TMI Blog2018 (11) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- nothing is available on record to show how it was computed or the basis on which assessee claimed itself to be liable to pay such compensation. In these circumstances, we are of the opinion that ld. Commissioner of Income Tax (Appeals) fell in error in allowing the claim of the assessee to the extent of ₹ 1,25,00,000/-. - decided in favour of revenue - I.T.A. No.3440/CHNY/2016 - - - Dated:- 3-9-2018 - Shri Abraham P. George, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Mr. Clement Ramesh Kumar, Addl. CIT. For the Respondent : Shri.G. Baskar, Advocate ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER In this appeal filed by the Revenue, it is aggrieved that the ld. Commissioner of Income Tax (A)-6, Chennai, through his order dated 24.10.2016 deleted ₹ 1,25,00,000/- out of a total disallowance of ₹ 1,33,41,882/- made by the ld. Assessing Officer on what has been termed as provision for contract loss. 2. Facts apropos are that assessee a company engaged in real estate and property development had filed its return of income for the impugned assessment year disclosing income of ₹ 8,54,06,673 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Balance 28,40,000 1,60,61,000 1,32,21,000 ----- 1,60,61,000 1,60,61,000 As per the assessee, M/s. Garabandal Constructions Pvt. Ltd. had filed a petition u/s.11(6) of the Arbitration and Conciliation Act, 1996 before the Hon ble Madras High Court on 19.03.2013. Contention of the assessee was that the sole arbitrator through his order dated 25.01.2016 approved a joint settlement memo, between assessee and M/s. Garabandal Constructions Pvt. Ltd, whereby assessee agreed to pay a sum of ₹ 75,00,000/- in final settlement. Further, as per the assessee a sum of ₹ 55,00,000/- out of the total provision was rental compensation payable to the customers on account of delayed delivery of flats. 4. Ld. Commissioner of Income Tax (Appeals) after verification of the details filed by the assessee arrived at the breakup of provision made by the assessee as under:- Sl.No Party Amount (₹) 1 Contractor Builder 70,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which were never made available to the ld. Assessing Officer. 6. Per contra, ld. Authorised Representative strongly supporting the order of ld. Commissioner of Income Tax (Appeals) submitted that existence of arbitration proceedings, which were initiated by M/s. Garabandal Constructions Pvt. Ltd could never be disputed. Relying on the application for appointing an Arbitrator filed by M/s. Garabandal Constructions Pvt. Ltd before Hon ble Jurisdictional High Court, placed at paper book pages 28 to 36, ld. Authorised Representative submitted that final bills submitted by M/s. Garabandal Constructions Pvt. Ltd on 07.12.2011, which fell during the relevant previous year, was for a value of ₹ 7,44,54,318/-. According to him, the contract value was only ₹ 6,20,00,000/-. Thus, as per the ld. Authorised Representative, M/s. Garabandal Constructions Pvt. Ltd had a claim against the assessee for a sum of ₹ 1,24,54,318/- which was in excess of contracted amount. As per the ld. Authorised Representative, para 9 of the said application clearly indicated a sum of ₹ 1,40,92,288/- as due from the assessee to M/s. Garabandal Constructions Pvt. Ltd. Thus, according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r page indicate that a sum of ₹ 85,00,000/- was provision in relation to the project of SITARA and the sum of ₹ 55,00,000/- was provision for rental compensation on the very same project. The question before us is whether these amounts were crystallized liability as on 31.03.2012. Application for appointment of Arbitrator was filed by M/s. Garabandal Constructions Pvt. Ltd on 1st day of July, 2013. No doubt in the said application, it is stated that M/s. Garabandal Constructions Pvt. Ltd had submitted its final bills valued at ₹ 7,44,54,318/- as on 07.12.2011 against which they claimed receipt of ₹ 6,38,26,100/- only. Relevant paras of the application is reproduced hereunder:- 9. The petition submits that the final bills were submitted for the value of the ₹ 7,44,54,318.60/- on 07.12.2011 and the final bill for the external work for the value of ₹ 34,36,003.42/- submitted on 4th June 2012. Thus the total bill value is ₹ 7,78,90,322.02/- whereas the petitioner have received so far only ₹ 6,38,26,100/-. Thus the balance to be payable to the respondent is ₹ 1,40,92,288.02/-. In the meeting held on 21at: December 2012 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raesenti solvendum in futuro relied on by the ld. Authorised Representative, can apply only if there is an ascertained liability for which amount is to be crystallized and paid later, and not to a situation where there is only a claim, with no acknowledged liability. In our opinion, ld. Commissioner of Income Tax (Appeals) fell in error in taking cognizance of the arbitration proceedings initiated well after the end of the relevant previous year, and coming to a conclusion that there was a crystallized liability of ₹ 70,00,000/- due from the assessee to M/s. Garabandal Constructions Pvt. Ltd as at the end of the relevant previous year. As for the rental compensation of ₹ 55,00,000/- nothing is available on record to show how it was computed or the basis on which assessee claimed itself to be liable to pay such compensation. In these circumstances, we are of the opinion that ld. Commissioner of Income Tax (Appeals) fell in error in allowing the claim of the assessee to the extent of ₹ 1,25,00,000/-. Order of the ld. Commissioner of Income Tax (Appeals) is set aside. 8. In the result, the appeal of the Revenue stands allowed. Order pronounced on Monday, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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