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TMI Blog2017 (11) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... e of work which was required to be done by the assessee and the dispute regarding excess claim by the other contractor, the matter was referred to the arbitrator and the claim was made for enhancement which was accepted by the CIT(A). Where contingent liability was made in view of the revised return filed by the assessee, the Tribunal has seriously committed an error in rejecting the claim of the present assessee. Thus, the issue no. 1 is answered in favour of assessee against the department. Liability to charge of interest u/s 234B and 234C - Held that:- Tribunal has not committed an error.In that view of the matter, the issue is answered in favour of the department against the assessee. Rejection of claim under Section 80G - Held that:- The payment was made on 31st March, 2006 and if the payment was taken to be made on 31st March, 2006 the person was having clear intention of paying through cheque nonetheless in the books of accounts entry was not made by the appellant, same was not reflected in Bank Account. In that view of the matter, merely because the provision/liability was shown, rejection of claim under Section 80G, in our considered opinion, is contrary to decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of debris and everything, while considering the matter, the Tribunal has considered the expenses prior to commencement of this company has taken the management and construction activity from the previous company on the basis of MOU, all expenses done was given a capital which was shown as an expenses by the previous company. Regarding removal of debris and everything that work which was required to be done on the war footing and the time consumed therefore, the expenses which was done by the contractor employees which can be done on Jaipur road but no doubt it has to be done on war footing therefore, expenses are bound to be more than normal which has been done. In that view of the matter, the Tribunal has not committed an error in allowing their expenses regarding removal of trees tampling or removal or debris and other expenses. Hence, the issue is also answered in favour of the assessee against the department. Depreciation @ 60% on EDP Equipments treating the same as the computer equipments allowed as in our considered opinion the optical fibers which are used exclusively for the computer configuration and it is mandatory for the operation. It is part of computer system. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in holding the sum of ₹ 6,33,803/- on account of leave encashment as a contingent liability and non-allowable. 6) Whether on the facts and in totality of circumstances, the ld. Tribunal was right in law in not allowing expenditure of ₹ 5,45,264/- on police stations, because the appellant company itself disallowed this amount in its computation of income. 7) Whether on the facts and in totality of circumstances the ld. Tribunal was right in law in holding that the ground as to grievance for refund of ₹ 1,72,60,505.03/- recovered by the Bank account of the assessee does not call for an adjudication. 8) Whether on the facts and in totality of circumstances, the ld. Tribunal erred in not allowing exemplary cost u/s 254(2)(b) of the Act. 9) Whether the impugned assessment order is liable to be annulled.? In Appeal No. 124/2010 (i) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in allowing the claim of respondents for capitalising the expenditure incurred for the period of prior to incorporation and existence of business? (ii) Whether in the facts and circumstances of the case Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various assets and commenced commercial operations on 9th April, 2005, which was opened to the public by the Prime Minister of India. Assessment year 2006-07 was the first year of assessment after commercial operations. The appellant company maintained regular and proper books of accounts and such accounts are duly audited by the statutory auditors on 26.6.2006 and the tax auditors on 29.11.2006. The return of income for the accounting year 1.4.2005 to 31.3.2006, relevant for the assessment year 2006-07, was filed by the appellant company on 29.11.2006 declaring total income of ₹ 9,16,60,935/- which was revised on 15.10.2007 and 30.10.2007 to loss of ₹ 32,90,096/-. The appellant company became entitled to a refund which was not allowed. After filing of revised return on 15.10.2007, the case of the appellant company was selected for scrutiny and notice u/s 143(2) was issued on 17.10.2007, fixing the case for hearing on 24.10.2007. The notice was duly served on the appellant company on 23.10.2007. The hearing was continued and Statutory notices were issued along with a detailed questionnaire, which were replied and complied with. Subsequently without any valid reason th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal has seriously committed an error in not appreciating the facts which are required to be considered in true spirits. Mr. Ranka senior counsel contended that while considering the matter the Tribunal has considered the issue twice. He contended that the authority while considering the matter has lost sight of the fact that ₹ 57,07,62,552/ which was the subject matter of the assessment was paid as ascertained liability and even CIT(A) while considering the matter referred the balance sheet forming part of statutory audit report dated 26th June, 2006. We have perused the note, which reads as under:- 5. There are claims and counter claims by the EPC contractors and the Company respectively. The matter is referred to arbitration as per the contract agreement. Pending disposal of the same no provision is considered in the accounts. 5. Since he was not ascertained, he accepted that the matter was referred for arbitration hence, under the provision his liability for accounts was to be considered. However, he contended that the audit report has specifically mentioned the amount referred. 6. Counsel for the appellant has relied upon the decision of Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 10(1) or under Section 10(2)(xv) of the Income Tax Act, 1922. It was held whether the Assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the Assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. 40. This was in line with the earlier decision in Calcutta Co. Ltd. v. Commissioner of Income Tax, West Bengal MANU/SC/0098/1959 : (1959) 37 ITR 1 (SC) where the Supreme Court explained that an Assessee following the mercantile system of accounting could claim a deduction of an estimated expenditure towards development of plots purchased by it even before actually incurring the expenditure. This was not a statutory liability but a contractual one. The Assessee in that case was a developer dealing in land and property. The Supreme Court noted that the relevant clauses of the sale deed spelt out the undertaking of the Assessee to carry out the developments within six months from the date of the sale. It was noted that although the entire sale consideration was not received during the relevant AY, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the balance of the profits or gains of the trade, manufacture, adventure, or concern'; and it appears to me that that language implies that for the purpose of arriving at the balance of profits all that expenditure which is necessary for the purposes of earning the receipts must be deducted, otherwise you do not arrive at the balance of profits, indeed, otherwise you do not ascertain, and' cannot ascertain, whether there is such a thing as profit or not. The profit of a trade or business is the surplus by which the receipts from the trade or business exceed the expenditure necessary for the purpose of earning those receipts. That seems to me to be the meaning of the word profits in relation to any trade or business. Unless and until you have ascertained that there is such a balance, nothing exists to which the name 'profits' can properly be applied. 43. In Bharat Earth Movers v. Commission of Income Tax (supra), the Supreme Court had an occasion to explain the distinction between accrued and contingent liability. There the Assessee Company had two sets of employees - one covered by the Employees State Insurance Scheme (described as 'staff') and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business; (iii) A condition subsequent, the fulfillment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; (iv) A trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated. 45. The Supreme Court in Bharat Earth Movers v. Commission of Income Tax (supra) held that the provision made by the Assessee for meeting its liability under the leave encashment scheme would entitle it to deduction since it was not a contingent liability. 46. The above dictum was followed by this Court in R.C. Gupta v. Commissioner of Income Tax (supra). In that case the AO on scrutiny of the Assessee's trading account noticed that a sum of ₹ 50,761/- stood debited to the raw material account. The Assessee explained that this was payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 210(1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maniam, Commissioner of Income Tax Ors. 269 ITR 1 wherein it has been held as under:- It would be, thus, seen that the Income Tax from the prize money of ₹ 6,30,000 was deducted as per the Sikkim Income Tax Manual, 1948, and the remaining amount of the prize money was paid to the petitioner. The prize money was won by the petitioner from the lottery floated by one of the States of the Indian Union. The petitioner won the prize money within the territory of India, though in the said territory a special Income Tax law, viz., Sikkim Tax Manual, 1948, was applicable. The said prize money won by the petitioner has been charged to tax as per the law applicable in the Sikkim State where the prize money was won. The Income Tax Act, 1961, was not applicable at the relevant time in Sikkim. So long as the Income Tax Act, 1961, did not become applicable to the State of Sikkim, Income Tax Act, 1961, could not be applied to the income earned in Sikkim. In the circumstances, we have no hesitation in holding that the prize money won by the petitioner from the lottery of the Government of Sikkim could have been charged to tax only in accordance with then existing Income Tax laws in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sikkim Tax Manual that held the field at the relevant time and the Income Tax from the prize money as per the then existing Sikkim Income Tax Manual was deducted. The order dated June 25, 1991, passed by the Commissioner of Income Tax, Bombay City IV, Bombay, therefore, cannot be sustained and in the light of what we have observed above, the assessment order dated November 29, 1989, for the assessment year 1988-89 shall have to be reworked out as per this order. Consequently, the writ petition is allowed. The assessment order dated November 29, 1989, (exhibit B) and revisional order dated June 25, 1991, (exhibit F) are quashed and set aside. Respondent No. 2 or the successor-Assessing Officer having jurisdiction in the matter is directed to work out the petitioner's assessment for the assessment year 1988-89 afresh as per this order. 6.4. He has also relied upon the decision of Gujarat High Court in case of Commissioner of Income Tax, Gujarat-I v. Ahmedabad Keiser-E-Hind Mills Co. Ltd. reported in [1981] 128 ITR 486 wherein it has been held as under:- However, so far as the present case is concerned, there is a circular of the Board which has been set out in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if there is a deviation on a point of law, so far as the circular of the Board in concerned, that circular will be binding on all officers concerned with the execution of the I.T. Act and they must carry out their duties in the light of the circular. In view of this clear position regarding the effect of the circular, it is obvious that in the instant case it was incumbent on the ITO to advise the assessee before us to claim relief under s. 2(5)(a)(iii) if the proceeding or any other particulars before him at the stage of the original assessment indicated that the assessee was entitled to such relief under the provisions of the relevant Finance Act, 1965, so far as the order under reference is concerned. This question in the light of this circular of 1955 has not been examined by the Tribunal. What applies to the obligation of the ITO would also apply to all officers of the department concerned with the execution of the I.T. Act, 1961. Therefore, so far as the controversy before us regarding the powers of the AAC is concerned, in the light of the facts before us and in the light of this circular, we decline to answer the question referred to us because the question before us bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C/0534/1971 : [1972]2SCR874a and Babutmal Raichand Oswal v. Laxmibai R. Tarte, MANU/SC/0504/1975 : AIR1975SC1297 that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt. The petition is allowed accordingly. Rule is made absolute. The respondent shall pay the costs quantified at ₹ 5,000=00. The revenue shall, in the first instance, pay the costs along with the refund to the petitioner, and recover the same from the respondent Commissioner, who shall bear the same out of pocket. 6.6. For the issue of cost, he has also relied upon the decision of Single Bench of this Court in case of Chiranji Lal Tak v. Union of India [2001] 252 ITR 333 wherein it has been held as under:- Litigation is not a luxury and/or amusement or entertainment. It is not pleasure or pleasant to come to the courts. Only when the Union or a State or its officers make it unavoidable, the litigants come up before the court for redressal of their grievances or for enforcement of their legal or fundament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. Now, in the present case, no finding appears to have been given by the Tribunal as to whether the sums of ₹ 25 lakhs and ₹ 12,50,000/- were held by the assessee in West Pakistan on capital account or Revenue account and whether they were part of fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If these two amounts were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss of ₹ 11 lakhs and ₹ 5,50,000/- resulting to the assessee on remission of these two amounts to India, on account of alteration in the rate of exchange, would be a trading loss, but if, instead, these two amounts were held on capital account and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of judgments in civil appeals Nos. 1694, 1730 and 1831. The effect of the above order which was made on February 1, 1972 was that the decision in civil appeals Nos. 1694, 1730 and 1831 on the point as to whether the wealth-tax paid by the assessee was a permissible deduction, was also to be the decision in civil appeal No. 1784. After the judgments of the Constitution Bench in civil appeals Nos. 1694, 1730 and 1831 on March 29, 1972 the question as to whether the wealth-tax paid by the assessee was a permissible deduction under Section 10(2)(xv) of the Act no longer remained subject of controversy in civil appeal No. 1784 as the decision on that point in the three appeals was also to govern the decision in appeal No. 1784. It is no doubt true that civil appeal No. 1784 was not disposed of before July 15, 1972 but that fact would not prevent the case of the assessee in that appeal being covered by Section 5 of-the amending Act. What is necessary to attract that section is that this Court should have held before July 15, 1972 on an appeal in respect of an assessment of the assessee for any particular assessment year that the wealth-tax paid by the assessee is deductible in comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of clause (c) of section 6, any direct tax payable by the employer for any accounting year shall, subject to the following provision, be calculated at the rates applicable to the income of the employer for that year,...... 35. Coming now to clause (c) of section 6, is it the actual taxable income, the direct tax on which is prior charge, which is to be worked out, or the tax on the estimated balance of gross profits after deducting depreciation and development charges but without deducting the bonus payable during the year ? In other words, when the Tribunal reaches the stage of clause (c), does it have to assess the taxable income in accordance with the various provisions of the Income-tax Act just as an Income-tax Officer would do and assess the liability of income tax on such taxable income according to the rates applicable during the particular accounting year, or should it compute the balance of gross profits as stated above and apply the said rates and estimate the amount of direct taxes and deduct them from the remaining gross profits ? Bonus being payable within eight months after the close of the accounting year in cases where there is no dispute pending before an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a company in which the public are substantially interested and its income is to be assessed accordingly by the Tribunal and compute its liability for direct taxes. Clause (c) of section 7 does away, for the purposes of sections 6 and 7, the distinction between the liability of an individual and a Hindu undivided family under the Income-tax Act and provides that the income derived by such a Hindu undivided family is to be treated as the income of that employer as an individual. Likewise, where profits and gains of an employer include profits from export, a rebate allowed under the Income-tax Act on such profits is not to be taken into account while working out the tax liability under section 6(c). Also, the rebate allowed under any of the Acts levying direct taxes on sums spent on development of an industry is also not to be taken into account while computing the tax liability. It was, however, argued that the provisions of section 7 lay down the only departure from the Income-tax Act and that except for that departure the Tribunal must assess the actual taxable income and arrive at the tax liability thereon at rates prevailing during the accounting year in question. In our view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act would not be sufficient for rehabilitation purposes.. It did away with rehabilitation as a prior charge partly because there were complaints that it was being ill-used, but partly also because it knew that the rebate in the Income-tax Act on bonus paid would go to the employer with which he could recoup the depreciation which would be larger than the one allowed under section 32 of the Income-tax Act. In our view it was for that it did not lay down that bonus is to be deducted before computing the amount on which direct taxes are to be calculated under section 6(c). If Parliament intended to make a department from the rule laid down by courts and tribunals that the bonus amount should be calculated after provision for tax was made and not before, we would have expected an express provision to that effect either in the Act or in the Schedules. In our view the contention urged by the company that the tax liability is to be worked out by first working out the gross profits and deducting therefrom the prior charges under section 6 but not the bonus payable to the employees is right. 37. In the result, the appellant company succeeds on the questions of development rebate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 case of amounts actually expended or paid; (ii) Just as receipts, though not actual receipts but accrued due are brought in for income-tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business; (iii) A condition subsequent, the fulfilment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; (iv) A trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated. 6. So is the view taken in Calcutta Co. Ltd. v. Commissioner of Income-Tax, West Bengal [1959]37ITR1(SC) wherein this Court has held that the liability on the assessee having been imported, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity which has accrued or which has been incurred although it may have to be discharged at a future date. However, a contingent liability which may have to be discharged in future cannot be considered as expenditure. 7. Udaipur Mineral Development Syndicate Pvt. Ltd. vs. Deputy Commissioner of Income Tax (Assessment) and Anr. (29.08.2002 RAJHC), (2003) 261-ITR-706 8. Taparia Tools Ltd. vs. Joint Commissioner of Income Tax (08.01.2003 BOMHC), 261-ITR-102 In this case, we are concerned with Deferred Revenue Expenditure, which is a special type of asset. In this case, we are not concerned with the nature of profits. In this case, we are concerned with ascertainment of true profits under the Income Tax Act and in order to ascertain such profits, we have to follow true accounting principles and we have to apply those principles in the light of the method of accounting followed by the assessee. In cases involving special types of assets, where profits cannot be deduced by following the method adopted by the assessee, the Assessing Officer is free to make adjustments as done in this case. Lastly, as stated above, in this matter, we are concerned with computation of taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance on AS 22 as the basis of his argument that the completed contract method should be substituted by deferred revenue expenditure (spreading the said expenditure on proportionate basis over a period of time). He also relied upon the concept of timing difference introduced by AS 22. It may be stated that all these developments are of recent origin. It is open to the Department to consider these new accounting standards and concepts in future cases of chit transactions. We express no opinion in that regard. Suffice it to state that, these new concepts and accounting standards have not been invoked by the Department in the present batch of civil appeals. 19. Subject to above, we see no reason to interfere with the impugned judgment of the High Court and accordingly the civil appeals are dismissed with no order as to costs. 10. Exide Industries Limited and Anr. vs. Union of India (UOI) and Ors. (27.06.2007 CALHC), 292-ITR-1 9. The objects and reasons as disclosed by the Finance Act, 1983, for enacting Section 43B are quoted below: 59. Under the IT Act, profits and gains of business and profession are computed in accordance with the method of accounting regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated. On each such occasion objects and reasons were disclosed. While inserting Clause (f) no special reasons were disclosed. His Lordship held that such disclosure was not mandatory. We do not have any reason for disagreement on such issue provided the subject amendment could be termed as in furtherance to widen the scope of the original section on the identical objects and reasons as disclosed at the time of enacting the original provision. As we find, the original section was incorporated to plug in deductions claimed by not discharging statutory liabilities. We also find that provision was subsequently made to restrict deductions on account of unpaid loan to the financial institutions. Leave encashment is neither statutory liability nor a contingent liability. It was a provision to be made for the entitlement of an employee achieved in a particular financial year. An employee earns certain amount by not taking leave which he or she is otherwise entitled to in that particular year. Hence, the employer is obliged to make appropriate provision for the said amount. Once the employee retires he or she has to be paid such sum on cumulative basis which the employee earns throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.... Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. 12. With deepest regard we have for his Lordship, we are unable to agree with his Lordship on this issue. 13. The appeal succeeds and is allowed. Section 43B(f) is struck down being arbitrary, unconscionable and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's business by referring to the expenses incurred by the assessee and the benefit derived by the spender in exclusivity. The motivation which led the assessee to spend the amount on bus and handing over it to the school by CIT(A) in assessee's own language reads as under : As per facts of the case this expense is allowable under Section 37(1) because the bus has been given to the school to remove the difficulty of staff/workmen's children in going to the school as the bus available with school was not sufficient to accommodate the children of workmen and as the children of workmen of company were placed at different destination, they entered the bus after others at nearer destination, hence mill-staff children could not get place in the bus and the bus took more time to collect and drop the mill children. Hence to solve these problems of staff children at the request of school, the bus was given to school by the company, thereafter which the bus problem of workmen's children was solved. Since the bus has been surrendered to the school no benefit of enduring nature was derived by the company as the right of ownership was transferred to school an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to fall or come within the sweep of meaning of intangible asset. The dictionary clause clearly stipulates that business or commercial rights should be of similar nature as know-how, patents, copyrights, trademarks, licences, franchises, etc. and all these assets which are not manufactured or produced overnight but are brought into existence by experience and reputation. They gain significance in the commercial world as they represent a particular benefit or advantage or reputation built over a certain span of time and the customers associate with such assets. Goodwill, when appositely understood, does convey a positive reputation built by a person / company / business concern over a period of time. Regard being had to the wider expansion of the definition after the amendment of Section 32 by the Finance Act (2) 1998 and the auditor's report and the explanation offered before the assessing officer, we are of the considered opinion that the tribunal is justified in holding that if two views were possible and when the assessing officer had accepted one view which is a plausible one, it was not appropriate on the part of the Commissioner to exercise his power under Section 263 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation on this part of assets as claimed in this ground cannot be allowed to the assessee as the assessee has even failed to bring it on its financial records and the balance sheet which is the summary of entire financial working for the year, does not show the name in any manner. It is further observed that the said liability was a disputed liability as cold be seen from the notes to the balance sheet. The quantification of the amount payable and the actual payment took place during the following financial year viz 2006-07. In the present day context when the disclosure requirements under the Companies Act are so stringent and mandates few disclosures as a compulsion such as this, it does not appeal to the reason that the assessee should not have even made an entry through the Profit Loss Appropriation Account to give effect to a transaction of such a substantial amount Though it is not the case of the department that the assets were non existent or no real payment as claimed has been made by the assessee meaning thereby that the department is simply carrying further the issue because of the non fulfillment of statutory requirements regarding the same. On a query by the bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the assessee is entitled for claiming that deduction of the expenses incurred in the year in which payment of TDS is actually made. Thus the ground of the appeal is rejected. Ground No. 14: 18. In this ground the assessee has agitated the disallowance made of ₹ 6,33,803/- claimed as provision for leave encashment. 18.1. We have considered the arguments of the parties,. We find that the assessee company has made the provision of ₹ 6,33,803/- towards the leave encashment liability which was to be paid to the employees at the time of their separation with the assessee company. Since the amount apportioned towards the provision is a contingent liability which may or may not be incurred and further its incurrence may happen in future only and not in the year under appeal. Therefore, considering these facts we are of the view that the lower authorities have rightly disallowed the claim of the assessee and accordingly we are not inclined to interfere with the orders of the ld. CIT(A), on this issue. Thus the ground of the appeal is rejected. Ground No. 15: 19. In this ground the assessee has agitated the disallowance made of ₹ 5,45,264/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the 92[***] undertaking is completed or the new 92[***] unit commences production or operation : 93[Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words an amount equal to one-tenth of such expenditure for each of the ten successive previous years , the words an amount equal to one-fifth of such expenditure for each of the five successive previous years had been substituted.] (2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely :- (a) expenditure in connection with- (i) preparation of feasibility report; (ii) preparation of project report; (iii) conducting market survey or any other survey necessary for the business of the assessee; (iv) engineering services relating to the business of the assessee : Provided that the work in conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the assessee commences; (ii) in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the extension of the 96[***] undertaking is completed or, as the case may be, the new 96[***] unit commences production or operation, in so far as such fixed assets have been acquired or developed in connection with the extension of the 96[***] undertaking or the setting up of the new 96[***] unit of the assessee; (b) capital employed in the business of the company means- (i) in a case referred to in clause (i) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the business of the company commences; (ii) in a case referred to in clause (ii) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the preliminary expenses have been sought to be taken by the company which has been formed only after the agreement between the original company and the NHAI. 9. In that view of the matter, the view taken by the Tribunal is just and proper. No interference is called for. 10. He further contended that the audit report was submitted on 25th September, 2006 and so called compromise or the arbitration award between the parties ought to have been reflected under 44AB. 11. He has relied on the observations made in the order of AO which are reproduced as under:- 5.3. From the details filed, audit report and the copy of correspondence and the settlement agreements, it is seen that:- 1. The assessee had not shown any such asset in its books as WIP on 31.03.2006, which means these expenses had not been recognized by the assessee as on the last day of the financial year. In its reply the assessee has clearly admitted but the same were neither ascertained nor acknowledged as debts by the company as on this date and hence nor provided for in the books of accounts. 2. The audit report as per the Companies Act has not taken this expenditure in the year 2005-06, but has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the present assessee for ₹ 57,07,62,552/-. Thus, the issue no. 1 is answered in favour of assessee against the department. 17. On the issue no. 2 regarding 234B and 234C of the Act, in our considered opinion, the Tribunal has not committed an error. 17.2 In that view of the matter, the issue is answered in favour of the department against the assessee. 18. On the third issue, the payment was made on 31st March, 2006 and if the payment was taken to be made on 31st March, 2006 the person was having clear intention of paying through cheque nonetheless in the books of accounts entry was not made by the appellant, same was not reflected in Bank Account. 18.1. In that view of the matter, merely because the provision/liability was shown, rejection of claim under Section 80G, in our considered opinion, is contrary to decision referred by counsel for the assessee. In that view of the matter, the issue no. 3 is required to be answered in favour of the assessee against the department. 19. On the issue no. 4 whether the Tribunal was right in law on correct interpretation of Section 40a(ia) of the Act, disallowance pertains during the year under appeal and whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding to the tax paid by the assessee which in turn comes in lacs of rupees but we do not want to put the department to heavy loss but at the same time, we want to put check on the officers not to act arbitrarily, therefore, we impose a cost of ₹ 11,000/-. 23. On the last issue regarding assessment order being annulled the issue is answered in favour of the assessee against the department. The assessment is not required to be cancelled on the behest of department as held in our earlier decision which has been referred hereinabove. In appeal no. 124/2010 24. On the first issue, in view of the fact that the amount was paid by the assessee for taking over the company therefore, the expenses which was done by the earlier company which has given it as a capital for this assessment year, the department could not have assessed such amount which has taken the whole amount against the capital gain but this company is entitled for the capital expenses as contended by counsel for the department. This could not have been allowed under the law if the assessee claim as revenue expenses but nonetheless since he has paid amount for taking over the management of the company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only road, they have to construct toll booth and provide facilities for the staff for the purpose of their accommodation. 14.5 In that view of the matter, the Supreme Court judgment which is sought to be relied upon by the department will not apply and the tribunal has rightly interpreted the change in law and more particularly under the law which has been inducted after year 1983. 14.6. Thus, on the first issue, we are in complete agreement with the view taken by the tribunal. 15. Regarding issue no.2, the contention which has been raised that equipment which are attached with the power equipment are not entitled under item no.5 of Schedule-I, in view of the fact that note 7 will not cover complete equipment which are attached with the system but in our considered opinion the optical fibers which are used exclusively for the computer configuration and it is mandatory for the operation. It is part of computer system. 15.1 In that view of the matter, the view taken by the tribunal is just and proper. 28. Therefore, both the issues are answered in favour of the assessee against the department. 29. Both the appeals stand disposed of. 30. The application ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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