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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Date of Hearing : Date of Hearing : 01 Date of Hearing : Date of Hearing : 01 01-12-201 01 201 2015 201 Date of Order : Date of Order : 18 Date of Order : Date of Order : 18 18-12-201 18 201 2015 201
ORDER ORDER ORDER ORDER
PER PER H.S. SIDHU : JM PER PER H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM
This appeal filed by the Assessee is directed against the Order dated 11.7.2008 passed by the Ld. CIT(A)-IX, Mumbai pertaining to assessment year 1997-98 on the following grounds:-
“1. That the order of Ld. CIT(A) is bad both in law and on facts of the case.
2. That the Ld. CIT(A) has erred in upholding the reassessment u/s. 147 of the Income Tax Act.
3. That the CIT(A) has erred in upholding the disallowance of amount claimed by the assessee towards contractual obligations/ liquidated damages aggregating to Rs. 4,06,87,253/-. The said sum is duly admissible as a deduction under section 37 of the Income Tax Act, 1961.
4. That the Ld. CIT(A) has erred in holding that documentary proof in respect of claim as made was not provided.
5. That the appeal is within time as the order of the Ld. CIT(A) was received on 6th August, 2008.
6. That the assessee may be allowed to modify, add, supplement, revise, amend grounds as raised hereinabove.
The facts narrated by the Revenue authority are not disputed by both parties, therefore, no need to repeat the same here for the sake of convenience.
At the time of hearing Sh. Rajan Bhatia, Ld. Counsel for the Assessee stated that the issue involved in ground no. 3 has already been adjudicated and decided by the ITAT in assessee’s own case for the assessment years 1996-97 and 1998-99 in & ITA No. 5367/Mum/2001 respectively vide order dated 12th March, 2008 in assessee’s favour. In view of above submissions, he requested that addition involved in ground no. 3 may be deleted by taking a consistent view, as stated above. In support of his contention, he has also filed the Paper Book containing pages 1 to 72 which includes the copy of the ITAT order dated 12.3.2008 passed in assessee’s own case for the assessment years 1996-97 and 1998-99 in ITA No. 4057/Mum/2000 & ITA No. 5367/Mum/2001 respectively.
On the contrary, Ld. DR relied upon the orders of the authorities below.
We have heard both the parties and perused the records available with us, especially the earlier orders of the Tribunal decided in favour of assessee in assessee’s own case. We find that in the assessment years 1996-97 and 1998-99, the Tribunal vide order dated 12.3.2008 passed in & ITA No. 5367/Mum/2001 has adjudicated the similar issue in assessee’s own case in its favour. For the sake of convenience, the relevant findings of the Tribunal from para 4.3 to 4.7 at pages 12 & 13 are reproduced below:-
4.3 The third ground raised by the assessee is that the CIT(A) has erred without appreciating the fact of the case in confirming the disallowance of Rs. 62,36,462/- out of “Provision for Contractual Obligation claimed by the assessee.
4.4 According to the assessee, the amount represented the remaining cost to be incurred at the time of completion of the contract. According to the assessee, the excess or shortfall in the amount is adjudicated on final acceptance of the Bill by the customers.
4.5 The assessee had claimed an amount of Rs. 2,63,71,552/- on account of provision for contractual obligation. The amount represented expenditure to be incurred in respect of projects completed during the year under consideration. Such expenditure includes, liquidated damages, provisions for material, labour and other expenses, which are due to be spent by the assessee-company in view of pending contractual obligations. The amount of claims made but not accepted by the customers as well as liquidated damages deducted by the customers are also covered under the provisions of contractual obligations.
4.6 The Assessing Authority in fact disallowed an amount of Rs. 62,36,462 from the claim made by the assessee. What has been allowed by the Assessing Authority is the amount of actual expenditure incurred by the assessee towards the contractual obligations.
4.7 The fact that the assessee had incurred a sizable portion of the provision as expenditure and the same has been allowed by the Assessing Authority itself is supporting the claim of the assessee that the expenses are accrued and the liability ascertained and the provisions are made on factual basis and they were not in the nature of any contingency of future expenses. The legal character of the provision for contractual obligation is in a way similar to the provision for warranty/ guarantee. Therefore, the discussion made in respect of the issue regarding provision of warranty equally applies to the provision for contractual obligations also. There is no doubt that the assessee has to incur expenditure towards the contractual obligations pertaining to the completed projects. This is evident from the fact that the Assessing Officer himself has disallowed only Rs. 62,36,462 as against the total claim of Rs. 2,63,71,552 made by the assessee- company. It shows that the assessee has already incurred a major portion of the provision by way of actual expenditure. Therefore, we do not find any reason to disallow the balance portion of Rs. 62,36,462. The said disallowance is deleted. The Assessing Authority is directed to allow the amount in full.”
5.1 In the background of the aforesaid discussions and respectfully following the precedent of the Coordinate Bench in respect of the assessment years 1996-97 and 1998-99 of ITAT Order dated 12.3.2008 passed in & ITA No. 5367/Mum/2001, in assessee’s own case in its favour, we delete the addition of Rs.4,06,87,253/- on account of contractual obligations/liquidated damages and decide the issue involved in ground no. 3 in favour of the Assessee.
Since we have deleted the addition in dispute, as aforesaid vide ground no. 3, hence, the other grounds are not being adjudicated.
In the result, the Appeal filed by the Assessee is allowed.
Order pronounced in the Open Court 18-12-2015.