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2021 (10) TMI 1388 - AT - Income TaxProvision for estimated loss of contracts - ascertained liability - AO observed that the said loss on an estimate, which is bound to vary due to variation in input costs - HELD THAT:- Accounting Standards are binding on the Company in so far as the preparation of books are concerned, but, are not binding for Income Tax purposes. Further, the Assessing Officer, by following the decision in the case of EDAC Engineering Limited [2013 (11) TMI 164 - ITAT CHENNAI], disallowed the same and the same was confirmed by the ld. CIT(A). The assessee, neither before the Assessing Officer nor before the ld. CIT(A) substantiated the provision made by it is an ascertained liability. Even before us, the assessee has not been able to explain as to what was the necessity for the assessee to make such a provision. Assessee has simply stated that the provision made by the assessee is an ascertained liability. If at all, it is an ascertained liability, it is the onus on the assessee to establish that the liability is an ascertained liability. No material was placed on record before the Tribunal. We are of the opinion that the provision made by the assessee for a loss on contract is not an ascertained liability and it is a simple provision made by the assessee which is not allowable u/s 37. So far as case law placed by the assessee are concerned, the decision in the case of Rotork Controls India Limited. [2009 (5) TMI 16 - SUPREME COURT] has no application to the facts of the present case. In the order passed by the Tribunal for the AY 2005-06 dated 03.08.2017, the issue dealt by the ITAT relates to provision of warranty and therefore, in our opinion, the issue under consideration need not be remitted back to the Assessing Officer. In view of the above, the ground raised by the assessee is dismissed. Provision made in respect of various expenditures - HELD THAT:- The assessee has made a provision - However, no explanation was given before the Assessing Officer. Even before the ld. CIT(A), the assessee has not given any explanation the reason for making such provisions of expenses. Even before us, the assessee has not been able to explain the reason for making such provisions. We are of the opinion that the provision created by the assessee in respect of various expenses is an unascertained liability and not allowable as an expenditure for the assessment year under consideration. Therefore, we confirm the order passed by the ld. CIT(A). So far as alternative submission is concerned, we direct the Assessing Officer to verify as to whether the assessee has reversed the provision and the same is offered for taxation for the assessment year 2012-13 and decide the alternative plea in accordance with law. This ground is partly allowed.
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