TaxTMI 
TaxTMI 
2017 (5) TMI 118
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....pany derives income from business of dealers and commission agent of engineering products and servicing activities. It has filed its return of income electronically on 29.8.2008 and 29.9.2009 declaring total income at Rs. 14,56,66,218/- and Rs. 17,63,31,404/- in the Asstt.year 2008-09 and 2009-10 respectively. In the Asstt.Year 2008-09, the assessee has revised its return on 16.9.2009 whereby it has disclosed income at Rs. 14,38,76,632/-. The case of the assessee for both the years were selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of accounts it revealed to the AO that the assessee has made a provision of Rs. 23,09,500/- in Asstt.Year 2008-09 and Rs. 23,93,080/- in Asstt.Year 2009-10. According to the assessee it has provided a scheme vide which if its sub-commission agent achieve a particular target then sub-agent will be entitled for a foreign tour provided by the assessee. For the purpose of providing such tour, the assessee has made provision, because these sub-agents have achieved their target. The ld.AO disallowed the claim of the assessee on the ground that it was a provision only, and not an ascertaine....
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....ed the genuineness of the expenses nor that the expenses had been incurred for the purpose of business. The sole reason for disallowance was that it was neither accrued nor incurred during year under consideration. He, therefore, submitted that when the genuineness of expenditure and the fact that the expenditure was incurred for the purpose of business was not disputed then necessary direction be given to Assessing Officer to allow the expenses either for the year under consideration or in the next year. Ld. DR, on the other hand, relied upon the order of authorities below and he stated that neither the liability had accrued during the year nor the expenditure was actually incurred. The assessee claimed expenses simply on the basis of the provision made simply on estimate. He, therefore, submitted that the order of the CIT(A) on this point should be sustained. 11. We have carefully considered the arguments of both sides and perused the material placed before us. The relevant facts as recorded by Assessing Officer in the order read as under: "3.2 In response the assessee vide its letter dated 8.12.2009 has furnished the justification mainly in the form of comparative st....
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....bove, it is evident that the Assessing Officer has not doubted that tour was to be arranged by assessee as a part of Sales Promotion expenses. He disallowed the expenses mainly on the ground that there was no basis for the provision and the tour was actually conducted in the next year and all the expenditures were actually incurred in next year. In our opinion, when the assessee has promised to arrange the tour for its clients, sub commission agents and Engineers on the basis of their performance during the year under consideration, then persons who achieved the target given by the assessee have acquired the right to go on tour as per the Scheme of assessee. Therefore, once the assessee's clients, commission agents and Engineers fulfill the target given to them, the assessee incurs the liability to take them on tour to Egypt as per the Scheme. Therefore, the provision for Egypt tour is to be allowed in the year under consideration. Now the only question is whether the provision made by the assessee is reasonable or not. From the details recorded by the Assessing Officer in para 3.3 and 3.4 of the order, which is reproduced above, it is evident that the assessee made the provision o....
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.... of the AO. The AO shall verify the TDS details and thereafter decide whether the assessee has credit or not, and if it has credit, then same be given to the assessee. No other issue was pressed in the Asstt.Year 2008-09. Accordingly, the appeal of the assessee for A.Y.2008-09 is partly allowed. 11. In the Asstt.year 2009-10, the next issue agitated by the assessee is that the ld.CIT(A) has allowed a sum of Rs. 23,09,500/- on payment basis. 12. The facts regarding this issue are that in the asstt.Year 2008-09, the assessee has made a provision of Rs. 23,09,500/- pertaining to the China Tour. This provision was disallowed by the AO in the Asstt.Year 2008-09. It has claimed this amount on actual payment basis in the Asstt.Year 2009-10. The ld.CIT(A) theoretically allowed, but with a rider that in case provision is allowed to the assessee in Asstt.Year 2008-09, then the deduction granted in Asstt.Year 2009-10 on actual incurrence of the expenditure would be withdrawn. Since we have allowed the provision in the Asstt.Year 2008-09 in the foregoing paragraphs, therefore, if any deduction is being granted to the assessee of Rs. 23,09,500/- in A.Y.2009-10, the same will be withdrawn ....