TMI Blog2019 (12) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... has been offered to income, the assessee will get the benefit of writing off of the entire amount of debt as is claimed as having becoming bad. Therefore, the only issue which needs to be looked into is as to whether a part of the debt written off was offered to income in this year or earlier years or not. Therefore, it will be in the fitness of things if this aspect is re-examined by the AO. Accordingly, we restore this issue to the file of the AO with a direction to verify and examine as to whether the assessee has offered to tax a part of the debt being claimed as bad and written off as income in earlier assessment years or in this year in form of brokerage or interest or not. If it has so been done, the AO shall allow the amount claimed as bad debt and written off as deduction. The assessee will be given due opportunity by the AO to present its case. Disallowance made u/s 14A - assessee made suo moto disallowance - HELD THAT:- We agree with the proposition of the Ld. AR that disallowance u/s 14A cannot in any case exceed the exempt dividend income. We, therefore, set aside the issue and remit the issue back to the file of the AO to work out the disallowance by calculating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the invoices filed by the assessee in this regard also does not throw any light on the issue. To this extent, we are in agreement with the lower authorities that the assessee should establish that the services were rendered and utilised for the year under consideration. Therefore, we deem it fit to restore this issue to the file of the AO to verify as to whether the services for which these invoices have been raised and for which the assessee had made provision have been received and utilised during the year under consideration. If it is so found, then the AO shall allow the impugned provision as deduction in this year only. Disallowance of depreciation on UPS - Assessee had claimed depreciation on UPS @ 60% by treating the same as part of computer and peripherals whereas the AO restricted the depreciation to 15% by holding that UPS was plant and machinery and not a part of computer and peripherals - HELD THAT:- This issue is no longer res judicata and there are a catena of judgments wherein it has been held that UPS is an essential part of computer system as a computer cannot function in isolation without the basic accessory. The leading case in this point is the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act ₹ 1,19,79,827/- iv) Merchant banking licence transferred ₹ 6,80,61,425/- v) Disallowance of provision for expenses ₹ 79,99,216/- vi) Disallowance of depreciation on UPS ₹ 43,17,187/- vii) Disallowance of depreciation on other assets ₹ 3,47,98,353/- 2.1 Aggrieved, the assessee carried the matter before the Ld. First appellate authority challenging these additions and disallowances. However, the appeal of the assessee was dismissed and now the assessee is before the Tribunal challenging the order of the Ld. CIT (A) and has raised the following grounds of appeal:- 1. That the Commissioner of Income tax (Appeals) erred on facts and in law in sustaining the disallowance of ₹ 2,04,87,736 (as against correct amount of ₹ 1,69,63,702) made by the assessing officer on account of the difference between purchase price of Stock Appreciation Right ('SAR') and the sale price of such SAR at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the disallowance of ₹ 85,38,920 made by the assessing officer under section 36(l)(vii) of the Act on account of bad debts written off on the ground that corresponding debt was not accounted as income in the books of accounts earlier. 3.1 That the Commissioner of Income tax (Appeals) erred on facts and in law in not appreciating that necessary conditions stipulated under section 36(1)(vii) read with section 36(2) of the Act stood satisfied inasmuch as part of the above debts written off comprised of brokerage income and interest on delayed payment which were duly accounted as income by the appellant earlier ill the books of accounts. 3.2 Without prejudice, and in the alternative, the Commissioner of Income tax (Appeals) erred on facts and in law in not allowing deduction of the above bad debts as loss incidental to business under section 28 of the Act. 4. That the Commissioner of Income tax (Appeals) erred on facts and in law in upholding disallowance of ₹ 1,19,79,827 made by the assessing officer under section 14A of the Act. 4.1 That the Commissioner of Income tax (Appeals) erred on facts and in law in ignoring the disallowance suo-moto of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on facts and in law in not directing the assessing officer to allow deduction of the above sum of₹ 79,99,216 in the subsequent year. 7. That the Commissioner of Income tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in allowing depreciation on UPS @ 15% as against depreciation @ 60% claimed by the appellant. 8. That the Commissioner of Income tax (Appeals) erred on facts and in upholding disallowance of depreciation to the extent of ₹ 3,47,15,985 holding that the appellant failed to produce necessary documentary evidences in support of addition to fixed assets without appreciating that the appellant was not provided sufficient time to furnish the same. 3.0 The Ld. Authorised Representative (AR) submitted that the issue of stock appreciation rights is squarely covered in favour of the assesssee by the order of the Tribunal in assessee s own case and in the case of the other group companies. It was submitted that this issue was decided in favour of the assessee by the ITAT Delhi Bench in assessee s own case for Assessment Year (AY) 2010-11 in ITA No. 4644/Del/2015 vide order dated 9.10.2017. It was submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction u/s 36(i)(vii) of the Act is available only to the assessees engaged in money lending or banking businesses and cannot be extended to share brokers. It was further submitted that the Ld. CIT(A) had upheld the action of the AO by holding that no evidences had been produced to demonstrate that the entire debt, including the principal amount , had been taken in to consideration by the assessee while computing its income in the relevant or earlier assessment years. The Ld. AR argued that the Ld. CIT (A) as well as the AO had erred in making disallowance on this account for the simple reason that post amendment to section 36(1)(vii) of the Act w.e.f. 1.4.1989, deduction for bad debt has to be allowed in the year in which it has been written off in the books of accounts and, thus, since the same has been done, the same could not be disallowed. It was further submitted that another condition essential for writing off of bad debt is that the debt or part thereof should have been taken into account while computing the income of the assessee in the previous year or earlier years and this too had been done because the debt comprises of brokerage income and interest on delayed payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, the only new investment was of ₹ 25 crores in Religare Aegon Assets Management Company (P) Ltd. which had been made out of assessee s own funds. Referring to the balance sheet as on 31.3.2008, the Ld. AR submitted that as on that date the assessee had its own funds amounting to ₹ 171.77 crores which included share capital of ₹ 28.19 crores and reserves and surplus of 143.57 crores. The Ld. AR, referring to various judicial precedents, submitted that it was settled law that interest expenditure cannot be disallowed u/s 14A where the assessee had sufficient surplus funds and there was no finding by the AO of any direct nexus of borrowed funds with the investments. 3.4 In the alternate, it was submitted that it has also been consistently held by the various Hon ble Courts that for the purpose of computing interest disallowance, only net interest expenses are to be considered. It was submitted that in the present case, the assessee had incurred interest expenditure amounting to ₹ 73,64,48,184/- whereas the interest income earned during the year amounting to ₹ 1,55,40,60,732/- thereby earning net positive interest income and, thus, no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carry on the merchant banking business, the assessee sought transfer of the merchant banking registration to Religare Capital Markets Limited vide application dated 22.5.2007, which was subsequently approved by the SEBI vide approval dated 21.1.2008. It was submitted that, undisputedly, no consideration was received or accrued as a result of such transfer of registration by the assessee but the lower authorities made the impugned addition on the ground that since the licence was transferred to a sister concern without any consideration, the same was not at arm s length price. It was submitted that the AO had computed the market value of the registration certificate on the basis of the income earned by the assessee from merchant banking business during the year consideration and multiplying the same by 5. The Ld. AR submitted that this licence was a capital asset which had been transferred pursuant to an application made by the assessee to SEBI and no consideration was received for this transfer. It was submitted that since it was a capital asset, no notional income could have been brought to tax. It was submitted that in absence of any consideration having been received by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng disallowance of depreciation on UPS, it was submitted that the assessee has claimed depreciation at @ 60% by treating the UPS as part of computer and peripherals whereas the AO has part disallowed the claim of depreciation by holding that UPS was not a part of computer and peripherals but was plant and machinery eligible for depreciation @ 15%. The Ld. AR submitted that it is settled judicial precedent that UPS is an essential part of computer system and computer cannot function in isolation without basic computer accessories and peripherals like switches, routers, cables, etc. which form an integral part of the computer system. It was submitted that numerous courts have held that depreciation should be allowed @ 60% on UPS. A list of such cases was cited before us. 3.8 With respect to ground No. 8 pertaining to disallowance of depreciation on fixed assets amounting to ₹ 3,47,15,985/- it was submitted that during the year under consideration, the assessee had purchased fixed assets amounting to ₹ 47,43,70,325/- which was duly recorded in the audited financial statements and the tax audit report and during the course of scrutiny proceedings the assessee had submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of income held to be taxable. What was loss to the assessee was by way of short receipt of share premium account and not by way of any expenditure or incurring any liability for such an expenditure. By issuing shares at below market price, the same did not result into incurring any expenditure, rather it resulted into short receipt of share premium which the assessee was otherwise entitled to. Though the guidelines of the SEBI required the assessee to account for short receipt of share premium as employee's compensation expenses, for claiming such expenses as allowable, the assessee had to qualify that expenses were incurred and the same were wholly and exclusively for the purpose of business. By issuing shares at less than market price, the assessee could not be said to have incurred any expenditure, rather it amounted to short receipt of share premium. The receipt of share premium was not taxable and, hence, any short receipt of such premium would only be a notional loss and not actual loss for which no liability was incurred. The SEBI guidelines are relevant for the purpose of accounting but are not conclusive for the purpose of allowing the same as an expenditure. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares, which is an important ingredient of shares, remained with the trust. The Stock Exchange was duly notified about non-transferability of the shares during the lock-in period. The shares were stamped with the remark 'nontransferable' during the lock-in period. It was not open to the employees to hypothecate or pledge the said shares during the lock-in period. During the said period, the shares had no realisable value. Hence, there was no cash inflow to the employees on account of mere exercise of options. On the date when the options were exercised, it was not possible for the employees to foresee the future market value of the shares. Therefore, the benefit, if any, which arose on the date when the option stood exercised was only a notional benefit whose value was. unascertainable and, the department had erred in treating the amount being the difference in the market value of shares on the date of exercise of option and the total amount 'paid' by the employees consequent upon exercise of the said options as perquisite value. [Para I I] B. Ground no. 4, 4.1, 4.2 4.3 -In relation to these grounds Revenue wants to rely on the following decisions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er any such income has been earned during the financial-year or not. 4. The above position is further clarified by the usage of term 'includible' in the Heading to section 14A of the Act and also the Heading to Rule 80 of I.T.Rules, 1962 which indicates that it is not necessary that exempt income should necessarily be included in a particular year's income, for disallowance to be triggered. Also, section 14A of the Act does not use the word income of the year but income under the Act . This also indicates that for invoking disallowance under section 14A, it is not material that assessee should have earned such exempt income during the financial year under consideration. 5. The above position is further substantiated by the language used in Rule 8D(2(ii) 8D(2)(iii) of I.T. Rules . 6. Thus, in light of above, Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act hereby clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. B. The Hon'ble Supreme Court, in the judgment in the case of Maxop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for earning the same, that could be subject to tax or, as the case may be, exempt from tax. The latter Circular, which is in consonance with the Memorandum explaining the provisions of Finance Bill, 2001 (introducing section 14A) as well as the Notes to the Clauses presented along with the said Bill, has been noted with approval by the Hon'ble Supreme Court in CIT v. Walfort Share Stock Brokers (P.) Ltd. [2010] 192 Taxman 211/326 ITR 1 (SC), holding as under: The insertion of section 14A with retrospective effect is the serious attempt on the part of Parliament not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act against the taxable income (see Circular No. 14 of 2001 dated November 22, 2001). In other words, section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income. In many cases the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of section 14A, the expenditure incurred in respect of exempt income wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditure incurred to earn exempt income from being deducted from other income which is includible in the total income for the purpose of chargeability to tax. 'The views expressed in Walfort Share and Stock Brokers (P.) Ltd. (supra), in our considered opinion, yet again militate against the plea urged on behalf of the Assessee. (iv) The expenditure is incurred to produce or generate or in anticipation of, income, whether taxable or non-taxable. In fact, the classification as to tax status (i.e., taxable or nontaxable) has nothing to do with the income generating process; an income being, as a matter of fiscal incentive, being granted tax exempt status under the Act, for the time being. The fact of having incurred expenditure for earning income - tax-exempt (or non-exempt), which is largely a question of fact, would thus remain, and not undergo any change, irrespective of whether it has resulted in any income (whether tax-exempt or nonexempt). The principle is well-settled, representing a fundamental concept of taxation, i.e., the allowability (or otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded while computing total income, any expenditure incurred to earn that income is also not allowed as a deduction. It is well known that tax is leviable on the net income. Net income is arrived at after deducting the expenditure incurred in earning that income. Therefore, from the gross income, expenditure incurred to earn that income is allowed as a deduction and thereafter tax is levied on the net income. The purpose behind Section 14A of the Act, by not permitting deduction of the expenditure incurred in relation to income, which does not form part of total income, is to ensure that the assessee does not get double benefit. Once a particular income itself is not to be included in the total income and is exempted from tax, there is no reasonable basis for giving benefit of deduction of the expenditure incurred in earning such an income. For example, income in the form of dividend earned on shares held in a company is not taxable. If a person takes interest bearing loan from the Bank and invests that loan in shares/stocks, dividend earned therefrom is not taxable. Normally, interest paid on the loan would be expenditure incurred for earning dividend income. Such an interest would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nant purpose test and upheld the theory of apportionment, in following words: 33. The entire dispute is as to what interpretation is to be given to the words 'in relation to' in the given scenario, viz. where the dividend income on the shares is earned, though the dominant purpose for subscribing in those shares of the investee company was not to earn dividend. We have two scenarios in these sets of appeals. In one group of cases the main purpose for investing in shares was to gain control over the investee company. Other cases are those where the shares of investee company were held by the assessees as stock-intrade (i.e. as a business activity) and not as investment to earn dividends. In this context, it is to be examined as to whether the expenditure was incurred, in respective scenarios, in relation to the dividend income or not. 34. Having clarified the aforesaid position, the first and foremost issue that falls for consideration is as to whether the dominant purpose test, which is pressed into service by the assessees would apply while interpreting Section 14A of the Act or we have to go by the theory of apportionment. We are of the opinion that the domi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has not only inserted Section 14A by the Finance (Amendment) Act, 2001 but also made it retrospective, i.e., 1962 when the Income Tax Act itself came into force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to accept the opinion of Punjab Haryana High Court which went by dominant purpose theory. The aforesaid reasoning would be applicable in cases where shares are held as investment in the investee company, may be for the purpose of having controlling interest therein. On that reasoning, appeals of Maxopp Investment Limited as well as similar cases where shares were purchased by the assessees to have controlling interest in the investee companies have to fail and are, therefore, dismissed. 36. There is yet another aspect which still needs to be looked into. What happens when the shares are held as 'stock-intrade' and not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share Stock Brokers (P.) Ltd. case~ Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40. We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned Supra the grounds of appeal raised by the appellant for the addition u/s 14A deserves to be dismissed and the grounds of appeal raised by the Revenue deserves to be allowed. 5.0 We have heard the rival submissions and have also perused the material on record. We now take up these grounds one by one for adjudication. 5.1 Ground Nos. 1,1.1, 1.2, 2, 2.1, 2.2 challenge the action of the Ld. CIT (A) in upholding the disallowance of ₹ 2,04,87,736/- made by the AO on account of the difference between purchase price of stock appreciation rights and the sale price of such right at the time of exercise by the employees by holding to be the same a capital loss not allowable as business deduction. We note that this issue was considered on an earlier occasion by the ITAT Delhi Bench in assessee s own case for assessment year 2010-11 in ITA No. 4644/Del/2015 wherein, vide order dated 9.1.2017, the assessee s appeal was allowed on identical facts. The relevant observations/findings of the Tribunal in assessment year 2010-11 are contained in paragraph 10 of the said order and the same is reproduced herein for a ready reference. 10. ... carefully considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss account and had not been considered as income, as mandated u/s 36(1)(vii) of the Act, the same was not allowable. In this regard it is seen that section 36(1)(vii) read with section 36 (2) of the Act post the amendment w.e.f. 1.4.1989 states that deduction for bad debt is to be allowed for the year in which the same is written off in the books of accounts. In the present case it is undisputed that the debt has been written off. The objection of the AO and the Ld. CIT (A) is that the debt should have been taken in computation of income in this year or earlier assessment years but the same is not evidenced from records. Section 36(1)(vii) read with section 36(2) also provides that the debt or part thereof should be taken account while computing the income of the assessee for the relevant previous year or an earlier year if the writing off of a debt is to be treated as a valid deduction. It has been submitted by the Ld. AR that the debt consists of amount recoverable towards the principal value of securities, brokerage charges for purchase or sale of securities and interest, if any, for delay in making the payment for the amount due. It is assessee s contention that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO shall allow the amount claimed as bad debt and written off as deduction. The assessee will be given due opportunity by the AO to present its case. Accordingly, ground Nos. 3, 3.1, 3.2 stand allowed for statistical purposes. 5.3 Ground Nos. 4, 4.1, 4.2 challenge the disallowance made u/s 14A of the Act to the tune of ₹ 1,19,79,827/-. In the present year, the assessee had admittedly earned dividend income of ₹ 20,400/- from shares in Ranbaxy Laboratories Ltd. which had been claimed as exempt u/s 10(34) of the Act. However, the assessee had made a suo moto disallowance of ₹ 1,82,616/- u/s 14A of the Act but the AO, after applying the provisions of Rule 8D of the Income Tax Rules, 1962, computed the disallowance at ₹ 1,21,62,443/- by making disallowance on account of interest expenditure as well as 0.5% of average value of investments. The main thrust of the assessee s arguments before us is that the disallowance u/s 14A of the Act cannot exceed the exempt income. The Hon ble Delhi High Court had an occasion to consider the applicability of section 14A in the case of Pr. CIT vs. M/s. Caraf Builders Constructions Pvt. Ltd. in ITA No. 725 of 2018 (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of dividend was earned in the year, and it was observed: 14. On the issue whether the respondentassessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl.,ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014. In the said decision it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y calculating the average investment under Rule 8D (2)(ii)/(iii) by taking those only investments which have actually yielded the divided income during the relevant year and if the same exceeds the dividend income then restrict the same to the extent of exempt income only. Here, since the assessee has suo moto disallowed an amount of ₹ 1,82,616/- u/s 14A of the Act, the disallowance should not exceed this amount. AO shall give proper opportunity to the assessee before deciding the issue. Accordingly, ground No. 4, 4.1 and 4.2 stand allowed for statistical purposes. 5.5 Ground Nos. 5 and 5.1 challenge the action of the AO in making the addition of ₹ 6,80,61,425/- being notional addition made on account of transfer of merchant banking licence by the assessee to another of its group company Religare Capital Markets Limited. This addition has been made since the assessee had transferred the licence to its sister concern without consideration and the notional value was arrived at by taking the income earned by the assessee from Mercantile Banking business during the year and multiplying it by five for five years. It is assessee s contention that the licence was a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income 35 can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. 15. The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140: (1971) 82 ITR 835) in which this Court also considered the dictionary meaning of the word accrue and held that income can be said to accrue when it becomes due. It was then observed that: (SCC p. 454, para 11) 11.... the date of payment ... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately. 16. This Court fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Ld. CIT (A) on the issue and direct the AO to delete the addition. Thus ground Nos. 5, 5.1 stand allowed. 5.7 Ground Nos. 6, 6.1 and 6.2 challenge the upholding of disallowance of provision made for expenses to the tune of ₹ 79,99,216/- in respect of legal and professional charges, recruitment charges expenses and software license expenses. The lower authorities have disallowed these provisions on the ground that the liability for payment of expenses has not crystallised during the year. It is the assessee s contention that the assessee had received services for which these invoices were raised in the year under consideration and since it was only after the end of the financial year that the invoices were received that provision had to be made in the books of accounts. The Ld. AR has drawn our attention to the copies of the various invoices in this regard which are placed at paper book pages 524 to 540. Admittedly, the assessee is following mercantile system of accounting in which the income of expenditure has to be accounted for on accrual basis. There is no dispute about the method of accounting being followed. The only doubt, as been raised by the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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