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TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 479
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....019. The grounds taken by the assessee read as under: - 1. The lower authorities have erred in finalizing an order of assessment which suffers from legal defects such as being passed in violation of principles of natural justice and the provisions of the Act and is devoid of merits and are contrary to facts on record and applicable law, and has been completed without adequate inquiries and as such is liable to be quashed. Disallowance of provision for contract losses 2. The Ld. CIT(A) and the Ld. AO erred in concluding that the provision for anticipated loss is an unascertained liability not allowable as a deduction under section 37 of the Act without appreciating that such provision represents the excess of estimated contract expendi....
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....tandards and the provision has been reversed in subsequent years. If the same is disallowed then it would amount to double taxation. The Ld. CIT-DR, on the other hand, supported the orders of lower authorities and submitted that no deduction could be allowed for mere provisions. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3. The assessee being resident corporate assessee is stated to be engaged in providing dredging and marine engineering services. The assessee claimed provision for expected losses on contract for Rs. 1137.26 Lacs. However, the assessee did not furnish the basis for the same during the course of assessment proceedings and accordingly, the same....
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....ing estimated with reasonable certainty though the actual qualification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability would be in-praesenti though it may have to be discharged at a future date. 4.3 The Ld. CIT(A) further held that in the present case, a provision was created for future losses which was unascertained and clearly a contingent liability. The very fact that this provision was offered to revenue in the subsequent years clearly evidences the fact that the provision made was not scientific and is not based on evidence. Thus, the provision made by the appellant was contingent and therefore, it would not partake the character of expenditure either u/s 28 or u/s 37 of ....
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....) thereby booking an actual loss of Rs. 8.61 crores. The Ld. AR submitted that though actual revenue billed during the year was Rs. 47.26 Crores, considering the fact that the project was completed to the extent of 43.09% during this year, the assessee booked additional revenue of Rs. 46.99 Crores during this year. Further, out of total expected loss of Rs. 19.98 Crores, the assessee has already recorded actual loss Rs. 8.61 Crores and made provision for the balance expected loss of Rs. 11.37 Crores. Hence, the provision has been created as per mandate of AS-7 and the same could not be held to be unascertained / contingent liability for the assessee. It is the submission that both revenue and expenditure as recorded by the assessee has been....
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.... for more than 3 years. To recognize the revenue under the project, the assessee has followed percentage of completion method which is clear from following tabulation as furnished by Ld. AR in its written submissions: - Particulars Formula Amt. (Rs.) Total cost estimated to be incurred for the project A 238,72,81,680 Total revenue estimated to be earned from the project B 218,74,51,975 Total estimate loss from the project C=A-B 19,98,29,705 Actual Cost incurred during the year D 102,86,41,580 Percentage of project completed (based on cost) E=D/A*100 43.09% Percentage of project to be completed F=100%-E 56.91% Actual revenue booked during the year based on POCM G=B*E 94,25,38,149 Actual revenue billed during the ye....