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TMI Blog2017 (12) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the contract for construction of influent pumping station at Ghatkopar for the Municipal Corporation of Greater Bombay, Maharashtra (BMC, for short). As per the agreement between the respondent-assessee and BAPL, the entire amount receivable by the latter on account of the aforesaid project was to be transferred to the respondent-assessee as consideration. 4. The respondent-assessee had started the aforesaid construction in the previous year relevant to the Assessment Year ('AY', for short) 1992-93 and the contract was completed in the previous year relevant to the AY under consideration i.e. 1997-98. The respondent-assessee had for the purpose of taxation opted for "completed contract method". 5. Return of income filed by the respondent-assessee on 27th October, 1997, declaring loss of Rs. 4,18,980/-, was taken up for scrutiny assessment. The assessment order dated 24th March, 2000 records that, pursuant to the directions issued under Section 144A of the Income Tax Act, 1961 (Act, for short), the income of the assessee for earlier AYs 1992-93 to 1996-97 was brought to tax by applying "percentage completion method" @ 12% of gross receipts. Administrative expenses were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The observations made by the Commissioner of Income Tax (Appeals) in this regard read as under:- "I have carefully considered the arguments of the A.O. and the submission of the appellant. The A.O. has discussed at length the inadmissibility of the claim for Rs. 54.1 crores. The issue of the allowance of this claim is not in appeal expect for an amount of Rs. 62,99,100/- which was separately claimed by the appellant. The A.O. made disallowance of Rs. 54.1 crores and Rs. 62,99,100/-in the same breath. The arguments given by her for disallowing the claim of Rs. 54.1 crores was applied in relation to the claim of Rs. 62,99,100/-also. However a distinction needs to have been made for appreciating both the claims. The bigger claim was rightly refused because it had neither been accepted by the appellant not had been ascertained or quantified. But the situation with regard to the claim of Rs. 62,99,100/- is different as there is no dispute about the pending work. In fact the quantification by the BMC for this work as per final claim made by it is yet higher at about Rs. 1.36 crores. The A.O. has given reason for not accepting the claim of the assessee in Para 29 of the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility has not been quantified for payment which law enjoins upon assessee to cannot be relevant (2000) 111 Taxman 612). An enforceable liability against the assessee was created in the year through the principal contractor by the BMC. This liability was not only quantified in the year but was also accepted by the assessee in the year. Assessee has been following mercantile system of accounting and the project in which the liability was created came to an end in this year. Therefore the claim could only have been ascertained and made in this year. Under the circumstance and in view of decisions mentioned supra, the deduction of Rs. 62,99,100/- is allowable. If subsequently there is a remission of liability, such remission would attract provisions of Section 41(1) of the Act. The A.O. is directed to allow the same." 7. Aggrieved, the Revenue preferred further appeal which has been dismissed by the impugned order dated 15th September, 2004, passed by the Income Tax Appellate Tribunal. The impugned order after referring to the order passed by the AO and the first appellate authority held that the assessee had accepted the liability and, therefore, the same was not contingent. There be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounting and estimated provision of expenses to be incurred against the work already completed. I. A copy of the letter dated 29.09.1995 of BMC to BAPL alongwith enclosures. J. A copy of the letter dated 20.11.1996 alongwith enclosures written by BAPL acknowledgement of confirmation of claim of Rs. 62 lakhs in their favour by the appellant vide letter dated 15.10.1996. K. A specific confirmation from Bhasin Associates Ltd. Certifying admitted claim of Rs. 62,99,100/- by the appellant in its favour in respect of BMC, Ghatkoper, Mumbai Project. L. A letter from the appellant to the said effect giving categorical confirmation vide letter dated 15.10.1006. It was submitted that there was no dispute between the appellant and BAPL the principal contractor. The appellant admitted his liability to that extent as he failed to fulfil (sic) his commitment to complete the work and as happens in every government contract the governments is empowered to get the uncompleted work finished from other sources at the risk and cost of the earlier contractor. Such amount can be recovered thereafter by the Govt. from the contractor as land revenue. It is pointed out by the learned counsel t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the actual claim of the BMC remains Rs. 1.36 crores only against which the appellant has admitted a liability of Rs. 62.99 lakhs. A reconciliation of the pending work claimed by the BMC and quantified by the appellant at Rs. 62.99 lakhs has also been filed. In respect of the issue alleged by the A.O. that certain amounts included in the claim of Rs. 54.1 crores made by the BMC are also included in the admitted liability of Rs. 62.99 lakhs of the assessee, it was stated that the same is correct. A copy of the letter dated 29.08.96 issued by BMC attaching therewith the list of pending balance and rectification work has been filed. Since the said work was factually incomplete and pending the appellant conceded the same and valued its cost at Rs. 62.99 lakhs. The items mentioned in the said list to BMC tally item by item in the Valuation made by the appellant and the main contractor as per details given on pages 52 & 53 of the paper book filed earlier. Further, it is stated that from exhibits RR and YY which form part of the claim of the BMC, it would be seen that for the rectification items claim was for Rs. 14.10 lakhs as against which the assessee admitted a liability of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Statute. Any subsequent probable remission cannot influence the result of an earlier year if as on the closing date of the earlier year, the nature of subsequent event was not know. Further the counsel for the appellant has place reliance on certain decisions. On the basis of the above arguments the learned counsel prayed that the action of the A.O. in rejecting the deduction of Rs. 62,99,100/-should be reversed." 10. In the absence of the said documents and papers, it would be hazardous and difficult for us to answer the question framed above without examining the contents of the agreement and correspondence exchanged between the parties. Noticeably, the exchange of correspondence itself between the respondent-assessee and BAPL, and BAPL and BMC remained undisputed and was not under challenge. 11. In view of the aforesaid position, we decline and do not answer the question of law as the appellant-Revenue has not placed on record the said letters including the agreements mentioned above. Without the said documents, it will not be possible to answer the question. The case of the respondent-assessee as accepted by the first appellate authority and the Tribunal is that they h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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