1. Whether it can be deducted before tax depends on its nature: the part that belongs to illegal use of damages should be regarded as non-operating expenses. However, because it is caused by illegal operation, we believe that neither the fine ruled by the court nor the compensation agreed by both parties can be deducted before tax. The part that belongs to the use fee, the part that has been repaid in the past, can be directly included in the non-operating expenses (because of its small amount), and the part that belongs to the use fee in the future period should be deducted before the enterprise income tax. Depending on the type of use right, it should be included in "intangible assets" and "long-term deferred expenses" respectively, or directly included in "management expenses".

2. If there is a court ruling, it can be recorded by the ruling, supplemented by a receipt. There is no court ruling, which needs to be supplemented by mutual agreement. Receipts can be issued for the part with fine nature, but it is best for the part with use fee to apply to the tax authorities for issuing invoices. Otherwise, if only the receipts are recorded, the payer may not deduct the incurred (or amortized) expenses before tax.

Legal basis:

People's Republic of China (PRC) tax collection management law

Article 1 This Law is formulated with a view to strengthening the administration of tax collection, standardizing tax collection, safeguarding national tax revenue, protecting the legitimate rights and interests of taxpayers and promoting economic and social development.

Article 2 This Law is applicable to the collection and management of various taxes collected by tax authorities according to law.

Article 3 The collection, suspension, reduction, exemption, refund and supplementary payment of taxes shall be carried out in accordance with the law. Where the State Council is authorized by law, it shall be implemented in accordance with the provisions of administrative regulations formulated by the State Council.

No organ, unit or individual may, in violation of the provisions of laws and administrative regulations, arbitrarily make decisions on tax collection, suspension, tax reduction, exemption, tax refund, overdue tax and other decisions inconsistent with tax laws and administrative regulations.

Article 4 Units and individuals that are obligated to pay taxes according to laws and administrative regulations are taxpayers.

Units and individuals that have the obligation to withhold and pay taxes according to laws and administrative regulations are withholding agents. Taxpayers and withholding agents must pay taxes, withhold and remit taxes and collect and remit taxes in accordance with the provisions of laws and administrative regulations.