2014 (7) TMI 290

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....ter considering the reply of the assessee, disallowed the provision created by the assessee. To make the disallowance, he used the reasoning taken by him for disallowing the provision for leave encashment, wherein, the AO had held the expense to be an unascertained liability, being contingent in nature. 3. Aggrieved, the assessee preferred an appeal before the CIT(A), who too, held that it was case of unascertained liability and therefore could not be allowed. While disallowing the provision for expense, the CIT(A), knocked off the addition made by the AO on account of leave encashment, being the basis for making the addition under this head. 4. Aggrieved, the assessee is now before the ITAT. 5. Before us, the Senior Counsel submitted that since the very basis itself has been knocked off, the reason to sustain the disallowance does not survive. He also submitted that the department has not filed any appeal against the decision of the CIT(A) on leave encashment. 6. The Senior Counsel, further pointed out that "post retirement medical benefit" comes along the service contract, therefore, the liability on the company becomes final and ascertained, the moment an employee si....

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....ached to the company the moment, the service contract is signed, we hold that the revenue authorities erred in disallowing the provision under this head. Having held so in principle, neither we have been able to gather the year wise breakup of the Actuarial valuation made by the Actuary as on 31.03.1997, nor the Senior Counsel, was able to apprise us on the valuation, pertaining to the year under consideration. 10. Taking into account the above reason, we deem it fit to restore the issue to the file of the AO, who shall call for the year wise valuation and then allow the claim accordingly. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to allow the claim of provision after verification of the Actuary's report pertaining to the current year. Ground no. 2: Right to use technical know how - Disallowance of 100% claim u/s 37(1) and allowance of 1/6th u/s 35 AB : Rs. 4,33,49,942/- The CIT(A) erred in Confirming the disallowance of Rs. 4,33,49,942/- towards right to use technical know how u/s 37(1) and allowing only 1/6th u/s 35AB. 11. In the course of assessment proceedings, the AO noticed that the assessee had claimed Rs. 5,20,19,930 on accoun....

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....he orders of the coordinate Bench covering assessment years 1992-93 to 1995-96, we allow the ground. 21. Ground is allowed. Ground no. 4: Partial disallowance of excise/custom duty paid during the year and included in closing inventory u/s 43B - Rs. 32,75,47,943/- On the Facts and in the Circumstances of the case and in law CIT(A) erred in disallowing the Appellant's claim of excise/custom duty paid of Rs. 32,75,47,943/and included in closing inventory u/s 43B.. 22. The Senior Counsel submitted that the issue is covered by the order of the coordinate Bench of ITAT at Mumbai, for the years covering assessment years 1992-93 to 1995-96 in Para 13, the Tribunal held: "13. We have considered the rival submissions as well as relevant material on the court. At the outset, we note that for the assessment year 1989-90 in order reported in 96 ITD 186, this Tribunal has considered and decided it this issue in para 12 and 13 as under: 12. In the second ground of appeal, the assessee is aggrieved that the CIT (A) erred in confirming the partial disallowance of excise / custom duty paid during the year and included in the closing inventory under section 43B, thereby ignoring the r....

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....ustained. We endorse the findings of the CIT(A) on both these disallowances, which also is supported by the assessee's case, dated 29.09.1999, where the disallowance had been confirmed. 27. We, therefore, sustain the disallowances, as computed by the CIT(A) at Rs. 48,532 and Rs. 1,31,692. Ground no. 7: Disallowance of provision for write off of stores and spares - Rs. 64,66,500/- The CIT(A) erred in confirming the disallowance of Rs. 64,66,500/- of provision made during the year towards stores and spares to be written off claimed u/s 37(1). 28. In the year under consideration, the assessee had made a provision for write off of Rs. 64,66,500 pertaining to store and spares. According to the AR, in a company where there is a lot of wear and tear at regular and fast intervals, these spares and stores articles had become obsolete and unusable and it was necessary, for the company to write them off. Therefore, in accordance with the decision of the management, the provision was made during the year and claimed. The revenue authorities treated this to be a contingent liability and disallowed the claim. 29. It was pointed out by the Senior Counsel that in the year, when the ....