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TMI Blog2017 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition of Rs. 11,07,83,044/- made by A.O. on account of disallowance of 'provision for development for development expenses' claimed by the assessee firm." 2. The brief facts of the case are that a search and seizure operation U/s 132(1) of the Income Tax Act, 1961 (in short the Act) was carried on 29/03/2010 at the various premises of Mayura Group. Mayura Infrastructure Development Company (MIDC) is a partnership firm which is developing a integrated township named as "Mayura City" at Madanganj, Kishangarh. The Assessing Officer made addition for not allowing the provision for development expenses of Rs. 13,61,02,357/- in the assessment year 2011-12 and Rs. 11,07,83,044/- in the assessment year 2013-14. 3. In both the years, the additions were deleted by the ld. CIT(A). The relevant para of the ld. CIT(A)'s order for A.Y. 2011-12 is reproduced hereunder:- "3.1.2 I have duly considered assessee's submission and carefully gone through assessment order passed by the AO. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,81,63,781/- which works out at cost of development expenditure already incurred at Rs. 128/- per sq yards on sale made. Therefore, provision of remaining development expenses to be incurred of Rs. 828/= per sq yards (956-128=828} amounting to Rs. 13,61,02,357/- was made on the area sold above. In support of its claim, assessee has relied upon the decisions of Hon'ble Apex Court in cases of Bharat Earth Movers &. Calcutta Co Ltd (supra) and Hon'ble Rajasthan High Courts in case of Om Metals and Minerals P Ltd (supra). It is pertinent to mention here that the Hon'ble Apex Court, in Om Metal and Mineral Pvt. Ltd (Supra) after considering the judgment rendered in the case of Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC) culled out following principles for a claim like this (430 245 ITR): For an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted Principles of Commercial practice and Accountancy, it is not as if such deduction is permissible only in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed valuer (in Rs.) A 43,35,00,000 Total Land Area available with MIDC(in Sq Yards) B 4,53,530.92 Cost of development expenses(A/B)(per Sq Yards) C 956 Actual development expenses upto 31.03.2011 (in Rs.) D 5,81,63,781 Cost of development exp. per sq yards of actual expenses(D/B) E 128 Provision to be made for more expenses(In Rs)(C-E) F 828 Sales made during F.Y 2010-ll(sq yards) G 1,64,456.89 Amount of provision on sold area(In Rs)(F*G) 13,61,02,357 The claim of the expenditure for which the provision has been made was having direct nexus with the income as declared by the assessee, therefore, such provision made by the assessee was allowable during the year under consideration. In view of these facts and circumstances, we are in agreement with the order of the ld. CIT(A). For holding so, we also get support from the following case laws:- 1. Bharat Earth Movers v/s Commissioner of Income Tax (2000) 245 ITR 428 (SC). 2. Calcutta Co. Limited v CIT (1959)( 37 ITR 1)(SC). 3. CIT v Triveni Engineering & Industries Limited ITA NO 56 OF 2009 in the High Court of Delhi, New Delhi. 4. EXL Service.com (India) Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 62,25,483 was set apart in a separate account as provision for encashment of accrued leave. It was claimed as a deduction. In the opinion of the Tribunal, the assessee was entitled to such deduction. The High Court had formed a different opinion and held that the provision for accrued leave salary was a contingent liability and therefore was not a permissible deduction. On appeal to the Supreme Court : Held, reversing the decision of the High Court, that the provision made by the assessee-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by the employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, was entitled to deduction out of the gross receipts of the accounting year during which the provision is made for the liability. The liability was not a contingent liability." Similarly in the case of Calcutta Co. Ltd. Vs. CIT, West Bengal, the Hon'ble Supreme Court has held as under:- In the relevant accounting year the appellant actually received in cash only a sum of Rs. 29,392 towards sale price of land ..... X X X X Extracts X X X X X X X X Extracts X X X X
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