2024 (3) TMI 212 - HC - Income Tax

Appeal Dismissed: Solid Waste Disposal Expenses Ruled as Accrued Liability, Not Contingent, Aligns with Accounting Standards.

Principal Commissioner of Income Tax 3 Versus M/s Green Environment Services Co-Operative Services Ltd.

Principal Commissioner of Income Tax 3 Versus M/s Green Environment Services Co-Operative Services Ltd. - [2024] 470 ITR 249 (Guj) Issues involved: Appeal by revenue u/s 260-A of the Income Tax Act, 1961 against ITAT order disallowing provision for Solid Waste Disposal Expenses claimed by assessee.Summary:Issue 1: Disallowance of provision for Solid Waste Disposal Expenses.During assessment proceedings, the Assessing Officer observed the assessee claimed Rs. 10,45,72,988 under 'Solid Waste Disposal Charges' in its books for the year. The assessee claimed Rs. 7,77,73,600 as provision for Solid Waste Disposal Site Expenses. The AO disallowed this amount as it was claimed on a provisional basis. The CIT(A) allowed the appeal, stating the expenses were accrued and claimed using a scientific method. The ITAT upheld the CIT(A) decision.Details: The revenue contended that the expenses were rightly disallowed as contingent liabilities. However, both the CIT(A) and ITAT found the provision to be an accrued liability, not a contingent one. The ITAT noted the assessee's accounting method was in line with Accounting Standards and section 145 of the Act. The ITAT upheld the CIT(A) decision, stating the provision was allowable as an accrued liability since the income related to waste disposal was already accounted for in the relevant year.Conclusion: The High Court found no error of fact or law in the ITAT's decision, as the provision was considered an accrued liability due to the income already being recognized. Therefore, no substantial question of law arose, leading to the dismissal of the tax appeal.