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2016 (6) TMI 1463 - KARNATAKA HIGH COURTRecognition of provision - whether the stock has become obsolete or not? - only reason why the Assessing Officer has disallowed the claim of the assessee is on account that the provision is contingent liability, cannot be allowed, expenditure can be allowed only on payment basis - HELD THAT:- ITAT having considered the adequate material placed before it, thought it fit not to remit the matter to the AO. It is also noticed that the method of accounting followed by the assessee is mercantile wherein the income and expenditure is on accrual basis. We have examined this issue in the light of the Judgment pronounced by the Apex Court in Rotork Controls Case [2009 (5) TMI 16 - SUPREME COURT] wherein the three tests are laid down to recognize a provision under the act. The ITAT being a last fact finding authority has held that all these ingredients which goes to the recognition of provision are satisfied and as such, there is no need to remit the matter back to the AO - No ground made out by the revenue to remand the matter back to the Assessing Officer. The claim of expenditure being consistent with the method of accounting followed and the provision has been made on concluded transactions, the order of the Assessing Officer is held to be incorrect. We do not see any reason to differ from this view, which is in accordance with Section 145 of the Act. Deduction u/s 80HHE - HELD THAT:- When no claim for deduction under Sec. 80HHE of the Act was made by the assessee, the issue for consideration thereof was an academic exercise. CIT(A) as well as the Tribunal ought not to have made any further observations thereafter, for giving treatment for the computation of the deduction under Sec. 80HHE. The observations can be said on hypothesis and surmises. CIT (A) as well as the Tribunal could observe for consideration of the claim of deduction u/s 80HHE in accordance with law. Under the circumstances, we find that the observations made by the CIT (A) as well as the Tribunal for the deduction under Sec. 80HHE deserves to be expunged by observing to the extent that the claim, if any, can be made by the assessee for deduction under Sec. 80HHE is to be considered in accordance with law. Hence, to that extent, the order of the Tribunal is set aside. Question is answered accordingly to that extent in favour of the Revenue against the assessee.
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