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2022 (11) TMI 356 - AT - Income TaxRevision u/s 263 by CIT - disallowing the provision for foreseeable losses in the computation of book profits u/s. 115JB - HELD THAT:- Assessee has created provisions for foreseeable loss for complying with the requirements of AS-7 and hence is an allowable deduction as it is only an ascertained liability. The provision for foreseeable loss being an ascertained liability, the same is treated as an allowable expenditure while computing book profits u/s115JB of the Act. We also find that the Ld. AR rightly placed reliance on the co-ordinate bench decision of this tribunal in the case of Summit Securities Ltd. [2020 (10) TMI 1343 - ITAT MUMBAI] wherein this provision for foreseeable loss was accepted to be an ascertained liability and hence allowable as deduction. Moreover, even in the following judicial precedents, it has been held that provision for foreseeable loss created as per AS-7 is an allowable deduction u/s 37. It is trite law that there is no estoppel against the statute. PCIT is duty bound to bring on record that the said item would be an eligible item for adding back while computing book profits u/s. 115JB of the Act, which had admittedly not done by the Ld. PCIT in the instant case. PCIT has also not applied the ratio decidendi laid down in the case of Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT] wherein the Ld. AO could not make any additions or deletions beyond what is prescribed in the list of items as per Explanation 1 to section 115JB(2) of the Act. In the instant case, there is no dispute that the said provision for foreseeable loss has been made in accordance with the guidelines and mandate provided in AS-7 issued by ICAI and hence we hold that the said provision is an ascertained liability and hence an allowable expenditure under section 115JB of the Act. It is pertinent to note that the said practice has been consistently followed by the assessee in the previous as well as subsequent years and has been also accepted by the Department except for the year under consideration. Hence, it could be seen that even on merits, the provision made for foreseeable losses would only be an ascertained liability and hence, it does not fall under any of the items listed in Explanation 1 to Section 115JB (2) of the Act warranting addition thereon. Hence, even on merits, this provision deserves to allowed while computing book profits u/s. 115JB of the Act. Appeal of the assessee is allowed.
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