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TMI Blog2021 (10) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) ought to have directed the Assessing Officer to exclude the interest expenditure while computing the disallowance of deduction u/s.14A of the Income-Tax Act. 2.1 The order of the Commissioner of Income Tax (Appeals) is wrong, illegal and opposed to facts in so far as it confirms the disallowance of provision of estimated loss of Rs. 1,14,45,495 on contracts. 2.2 The Commissioner of Income Tax (Appeals) erred in disposing of the aforesaid ground in a summary manner without adverting to the facts of the case and the submissions made before him in the proper prospective. 2.3 The Commissioner of Income Tax (Appeals) erred in stating that the Appellant had not demonstrated how it considered the provision of estimated loss on contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim. Vide letter dated 24.02.2015, the assessee stated as follows: "Para 21 of AS-7 stipulates that when the outcome of a construction contact can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date. An expected loss on the construction contract should be recognized as an expense immediately in accordance with paragraph 35 of AS-7. In view of the above, wherever the company expects that it is going to incur a loss on a contract, it ascertains the expected loss and provides for the same in the books of account. The company makes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not able been able to demonstrate in this appeal with reference to the facts despite the specific opportunity given, as to how it considered the provision of estimated loss on contract to be an ascertained liability. Instead, it has loaded its submissions with a plethora of judgements, which can only be helping the cause of the assessee if the assessee is able to demonstrate its applicability to the facts and circumstances of its own case. With the above observations, the ld. CIT(A) confirmed the order of the Assessing Officer. 5. On being aggrieved, the assessee is in appeal before the Tribunal. Before us, the ld. Counsel for the assessee has submitted that the loss estimated by the assessee is an ascertained liability and submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses respectively by reference to the stage of completion of the contract activity at the reporting date and an expected loss on the construction contract should be recognized as an expense immediately in accordance with paragraph 35 of AS-7. The Assessing Officer has considered the explanation of the assessee and observed that the said loss on an estimate, which is bound to vary due to variation in input costs. Accounting Standards are binding on the Company in so far as the preparation of books are concerned, but, are not binding for Income Tax purposes. Further, the Assessing Officer, by following the decision in the case of EDAC Engineering Limited [2013] 30 Taxmann.com 355 (Chennai - Trib.), disallowed the same and the same was conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order, the Assessing Officer has noted that the assessee has created provision for various expenses, such as, administrative expenses provision of Rs..8,00,000/-, consultancy expenses provision of Rs..30,99,292/- and provision for Zambia branch expenses of Rs..9,54,127/-. The assessee has not given any explanation before the Assessing Officer. Therefore, the Assessing Officer disallowed the entire provisions for various expenditures. Before the ld. CIT(A), the assessee has not been able to establish that the liabilities are ascertained liabilities and not only that the basis for making such provisions for expenses were not explained. Therefore, the ld. CIT(A) confirmed the order of the Assessing Officer. 10. Before us, the ld. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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