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2015 (4) TMI 478 - HC - Income TaxDeduction of Provision for contingency - Ascertained liability - Allowable deduction - Held that:- The ITAT has come to a correct conclusion that the liability was ascertained and it has been an admitted fact that the work had been completed at the Dam namely; Right Bank Dam Division, Hidkal Dam and the provision was made only for supplies. Though it may be that the assessee made a provision at the rate of 6 ½ % of the supplies for possible loss due to deduction made by the Government for not keeping the supplies to the satisfaction of the department which, in-fact, had been deducted by the Government @ 10 %. However, to be on the safer side, the assessee made a provision @ 6 ½ % only. It is an admitted fact that the provision, if any made, was to make over the deficiencies, in respect of the work done as per direction of Government by which 10% deduction was made. Admittedly, the entire amount was included by the assessee in the total receipts and once entire receipt has been shown, the expenditure ought to have been allowed and therefore, this was an allowable deduction. In our view, the assessee has to ensure an expenditure and if not paid on or before close of the financial year, it certainly deserves allowance. Admittedly, the system of accounting, followed by the assessee, is mercantile and any expenditure, not paid by the close of the year, is as it is allowable and in-fact, even in a mercantile system of accounting, while income is also to be included, which has accrued to the assessee, so also the expenditure is to be allowed in similar fashion. In the light of the opinion of the Hon'ble Apex Court in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME Court]and Rotork Controls India (P.) Ltd. [2009 (5) TMI 16 - SUPREME COURT OF INDIA], and Calcutta Co. Ltd. [[1959 (5) TMI 3 - SUPREME Court]] in our view, the ITAT was correct and justified in allowing the amount of ₹ 87,224/- which was an ascertained liability on account of the allowable deduction. - Decided against the revenue.
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