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2016 (10) TMI 966 - AT - Income TaxDisallowance of provision for direct expenses - AO observed that expenditure actually not incurred during the year - mercantile system of accounting - construction activity - Held that:- It remains undisputed that the provision was made by the assessee for certain expected expenditure. As such, the provision was made due to the arising of the possibility of the expenditure in futuro. This was what had prompted the estimation. Now, if the provision does not stand exhausted even four years from the end of the year in which it was made, this does not mean that the provision to that extent was ill conceived. The details of the expenditure intended were duly made available. That such incurrence of expenditure did not come about, cannot put to naught the provision which was made bonafide. The legal position remains that the amount unutilized would be available for being offered to tax in the next assessment year. The basis of the provision made has not been observed by the ld. CIT(A) to be irrational. In this regard, the decision of the Hon’ble Supreme Court in the case of ‘Bharat Earth Movers Vs CIT’, (2000 (8) TMI 4 - SUPREME Court ), which was followed by the Hon’ble Delhi High Court in the case of ‘Yum Restaurants (I)(P) Ltd.’(2015 (2) TMI 17 - DELHI HIGH COURT ), under similar circumstances, is directly attracted. Therefore, we are of the considered opinion that the ld. CIT(A) has gone wrong in sustaining the addition to the extent of ₹ 43,06,801/-. The same should also have been deleted. We order so now. Therefore, the addition of ₹ 5,11,50,000/- is deleted in toto. - Decided in favour of assessee
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