ITAT Overrules CIT(A) and AO, Allows Deduction for Ascertained Contract Losses Based on Scientific Estimation.

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....The case pertains to the disallowance of a provision for contract losses by the CIT(A) and AO, who erroneously concluded it as an unascertained liability not deductible u/s 37. The provision represents the excess of estimated contract expenditure over estimated contract revenues. The ITAT held that the provision constitutes an ascertained liability/probable loss for the assessee, made on a scientific basis. Both lower authorities erred in appreciating that revenue from the contract was also recognized on a percentage of completion basis. The case laws cited by the assessee support this view. The FLSmidth case is distinguishable as the assessee couldn't explain how contract costs would exceed revenues. However, in the present case, the asses.........