9911796707
TMI Blog2015 (9) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year 2009-10 and second installment of 60% of the aggregate arrears in the financial year 2009-10 i.e. 2010- It is quite clear that the liability of payment of 60% of arrears of salary has arisen during the assessment year under consideration and the liability was also discharged at a future date. In this view, the liability is not in the nature of any contingent liability. From these facts, it can be very easily inferred that there was an ascertained liability in the form of payment of arrears of revised pay scales, which partly was booked in an earlier year and the remaining in the present year. Since the assessee is following the mercantile system of accounting and the provision on account of arrears for salary paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for 60% arrears of the revised pay scales amounting to ₹ 204.52 Lacs has been made during the year 2009-10. (ix) The company has made provision of service charge @ 1% on the procurement of the gunny bags amounting to ₹ 23.30 lacs for the year 2008-09 and ₹ 20.11 lacs for the year 2009-10 as payable to Director Food Supply. 3. The Assessing Officer asked the assessee to justify the eligibility of year of payment of these provisions. The assessee explained to the Assessing Officer that the expenses had been claimed on accrual basis by following the mercantile system of accounting. However, the Assessing Officer rejected the submissions of the assessee, In view of the fact that the provision made is allowed as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the basis of facts before me, it is noted that the expenditure on account of arrear salary due to revised pay package was provided in the assessee's books of account as per State Government notification dated 07.01.2009 and in view of minutes of board meeting held on 18.03.2009. The appellant made provision for 40% arrear of the revise pay scales of Rs.l06.37 lacs in year 2008-09 to be released during 2009-10 and the remaining provision of 60% arrears of the revised pay scale of ₹ 204.52 lacs was made during 2009-10 which was to be released in subsequent year 2010-11. Thus the liability was booked in the account which arose in F.Y. 2009-10 as per the mercantile system of accounting being followed by the appellant. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification stipulates that provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represent only a best estimate in the light of available information. Therefore, the accounting policy does recognize the provisions for known liabilities in the case of assessees following the mercantile system of accounting. 6.2 Therefore, in view of above facts, it is undisputed that there was ascertained liability in the form of payment of arrear of revise pay scales which in part was booked in the preceding year and partly in the current year as per directions of State Government notification. It is also certain that such liability has been discharged in the following year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not accrued during the year. As per him, the said provision was not allowable as per the Income Tax Act and is allowed in the year of payment of the same as no liability has incurred in this year. In view of this, it was prayed that the order of the learned CIT (Appeals) may be set aside and the order of the Assessing Officer be confirmed. 8. The learned counsel for the assessee relied upon the order of the learned CIT (Appeals) and submitted that learned CIT (Appeals) has given a detailed finding of fact on the issue and there is no error and mistake in the said findings of the learned CIT (Appeals). In view of this, it was prayed that the appeal of the Department be dismissed. 9. We have heard the rival contentions and peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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