Law: Income Tax Act, 1961

Section: 256

Income-tax-----Business expenditure---Fines and penalties. Employees provident fund---Amount of damages for delay in payment of contributions---Whether compensatory or penal in Pature---Matter remanded---Employees' Provident Funds and Miscellaneous Provisions Act, 1952, S. 14B. The amount of damages for delayed payment of contribution under section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, comprises both the element of penal levy as well as compensatory payment and it will be for the authority under the Act to decide with reference to the provisions of that Act and the reasons given in the order imposing and quantifying the damages to determine what proportion should be treated as penal and what proportion as compensatory: Held, that since the matter was not examined by the Tribunal in the light of the principle stated above, the matter had to be remanded to the Tribunal for fresh consideration. Swedeshi Cotton Mills Co. Ltd. v. CIT (1998) 233 ITR 199 (SC); (1998) 93 FJR 461 (SC) and Prakash Cotton Mills (P.) Lid. v. CIT (1993) 201 ITR 684 (SC) and (1993) 82 FJR 546 (SC) fol. JUDGMENT MRS. RANJANA DESAI, J.---By this reference under sec­tion 256(1) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue: facts and in the circumstances of the case, payment of damages of Rs.6,06,544 under section 14B of the Employees' Provident Funds and Family Pension Fund Act, 1952, was allowable deduction if the assessee had acted in good faith in normal course of business as trader?" It is evident from the…

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