2015 (10) TMI 2578 - HC - Income Tax

Provision for transit breakages - whether was not contingent in nature or based on a scientific basis and as such was not an allowable deduction while computing the total income? - Held that - In In view of the judgment passed in Seagram Distilleries Pvt. Ltd case 2015 (10) TMI 491 - DELHI HIGH COURT there is no reasonable scientific method adopted by the Assessees to estimate the transit breakages so as to justify creating of provision for such breakages. The provision would, in the circumstances, be a provision for a contingent liability and, therefore, in terms of the AS 29 ought not be recognised. The actual transit breakages as and when they occur are allowable as revenue expenditure in the accounting year in which such breakages occur. Question framed is answered in favour of the Revenue and against the Assessees.

Summary

The Delhi High Court dismissed the appeal by the Assessee regarding the provision for transit breakages not being an allowable deduction. The judgment was in favor of the Revenue based on a previous case involving Seagram Distilleries Pvt. Ltd. The appeal was accordingly dismissed.