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Navkar International Pvt. Ltd. Versus D.C.I.T. C-II, Ludhiana

2011 (6) TMI 929 - ITAT CHANDIGARH

ITA No. 273/Chandi/2011 - Dated:- 24-6-2011 - Sushma Chowla (Judicial Member) And D. K. Srivastava (Accountant Member) For the Appellant : Anup Kumar Jain For the Respondent :. Jaishree Sharma ORDER D. K. Srivastava (Accountant Member) The appeal filed by the assessee is directed against the order passed by the ld. CIT(A) on 1.2.11, on the following ground: That the ld. CIT(A) has erred in law in confirming the addition of ₹ 19,68,620/- made by the AO on account of disallowance of loss cau .....

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fire ₹ 1,34,15,820/- Unaffected stock ₹ 21,82,264/- Stock affected ₹ 1,12,33,556/- Claim filed with Insurance Co. ₹ 112.33 lacs Less claim of loss expected to be received ₹ 92.65 lacs Short claim to be received ₹ 19.68 lacs Total loss provided in the books ₹ 19.68 lacs 3. The AO, however, did not allow the aforesaid loss amounting to ₹ 19.68 lacs claimed by thee assessee as the claim of the assessee was not settled by the Insurance Company in the .....

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peal on the account that the estimated loss based on the surveyor s report cannot be allowed. Considering the totality of the facts and circumstances of the case, I am also of the view that the estimated loss claimed by the appellant in the year under consideration is not allowable as there is no provision of law under which such provisional claim is allowable. Further, the claim was settled after 31.3.2006. Keeping in view the above factual position of the case, the disallowance made by the AO .....

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in the year under appeal. His second submission was that mere difficulty in estimation of loss or settlement of claim by the Insurance company in subsequent years, would not convert accrued liability in the year under appeal as contingent liability or conditional liability. His third submission was that the case of the assessee was squarely covered by the principles laid down in Calcutta Company Ltd v. CIT, 37 ITR 1 (SC). 6. In reply the ld. DR supported the order passed by the AO and the ld. C .....

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s of accounting, the date on which the liability accrues is the date to be considered for the purpose of entering that liability in the accounts. That is so even though the liability is capable of estimate only. The difficulty in making the estimate does not convert the accrued liability into a conditional or contingent one, because it is always open to the AO to arrive at a proper estimate thereof having regard to all the circumstances of the case. 8. In the present case, the assessee has suffe .....

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