TMI Blog2006 (1) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... eal : "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 72,00,000 which was only a provision pending revision and there is no tenet under the IT Act wherein unascertained liabilities could be allowed as a deduction." 2. Facts of the case leading to this ground of appeal briefly are that as per the audit report for the year ended 31-3-1998 the assessee had provided for a sum of Rs. 72 lakhs under the head Salaries and wages , pending revision. On further enquiry the Assessing Officer learnt that this liability had been provided for in relation to wage revision implemented with effect from 1-7-1997. However, the liability on account of wage revision had not been ascertained and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is held that the addition of Rs. 72 lakhs made by the Assessing Officer by disallowing the provision for salary payment was not tenable. The addition of Rs. 72 lakhs is deleted." 4. Aggrieved by this order revenue is in appeal before us. During the course of hearing before us the learned D.R. argued that in this case the decision that had been taken earlier was to revise the pay and wages w.e.f. 1-7-1999. However, subsequently the Board of Directors decided to effect pay revision from 1-7-1997. The decision to revise pay w.e.f. 1-7-1997 had not been taken till the end of the previous year under assessment i.e., on 31-3-1998. That being so no liability had been incurred by the assessee nor any liability had accrued against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and was required to be given effect to by us. The learned AR of the assessee argued that as per Accounting Standard 4, the assessee was required to take note of significant events occurring after the balance-sheet date if they brought about any change in the income and expenditure or assets and liabilities of the assessee for the period covered by the balance-sheet. The learned AR argued that it was the requirement of the Company Law also that the information regarding happening of such events is recorded in the accounts of the assessee. 6. In support of various contentions the learned A.R. placed reliance on the judgments in Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 (SC); CIT v. Swadeshi Cotton Flour Mills (P.) Ltd. [1964] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, in the meeting held on 28-9-1998 the Board decided that the scales of pay may be revised with effect from 1-7-1997 instead of 1-7-1999 and the next wage revision would be due on 1-7-2002. Thus, the very decision to revise the pay scales came into existence after 31-3-1998 i.e., end of the previous year under assessment before us. We, therefore, do not see force in the argument of the assessee that the liability of payment of extra pay as per the revised pay scales had already accrued during the financial year 1997-98 but quantified or determined subsequently. The fact of the matter is that there was no liability to pay any extra amount by way of revised pay as on 31-3-1998 and such liability accrued for the first time during the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet date, but reflect circumstances which have occurred in the following period." Besides, clause 13 of the Accounting Standards states as under : "Assets and liabilities should be adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date or that indicate that the fundamental accounting assumption of going concern ( i.e. , the continuance or existence or substratum of the enterprise) is not appropriate." It is, thus, seen that events occurring after the balance-sheet should be indicative of a liability existing at the balance-sheet date, but noticed subsequently or the same should be relating to conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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