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2014 (9) TMI 725 - HC - Income TaxUnexplained cash credits u/s 68 – Accrual of income - receipt of service charges for providing maintenance for five years with the supply of spare parts and another five years - assessee had offered the entire amount of 55,12,088 for tax in proportionate basis, in 5 assessment years as the corresponding or necessary expenditure would be incurred in the said span of 5 years - Held that:- The Tribunal has referred to remand report of AO in which he had reported that expenditure made for the maintenance of equipments in the subsequent years was adjusted against the provisions made for equipment maintenance by the assessee and the provision for equipment maintenance for AYs 2006-07, 2007-08 and 2008-09 were verified by the AO – the calculations had been made on scientific basis and the balance amount was offered for taxation in the subsequent years - for a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation - where there are a number of obligations the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole - if the historical trend indicates that large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the any of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the Act - It would all depend on the data systematically maintained by the assessee – invocation of section 68 is not warranted - The source of money and genuineness of credit entry was never doubted – Decided against revenue.
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