TMI Blog2016 (8) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order dated 14-5-2010 of the Queen s Bench Division of the High Court of Justice, UK. Based on the above Court Order, the assessee has provided further a sum of ₹ 6,00,00,000/- debited to the profit loss account as an exception item. Once as per the decision of the Queen s Bench Division of the High Court of Justice, UK the matter has been finally settled and in this respect AR pointed out that the entire amount has already been paid by the assessee to the Lessor and in this respect a compromise was entered into between the parties before the Indian Court and the entire decree passed by the UK Court was satisfied. It is important to mention here that it was the decree of the Queen s Bench Division of the High Court of Justice, UK which was fully satisfied from which it can be gathered that the liability of the assessee was crystallized in view of the order dated 14-05-2010 of the High Court of Justice, UK which was ultimately satisfied by the assessee by making payment to the lessor. Therefore, once the liability for making payment was crystallized by the High Court Order, then question of contingent liability does not arise. Therefore, both the AO and the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) has totally misconceived it to be contingent liability considering t he fact that the case filed by the U. K. Company for recovery of settled liability in Delhi High Court, is pending the Appellant company is contesting the same on recovery issue. 2. The assessee vide its letter dated 25th April, 2016 has requested for admission of the following additional ground by stating that the same is purely a legal ground and no new evidence or material would be required for adjudication of the same:- The learned lower authority has grossly erred in making addition in the book profit on account of claim for earlier termination of leases at ₹ 6,00,00,000/- on account of Provision for Gratuity at ₹ 13,72,96,680/- and on account of provision for Leave encashment at ₹ 4,39,51,771/- even though said disallowances are not covered as per Explanation (1) of section 115JB. Due to inadvertence the aforesaid ground has remained to be included in the memorandum of appeal. 3. The brief facts of the case are that the assessee in the present case is engaged in the business of courier (express) services, surface (cargo) express and tours travels ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest for admission of the additional ground be dismissed. 5. We have both the parties and on perusal of the records we have noted that the ground now being raised as additional ground is purely of legal nature and no new facts or evidences are required for adjudicating the said ground. Therefore, keeping in view the principles laid down in the case of National Thermal Power Corporation Vs CIT reported in (1998) 229 ITR 383 (SC), wherein it has been held that the power of the Tribunal to entertain the additional ground is not in any way restricted in view of the decision of the Hon ble Supreme Court and it has jurisdiction to examine the question of law which arises from the facts available before the lower authorities and which has a bearing on the liability of the assessee; even if such question has not been raised before the lower authorities. Therefore, considering the aforementioned judgment as well as the facts of the present case, we are of the considered view that the additional ground now being raised by the assessee is of legal nature and based on assessment record. Hence, we admit the same for adjudication. 6. We have heard the learned the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant in the High Court order. Under the circumstances, I find that the observation of the Assessing Officer is perfectly in order as in the case if the decree is stayed then the liability cannot be recovered from the appellant. Moreover, the appellant has not brought anything in record to show as to whether it has further challenged the decision passed by the Hon ble High Court of Justice of U. K. and the time lapse for which there still will be time to file the appeal against the order. Since the element of facts is not discussed by the appellant, it cannot say with certainty that the liability will crystalise. It is also a matter of fact that the appellant in the past has not claimed damages as being crystallized despite showing the same in its profit and loss account. Further, the basic question arises when should we recognize expense/revenue in our books of account . The accrual concept of accountancy states that expense is accounted for in the books of accounts when there is liability to pay. Following the accrual concept of accounting, in the instant case, the assessee s liability to pay does not arise in this case and it is basically a contingent liability whos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to the Lessor and in this respect a compromise was entered into between the parties before the Indian Court and the entire decree passed by the UK Court was satisfied. It is important to mention here that it was the decree of the Queen s Bench Division of the High Court of Justice, UK which was fully satisfied from which it can be gathered that the liability of the assessee was crystallized in view of the order dated 14-05-2010 of the High Court of Justice, UK which was ultimately satisfied by the assessee by making payment to the lessor. Therefore, once the liability for making payment was crystallized by the High Court Order, then question of contingent liability does not arise. Therefore, both the AO and the learned CIT (A) was wrong in treating the liability as contingent liability of the assessee. Our this stand is fortified by the following decisions:- (i) R. C. Gupta Vs CIT, Delhi-VIII, 298 ITR 161 (2008) wherein the Hon ble Delhi High Court in Para 9 of the order has held as under:- The liability in the instant case was capable on being estimated with reasonable certainty when a recovery suit was filed by Hindustan Steel Limited against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ₹ 20,50,00,000/- by treating the same as crystallized in the year under consideration. 10. By the additional ground, the assessee has challenged the order of the Revenue authorities by submitting that the Revenue authorities erred in making addition in the book profit on account of claim (i) for earlier termination of lease for ₹ 6,00,00,000/-, (ii) Provisions for Gratuity for ₹ 13,72,96,680/- and (iii) provision for Leave Encashment for ₹ 4,39,51,771/-. 11. In this regard we have heard the learned Counsels for both the parties and also perused the orders of the authorities below. Out of the above three heads before us by way of additional grounds in respect of claim for earlier termination of lease, provisions for Gratuity and Leave Encashment, we are of the considered view that we have already given our findings while adjudicating the main ground of appeal of the assessee herein above. Therefore, our findings on the main ground are applicable on the additional ground qua earlier termination of lease for ₹ 6.0 Crores and therefore in view of the said decision the addition is deleted. So far as the addition on account of provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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