TMI Blog2016 (6) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... in complete agreement with the view taken by the Tribunal. - Decided against assessee - TAX APPEAL NO. 470 of 2000 With TAX APPEAL NO. 471 of 2000 With TAX APPEAL NO. 472 of 2000 - - - Dated:- 7-6-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR HM TALATI, ADVOCATE, MR TEJ SHAH, ADVOCATE FOR THE OPPONENT : MR KM PARIKH, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) All these appeals arise out of a common order dated 12.7.2000 passed by the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) whereby the Tribunal has dismissed the appeals of the present appellant-assessee. 2. The facts of the present case are that the assessee is a contractor dealing with the contract with the railway for supply of concrete sleepers for which the assessee has entered into a contract vide letter dated 15.11.1979 where the following terms of contract were made between the parties: 12. Escalation on prices of raw material The contract rate per monoblock concrete sleeper in terms of clause 2 of the contract is based on the following prices of principal raw material viz., cement HTS. Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Income-tax reported in (2000) 245 ITR 428 wherein it was held as follows: The law is settled: if a business liability has definitely arisen in the accounting year; the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. Applying the principles laid down in Metal Box Co. of India Ltd. v. Their Workmen (1969) 73 ITR 53 (SC) and Calcutta Co. Ltd. v. CIT (1959) 37 ITR 1 (SC), it must be held that the provision made by the assessee-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 accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent, the fulfilment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; (iv) A trader computing his taxable profits for a particular year may properly deduct not only the payment actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated. Applying the aforesaid test, it was apparent on the facts of the instant case that the assessee as a trader while computing its taxable profits for the year under consideration was properly required to deduct not only the payments actually made for use of premises and facilities but also the prsent value of any payments in respect of such use in that year; though payable in a subsequent year in case such liability could be satisfactorily estimated. As already seen, the assessee had given detailed working of the estimated liability for the year under consideration and there was no dispute as regards the same. Furthermore, merely because subsequently there might be a reduction or even extinction of liability, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add any amount in the taxable income of the assessee which is the resultant effect of the changed method of valuation. There was no reason to deviate from the view which had been expressed by several High Courts including the Gujarat High Court. As stated hereinabove, it was not in dispute that the change was bona fide. The new method which was adopted, had been continuously followed in the subsequent years. The assessee had changed the method so as to see that the method adopted by the assessee was also as per the method adopted by other business units in the industry. It were also pertinent to note that in the subsequent years, the revenue had not objected to the change made by the assessee in the method of stock valuation. 9. The learned counsel for the appellant has further relied on the decision in the case of Commissioner of Income-tax v. Carborandum Universal Ltd., reported in (1984) 149 ITR 759 (Madras) where it was held as under: The AAC and the Tribunal had both found that the change in the method of valuation of stock from total cost to direct cost was bona fide and intended to be followed from year to year and that it was not restricted for any particular peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 19. In the instant case, as noticed above, the assessee did not want spread over of this expenditure over a period of five years as in the return filed by it, it had claimed the entire interest paid upfront as deductible expenditure in the same year. In such a situation, when this course of action was permissible in law to the assessee as it was in consonance with the provisions of the Act which permit the assessee to claim the expenditure in the year in which it was incurred, merely because a different treatment was given in the books of account cannot be a factor which would deprive the assessee from claiming the entire expenditure as a deduction. It has been held repeatedly by this Court that entries in the books of account are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act [see: Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta (1972) 3 SCC 252; Tuticorin Alkali Chemicals Fertilizers Ltd., Madras v. Commissioner of Incometax, Madras (1997) 6 SCC 117; Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax, Calcutta (1978) 4 SCC 358; and United Commercial Bank, Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1987-88. The order of Commissioner of Income-tax (Appeals) is not with him and the present contention he has relied on for the first time before the Tribunal. 14. Learned counsel Mr. Parikh for the respondent has taken us through paragraph No. 9 at page 20 of the order of the Tribunal and contended that the assessee has changed the method of accounting and while considering the case of the appellant in paragraph No. 7 at page 18, the Tribunal has rightly observed as under: The learned counsel further submitted that even though the assessee had been earlier filing the returns without showing the escalation claims, it had revised the return for A.Ys. 1984-85 and the escalation claims have been included in the years to which the same pertained and this change of method of accounting would be accepted by the A.O. It is contended that this contention was raised for the first time before the Tribunal which cannot be accepted. 15. We have heard learned advocate Mr. Shah for the appellant and learned counsel Mr. Parikh for the respondent. Before proceeding further with the judgement, we accept the principle which has been sought by learned advocate Mr. Shah for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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