TaxTMI 
TaxTMI 
2025 (9) TMI 1201
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....in remanding the issue of taxability of subsidy and remission of statutory dues of Rs. 110,90,94,770/- to the Assessing Officer and directing the AO to decide the issue on the basis of outcome of the order of Hon'ble Supreme Court pending against decision of Hon'ble Allahabad High Court in W.P. (C) No.2679/2008 ? ii. Whether on the facts and circumstances of the case, the Ld. ITAT has failed to decide the issue of taxability of subsidy and remission of statutory dues on the incorrect premise that the said issue is pending before Hon'ble Supreme Court? iii. Whether on the facts and circumstances of the case, the Ld. ITAT has erred in deleting the entire additions of Rs. 6,89,80,258/- on the issue of after sales expenses, wherein the assessee company themselves admit that the after sales expenses incurred during the year are only Rs. 1,76,30,000/?" 5. Mr. Puneet Rai, learned Senior Standing Counsel for the appellant submits that the substantial question numbers (i) & (ii) are interconnected. The same relate to the action of the CIT (Appeals) partially reversing the Assesssing Officer's (AO) finding, which rejected the assessee's subsidy claim of Rs. 1,10,90,94,77....
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....sue herein is very much pending before their lordships for final adjudication, it would indeed be pre mature for us to apply "accrual" principle at this stage for lack of any reasonable certainty in recognition of revenue as per Chainrup Sampatram v. CIT(1953) 24 ITR 481 (SC). Their lordships have categorically held that a revenue receipt could be recognized as an income only in case there arise a reasonable certainty thereof. We reiterate that the Revenue's clear cut case is that the same has indeed been not actually received all along as the dispute is pending before hon'ble apex court. We, accordingly are of the considered view that the instant common first and foremost issue between the parties is required to be re-adjudicated by the learned Assessing Officer after it is decided in the hon'ble supreme court so as to avoid multiplicity of proceedings. We order accordingly. It is made clear tht the assessee indeed be at liberty to raise all legal and factual pleas in consequential proceedings. This assessee's instant substantive ground nos. 1 to 1.3 and Revenue's corresponding first substantive ground herein are hereby accepted for statistical purposes in very terms." ....
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.... the Companies Act, 1956, "provision" means 6 any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy." Any amount set-aside to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision; 6.4 From the above definition, it is evident that in case of a provision, it is not possible to predict any certainty as to when and to what extent a liability would materialize resulting in business expenditure. As per Section 37(1) of the income Tax Act only those expenses which have been incurred wholly and exclusively for the purpose of business are allowed as deduction. In the instant case, setting aside Rs. 6,89,80,258/- is just a provision for liability which has not matured, therefore, the same cannot be treated as an expense which have been incurred wholly and exclusively for the purpose of business. 6.5 It is pertinent to mention here that Hon'ble Supreme Court in the case of Bharat Earthmovers ltd. Vs, CIT (2000) held that "if....
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.... in its grounds at para 6.1 on page 14 of its paper book filed with appeal memo has admitted that out of the expenditure of Rs. 6.89 crores an amount of Rs. 5.1350 Crores only was provision and the balance of Rs.1.7630 Crores was actual expense. The ground taken by the appellant in its appeal memo settles the dispute. The disallowance to the extent Rs. 5.1350 Crores is therefore confirmed being the provision and for which the liability has not yet arisen. The amount for Rs. 1.7630 Crores which admittedly represented actual expenses is allowed and addition to that extend is deleted. The appellant gets relief to the extent of Rs. 1.7630 Crores out of the disallowance of Rs. 6,89,80,258/-." 11. It has come on record that the learned CIT(A) had simply gone by the assessee's provision to reject its claim on the one hand and deleted the balance portion on account of actual expenditure in it's favour. We are of the considered view that the Revenue's second substantive ground herein, seeking to revive the impugned actual expenditure, hardly carries any merits as this is not even its case that the same has not been expended wholly and exclusively for the purpose of business u/s 37(....