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2023 (1) TMI 177 - HC - Income TaxProvision for estimated loss on contracts - Allowable business expenditure under Section 37 - as per assessee provision for estimated loss on contracts is created on a scientific basis in accordance with the Accounting Standard (AS) 7 and as such it is an ascertained liability allowable as deduction under Section 37 - appellant had claimed the aforesaid estimated loss on the strength of Accounting Standards (AS) 7 of the Institute of Chartered Accountants - whether the provision made by the appellant in its books of account regarding the estimated loss on the ongoing project can be allowed or not by applying Paras 21 and 35 of the Accounting Standard (AS) 7? - HELD THAT:- The appellant has not explained how the total contract costs will exceed total contract revenue despite being specifically asked to explain. The appellant has neither explained the same before the lower authority nor before the first appellate authority nor before the Income Tax Appellate Tribunal. The only explanation that was given by the appellant before the Assessing Officer in its reply dated 24.02.2015 before the Assessment Order was passed u/s 143(3) of the Income Tax Act, 1961 on 24.03.2015, was a mere reiteration of the contents of paragraph 21 of Accounting Standard (AS) 7 which has been extracted above. No further explanation has been given by the appellant. A reading of paragraph 5 of the order passed by the Appellate Commissioner also indicates that the appellant has not demonstrated its case despite specific opportunity being given and has merely relied on the Judgments settling the substantial questions of law. Barring reference to Accounting Standard (AS) 7 for recognition of estimated loss there is no explanation on the facts by the appellant. Therefore, the decisions allowing deductions in the peculiar facts of the case cited by the Hon’ble Supreme Court in Rotork Controls India (P) Ltd. [2009 (5) TMI 16 - SUPREME COURT] as held therein would not come to the rescue of the appellant. In the light of the above discussion, the substantial questions of law is answered against the appellant. We therefore, do not find any merits in the above appeal filed by the appellant. The appeal filed by the appellant therefore is liable to be dismissed.
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