supply machinery is treated as a Capital receipt.
BUT what will the treatment in the hands of the supplier who is paying it, whether it is allowable expenditure or not ??
Pls support ur ans wid relevant Income tax Act provision.
Thanks in advance.
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Liquidated damages Treatment
Replies (2)
Any penalty or damages, if it is punitive in nature is not allowed, but if it compensatory in nature is allowed under income tax. So in this case, the damages paid will be allowed under sec 37(1) since it is compensatory in nature.
But in one hand if Govt is not treating it as an income (it is a capital receipt) then on the other hand why govt will allow it ?
Just need to confirm
Just need to confirm
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