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M/s. First Advantage P. Ltd. Versus PR CIT 12, Mumbai

Revision u/s 263 - allowability of provision for expenses - Held that:- As found from record that assessee as an accounting practice, closes its books of accounts on monthly basis and, accordingly, inter-alia provision for the above-referred expenses i.e., rent, electricity and maintenance is generally made at the end of each month. On the first day of the next month, the provision entry is reversed and actual payment is recorded. However, during the assessment proceedings, instead of the year e .....

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in respect of rent, utilities and office maintenance, the total provision outstanding as at the year-end is INR 2,85,917/- and not ₹ 1,23,09,109/- taken by CIT in his order u/s.263. We accordingly modify the order of CIT and direct the AO to verify the said provision of ₹ 2,85,917/- as been claimed to be subsequently paid / adjusted in the subsequent year i.e. A.Y. 2013-14. If the AO found that a sum of ₹ 2,85,917/- had not actually paid in the next year, he may add the same to .....

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directing the Assessing Officer to modify the assessment order by adding an amount of ₹ 1,23,09,109/- to the total income. 2) The learned Principal Commissioner of Income Tax erred in holding that a sum of ₹ 26,08,116/- is merely a provision for rent and, therefore, it is disallowable. 3) The learned Principal Commissioner of Income Tax erred in holding that a sum of ₹ 75,46,339/- is merely a provision for electricity expenses and no liability has accrued during the previous ye .....

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ght to have considered that the provision for above expenses which is outstanding as on 31 SI March, 2012 was ₹ 2,85,917/-, the breakup of which is as under: Account Head Provision for Expenses (Rs.) Rent 2,62,945/- Utilities 1 Electricity Charges NIL Office Maintenance Charges 22,972/- Total 2,85,917/- 7) The learned Principal Commissioner of Income Tax erred in holding that the amendment to section 263 by Finance Act, 2015 which amendment is effective from 1st June, 2015 empowers him to .....

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st returned income of ₹ 12,19,90,540/- after disallowing ₹ 1,22,01,914/- u/s. 40(a)(i) of the I T Act. Thereafter CIT invoked his powers u/s.263. 3. In the show-cause notice issued u/s.263 the CIT observed that from the Profit & Loss Account placed on record for the A. Y 2012-13, interest on fixed deposit has been credited to the extent of ₹ 1,03,87,939/- whereas interest accrued and not due at ₹ 28,80,806/- does not find place on the credit side of the P & L A/c. .....

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75,46,369/- and ₹ 21,54,654/- have been debited under the head provisions for rent, provision for electricity charges and provision for maintenance. Since, the above amounts represent only provisions they cannot be allowed a deduction as liability for the same cannot be said to have accrued. 5. With regard to the computation of income available on record, CIT observed that the licensee fee for the A.Y 2012-13 has been claimed to the extent of ₹ 1,22,01,914/- being 100% from the asse .....

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ity charges and maintenance charges. 7. It was argued by learned AR that CIT has erred in directing the AO for making addition of ₹ 1,23,09,190/- to the total income of assessee on the allegation of provision made on account of rent, electricity and maintenance charges. As per learned AR the provision for above expenses which is outstanding as on 31st March, 2012 was ₹ 2,85,917/-, the breakup of which is as under: Account Head Provision for Expenses (Rs.) Rent 2,62,945/- Utilities 1 .....

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in outstanding rent was only ₹ 2,62,945/- as against outstanding rent considered by CIT at ₹ 26,08,116/-. As per the list of accrued expenses, there was no provision for electricity expenses and maintenance expenses. 9. In view of the above, it was vehemently argued by learned AR that CIT has wrongly taken provision for expenses which were not at all claimed in the P & L Account so as to reduce the profit. He submitted that CIT has not applied his mind at all to the statements fi .....

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tradiction in the information filed by assessee before CIT with respect to the provisions so made on account of rent, electricity charges and maintenance charges. She invited our attention to the reply filed by assessee before CIT vide its letter dated 11/08/2015 and 13/08/2015. 12. We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that assessee as an accounting practice, closes its books of accounts on monthly basis and, ac .....

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