TaxTMI 
TaxTMI 
2013 (1) TMI 109
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...., the assessing officer while verifying the details of miscellaneous expenses noticed that the assessee has debited an amount of Rs. 2,62,42,012/- towards 'Provision for CISF security expenses'. He noted that such amount is a mere provision. On query raised by him for justifying such claim, the assessee while stating that the said amount pertained to the proportionate expenses at 32% of the total cost incurred by Nuclear Fuel Complex on CISF personnel, for providing security to their complexes and premises, has submitted that they are required to make such provision in the accounts for the financial year 2006-07, as per the approval of their parent department, Department of Atomic Energy (DAE), to the proposal in that regard submitted by NFC. The assessing officer was not satisfied with the explanation of the assessee. Referring to the letter of the department of Atomic Energy dated 16.4.2003, the assessing officer noted that the approval of competent authority has not been taken for finalizing the Memorandum of Understanding. He therefore, noted that such liability in this case is in the nature of a contingent liability and the same cannot be allowed as a deduction for the assessm....
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....are of security charges for the previous year relevant to assessment year 2007-08 only. It was clarified before the CIT(A) that the question of obtaining approval on year to year basis does not arise. Reliance in this behalf was also placed on the decision of this Tribunal in assessee's own case for assessment year 2006-07, wherein the Tribunal allowed the assessee's claim on the basis of the one time approval granted by the controlling department, viz. DAE. It was further submitted that NFC has been raising demand towards share on security expenses on provisions of CISF personnel, on quarterly basis and the ECIL has been making payments after adjusting NFC's share of private security expenses borne by ECIL, and thus, as against demands of Rs. 57,81,333 and Rs. 70,77,460 received from NFC for the first two quarters of financial years 2006-07, actual payments to NFAC amounted to Rs. 55,67,529 and Rs. 68,74,4893 respectively, which worked out to a total of Rs. 128.42 lakhs. Since demand letters for the last two quarters were not received from NFC before the close of the accounts, ECIL made a provision of Rs. 138 lakhs for these two quarters since it is mandatory to follow actual basi....
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....t has not furnished the amount of such provision pertaining to the said third quarter, 50% o the said amount of Rs. 138 lakhs claimed as provision for the last two quarters, shall be considered as the provision pertaining to such third quarter. Hence, excluding an amount of Rs. 69 lakhs out of such amount of Rs. 262.42 lakhs, the balance amount is allowable as deduction in this case. Thus, out of such disallowance of Rs. 2,62,42,012/- towards provision of CISF security expenses made in the assessment, disallowance to the extent of Rs. 69,00,000/- is confirmed and the balance amount is deleted." 8. As for the other disallowances, disputed in the first appeal before him, of Rs. 1,69,73,787/- on account of excess claim made for weighted deduction under S.35(2AB) of the Act, and the disallowance of Rs. 10,64,l00,000/- towards provision for wage revision arrears, the CIT(A) confirmed the disallowances made by the assessing officer, rejecting the grounds of the assessee in that behalf, and in that process ultimately partly allowed the appeal of the assessee before him. 9. Aggrieved by the relief granted by the CIT(A) the assessee preferred the present appeal before us and has raise....
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....or the first two quarters for the relevant previous year but for the last two quarters, for whatever reason, the NFC has not raised bills and assessee therefore had to make a provision for the said expenditure. Similar expenditure has been claimed and allowed by the ITAT in assessee's own case for the AY 2003-04. The Tribunal in ITA 1056//08 dt.10.10.09 has held considering the various correspondence that the liability of ECIL to pay its dues on account of security expenses to NFC definitely accrued during the AY 2003-04 relevant to the AY 2004-05. 11. The Tribunal, following the decision of the Apex Court in case of Bharat Earth Movers v. CIT [2000] 245 ITR 428 upheld the claim of the assessee that the liability to pay security expenses to NFC accrued during the financial year and it was not contingent upon any other happening. Hence, the ITAT had allowed the claim of the assessee towards their share of security expenses. As held by the Tribunal in the assessee's own case for the assessment year 2004-05 the liability to pay their share to the security expenses to NFC is a defined and accrued liability. The mere fact that it was not quantified during the year by way of raising o....
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....ame capital expenditure which was not taken into account in determining the R&D expenditure. According to assessee this would amount to double deduction and hence it is a prima facie mistake in the certificate given by DSIR Therefore the Assessee submitted that their entire claim of Rs. 48,58,76,987 u/s.35(2AB) should be granted. 16. Section 35(2AB) reads as under: 1. Where a company engaged in the business of ["biotechnology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule] incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of [a sum equal to [two] times of the expenditure] so incurred. [Explanation - For the purposes of this clause, "expenditure on scientific research", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing ....
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....t know, the same can only be rectified by DSIR and not the ITAT in appellate proceedings. We, therefore, uphold the decision of lower authorities in restricting the weighted deduction u/s.35(2AB) to Rs. 46,89,03 lakhs and disallowing sum of Rs. 1,69,73,987 out of the claim made by the assessee. We, however, direct that in case DSIR corrects the amount of research and development expenditure on which the assessee is entitled weighted deduction for the assessment year under appeal, corresponding weighted deduction u/s.35(2AB) shall be granted on receipt of the clarification from DSIR. Consequentially if the assessee is able to prove that any amount of expenditure in their in-house research and development facilities was omitted to be considered by the DSIR for weighted deduction the same may be allowed as a deduction u/s.35/ 37 of the Act. With this observation we dismiss the appeal of the assessee on this issue. 18. With respect to the Provision for Wage revision, the Assessing Officer and the CIT(A) disallowed Rs. 10.64 Crores towards provision for wage revision arrears. From the facts furnished to us the assessee entered into wage agreement for a period of 10 years from 1.1.97 ....
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.... available as early as 1.1.97. for these employees the revised wages/salary was to be given w.e.f. 1.1.97. Thus, it can be said that the appellant was reasonably certain of its increased liability on this account. As the Personnel Department of the appellant had knowledge of dealing with such pay hikes in the past, the assessee could estimate the quantum of such enhanced liability. The liability was certain. What was not certain is the quantum of such liability. Also, the entries taken in the books of account towards provision of enhanced salary/wages cannot be said to be unilateral entry made by the appellant. The appellant accepted its liability to the extent provision was made in the books of account based on the demands from its employees. It may also be noted that the accounting standards were also made part of the Act. Taking into account principle of prudence and the definition of accrual as given therein, as also the principle of real income, we are of the opinion that in the facts of the present case, the provision made towards additional liability on account of enhanced wages and salary are allowable in the year of making such provision. In this view of the matter, this g....