TMI Blog2013 (5) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... d/11 - - - Dated:- 4-2-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : S/Sri C. S. Subramanyam V. Siva Kumar For the Respondent : Smt. Vidisha Kalra ORDER Per Saktijit Dey, Judicial Member: The assessee has filed this appeal being aggrieved by the order dated 15-11-2010 of CIT (A)-IV, Hyderabad passed in appeal No.233/ACIT 3(3)/CIT (A)-IV/09-10 pertaining to the assessment year 2006-07. 2. The assessee has raised altogether seven grounds. Ground Nos. 1 and 7 being general in nature, needs no adjudication and therefore these grounds are dismissed as such. In ground Nos. 2 and 3, the assessee has challenged the order of the CIT (A) in sustaining the disallowance of expenditure of an amount Rs.8,45,44,976/- being a provision only. 3. Briefly the facts relating to this issue are, the assessee M/s. Viom Net Work Limited formerly known as M/s. Wireless TT Info Services Limited is engaged in the business of providing content based services to telecom Service Providers. The assessee is a subsidiary of its holding company M/s Tata Tele Services Limited (TTSL). The assessee company entered into agreements with TTSL and Tata Tele Services (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice asking the assessee to explain regarding the allowance of the expenditure u/s 36 of the Act when the expenditure is only a provision. The assessee in its reply submitted that the provision was made under the matching concept principle of accountancy and the same has been accrued during the financial year under consideration. It was submitted that in the absence of invoices from the vendors( supplier of services/products) the company was not aware of the actual quantum of expenditure and therefore it quantifies the expenditure based upon estimation for the purpose of providing in the books of accounts. The assessee further stated that the provision amount has been debited to the relevant expenditure head and the corresponding entry has been pass by crediting the provision account which bears the nomenclature "content charges payable account". 4. The Assessing Officer however was not convinced with the submissions of the assessee. The Assessing Officer observed that the assessee in one breath is submitting that the access charges payable was a provision and on the same breath claimed that the same should be allowed as deduction. Even the provisions made was also no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee contending that as per the amended provision the amount of provision made as at 31-3-2066 is allowable as deduction to the extent of payment before the due date of filing of the return. It was contended by the assessee that out of the total amount accrued as on 31-3-2006, an amount of Rs.6 crore was paid before due date of filing of the return. Referring to the "content vendor expenses payable account" the assessee contended that the entire amount provided for in the month of February had been reversed and a fresh provision was made for March,. 2006. He claimed that the entire provision made in the month of March, 2006 is allowable to the extent of payment before the due date of return of income for the relevant assessment year. The CIT (A) also rejected such contention of the assessee by observing that the assessee is in regular practice of reversing the provisions made in a month on the 1 st day of next month. It was further heldby the CIT (A) that when the assessee was asked to demonstrate as to how the amount of Rs.8,45,44,976/- provided in the month of March included the expenses payable for the month of March and not to any earlier month, the assessee could not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned AR citing the decision of Income-tax Appellate Tribunal, Delhi Bench in case of Frederic R. Harris (I)(P) Ltd. V/s. DCIT (81 ITD 227) submitted that if a particular expenditure has been incurred, the entries are made in the books of account irrespective of the payment, the assessee is entitled to claim deduction on that account. The learned AR submitted that the Notification No. 9949, dt. 25/01/1996 states that provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information, therefore, the assessee is entitled to the deduction if the liability is a known liability. The learned AR referring to the agreements entered with TTSL/TTML and with content service providers submitted that the revenue share between TTSL/TTML and the assessee are fixed, similarly access charges payable to the content service providers are also fixed under the agreement. The learned AR submitted that on the basis of these agreements the assessee has worked out the provision made for access charges payable. 9. The learned Departmental Representative strongly supporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the deductees are not identifiable and in absence of details relating to correct amount to be paid and correct amount of TDS, adhoc deduction of tax on estimated provision was not possible. The assessee cannot be allowed to take such contradictory stand. It is also a fact that the assessee has not been able to substantiate as to how the said provision was only in respect of the contents/value added services for which revenue was recognized for relevant year as has been observed by the CIT(A). So far as decisions relied upon by the assessee are concerned, they are found to be distinguishable on facts and do not apply to the case of the assessee. In case of Bharat Earth Movers ((supra), the Hon'ble Supreme Court found that the provision for leave encashment is a liability in praesenti though it will be discharged at a future date and the provision was for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, subject to the ceiling on accumulation s applicable on the relevant date. Thus, the liability on account of leave encashment as well as the identity of the persons to whom it is payable is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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