2017 (4) TMI 1529 - AT - Income Tax

Addition on account of motor accident claims of earlier years - CIT- A allowed the claim - claim of the appellant that the liability crystallizes only after the award by the MACT and the payment is made thereafter - AO noticed that the assessee had claimed a deduction in respect of payments towards motor accident claims but all these payments donot pertain to the current year alone AND in many cases the compensation award by Motor Accidents Claim Tribunal (MACT) was given much earlier but assessee did not create any provision or liability at that point of time - HELD THAT - We find that merely because the MACT awards are booked by the assessee at a later point of time than the date of the award cannot be reason enough to decline the claim for deduction in respect of these awards. It is sometimes possible rather its inherent mechanism of the system as it exists that sometimes there is considerable delay in communicating the awards granted by MACT. The awards are generally conveyed through the lawyers representing the assessee and it does take time in many cases. It is not the case of the AO that the subsequent claims are duplication of claims in respect of the same liability and the assessee does not stand to gain as a result of this delay in accounting. In any event the quantification of claims is verified by the statutory auditors as also the CAG audit teams and the same method of accounted is being followed by the assessee for last 50 years. As there is no change in method of accounting as there is no duplication of claims and as assessee does not anyway gain anything from delaying accounting for these claims we see no reasons to reject the claims merely because these claims are accounting for in the books of accounts at a point of time later than awards being granted i.e. when the assessee gets to know about the same. CIT(A) has given a categorical direction to the Assessing Officer for verification of claim on account of the liability having been crystallized in the relevant previous year. Grievance of the Assessing Officer regarding crystallization of liability does not therefore survive any longer. In view of these discussions as also bearing in mind entirety of the case we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. Addition on account of shortage of spare parts - assessee claimed a shortage of stock with no complete details - as explained by the assessee that during the relevant previous year the assessee has consumed diesel for 592.18 crores and CNG worth 67.04 crores and the inherent nature of these products is such that there is scope for evaporation of diesel and CNG - CIT-A deleted the addition - HELD THAT - The stand of the CIT(A) in this regard is very well reasoned and it does not indeed call for any interference. When an assessee is dealing with such a huge volume of diesel and CNG as the assessee before us it is quite understandable that there can be some loss by way of evaporation and in the process of distributing the diesel and CNG to the motor vehicles. This loss has been certified by the auditors as well. It is also not the case of the Assessing Officer that the loss is excessive or unreasonable. In view of these discussions as also bearing in mind entirety of the case we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.

Summary

Issues:
1. Challenge to CIT(A) order for assessment year 2009-10.
2. Addition of reconditioning of buses and income from license fee of canteen.
3. Addition of motor accident claims of earlier years.
4. Addition of shortage of spare parts.

Analysis:

Issue 1: Challenge to CIT(A) order for assessment year 2009-10
The appeal challenges the CIT(A) order dated 28th January 2014 for the assessment year 2009-10. The counsel for the assessee concedes that certain grounds are covered against the assessee based on a previous Tribunal order for the assessment year 2005-06. These grounds are allowed, and the matter can be taken up at higher forums if needed.

Issue 2: Addition of reconditioning of buses and income from license fee of canteen
The CIT(A) deleted the addition of reconditioning of buses and income from license fee of the canteen, treating them as capital expenditure and business income, respectively. The Assessing Officer challenged this deletion, but the Tribunal upheld the CIT(A)'s decision based on consistent accounting policies and the crystallization of liabilities only after awards by the Motor Accidents Claim Tribunal. The Tribunal found no reason to reject the claims and declined to interfere in the matter.

Issue 3: Addition of motor accident claims of earlier years
The Assessing Officer disallowed a deduction claimed by the assessee towards motor accident claims of earlier years. The CIT(A) allowed the deduction after considering the consistent accounting policy of the assessee, where liabilities crystallize only after awards by the MACT. The Tribunal upheld the CIT(A)'s decision, noting the delay in communicating MACT awards and the verification of claims by auditors. The Tribunal approved the CIT(A)'s conclusions and declined to interfere in the matter.

Issue 4: Addition of shortage of spare parts
The Assessing Officer disallowed a claim for shortage of spare parts made by the assessee. However, the CIT(A) reversed this decision, considering the nature of products and the certified loss by auditors. The Tribunal found the CIT(A)'s reasoning sound and declined to interfere in the matter, ultimately dismissing the ground of appeal.

In conclusion, the Tribunal partly allowed the appeal, dismissing certain grounds while upholding the CIT(A)'s decisions on various issues. The Tribunal's decision was based on a thorough analysis of facts, legal positions, and the reasoning provided by the parties involved.