Law: Income Tax Act, 1961

Section: 254

Income-tax--Appeal to Appellate Tribunal---Powers of Tribunal---Power to remand--­Amounts paid by way of compensation for breach of contracts---Deduction claimed for such amounts---Tribunal justified in remitting matter to ITO to find out whether payments were genuine---Indian Income Tax Act, 1961, S.254. The assessee-company paid two substantial amounts towards compensation for breach of contracts and claimed this expenditure as deduction. On a statement given by Z to the Assistant Director of Inspection, the Income-tax Officer concluded that the payments were not genuine and rejected the claim. The Tribunal was of .the view that the question whether the transactions were genuine or not had to be decided and hence remanded the matter to the Income-tax Officer for fresh disposal. On a reference: Held, that since the question whether the payments made by the assessee were genuine or not and certain other aspects of the question regarding the payments were required to be examined, there was no error in the order of the Tribunal in remitting the matter back to the Income-tax Officer. JUDGMENT N.V. BALASUBRAMANIAN, J.---The assessee is a company. In the previous year ended March 31, 1979, relevant to the assessment year 1979-80, the assessee had placed an order on April 6, 1978, with one Kodiyar Chemical Corporation of Bombay for a supply of 10 kgs. of vitamin B-12 crystals at Rs.85 per gram to be supplied during the month of November and December, 1978, and in January, 1979. The offer was also accepted on April 11, 1978. However, this contract was cancelled on October 30, 1978, on the ground that the assessee did not require the material at that time. By a letter, dated November 4, 1978, the supplier protested against the cancellation and on January 10, 1979, an agreement was reached, wherein, the assessee agreed to pay a compensation towards the breach at the rate of Rs.20 per gram and there was a debit of Rs.2 lakhs which was sent by a demand draft on March 31, 1979, and the supplier acknowledged it on May 9, 1979. It is also stated that there was another transaction by which the assessee agreed for purchase of goods on import entitlement of the value of Rs.10…

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