TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 907
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....arned Authorised Representative ("learned AR") placed on record the modified grounds of appeal, which are reproduced hereunder and are considered for adjudication of the present appeal: - "1. That the learned Commissioner of Income Tax (Appeals) erred both in law and on facts in upholding the disallowance of Rs. 1,27,00,000 being provision for project-related expenses, without appreciating that the said provision was made on a scientific and consistent basis in accordance with the matching principle in line with project completion method. 2. That the learned CIT(A) erred in confirming the disallowance of Rs. 1,00,00,000 being provision created towards anticipated legal claims, without considering that the liability had ari....
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....submitted that these expenses are not contingent in nature, but have been estimated based on the actual liability to be incurred for the final, necessary, and obligatory expenses of the project. The assessee submitted that, under the sale deed, a contractual obligation was created on the assessee to provide a clear title, as well as common amenities and facilities, as promised to the buyers. Thus, it was submitted that the estimate has been made on the expert's advice, and there is no chance that the expenses to be incurred would be less than the provisions made. Furthermore, the assessee submitted that it had incurred an expenditure amounting to INR 1,08,21,977 during the succeeding financial year and INR 18,78,023 during the period Ma....
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....y the assessee on a yearly basis to determine how the amount for the provision was estimated. Accordingly, the AO, inter alia, disallowed the provision for the cost of construction, amounting to INR 1.27 crore, and the provision of the cost of tenant dispute, amounting to INR 1 crore, by treating the same as contingent liability, and added the same to the total income of the assessee. 5. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the addition on both counts on the basis that the provision made is found to be unascertained and contingent, as the exact liability had not arisen as on the balance sheet date. Furthermore, the learned CIT(A) held that the liability arising from the legal disp....
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....rder to substantiate that actual expenditure was incurred in the subsequent years, the assessee also furnished a ledger account, vouchers and bank statements. We find that the said documents also form part of the paper book filed by the assessee before us. 7. The Hon'ble Supreme Court in Bharat Earth Movers vs. CIT, reported in [2000] 245 ITR 428 (SC), observed as follows: - "4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quant....
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....iousness of the claim involved, the assessee made a provision of INR 1 crore in respect of the ongoing civil dispute. As per the assessee, the Hon'ble Civil Court on 02/02/2019 directed the assessee to reconstruct the house, restore amenities and pay a compensation of INR 60 lakh with interest. It is evident from the record that the lower authorities disagreed with the submission of the assessee, as the provision was made prior to the court's final ruling, and at the time of making the provision, the liability was not yet crystallised and was dependent on the outcome of the judicial proceedings. Therefore, it was held that the liability was contingent in nature during the relevant assessment year, and the provision made does not qualify as ....