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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
Per Inturi Rama Rao, Accountant Member
This appeal was recalled by this Tribunal in M.P. No.98/Bang/2015 by order dated 06.11.2015 on account of non-adjudication of ground No.6 raised in the original memo of appeal. Ground No.6 raised in the original memo of appeal reads as under:-
“6. The learned Assessing Officer had erred in disallowing the miscellaneous expenditure incurred to the extent of Rs.4,83,600/- and the learned CIT(A) has erred in confirming the same. On proper appreciation of facts and evidence available, the expenditure incurred exclusively for business purpose and same is to be allowed as such and disallowance as done/confirmed is to be deleted.”
Ground No.6 challenges the confirmation of disallowance of miscellaneous expenditure of Rs.4,83,600 by the CIT(Appeals). The Assessing Officer disallowed the above expenditure on the ground that the provisions made are contingent in nature. The details of expenditure are as under:-
Sl. Date Ledger Description Amount No. 1. 09.06.2009 Miscellaneous Expenses incurred by 8,600-00 Anandjit Sunder Raj towards gift for A Ranga Raju’s daughter marriage, Nagarjuna Constructions dated 01.06.2009 2. 31.03.2010 Miscellaneous Provision accounted for the 75,000-00 month March 2010 (Net of TDS) 3. 31.03.2010 Miscellaneous Provision accounted for the 1,00,000-00 month March 2010 (Net of TDS) 4. 01.06.2009 Professional Visiting property at 50,000-00 charges Mumbai for Vaastu inspection. Payment made to N.S. Murthy towards Vaastu inspection 5. 31.03.2010 Travel Journal Monthly closure 1,50,000-00 6. 31.03.2010 Miscellaneous Provision for gifts for year 1,00,000-00 ending 31.03.2010 TOTAL 4,83,600-00
The CIT(Appeals) confirmed the disallowance of provisions holding that the appellant had failed to establish crystallization of liability during the previous relevant to assessment year under consideration by producing documentary evidence in respect of the above provisions. The CIT(A) further held that substantial amount of provisions was reversed in the subsequent year indicating that there was no proper basis for making such provisions.
Being aggrieved, the issue was agitated before this Tribunal vide ground No.6.
The ld. AR submitted that the provisions were made based on the claims submitted to the appellant company. Therefore, the liability has crystallized during the previous year relevant to assessment year under consideration and in this connection he relied on the following decisions:-
(1) Bharath Earth Movers v. CIT, 254 ITR 428 (SC) (2) CIT v. Oswal Woollen Mills Ltd. (2002) 254 ITR 66 (P&H) (3) Escorts Mahle Ltd. v. DCIT, 309 ITR (AT) 181 (Del)
On the other hand, the ld. Sr. DR relied on the orders of lower authorities.
We have heard the rival submissions and perused the material on record. From a perusal of the details submitted, it is clear that provisions are made based on the claim submitted by the respective parties. It is also an undisputed fact that the services were rendered by the respective parties during the previous year relevant to assessment year under consideration. The mere fact that the payment has been postponed cannot come in the way of allowability of the expenditure, even though some portion of the provision has been reversed in the subsequent assessment year. The ratio laid down by the Hon’ble Supreme Court in the case of Bharath Earth Movers v. CIT, 254 ITR 428 (SC) is squarely applicable to the facts of the assessee’s case. Therefore, we allow this ground of appeal.
Pronounced in the open court on this 20th day of May, 2016.