GIRISH CHANDRA GUPTA J. - (1.) The assesse has come up in appeal under Section 260A of the Income Tax Act, 1961 against a judgement and order dated 23rd March, 2005 of the ITAT 'C' Bench, Kolkata in ITA No. 2129/KOL/ 2004 pertaining to the assessment year 2001 -2002. The Tribunal by the impugned order has upheld the order of the CIT (A) confirming disallowance of Rs.6,67,266/ - paid by the assessee to the Calcutta Port Trust (hereinafter referred to as CPT for brevity) by way of compensation for encroachment of land by the assessee from June 1994 to May 2000 and then June 2000 to October 2000. The questions of law which arise for determination in the instant appeal are as follows: - (i) Whether the damages of Rs.6,67,266/ - paid by the Appellant to the Calcutta Port Trust as per Clause 22 of the Lease Agreement dated October 21, 1982 by and between the appellant and Calcutta Port Trust is an expenditure covered by the Explanation to Section 37(1) of the Income Tax Act, 1961? (ii) Whether in the facts and circumstances of the case the payment of Rs.6,67,266/ - to the Calcutta Port Trust by the Appellant was an expenditure incurred wholly and exclusively for the purposes of the Appellant's business and therefore allowable as deduction under Section 37(1) of the Income Tax Act, 1961, in determining the Appellant's income for the assessment year 2001 -02? (iii) Whether the expenditure of Rs.6,67,266/ - incurred by the Appellant as and by way of payment of damages to the Calcutta Port Trust for contravention of contractual obligation by way of encroachment of land adjacent to the demised land, belonging to the Calcutta Port Trust, is an expenditure capital in nature and thus not an allowable expenditure under Section 37 (1) of the Income Tax Act, 1961? (iv) Whether in coming to the conclusion that the payment of Rs.6,67,266/ - by the Appellant to the Calcutta Port Trust was an expenditure covered by the Explanation to Section 37 (1) of the Act and/ or that such expenditure was capital in nature and, therefore, on both counts was not an allowable deduction under Section 37(1) of the Income Tax Act, 1961, the Tribunal has misdirected itself in law, has acted by an outright refusal to consider relevant matters and has taken into consideration irrelevant materials and whether the said findings of the Tribunal are perverse?
(2.) The facts and circumstances in brief are as follows: -
(3.) The assessee had acquired a plot of land by way of lease from CPT under a lease agreement dated October 21st, 1982. CPT by a letter dated 28.06.2000 informed the assessee that about 855.7 sq. metres of land belonging to the trust adjacent to the demised plot at Budge Budge had been encroached by the assessee in violation of the terms and conditions of the lease agreement. The assessee was therefore asked to pay damages by a letter dated 28.09.2000 before proposal of the assessee for grant of a long - term lease in respect of the encroached land could be placed before the Board of Trustees for examination. Such payment was duly made.;