TMI Blog2017 (5) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... actuarial report, which is not shown by the Revenue to be unacceptable on the ground that it is not based on known accounting or financial principles, the mere fact that the actual pay out in a particular AY may be far less than the provision cannot provide a justification to deny the deduction. The Court concurs with the view of the CIT (A) and ITAT that the provision does not attract Section 43 B of the Act Accrual of income - Addition of notional accrued interest - Held that:- No part of the advance given by the Assessee to M/s. Karsan has been able to be recovered by it. As pointed out by learned counsel for the Assessee, there was a case registered with the Central Bureau of Investigation (CBI) in that regard and any prospect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the disallowance of demurrage and wharfage charges, which according to the Revenue was in the nature of penalty and, therefore, not amenable to deduction under Section 37(1) of the Income Tax Act, 1961? 4. The said question already stands answered in favour of the Assessee and against the Revenue by the judgment of this Court in Mahalaxmi Sugar Mills Company v. Commissioner Of Income Tax,(1986) 157 ITR 683 (Delhi) and of the Allahabad High Court in Nanhoomal Jyoti Prasad v. Commissioner Of Income Tax, (1980) 123 ITR 269 (All). 5. However, learned counsel for the Revenue seeks to rely on the judgment of the Rajasthan High Court in Tata Iron Steel Co. Ltd. v. Union of India (decision dated 28th January 2014 in SB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AYs in question were far less than the provision made for that purpose, the actuarial report cannot be said to have been prepared on a scientific basis and was therefore not binding on the AO. 9. The Court is unable to accept this submission. The making of a provision to meet a contingent liability need not be in order to meet such liability entirely in the year of its creation. The provision having been made on the basis of an actuarial report, which is not shown by the Revenue to be unacceptable on the ground that it is not based on known accounting or financial principles, the mere fact that the actual pay out in a particular AY may be far less than the provision cannot provide a justification to deny the deduction. The Court concurs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome' can be said to have accrued to it. 12. The ITAT has in the impugned order held as under: There is no dispute that the ICA has awarded interest to the assessee @ 5% p.a. on the advance made to M/ s. Karsan. It is also not disputed that the assessee could not make recovery against the advance (principal amount) of ₹ 130.69 crores, an amount of ₹ 1.05 crores only could be recovered leaving balance advance of ₹ 129. 64 crores which could not be recovered till date. The notional interest awarded by the International Court of Arbitration, which has now attained finality is a hypothetical income which cannot be subjected to tax. Merely because the said amount has been awarded by way of an order, does not mean tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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