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2016 (3) TMI 148 - HC - Income TaxAddition on account of claim of interest and sales tax recoverable from IFCI - Held that:- The position which obtains is that the liability in respect of interest has been incurred in the respective years though paid but not charged to profit and loss account of those years. The liability in respect of those years was charged to profit and loss account of this year although no amount was paid by way of interest to the IFCI in this year in so far as the amount of ₹ 22,04,344/- is concerned. In other words, there is no foundation to hold that the liability was inchoate in those years which crystalized in this year, the reason being that the assessee was required to pay interest at the agreed rate and no rebate was admissible in view of non fulfilment of export obligation which was also clear in those years. Therefore, we do not find ourselves in agreement with the learned counsel that the liability was otherwise allowable under this Act in this year. The liability was also not paid in this year. Therefore, correctly held that the assessee is not entitled to deduct this amount in computation of its income - Decided against assessee Claim of sales tax liability - Accrual of liability - Held that:- assessee had failed to justify how the amounts claimed were transferred to the recoverable account when these were not the liability of the assessment year in question and they were not paid or were payable in this year. - The assessee has followed mercantile system and there is no dispute in this matter. If the liabilities of earlier three years in respect of interest or earlier year in respect of sales tax is allowed merely on the basis of Board resolution, it will lead to distortion of the picture of profits of this year. Therefore, we are of the view that the amounts were not deductible as neither the liability accrued in this year nor it was paid in this year. - Decided against assessee Addition under the head 'entertainment expenditure' - Held that:- We find that the expenditure was incurred on staff members for providing tea etc. Further expenditure was also incurred on lunch and dinner for staff as well as for others. The assessee has not culled out the expenditure incurred on outsiders which will be in the nature of entertainment expenditure while the expenditure on the staff members during office hours or for late sitting in the office will not be in the nature of entertainment expenditure. However, in the absence of proper working furnished by the assessee, the estimate of entertainment expenditure at 25% of the total expenditure is reasonable.- Decided against assessee
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