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2022 (5) TMI 111 - AT - Income TaxAddition on account of provision for inventory of obsolescence - assessee could not give justification regarding provision made by the assessee - CIT-A deleted the addition - HELD THAT:- The assessee has claimed provision for inventory of obsolescence as allowable expenditure. The AO disallowed the same being a provision and not the actual expenses. As per the Assessing Officer, the expenses being uncertain is not allowable expense u/s 37(1) of the Act. We find that this reasoning of AO is contrary to ratio laid down by the binding precedents. See HOTLINE TELETUBE AND COMPONENTS LTD. [2008 (8) TMI 6 - HIGH COURT DELHI] and HOTLINE TELETUBE AND COMPONENTS LTD. [2008 (8) TMI 6 - HIGH COURT DELHI] - Decided against revenue. CIT-A admitting the additional evidences without affording an opportunity to AO - HELD THAT:- We find that Ld. Sr. DR could not point out that what were the additional evidences filed before Ld.CIT(A) which was not confronted to the AO. Therefore, in the absence of specific averment regarding additional evidences, we do not see any merit in the ground of Revenue’s appeal. Thus, Ground No.2 raised by the Revenue is dismissed. Disallowance of non business expenses - HELD THAT:- The disallowance was purely made on adhoc basis. The AO has merely stated that the assessee could not justify the business expediency. We are unable to understand that how the AO was convinced in respect of 95% of expenses being incurred as per the business expediency and with regard to 5%, the assessee could not prove business expediency. This approach of the AO is not inconsonance with the settled principle of law. We therefore, do not see any reason to interfere in the finding of Ld.CIT(A), the same is hereby confirmed. Ground No.3 raised by the Revenue is therefore, dismissed. Addition to the total income on account of deferred grant - assessee submitted that Ld.CIT(A) failed to appreciate the fact that the assessee himself had offered this income in the Assessment Year 2016-17. Therefore, this amount cannot be allowed to be taxed twice - HELD THAT:- It is the say of the assessee that grant was given with specific direction by the grantor to be utilized for capital infrastructure. Since the amount could not be utilized during the year, it was booked as liability and same was written back in the Assessment Year 2016-17 and offered for tax. The Revenue could not controvert the fact that the amount was offered for tax in Assessment Year 2016-17. It is settled principle of law that an amount cannot be taxed in the hands of the assessee if it does not partake the character of income. In the present case, the amount of grant was offered for tax in the year 2016-17. It is also equally settled principle of law that the income is required to be taxed in the correct Assessment Year. We therefore, set aside the impugned order on this issue and direct the Assessing Officer to verify and tax the impugned amount in correct Assessment Year. This ground of assessee’s cross-objection is allowed for statistical purposes only.
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