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TMI Blog2018 (9) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of probability. Thus, the assessee having failed to fulfil the triple test prescribed in Rotork Controls India (P) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA), is not entitled to the deduction as claimed by them. As assessee submitted that the assessee should be entitled to claim the same in the year when the damages had been recovered. Needless to state that it is for the assessee to disclose the same in the return of income to the relevant year, which will obviously be considered by the Assessing Officer in accordance with law. Accordingly, the second substantial question of law framed in these appeals is answered in favour of the Revenue and against the assessee. - Tax Case (Appeal) Nos.170 & 171 of 2004, 501 & 502 and 1450 & 1451 of 2007, T.C. (A) No.170 of 2004 - - - Dated:- 13-8-2018 - T. S. Sivagnanam And V. Bhavani Subbaroyan, JJ. For Appellant : Mr.G.Baskar ( in all Appeals ) For Respondent : Mr.Karthik Ranganathan, ( in all Appeals ) Standing Counsel JUDGMENT [ Delivered by T. S. Sivagnanam, J. ] In these batch of cases, the issue arises out of the common order of the Tribunal in the assessee s own case for the assessment years 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted delay in execution the Tribunal was right in coming to the conclusion that the claim of Liquidated damages in respect of delay in delivery has not arisen during the current year under appeal? T.C.(A) Nos.501 and 502 of 2007 : (a) Whether on the facts and in the circumstances of the case, the Tribunal is empowered to entertain a second application for rectification of its order having rejected an identical application earlier? (b) Whether the facts and circumstances of the case warranted a rectification of its earlier order by the Tribunal? (c) Whether the Tribunal as in the guise of rectifying its order dated 12.12.2002 has in effect reviewed the said order which it is not empowered to do? T.C.(A) Nos.1450 and 1451 of 2007 : (a) Whether on the facts and in the circumstances of the case, the Tribunal was right in dismissing the Revenue's appeal against the order of the CIT(A) granting relief in a miscellaneous application when the issue was still debatable? (b) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee is entitled to deduction of the provisions made for damages fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the liability to pay liquidated damages arises immediately on occurrence of the delay. Hence, the liability accrued is an accrued liability and the assessee has accepted the delay in each of the contract as on 31.03.1997 and 31.07.1998 and have computed liquidated damages as per the respective contracts. The above contention though not initially accepted by the Tribunal, on the second miscellaneous petition having been filed, the Tribunal accepted the case of the assessee and held as follows:- .............The claims in the books are based on the terms of the contract between the parties. Since the liability has arisen and is crystallized as a result of binding contract between the parties the same is allowable as held by the Hon'ble Supreme Court reported in 37 ITR 1 and 245 ITR 248 as well as the decision of the Special Bench reported in 35 ITD 18 and 43 ITD 527 and as conceded by the department before the jurisdictional High Court in 130 Taxman 400 (supra). We further hold that allowability of the claim need not be postponed till the plea for waiver is considered or rejected by the customer. We also hold that in view of the decisions of the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount was unascertained and contingent. It is submitted that the said decision can have no application to the facts of the present case, as the liability has been fixed under the agreement and the assessee has accepted the delay and the payments have been effected to the assessee after deducting the amount towards damages as fixed under the contract. With the above submissions, the learned counsels prayed for allowing TC(A) Nos.170 and 170 of 2004 filed by the assessee and dismissing TC(A) Nos.501 and 502 and 1450 and 1451 of 2007 filed by the Revenue. 18.Mr.Karthik Ranganathan, learned Standing Counsel appearing for the Revenue sought to sustain the order passed by the Tribunal by contending that to be entitled for deduction on the provision made, the assessee has to satisfy the three tests laid down by the Hon'ble Supreme Court in Rotork Controls India (P) Ltd. vs. Commissioner of Income Tax reported in (2009) 314 ITR 0062. 19.By referring to the decision in the case of Commissioner of Income-tax vs. Forbes Campbell Finance Ltd. reported in (2013) 352 ITR 602, it is submitted that the Hon'ble Court has held that unless the three conditions recognising the liability a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation. If these conditions are not met, no provision can be recognized. 12. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation. 23.Thus, the three tests being that (a) an enterprise has an obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. The Revenue cannot dispute the fact that the assessee in the instant case satisfied test Nos.(a) and (c). 24.To be entitled to a deduction as claimed by the assessee, the assessee has to cumulatively satisfy all the three tests. Therefore, it has to be seen as to whether it is probable that an outflow of resources will be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as a case of possibility but, not a case of probability. Thus, the assessee having failed to fulfil the triple test prescribed in Rotork Controls India (P) Ltd. (supra), is not entitled to the deduction as claimed by them. 29.The learned counsel for the assessee submitted that the assessee should be entitled to claim the same in the year when the damages had been recovered. Needless to state that it is for the assessee to disclose the same in the return of income to the relevant year, which will obviously be considered by the Assessing Officer in accordance with law. Accordingly, the second substantial question of law framed in these appeals is answered in favour of the Revenue and against the assessee. 30.In the light of the decisions referred above, we have taken the second question of law and decided the case in favour of the Revenue and against the assessee. 31.The first substantial question of law, which has been framed for consideration as to whether on the facts and in the circumstances of the case, the Tribunal was right in dismissing the Revenue's appeal against the order of the CIT(A) granting relief in a miscellaneous application when the issue was still d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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