TaxTMI 
TaxTMI 
2016 (6) TMI 1356
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....s on gunny bags payable to Food and Supplies Department, Govt. of Haryana without quoting the section of the Income Tax Act, 1961 under which it is not allowable. 3. Brief facts relating to the issue are that during assessment proceedings the AO found on perusal of the Notes to the Accounts appended to the Audited Balance Sheet of the company, at page no. 48 item no. (viii) & (ix), that the company had made a provision of service charge @ 1% on the procurement of gunny bags amounting to Rs. 20,11,000/- for the impugned year. On being confronted about the allowability of the same, the assessee submitted that the same was payable to the Food & Supplies Department, Government of Haryana and had been provided on accrual basis. The assessee fu....
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....een paid they could not be included for the purpose of valuation of goods. Ld. CIT(A) further held that matter of taxability could not be decided on the basis of entries which the assessee may choose to make in his account but has to be decided in accordance with the provisions of law and further held that the directions or comments made by C&AG cannot over ride the applicable provision of Income Tax Act, since the Income Tax Act is an independent code in itself and applicable income or loss has to be computed in accordance with the provision of Income Tax Act only. Thus the Ld. CIT(A) held that in view of the applicability of the provision of section 145 A regarding the valuation of goods and the various jurisdictional pronouncements relat....
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....reating the impugned provision and whether there was any agreement or otherwise to substantiate the incurring of the liability. In response to the same the Ld DR expressed his inability to provide any such document. 8. Ld. DR on the other hand relied upon the order of the Ld. CIT(A). 9. We have heard the rival submissions and perused the orders of authorities below and also the documents placed before us. 10. The issue arising in the present appeal is the allowability of provision created in the books of the assessee for service charge payable on gunny bags. It is imperative at this juncture to understand the position of law with regard to allowability of expenses. Deductions can be permitted only in respect of expenses which are fo....