Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2013 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (2) TMI 288 - AT - Income TaxDisallowance of provisional cost of site development - Whether provisional cost of site development debited to the P&L u/s 37(1) is to be treated as an admissible expenditure as it’s ascertained liability - Whether this expenditure is a crystalised or a contingent liability - Assessee is accounting the sale of plots at the time of registration - Against this sale, the cost of the plot is shown in the P&L which also includes the component of cost of site development Held that:- The liability on accrual basis has to be recognized when the assessee is following the mercantile method of account in accordance with AS-I, which is recognized in section 145. The expenditure committed to be incurred in terms of sale agreement besides the regulations prescribed by the local authorities are expenditures, which are partly actually incurred and partly to be incurred. It is not a mere provision but liability in praesenti As decided in case of Bharat Earth Movers (2000 (8) TMI 4 - SUPREME COURT) there are certain requirements to be met before such provisions are allowed and they revolve around reasonable estimations. In that sense, the revenue’s objection on the quantification of the same is definitely justified. The said judgments concur with each other in allowing such liabilities, as long as such liabilities are capable of being estimated with reasonable certainty. Till these requirements are satisfied, the liability is not a contingent one The assessee is under obligation to explain to A.O. the mode and manner of arriving at the figure of Rs. 250/- per unit towards the site development expenses to be incurred in future. It is not the requirement of the law that the assessee can debit the said expenditure on actually incurring the same. Remand back to AO
|