Loading judgment…
Facts
The appeal concerns two additions challenged by the assessee: Rs. 250.59 lakhs for a provision made for M/s Balbir Sharma, and Rs. 18.38 lakhs for an arbitration award to Jai Balaji Industries Limited. The assessee argued both are ascertained liabilities. The amount for M/s Balbir Sharma was paid in FY 2018-19, and the arbitration award is pending before the High Court.
Held
The Tribunal held that the provision for M/s Balbir Sharma was made due to an audit remark and was subsequently paid. The arbitration award, though pending before the High Court, represents a liability. Thus, both amounts are liable to be allowed in the year of payment.
Key Issues
Whether the provision for liabilities, one paid and another pending legal resolution, should be allowed in the assessment year 2017-18 or in the year of actual payment.
Sections Cited
IT Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R
Per Rajesh Kumar, AM:
This is an appeal filed by the assessee against the order dated 29.08.2025, passed by the Id. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2017-2018.
It was submitted by the Ld.AR that two additions are challenged in this appeal. The first one is in respect of an amount of Rs.250.59 lakhs being a provision made in the financial year 2016-17 relevant to the assessment year 2017-18 in respect of amount to due to be paid to M/s Balbir Sharma. The second is an amount of Rs.18.38 lakhs being an arbitration award liable to be paid to Jai Balaji Industries Limited. It was submission that the amount of Rs.250.59 lakhs had been paid to M/s. Balbir Sharma during the financial year 2018-19 relevant to the assessment year 2019-20. It was the submission that during the audit for the financial year 2015-16 the CAG had remarked that provision for Rs.250.59 lakhs due to be paid to M/s. Balbir Sharma had not been provided for and consequently the provision was made for the financial year 2016-17 relevant to the assessment year 2017-18. It was submission that in respect of the arbitration award payable to the Jai Balaji Industries Limited, the issue was still pending before the Hon’ble Jurisdictional High Court. It was submission that the both the amounts are ascertained liabilities and same are liable to be allowed.
In reply, the Ld.CIT DR submitted that he has no objection if the direction be given that the amounts are to be allowed in the year of payment.
We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the provision in respect of the amount due to M/s. Balbir Sharma has been made on account of remark by the AO during the audit for the financial year 2015-16. The amount has been paid during the financial year 2018-19 relevant to the assessment year 2019-20. In respect of the arbitration award payable to the Jai Balaji Industries Limited the amount of Rs.18.38 lakhs is still not paid insofar as the issue is pending before the Jurisdictional High Court. Thus, it cannot be said that both the provisions are unascertained. This being so, it is directed that the said amounts are liable to be allowed in the year in which the payments have been made . It was mentioned by the ld. AR on behalf of the assessee that the assessment for the assessment year 2019-20 is not opened. It is directed to AO that the necessary allowance shall be made during the year of payment subject to the assessee providing proof of payment.