C.S.P.Singh, J. - (1.) The Income-tax Appellate Tribunal, Delhi Bench, Delhi, has referred the following four questions for the opinion of this court. "1. Whether the Tribunal was in law justified in allowing the assessee's claim in respect of interest on the arrears of sales tax in computing the assessee's income for the year under consideration ? 2. Whether the interest on the outstanding balance of sales tax was an allowable deduction under the Income-tax Act ? 3. Whether there was material on record justifying the Tribunal's finding that the liability of Rs. 69,383 for damages had crystallised in the accounting period relevant to the assessment year under consideration ? 4. Whether the claim of the assessee for damages could be held to be an allowable deduction in computing the assessee's income liable to assessment for the year under consideration ? "
(2.) So far as the first two questions are concerned, they are clearly covered by the decision of this court in the case of Saraya Sugar Mills P. Ltd, v. CIT [1972] 116 ITR 387 (FB) and in view of that decision the assessee's claim for interest on the arrears of sales tax and interest on the outstanding balance of the sales tax was not an allowable deduction. Coming now to the facts relevant for answering the third and fourth questions.
(3.) The assessee entered into a contract on the 21st of September, 1968, for the supply of 5,000 Kms. of A.C.S.R. Weasel conductor with the U.P. Electricity Board. The supplies were to be completed by July, 1969, but as the raw material, according to the assessee, was not available, it did not supply the contracted quantity, and sought extension for a period of six months, which was refused by the U.P. Electricity Board. Under the agreement entered into between the assessee and the Electricity Board in respect of this supply, Clause 27 thereof contained a provision for reduction of the contract price. This clause of the contract ran as under : "If the contractor shall fail in the due performance of his contract within the time fixed by the contract or any extension thereof, the Contractor agrees to accept a reduction of the contract price by half per cent. per week reckoned on the contract value of sueh portion only of the plant as cannot in consequence of the delay be used commercially and efficiently during each week between the appointed or extended time, as the case may be, and the actual time of acceptance under Clause 29 and such reduction shall be in full satisfaction of the contractor's liability for delay but shall not in any case exceed 10 per cent. of the contract value of such portion of the plant.";