PR. COMMISSIONER OF INCOME TAX-1, DELHI vs. FIELDFRESH FOODS PVT. LTD.

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ITA/314/2024HC DelhiDLHC01037414202402 July 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE RAVINDER DUDEJA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found no substantial question of law meriting consideration. It noted that the CIT(A) had found the provision to be for goods in transit, which were reflected in closing stock and balance sheet, making it an ascertained expense. The court also observed that the debit and credit entries balanced out, making the effect revenue neutral.

What were the facts?

The Revenue appealed against an ITAT order deleting an addition made by the AO on account of provision for purchase of finished goods and provisional expenses. The CIT(A) had previously allowed the assessee's appeal, finding the provision to be an ascertained liability for goods in transit.

What were the issues?

Whether provisions made by the assessee for purchase of finished goods and provisional expenses were ascertained liabilities or contingent in nature, and thus allowable as expenses.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

$~32 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 314/2024

PR. COMMISSIONER OF INCOME TAX-1, DELHI .... Appellant

Through: Mr. Sanjay Kumar, Adv.

versus

FIELDFRESH FOODS PVT. LTD. .... Respondent

Through: None CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE RAVINDER DUDEJA

O R D E R %

02.07.2024

CM APPL. 36009/2024 (34 days delay in filing)

1.

Bearing in mind the disclosures made, the delay of 34 days in filing the appeal is condoned. 2. Application stands disposed of. ITA 314/2024

3.

The Principal Commissioner impugns the order of the Income Tax Appellate Tribunal [“Tribunal”] dated 23 November 2023, and has proposed the following questions of law for our consideration:- “A. Whether on the facts on the circumstances of the case and in law, the Ld. ITAT has erred in deleting the addition of Rs.22,31,99,107/- made by AO on account of provision for purchase of finished goods ignoring that the provisions made by assessee was not ascertained liability and it was contingent in nature as the goods not were received during the year, shown as the goods shown in the balance sheet as transit in nature and the payment has not actually been made, therefore, not allowable expenses under Section 37 of the Act?

B. Whether on the facts on the circumstances of the case and in law, the Ld. ITAT has erred in deleting the addition of This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/07/2024 at 14:21:26

Rs.2,26,54,932/- made by AO on account of provisional expense ignoring that provision made by assessee was not ascertained liability and it was contingent in nature and the assessee has no given any reply for the allowability of this expense?”

4.

We, however note, on a detailed analysis of the assessment order as framed, the Commissioner of Income Tax (Appeals) [“CIT(A)”] had while allowing the appeal observed as follows:-

"4.3.5 Thus, in light of the given facts it is clear that the said provision was infact payment for purchase of goods in transit whose entries were reversed in the beginning of the following year and the payments were made during F.Y. 2014-15 (A.Y. 2015-16). Since, the purchased goods were reflected as closing stock in the P&L Account (on the credit side) and in the balance sheet as goods in transit, these were infact ascertained and not contingent expenses. While, the goods were received, the bills were received later on. Hence, the claim of expense stands explained and proved, therefore allowable. Accordingly, the addition of Rs.22,31,99,107/- on account of unascertained provision stands deleted."

5.

Before us it is not disputed that since both the debit and credit entries had been balanced out, the effect would be revenue neutral. 6. In that view of the matter, we find no substantial question which would merit consideration of this Court. 7. The appeal shall consequently stand dismissed.

YASHWANT VARMA, J.

RAVINDER DUDEJA, J. JULY 2, 2024/kk

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/07/2024 at 14:21:26

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