TaxTMI 
TaxTMI 
2010 (9) TMI 36
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....") in I. T. A. No. 1261/DEL/2008 for the assessment year 2003-04. By the impugned order, the Income-tax Appellate Tribunal has deleted the addition of Rs. 1,34,34,500 made by the Assessing Officer (hereinafter referred to as "AO") on account of prior period expenses. 2. Briefly stated the relevant facts of this case are that the respondent- assessee filed a return declaring a loss of Rs. 3.81 crores. The case was selected for scrutiny wherein the Assessing Officer observed that although the respondent-assessee had entered into an agreement in August, 2002 with M/s. Exxon Mobil Asia Pacific Pvt. Ltd. with retrospective effect, i.e., from January 1, 2002, yet the expenses had been incurred during the period January to March 2002 and, thus,....
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....lowed expenses merely on the ground that invoices had been raised on September 19, 2002, i.e., during the assessment year under consideration. 6. The learned counsel for the Revenue relied on the Supreme Court's decision in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428 wherein it was held that if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. According to her, what should be certain is the incurring of the liability and it should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. 7. Ms. Shashi M. Kapila, learned counsel for the ....
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....calculated at the rate of 1.5 days per month, i.e., 18 days in a year. The earned leave could be accumulated up to a maximum of 240 days while the vacation leave could be accumulated up to a maximum of 126 days. The earned leave/vacation leave could be encashed subject to the ceiling on accumulation. The officers could at their option avail of the accumulated leave or in lieu of availing of the leave, apply for encashment whereupon they would be paid salary for the period of leave earned but not availed of. The question raised in the case was whether, on the facts and in the circumstances of the case, the provision for meeting the liability for encashment of earned leave by the employee is an admissible deduction ? The assessee-company had ....
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....98 ITR 189 (SC) ; Saurashtra Cement and Chemical Industries Ltd. v. CIT [1995] 213 ITR 523 (Guj) and Addl. CIT v. Farasol Ltd. [1987] 163 ITR 364 (Raj) 11. In the case of Nonsuch Tea Estate Ltd. v. CIT [1975] 98 ITR 189 (SC) it was held that the liability to pay crystallized in the year of approval. In the said case, under an unwritten agreement, M/s. Harrisons and Crosfield Ltd. (hereinafter referred to as "H. & C. Ltd.") were the managing agent of the assessee-company and were entitled to a commission of 1\xba per cent. on all sales. After the coming into force of the Companies Act, 1956, a new agreement was entered into for the reappointment of H. & C. Ltd. for a period of 10 years with effect from April 1, 1956, on ....
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....mined and crystallized in the year in question. 13. In Addl. CIT v. Farasol Ltd. [1987] 163 ITR 364 (Raj), the assessee entered into a contract with Oil and Natural Gas Commission in February, 1964. The operation started in December 1964. The assessee claimed deduction of expenses for the period September 10, 1964 to December 31, 1965 after the communication of approval in the assessment year 1966-67. The High Court held that the expenditure incurred in earlier years can be allowed as a deduction in the assessment year 1966-67 as it crystallized only when approval was received. 14. Hence, we are of the view that liability of the assessee under the agreement had arisen and accrued in August 2002, when the agreement was executed a....