In Brief
A company (Ballarpur Industries) paid Rs. 3.25 crores to settle a dispute with a joint promoter shareholder pursuant to a compromise in a civil suit. The company claimed the payment as revenue expenditure for tax deduction, but the Assessing Officer and first appellate authority (CIT Appeals) rejected it as non-deductible. The Income Tax Appellate Tribunal reversed their orders, allowing the deduction, and the High Court upheld this. The Supreme Court remanded the case to the Tribunal for reconsideration, finding that the Tribunal had mischaracterized the reasoning of the lower authorities and proceeded on that incorrect basis. The Court did not decide the merits, directing fresh adjudication.
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