ACIT-15(2)(1), MUMBAI vs. M/S.IOT ENGINEEING PROJECT LIMITED, MUMBAI

In the appeal filed by the revenue, the revenue is aggrieved for deleting the disallowance by the ld. CIT(A) on account of employees’ contribution to the provident fund. We found that the tax effect in the appeal of the revenue is less than Rs. 50.00 lacs, therefore, in view of the CBDT circular No. 17/2019 dated 08/08/2019 the appeal deserves to be dismissed.

In the cross appeal, the assessee is aggrieved for the addition of Rs. 5,32,236/- on account of provision for foreseeable losses.

At the outset, the ld AR of the assessee placed on record the accounts of the subsequent year wherein the provision made in the earlier year was again written off as income by the assessee.

Rival contentions have been made and record perused. It was the contention of the ld AR that it is a statutory requirement to prepare and maintain its books of account and compute its profit and loss for the period in accordance with the accounting standard prescribed by the ICAI and notified by the MCA under the Companies Accounting Standard Rules, 2006. Thus, where provision for expected losses is recognized by an assessee in accordance with requirement of AS-7, it shall not be account in accordance with the statutory requirement. Further adherence to applicable accounting standards lead to the true and fair view of the financial statements i.e. by not overstating it profits. Keeping in view the fact that the provision has again been taken as income in the subsequent year by reversing the entry, there is no justification for disallowing the same.

In the result, appeal of the revenue is dismissed whereas appeal of the assessee is allowed.