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TMI Blog2014 (5) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the Tribunal, what the assessee did was only make a provision for a possible expenditure or liability - It was thus neither an allowance nor deduction - not for any loss, expenditure or trading liability incurred by the assessee - the Tribunal correctly held that Section 41 (1) of the Act would not apply - CIT (A) has permitted the AO to re-verify whether any deduction towards such provision was allowed in the AY 2003-04 to 2007-08 - if any amount of such provision is found allowed, for the years to that extent, the provision on written back is to be taxed u/s 41 (1) of the Act – Decided against Revenue. - Tax Appeal No. 195 of 2014 - - - Dated:- 6-5-2014 - Akil Kureshi And Sonia Gokani,JJ. For the Appellant : Mr. K. M. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Development Board { NDDB for short}. For the A.Y 2007-08, its return of income was scrutinized by the Assessing Officer. He noticed that the assessee had written back provision amounting to Rs. 24.15 Crores which provision was made in the earlier years. He confronted the assessee why such provision of written back be not taxed during the year under consideration. The assessee represented that the NDDB was exempt from payment of Incometax upto the A.Y 2002-03. The provisions were made during the years when no tax was to be paid by NDDB. The NDDB has thus not claimed any benefit of tax deduction on such amounts. Section 41 (1) of the Act, therefore, would not apply. Assessee also contended that in any case Section 41 (1) of the Act pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then this deduction on account of provision under Section 36(1)(iv) is not allowable deduction in that year, because under this section, actual write off is allowable and not the provision. This is a pre requirement of Section 41 (1) that where the allowance or deduction has been made in the assessment for any year, in respect of loss, expenditure or trade liability incurred by the assessee, and the same is subsequently ceased or has been remitted, then there is income under Section 41 (1) of the Act. Since in the present case, no deduction has been allowed to the assessee, in the year of making the provision, and it cannot be allowed because provision is not allowable under Section 36 (1)(iv), write back of such provision cannot give rise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. In the present case, as held by the CIT [A] as well as the Tribunal, what the assessee did was only make a provision for a possible expenditure or liability. It was thus neither an allowance nor deduction. In any case, not for any loss, expenditure or trading liability incurred by the assessee. In that view of the matter, the Tribunal correctly held that Section 41 (1) of the Act would not apply. Further, we have noticed that CIT (A) has permitted the Assessing Officer to reverify whether any deduction towards such provision was allowed in the assessment years 2003-04 to 2007-08. He further provided that if any amount of such provision is found allowed, for the said years to that extent, the provision on written back is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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