Law: Income Tax Ordinance, 1979

Section: 62

Income tax Ordinance (XXXI of 1979)---S. 62 Assessment Deduction on account of risk purchase-Assessee entering into a contract with Government for supply of store making all reasonable efforts to fulfil contract but somehow prevented from doing it on account of rather rigid and Unreasonable attitude exhibited by concerned department Liability occurring on account of risk purchase not occasioned by any deliberate or dis-honest breach of contract Deduction made on account of risk purchase, held, was not fine but a deduction relating to business activities of assessee and an item of profit and loss expenditure and assessee was entitled to such deduction. ORDER SIKANDAR HAYAT KHAN (MEMBER). This departmental appeal is directed against the impugned order of the learned C. I. T. (Appeals) by virtue of which he allowed relief to the assessee on account of risk purchases made on his behalf by the Ministry of Defence. It was accordingly prayed that relief allowed by him may be ordered to be vacated by the Tribunal. 2. The assessee, a registered firm, derives income from the manufacture and supply of defence stores to the Ministry of Defence. In respect of the charge year 1981 82 the Ministry of Defence deducted a sum of Rs. 1,44,V81 on account of risk purchases made on behalf of the assessee. This amount was claimed by the assessee as a P & L expenditure for the relevant year. However, claim of the assessee was turned down at the assessment stage in the following words: "According to law penalties imposed for breach of miles is an in admissible expenditure. Similar is the position of the late delivery amount etc." 3. Against the disallowance of Rs. 1,44,087 on account of risk purchases made on behalf of the assessee, an appeal was tiled before the learned C. I. T. (Appeals) who by virtue of Appeal No. 392, dated 28 5 1983 allowed the amount as a P & L expenditure in the following words: "I have no doubt in my mind that the firm did its best to fulfil the terms of contract and even offered better and latest stores on the same cost and rates but could not succeed in its efforts due to a very rigid and unreasonable attitude of the department. The loss sustained by…

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