TMI Blog2015 (4) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, this was an allowable deduction. In our view, the assessee has to ensure an expenditure and if not paid on or before close of the financial year, it certainly deserves allowance. Admittedly, the system of accounting, followed by the assessee, is mercantile and any expenditure, not paid by the close of the year, is as it is allowable and in-fact, even in a mercantile system of accounting, while income is also to be included, which has accrued to the assessee, so also the expenditure is to be allowed in similar fashion. In the light of the opinion of the Hon'ble Apex Court in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME Court]and Rotork Controls India (P.) Ltd. [2009 (5) TMI 16 - SUPREME COURT OF INDIA], and Calcutta Co. Ltd. [[1959 (5) TMI 3 - SUPREME Court]] in our view, the ITAT was correct and justified in allowing the amount of ₹ 87,224/- which was an ascertained liability on account of the allowable deduction. - Decided against the revenue. - DB Income Tax Reference No. 16/1995 - - - Dated:- 13-1-2015 - The Acting Chief Justice Mr. Sunil Ambwani And Mr. Justice J. K. Ranka,JJ. For the Petitioner : Mr. Anuroop Singhi with Mr. OP Pare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30/07/1992 and despite of 11 years having been passed, since the date of the order of the ITAT in the case of Instrumentation Limited, the revenue was unable to bring on record whether reference was filed in the case of Instrumentation Limited or otherwise and thus dismissed the appeal of the revenue. 5. It is contended by learned counsel for the revenue that the ITAT grossly erred in placing reliance on the judgment of the ITAT in the case of Instrumentation Limited. He contended that the matter of Instrumentation Limited had come up before this Court and on 08/08/1986 this Court in the case of CIT Vs. Instrumentation Limited (DB Income Tax Reference Application No. 170/1982) directed the ITAT to state the case and refer the question on the same issue for decision of this Court within three months. He further contended that subsequently this Court in the case of CIT Vs. Instrumentation Limited vide order dt. 13/03/2008 in DB Income Tax Reference No.30/1995 and DB Income Tax Reference No.87/1995, observed that the respondent namely; Instrumentation Limited being a Government Company and in the light of the judgment rendered by the Hon'ble Supreme Court in the case of Oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted fact that the work had been completed at the Dam namely; Right Bank Dam Division, Hidkal Dam and the provision was made only for supplies. Though it may be that the assessee made a provision at the rate of 6 % of the supplies for possible loss due to deduction made by the Government for not keeping the supplies to the satisfaction of the department which, in-fact, had been deducted by the Government @ 10 %. However, to be on the safer side, the assessee made a provision @ 6 % only. It is an admitted fact that the provision, if any made, was to make over the deficiencies, in respect of the work done as per direction of Government by which 10% deduction was made. Admittedly, the entire amount was included by the assessee in the total receipts and once entire receipt has been shown, the expenditure ought to have been allowed and therefore, this was an allowable deduction. In our view, the assessee has to ensure an expenditure and if not paid on or before close of the financial year, it certainly deserves allowance. Admittedly, the system of accounting, followed by the assessee, is mercantile and any expenditure, not paid by the close of the year, is as it is allowable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. Applying the above-said settled principles to the facts of the case at hand, we are satisfied that provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. 10. The Hon'ble Apex Court in the case of Rotork Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. 11. We may also observe that the judgment rendered by this Court in the case of Rajasthan State Mines Minerals Ltd. (supra), relied upon by counsel for the revenue, is distinguishable on facts. Both the CIT(A) as well as ITAT have come to a definite finding of fact that the liability existed and was ascertained, therefore, the claim was allowable. 12. We may also observe that this Court in the judgment of Rajasthan State Mines and Mineral (supra) with reference to whether a claim is allowable or not, has observed in Para 11 that even the actual liability which is not praesenti is also an expenditure. The only thing, which is required is that it must be the actual liability and not contingent or unascertained. 13. The Hon'ble Apex Court, in the case of Metal Box Company of India Ltd. Vs. Their Workman (supra), had also an occasion to consider as to what is a provision or a reserve and after referring to the settled principle, observed as under:- The next question is whether the amount so provided is a provision or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
