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TMI Blog2009 (6) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed, then, the sale entries recorded in subsequent year were to be deleted therefrom. Learned counsel for the assessee further submitted that the learned CIT(A) also gave directions to this effect to the AO, however, the AO had not given any effect to such directions so far and now, the assessee was not pressing this ground for smallness of the amount, however, the necessary adjustment was to be done in the subsequent year's figures, hence, suitable directions could be given. Learned Departmental Representative also agreed. 6. On due consideration of facts, we are of the view that once the impugned entries have to be recognized as sales of the year under consideration, hence, the same are required to be deleted from the next year. Accordingly, we direct the AO to delete the same from the subsequent year. Thus, this ground of the assessee stands dismissed subject to the aforesaid directions. 7. Ground No. 2 reads as under: "2. On the facts and in the circumstances of the case, the learned CIT(A) has legally erred in confirming the disallowance of ascertained liability of Rs. 3,128.07 lakhs on account of the provisions made for incremental wages under National Coal Wage Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soon as the service was rendered, right to compensation for the services rendered accrued, though the right to receive the payment arose as per the terms/conditions of the contract of employment. It was further contended that for the employer, the liability to compensate the employees for the services rendered was an existing ability. The learned counsel for the assessee further contended that such provision was also allowable on the basis of matching principle. He further contended that in the year 1996-97, similar provision was made which was disallowed by the AO, however, the learned CIT(A) had accepted the claim of the assessee and the Department in the appeal before the Tribunal, did not contest the same, hence, a differential treatment could not be given subsequently. It was also submitted that the assessment order for asst. yr. 2004-05 was subjected for an action under s. 263 of the IT Act, 1961 (for short "the Act") even then the learned CIT did not touch the issue of allowability of wages, had been allowed by the AO. Hence, both these facts reflected the attitude of the Department towards such claim and, accordingly, the principle of consistency was to be applied and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively, it was contended that in case the disallowance was to be confirmed, then, the deduction should be allowed in the year of approval and the payment of arrears. Thereafter, the learned counsel for the assessee contended that the decisions relied on by the AO were distinguishable on facts e.g., in the case of Indian Molasses Co. (P) Ltd., the assessee had made provisions against a liability that itself was contingent whereas in the present case, the liability was already existing only the quantification of the said liability was pending. The learned counsel for the assessee also relied on various judicial decisions for the application of rule of consistency. 12. Learned Departmental Representative, on the other hand, placed strong reliance on the order of the learned CIT(A). 13. We have considered rival submissions, orders of the authorities below and the materials available on record. It is noted that the assessee is a wholly-owned subsidiary of Coal India Ltd., a Government of India Enterprises. It is also noted that the wages for the employees are reviewed periodically as per agreement with the Coal Mines Officers Association of India. It is also noted that NCWA-VI expired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king of provision of such expenses in the relevant accounting period. It is also pertinent to note that such provision may be less or more and depending upon the criteria on the basis of which such provision is made, however, the excess expenditure provided can be written back in subsequent year and may be offered as income under s. 41(1) of the Act or the short provision can be claimed as expenditure in that year. Thus, in both the situations, the interests of Revenue are protected. 15. The Hon'ble Supreme Court has, in a very recent judgment, in the case of Rotork Controls India (P) Ltd., held that a provision to be termed as provision of liability had to be such which could be measured by using substantial degree of estimation and it was to be recognized only when: (i) the enterprise had a present obligation as a result of a past event; (ii) it was probable that an outflow of resource will be required to settle the obligation; and (iii) reliable estimate could be made of the amount of obligation then such provision was definitely to be recognized in the books of account and if these conditions were not made, no provision could be recognized. In the present case, it is not in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of ascertained liability and, therefore, such provisions have been correctly made in the year under consideration. Further, this is also allowable in view of our reasonings in the para 14 of this order. Accordingly, we accept this claim of the assessee. Consequently, this ground of appeal by the assessee is also allowed. 19. In ground Nos. 4, 5 and 6, the assessee is aggrieved by the decision of the learned CIT(A) in confirming the disallowance in respect of overloading charges, underloading charges and credit notes issued by the assessee to its customers for stones, shells, etc., contained in the consignment sent to them at various points of time. 20. The facts, in brief, are that the assessee is a colliery company and transports coal to Electricity Boards in railway wagons. The freight for such transportation is payable by the customers and is dependent upon the carrying capacity of railway wagons. The AO found that underloading charges where the amount of reimbursement of excess freight paid by the customer due to loading of less quantity of coal as against the carrying capacity of the wagons reimbursed by the assessee company. The overloading charges are the case of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company, hence, the findings of the Revenue authorities on these items were not correct at the very outset. As regards the underloading charges, the learned counsel for the assessee contended that the same were allowable on the principle of commercial expediency and placed reliance on the various judicial decisions in support of this contention. It was further contended that there was (sic-no) infraction of law whatsoever in the case of underloading as to attract the provisions of Explanation to s. 37(1) of the Act as had been done by the Revenue authorities. As regards overloading charges, the assessee explained that the railways framed rules so as to protect its revenue which was generally six times of the normal freight and overloading in excess of carrying capacity of wagon resulted into levy of such charges which were shared by the customers and the assessee equally. It was further contended that these were incurred by the assessee in the normal course of its business activities. It was further contended that these charges were akin to excess bagages charged by the airlines for weight beyond free allowance. The learned counsel for the assessee further submitted that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions, orders of the authorities below and the materials available on record. We find that all the three charges have been clubbed together without analyzing the exact nature of these items. As far as underloading charges and credit notes are concerned, these expenses have been incurred by the assessee as a consequence of agreement with its customers and these have not been paid to railways like overloading charges, hence, at the very outset, these are not covered within the ambit of Explanation to s. 37(1) of the Act. The fact of incurrence of these expenses for the purpose of business is also not in doubt. Accordingly, we hold that these are allowable expenses as incurred for the purpose of business. Thus, ground Nos. 5 and 6 of assessee's appeal are accepted. 26. As regards overloading charges, we have to take into consideration the environment in which the companies are operating. Railway is the only mode of transportation if the person wishes to transport its product through railway. This fact is important because such activities of railways are commercial in nature and freights are fixed on commercial basis. If we look the issue in its perspective, then, what eme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved which were also there in assessee's appeal in ITA No. 289/Nag/2006 for asst. yr. 2002-03, hence, following the same reason, these grounds of the appeal by assessee are allowed in the year under consideration. 31. In the result, assessee's appeal stands allowed. 32. Now, we take up assessee's appeal in ITA No. 261/Nag/2008, for asst. yr. 2003-04, wherein the learned CIT under s. 263 of the Act has revised the assessment order in respect of the provisions of wages under NCWA-VII. 33. The facts, in brief, are that the assessee is a subsidiary of Coal India Ltd. and made provision of Rs. 40,08,97,000 towards wages payable which was accepted by the AO. Subsequently, the learned CIT formed an opinion that in the absence of any agreement/settlement such liability had not crystallized and, therefore, deduction of such provision had rendered the assessment erroneous as well as prejudicial to the interests of Revenue. 34. The learned counsel for the assessee contended that earlier NCWA expired on 13th June, 2001, hence as per the directions of its holding company, 10 per cent of basic pay was provided towards salary/wage of non-executive employees. The assessee also placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also involved in the asst. yr. 2002-03 in assessee's appeal wherein the similar claim had been disallowed by the AO and confirmed by the learned CIT(A), hence on merits, the same arguments could be presumed to have been made herein. He also submitted that lack of discussion on the issue in the assessment order would not render such order erroneous and for this reason he relied on various judicial decisions which we are not citing here as it is a settled judicial proposition that the assessee has no control over the manner in which the AO writes the order. Learned counsel for the assessee also placed reliance on the various decisions cited before the learned CIT for various general propositions such as change of opinion and lack of inquiries. As regards the factual difference, noticed by the learned CIT with regard to asst. yr. 1996-97, the learned counsel for the assessee submitted that in sum and substance, there was no difference because as per the accepted commercial principles, business practices and prudence, the events occurring after balance sheet date but before the finalization of accounts had to be considered in preparing the financial statement of a particular year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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