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20. It is in these circumstances that the assessee is now before us.

21. Shri Ramamani, the learned counsel for the assessee, took us through the facts and circumstances of the case, and contended at the outset that, in the case before us, there is no device or scheme for evasion or avoidance of tax. The contracts for supply of machinery contain a built-in clause for levy of penalty for the delay in the supply of the items concerned. A plain reading of the provisions of the delayed delivery clauses will indicate that the mere factum of delay entails penalty. What is more, the quantum of penalty is particularised or specified in the contracts. With the result, the moment the assessee delayed the delivery of the goods contracted to be supplied, the assessee's customers got a right to enforce the penalty clause. And concomltantly the assessee became liable to pay the penalty. This, taken in conjunction with the fact that the assessee did not at any time dispute its liability to pay the penalty, would mean that, by reason of the delay on its part, it lost its right to receive 100 per cent of the invoice value. Consequently, the assessee was justified in taking into account, on accrual basis, the penalty payable under the delayed delivery clauses. Further, in the year in which the assessee's customers actually waived, wholly or in part, the penalty imposable, the assessee had offered the sum in question for taxation.

23. Shri Ramamani then contended that, the quantum of the penalty leviable for delayed delivery of goods being specified in the contract itself, the provisions of Section 74 of the Contract Act would come into play. In cases of the type under consideration, the legal effect of Section 74 is that the party complaining of delay is to receive only reasonable compensation not exceeding the stipulated amount. What is significant in this regard is that, in such cases, if the party who committed the breach does not dispute the penalty payable, the person complaining of delay is entitled to enforce the penalty clause in full. And, by the same token, the person who committed the breach becomes liable to pay the penalty in question. This is exactly what had happened in the case before us and, consequently, no objection could possibly be taken to the assessee's quantifying the penalty payable for the delayed delivery strictly in accordance with the provisions of the delayed delivery clauses and in claiming, on accrual basis, a revenue deduction in respect thereof.