TaxTMI 
TaxTMI 
2014 (8) TMI 766
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....t to its office building during the assessment year and bills settled in the subsequent year. 2. While upholding the disallowance of Rs. 14, 00, 000 the CIT(A) erred in holding that the Appellant has not produced any evidence to show that the repair work commenced and completed during the assessment year. 3. The CIT(A) erred in treating the provisions for repairs and maintenance of Rs. 14, 00, 000/-as "Contingent Liabilities". 4. The CIT(A) erred in not treating that the Appellant was following mercantile system of accounting. 5. The Appellant prays that the relief on the aforesaid grounds be allowed and appellate order be set aside/modified accordingly. The Appellant craves leave to add, amend, alter or modify any of the abo....
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....m M/s. Space HVAC Systems P, Ltd. (SHSPL) related to air-conditioning work. It was pleaded by the assessee that the amount of Rs. 14 lakhs narrated as 'Provision for repairs and maintenance' relate to the aforesaid bills. He further held that the assessee had been consistently following the system of accounting for expenses based on receipt of the bills, that bill from SE revealed that the work of plastering/ painting/waterproofing etc. was a prolonged one culminating in the final bill raised in FY 2007-08, that the expression 'provision for expenses', used by the assessee itself betrayed the nature or this debit, that the liability had not accrued in the year under appeal, that amount of Rs. 14 lakhs debited to the P&L acco....
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....d as a deduction, that the assessee itself had admitted that the impugned amount represented an advance which could not be allowed as deduction in any case, that the claim that the work was completed during the year itself had not been supported by any evidence, that the expenditure which was deductible for income-tax purposes was one which was towards liability actually existing at the relevant time, that putting aside of money which might become expenditure on the happening of an event was not an allowable item, that contingent liabilities did not constitute expenditure and could not be subject matter of deduction even under the mercantile system of accounting. He relied upon the cases of Indian Molasses Co. P. Ltd. (3 ITR 66) and Shree S....
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....jurisprudence onus is always on the assessee to prove that expenditure was incurred wholly and exclusively for the purposes of business for a particular year. If the assessee furnishes documentary evidences about incurring of expenditure AO has to allow it, but if it fails to lead such evidences then expenditure cannot be allowed. Because it will be a case of spending of certain amount and every outgoing or spending of money cannot be termed an expenditure incurred for business purposes. As every incoming cannot be taxed as income, similarly each and every outgoing cannot be termed business expenditure. Wholly and exclusively, the two adverbs used in the section 37 of the Act signify quantum of expenditure and the motive/object/purpose of t....
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....e. In the case of Rotork Controls India P. Ltd. (314 ITR 62), the Hon'ble Apex Court has held that a provision is a liability which can be measured only by using a substantial degree of estimation, that a provision is recognized when : (a) an enterprise has a present obligation as a result of a past event ; (b) it is probable that an outflow of resources will be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation, that if these conditions are not met, no provision can be recognised. In that matter the Hon'ble Court spoke of historical trend also. From the above discussion it is clear that provision can be made an allowed in certain conditions. Deductions are not permissible for anticipa....
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....te account as 'provision for encashment of accrued leave'. Matter travelled up to the Hon'ble Supreme Court. Reversing the judgment of the Hon'ble High Court the Apex Court held that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, was entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability, that the liability was not a contingent liability. In the case of Hindustan Fertilizers Corporation Ltd. (supra) the issue befo....