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2021 (10) TMI 115 - AT - Income TaxProvisions of anticipated losses - certainty in recognizing expenses - assessment framed as per AS-7 - HELD THAT:- Hon’ble Delhi High Court in case of Triveni Engineering & Industries Ltd. [2010 (11) TMI 90 - DELHI HIGH COURT] decided the identical issue by holding that, “no doubt, unless the expenditure is actually incurred or it is accrued in the relevant years, it would not be allowed as a deduction. However, at the same time, in the given scenario, where in relation to the project works undertaken by the assessee, completed contract method of accounting is followed which is consistent with the Accounting Standard and these Accounting Standards also lay down the norms indicating the particular point of time when the provisions for all known liabilities and losses has to be made, the making of such a provision by the assessee appears to be justified more so when the assessee has recognized gain as well as on such project during the year itself.” In the instant case, assessee has shown revenue gain for AY 2011-12. When “completed contract method of accounting” is undisputedly applied to consistently by the assessee in a long term project, the actual profit/loss will come on record in the year of completion of contract when all the undisputed losses and gains would be adjusted. When percentage completion method, which is in accordance with AS-7, has been consistently applied by the assessee and has been accepted by the Department and the expenditures incurred by the assessee are admissible one, we find no ground to interfere into the findings returned by the ld. CIT (A). Set off of the brought forward losses against the income from other sources - CIT-A allowed claim - HELD THAT:- Perusal of the impugned order passed by the ld. CIT (A) goes to prove that this issue has been decided on the basis of facts brought on record by the parties to the appeals. When the core business of the assessee company is construction of power plant and purchasing the FDRs for availability of the easy funds for smooth functioning of the business, earning of interest on the FDRs on the funds invested from the business funds cannot be disallowed on the ground that earning interest on the FDRs is not part of the business of the assessee. Ld. CIT (A) has rightly decided that, “although interest income has been shown as income from other sources it is still a part of the business income in nature as in all other assessment years and is available for set off of any losses from the previous year.” So, investing surplus funds in FDRs during the business activities is part of primary business of the assessee company to make easy availability of funds for core activities and as such, interest income has been rightly treated as business income by the ld. CIT (A). Consequently, we find no ground to interfere into the findings returned by the ld. CIT (A) - Decided against revenue.
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