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2012 (9) TMI 730 - AT - Income TaxDisallowance of payment of incentive to the drivers - the liability was contingent in nature for the year under consideration - Held that:- As decided in Bharat Earth Movers Versus CIT [2000 (8) TMI 4 - SUPREME COURT] if an assessee is maintaining accounts on mercantile system and a liability accrued, though discharged at a future date, held to be an allowable deduction while working out the profit and gains. The Hon’ble Court has held that having regard to the accepted principle of commercial practice and accountancy such deduction is permissible, so the liability was held as not a contingent liability. Decision of the AO was nothing but simply following the past history of the disallowance. Meaning thereby, even after the extreme step of search was taken by the Revenue Department, but the genuineness of the payment of the incentive to the drivers was not doubted - the liability of payment of incentive had definitely arisen during the accounting period under consideration and that liability was undisputedly discharged at a future date. The incurring of the liability was ascertainable for the year under appeal, therefore it is to be satisfied that it was not a contingent liability. In the result the findings of the authorities are reversed and direct to allow the claim - in favour of assessee.
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