2013 (4) TMI 285

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....D.D. Chopra ORDER Heard learned counsel for the appellant and Mr. D.D. Chopra, learned counsel for the opposite parties. U.P. Samaj Kalyan Nirman Nigam Limited is a Corporation owned by government and is engaged in the business of construction activities in respect of building public sector for the assessment year 2006-07. The said Corporation has filed its return declaring total income o....

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....sment year as the assessee has adopted mercantile system of accounting. The said order was assailed by the assessee by filing an appeal which was rejected. Thereafter a second appeal was filed which too was rejected, including the additional ground with regard to confirmation of dis-allowance of prior year expenses to the tune of Rs.35,11,687/- as the assessee has been following mercantile syst....

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....ration. We are of the prima facie view that merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on the mercantile ....

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....material crystallizing the expenditure is not in existence in respect of which such income or expenses relate, the mercantile system does not call for adjustment in the books of account on estimate basis. It is actually known income or expenses, the right to receive or the liability to pay which has come to be crystallized, which is to be taken into account under the mercantile system of maintaini....