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2011 (3) TMI 847 - AT - Income TaxAccrual of expenditure - actual or contingent - mercantile basis of accounting - Expenditure on performance incentives and sales incentives - held that: - Without making provisions for performance incentive and sales incentive the true picture of the company cannot be ascertained. Since in the instant case, the assessee has made provisions, a part of which has admittedly been paid subsequently and the unpaid part has already been offered to tax in the impugned assessment year itself; therefore, the bonafide of the assessee in making the provision, should not have been doubted. In this view of the matter, set aside the order of the CIT(A) on this issue and direct the Assessing Officer to delete the disallowance - Decided in favour of assessee. Inflated expenditure - Provision for excessive expenditure - Advertisement and sales promotion expenses - held that:- The assessee could have made the claim in the subsequent year when such bill is received. - Merely because the assessee has reversed the entry in the subsequent year; the same is not the proper accounting method - If the system is allowed then any person, who earns huge income in a particular year can inflate the provisions for expenses and in the subsequent year when there is less income or loss, can reverse the entry - This, cannot be permitted - Therefore, do not find any infirmity in the order of the ld CIT(A)upholding the addition - The ground raised by the assessee is accordingly dismissed.
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