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Issues involved: Whether provision for maintenance costs can be claimed as an expense u/s 37 of the Income Tax Act, 1961.
Summary: The High Court heard appeals by the Revenue for assessment years 2003-04 and 2005-06 regarding the claim of maintenance costs as an expense u/s 37 of the Income Tax Act. The Tribunal found no merit in the Revenue's grounds, noting the consistency in the assessee's accounting principles over the years. The Tribunal upheld the order of the Ld. CIT (A) based on the principle of consistency. The Revenue confirmed that they did not appeal against adverse orders in earlier assessment years where similar additions were made and later deleted by the CIT (Appeals). The Revenue mentioned that the assessee changed their accounting method from assessment year 2007-08 onwards, no longer making provisions for maintenance costs to avoid confusion or litigation. The Court, after examining the Tribunal's reasoning, declined to admit the appeal, emphasizing that the provision for maintenance was based on flying hours undertaken in the relevant year. It was noted that aircraft require maintenance after prescribed flying hours, and interfering with the established accounting practice on a piecemeal basis could create difficulties. In conclusion, the appeal by the Revenue was dismissed, considering the consistent accounting practice followed by the assessee and the rationale behind the provision for maintenance costs based on flying hours undertaken.
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