TaxTMI 
TaxTMI 
2019 (7) TMI 71
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....hich reads as follows : "1. The order of the learned Commissioner of Income-tax (Appeals), in so far as it is prejudicial to the interests of the Revenue, is opposed to law and the facts and circumstances of the case. 2. The learned Commissioner of Income-tax (Appeals) erred in holding that the provision made for future expenses are allowable, without appreciating that the assessee had failed to produce any clear basis during assessment proceedings or establish the certainty of expenditure and on what it would be expended, thus, proving the provision made towards the future expenses to be contingent in nature. 3. The learned Commissioner of Income-tax (Appeals) erred in giving relief to the assessee without appreciating that the assessee had not incurred any such expenditure during previous year and such liability to be incurred on a future date was a contingent liability and therefore, could not be allowed under section 37(1) of the Income-tax Act. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Commissioner of Income-tax (Appeals) be reversed and that of the Assessing Officer be restored. 5. The app....
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....00 Total turnover till 31-3-2011 1,13,17,81,330 Total projected future expenses (unbillable) 58,62,00,000 Provision for expenses as on 31-3-2011 6,66,64,500 5. The Assessing Officer on a perusal of the aforesaid explanations given by the assessee asked the assessee to explain what is unbillable amount of Rs. 58,62,00,000 (of which the sum of Rs. 6,66,64,500 claimed as deduction under the provision by the assessee is forming part) as claimed by the assessee as above which was to be spread over for the period for which the contract was to be executed for Bangalore Metro Rail Corporation Ltd. According to the Assessing Officer, the assessee was not in a position to explain what was unbillable amount. The Assessing Officer, examined the commercial manager of the association of persons and in his sworn statement he had explained that the unbillable amount are monies which need to be spent for construction of roads after completion of the project. The Assessing Officer thereafter made a reference of provision of section 37 of the Income-tax Act (the Act) and was of the view that under the aforesaid provision, the only expenditure which is incurred by the assessee which is w....
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....ade by the assessee was only on the basis of estimate and that incurring of expenditure by the assessee was purely contingent and therefore the deduction claimed cannot be allowed. For the aforesaid reasons the Assessing Officer did not allow the claim of the assessee for deduction. 8. On appeal by the assessee, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow the claim for deduction made by the assessee. The Commissioner of Income-tax (Appeals) found that the assessee-association of persons was required to execute the entire work starting from the design to the execution of the work and thereafter it was also required to undertake restoration work with a view to restoring roads, foot paths and other amenities that were disturbed or diverted at the time of execution of the project. The association of persons commenced operation during the financial year 2009-10 and the first balance-sheet was drawn for the year ended March 31, 2010. No income was offered during the aforesaid assessment year since the extent of work had not progressed for recognizing the revenue. The association of persons first recognized revenue only during the financial year 2010-....
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....expenses for laying of roads after completion of the tunnelling work is concerned, the basis of estimate has been given by the assessee to the Assessing Officer in the letter dated November 14, 2013 filed before the Assessing Officer along with all supporting and technical documents. A perusal of the aforesaid documents show that complete technical details was provided by the assessee. The breakup of the expenses on laying of roads given by the assessee to the Assessing Officer is as follows : Sl. No. Description Unit Qty. Rate Amount (Rs.) Remarks 1. East Ramp LS 1. 27,408,437 27,408,437 2. Cricket Stadium LS 50,959,163 50,959,163 3. Vidhana Soudha Station 60,166,620 60,166,620 4. Central College 21,402,059 21,402,059 5. City Railway Station 24,429,048 24,429,048 6. Pocket Track 17,917,276 17,917,276 7. West Ramp 22,412,164 22,412,164 Sub Total 224,694,766 Weigheages to be added for finished items at 5% &....
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....ign work is at page 221 and the related cost are at page 249. The variation contract with Mott Macdonald Pvt. Ltd is at page 251. The CECI Design Consultant and details of their design work are at page 253. The details of design charges payable to Spar Geo infra Pvt. Ltd., at a page 256. 17. In the light of the complete details filed by the assessee to show that the expenditure in question was not contingent liability at a certain liability, it was not proper on the part of the Assessing Officer to have ignored these documents. Though the Commissioner of Income-tax (Appeals) has not made a reference to these documents but has taken note of the fact that the basis of projected future expenses as claimed by the assessee was reasonable and cannot be regarded as contingent expenditure. 18. As far as the law with regard to allowing deduction on account of a provision the same is well settled. The hon'ble Supreme Court in the case of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 (SC) has laid down that under the mercantile system of accounting an estimate of accrued liability to be discharged at a future date is an allowable expenditure. In that case the assessee bought lands and sold t....