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Facts
The assessee, involved in waste disposal, claimed expenditure for pit covering and closure expenses. The Assessing Officer disallowed a portion of these expenses, treating the unutilized provision as an addition. The assessee appealed to the CIT(A).
Held
The Tribunal held that provisions for post closure and pit covering expenses are allowable deductions, consistently following its own previous decisions and those of higher courts. The CIT(A) had allowed the claim based on these precedents.
Key Issues
Whether provisions for post closure and pit covering expenses are allowable as a deduction or should be disallowed as a contingent liability or unutilized amount.
Sections Cited
115J
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the revenue arises out of order dated 14/01/2025 passed by Ld.CIT(A)-54, Mumbai for assessment year 2020-21 on following grounds of appeal : “i. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowances made on account of Provision for Post Closure expenses and Provision for Pit A.Y. 2020
21. BEIL Infrastructure Limited Covering expenses which were merely provisions and the same were neither accrued nor paid during the year?" ii. "Whether, on the facts and in circumstances of the case and in Law, the Ld. CIT(A) has erred in basing its decision on the order of co-ordinate benches in the case of the assessee for earlier years, on the issue of Provision for Post Closure and Pit Covering expenses, whereas the Revenue has not accepted the said decisions of co-ordinate benches in any of the years and has filed further appeal?" iii. "Your appellant craves leave to add, alter or amend any of the Grounds of appeal."” Brief facts of the case are as under:
2. The assessee is involved in business to create, execute and operate centralised secured land field facility for disposal of solid waste generated by industries in Bharuch, Gujarat. During year under consideration assessee filed its return of income on 05/02/2021, declaring total income of Rs.49,80,69,530/- and declared book profits under 115J amounting to Rs.61,32,52,177/-. 2.1 The case was selected for scrutiny and assessee was called upon to furnished details in respect of the provisions made for pit cover and pit closure expenditure amounting to Rs.16,50,90,177/-, wherein the assessee claimed expenditure of Rs.7,47,18,936/-, as utilised during the year. The said amounted was debited to the profit and loss account. The Ld.AO, thus called upon the assessee to furnish submissions, as to why there is difference of provision and why the utilised amount should not be disallowed. 2.2 The Ld.AO after considering the submissions of the assessee disallowed the claim based on the assessment order 2012-13 passed in assessee’s own case. The Ld.AO made addition of Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld. CIT(A).
3. Before the Ld.CIT(A) the assessee submitted that, for preceding assessment years coordinate bench of this Tribunal in assessee’s own case for assessment year 2017-18, 2018-19 allowed claim of assessee, following the decision of this Tribunal for assessment years 2002-03 and 2004-05. Relevant extracts of the order of this Tribunal for respective assessment years are reproduced in the impugned order. The Ld.CIT(A) thus allow the claim of the assessee. Aggrieved by the order of the Ld.CIT(A) revenue is in appeal before this Tribunal.
At the outset, the Ld.AR submitted paper book containing four orders passed by coordinate bench of this Tribunal in assessee’s own case for preceding assessment years, the details which are as under: “1. Order dated 28 November 2016 passed by Hon’ble Ahmedabad Tribunal, in case of BEIL Infrastructure Ltd. for AY 2002-03 to AY 2006- 07 (ITA No. 733, 1424, 4389 & 4408/Ahd/2007) (ITA No. 29/Ahd/2009) (ITA No. 123,2882,119/Ahd/2010) 2. Order dated 24 April 2023 passed by Hon’ble Surat Tribunal, in case of BEIL Infrastructure Ltd. for AY 2007-08 to AY 2011-12 (ITA No. 500 to 504 & 1935/Ahd/2015) 3. Order dated 30 June 2023 passed by coordinate bench of this Tribunal, in case of BEIL Infrastructure Ltd. for AY 2012-13 & AY 2015- 16 (ITA No. 586 & 1950/Mum/2017)
A.Y. 2020-21 BEIL Infrastructure Limited 4. Order dated 4 June 2024 passed by coordinate bench of this Tribunal, in case of BEIL Infrastructure Ltd. for AY 2017-18 & AY 2018- 19 (ITA No. 2732 & 2729/Mum/2023)”
On the contrary, the Ld.DR though placed reliance on the order of the Ld.AO, informed this bench that appeal has been filed by revenue against the above order of this Tribunal before Hon’ble High Court. We have perused the submissions advanced by both sides in light of records placed before us.
It is noted that, on identical facts, multiple orders are passed by coordinate bench of this Tribunal consistently. We refer to the most recent order passed for assessment years 2017-18 and 2018-19 in 2729/Mum/2023 vide order dated 04/06/2024 wherein the issue has been considered as under: “7. The next issue urged by the revenue in both the years relates to disallowance of Provision for pit closure expenses. As noticed earlier, the AO restricted the claim of the assessee to the amount of actual expenses holding that the Provision for Post Closure expenses is a contingent liability. The ld CIT(A) allowed the claim of the assessee by following the decision rendered by the Tribunal. We notice that the co- ordinate bench has considered an identical issue in AY 2012-13 in the assessee’s own case and has decided this issue in favour of the assessee with the following observations:- “ 9. In ground no. 5 of appeal, the assessee has assailed disallowance of provision for post closure care expenditure under normal provision and u/s 115JB of the Act. We find that disallowance in respect of identical provisions was made in AY 2007- 08 and AY 2008-09. In AY 2007-08, the Tribunal in appeal of the assessee ITA NO.2290/Ahd./2010 (supra) deleted the disallowance placing reliance on earlier order of Tribunal in assessee’s own case. In assessment year 2008-09, the Coordinate Bench followed the decision of Tribunal in assessee’s own case for AY 2007-08. No material has been brought on record by the Revenue to substantiate that there has been any change in the facts in the impugned assessment year. We see no reason to deviate from the consistent view taken by the Tribunal A.Y. 2020-21 BEIL Infrastructure Limited on this issue. Hence, assessee’s claim of provision for post closure expenditure is allowed. Thus, assessee succeeds on ground no. 5 of appeal.” We notice that the Tribunal is consistently holding that the Provision for Pit closure expenses is allowable as deduction. Since the Ld CIT(A) has followed the decision rendered by the Tribunal in the assessee’s own case, we do not find any infirmity in the order passed by him on this issue.
The next issue urged by the revenue in AY 2017-18 relates to the disallowance of Provision for Pit covering expenses. Identical claim was examined by the co-ordinate bench in the assessee’s own case, viz., Bharuch Enviro Infrastructure Ltd (Earlier name of the assessee) vs. DCIT (ITA No.733, 1424, 4389 & 4408/Ahd/2007 dated 28-11-2016) and it was decided in favour of the assessee with the following observations:- “21.Common grievance no. 3 - Disallowance of provision for Pit Covering Expenses. 22.The A.O. found that the assessee has debited expenses of Rs. 84,72,597/- under the head "Pit Covering Expenses". On further verification, the A.O. noticed that the assessee has incurred actual expenditure for pit covering at Rs. 66,92,900/- as against the provision of Rs. 84,72,597/-The assessee was asked to explain why the expenses of Rs. 17,79,697/- should not be disallowed. The assessee explained that the liability to incur expenditure on pit covering arises as soon as the pits were dug and the pits are required to be covered after each pit is completely filled as per guidelines issued by GPCB. The A.O. denied the contention of the assessed on the ground that the pit is closed immediately and, therefore, the difference between the provision and the amount actually spent could not be explained properly. The A.O. further added the excess provision to the book profit treating the same as unascertained liability for the computation of book profit u/s. 115JB of the Act The Hon'ble Rajasthan High Court in the case of Udaipur Mineral Development Syndicate Pvt. Ltd. 261 ITR 706 had held that "as soon as the assessee dig the pits its liability to refill them arose and it was entitled to deduction of the expenses incurred for filling those pits, as the assessee was following mercantile system of accounting". Similar view was taken by the Co-ordinate Bench of Hyderabad in the case of NMDC Ltd. 56 taxrhann.com 396. The Co--ordinate Bench at Ahmedabad in the case of Enviro Technology Ltd. in 734 to 736/Ahd/2007 following the order of the Hon'ble Rajasthan High Court (supra) allowed the claim of the assessee.
A.Y. 2020-21 BEIL Infrastructure Limited 23. In the light of the aforementioned judicial decisions, we direct the A.O to allow the provision for pit covering expenses in totality.” We notice that the Tribunal is consistently holding that the Provision for Pit covering expenses is allowable as deduction. Since the Ld CIT(A) has followed the decision rendered by the Tribunal in the assessee’s own case, we do not find any infirmity in the order passed by him on this issue.
In the result, both the appeals of the revenue are dismissed.”
Following above the consistent view we do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld. In the result the appeal filed by the revenue stand dismissed. Order pronounced in the open court on 30/04/2025