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TMI Blog2016 (6) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... e to which the Ld. AR referred to the notification reproduced above and the voucher place at Paper Book page no. 21-24 and 14 respectively detailing the employees on account of whom the provision was created. This, we find, does not establish that the impugned provision of expense had accrued during the year and pertained to the year under appeal. Since the basic ingredient for allowability of an expense / claim, has not been satisfied by the assessee, the onus for which undoubtedly lies on the assessee, we hold that the provision created for financial assistance is not allowable - Decided against assessee. Addition on account of service charges on gunny bags payable to Food and Supplies Department, Govt. of Haryana being payable for procurement of gunny bags by the said department - HELD THAT:- The facts in the present case, we find, are identical to that in the preceding year [ 2016 (6) TMI 1356 - ITAT CHANDIGARH] no document evidencing the creation of the charge was produced before us in the present case also, despite a specific query raised by the bench in this regard. The issue is covered by the order of the Hon ble ITAT Bench Chandigarh in the preceding year and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear of payment irrespective of the method of accounting followed by the assessee. 4. Aggrieved by the same the assessee filed an appeal before the Ld. CIT(A) who upheld the order of the AO by relying upon his order in the assesses own case for AY 2010-11 in which he had held as follows : 7.2 I have gone through the facts of the case and the written submission filed by appellant. This issue is covered in the appellant s own case for the A.Y. 2010-11 vide order dated 27.12.2013 in Appeal No. 99/PKL/12-13. The findings are reproduced as under:- 7. Regarding Ground No. 3 the appellant submitted that the assessee pays service charges @ 1% on the procurement of gunny bags through Food Supplies Department, Government of Haryana which has been provided on accrual basis and accordingly no observation has been made by the C AG in their comments on this issue. A copy of the voucher was also submitted. Similar objection was made by the C AG in their comments for the assessment year 2008-09 and the AO had proposed to add the expenses on this issue as the same were not provided on accrual basis. As such the appellant submitted that the service charges as per no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation. Explanation- For the purpose of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment. This provision was introduced in 1999 and over writes other provisions. Its objects include for the purpose of valuation of goods, the actual amount of tax, duty, cess or fee, paid by the assessee. The sub clause (ii) of clause (a) of section 145A includes the amount of fee by whatever named called. In the instant case, the valuation of goods include 1% service charges, however, the same has not been actually paid. Unlike in the case of section 43B which mandates the inclusion, in the computation of income, amounts paid towards certain liabilities including tax but not actually arising or accruing at the time of payment. The provision of section 145A directs inclusion of amounts of tax, duty, fee, etc. actually paid for purpose of valuation of goods. In this regard, I place reliance on the decision of Hon ble High Court of Delhi in the case of CIT Vs. Luxmi Sugar Mills Co. Ltd. (2013) 32 taxmann.com 379 where the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee for Assessment year 2010-11 in ITA No. 164/Chd/2014 wherein the provision created for service charge has been disallowed by holding as follows : 10. The issue arising in the present appeal is the allowability of provision created in the books of the assessee for service charge payable on gunny bags. It is imperative at this juncture to understand the position of law with regard to allowability of expenses. Deductions can be permitted only in respect of expenses which are found to have been incurred in the relevant accounting period. The determination of the question whether the assessee had incurred the expenditure during the relevant accounting period is an indispensable preliminary step. The principles that should normally be followed are well settled by the decision of the Supreme Court in Kedar Nath Jute Manufacturing Co. Ltd. Vs. CIT (1971) 82 ITR 363(SC) namely in order to be entitled to deduction, the expense must be incurred or the liability for expense must have incurred in the year in question depending upon the system of accounting followed being mercantile or cash. Thus in order that an item of expenditure should be entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistance payable to dependents of deceased employees. The assessee was issued show cause notice as to why the same be not disallowed. On direction given by the Addl. CIT, sought by the assessee under section 144A of the Act, the assessee was required to furnish documentary proof of the payments made. Since the assessee failed to produce any such proof the AO rejected the claim of the assessee and made addition of the same to the income of the assessee. 11. During the course of appellate proceeding before the Ld. CIT(A), the assessee contended that the impugned amount was not covered under section 43B of the Act. The assessee also submitted the copy of the voucher alonwith details of the amount payable employee wise, as submitted to the AO at the time of the assessment. Ld. CIT(A) held that the disallowance made was not covered by Section 43B of the Act and to that extent the order of the AO was corrected. The Ld. CIT(A) further held that being a provision made for future liability the same was not allowable since the liability to incur the expenses had not arisen during the year under consideration. Therefore the disallowance of ₹ 39,21,960/- on account of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve as financial assistance a sum equal to the pay and other allowances that was last drawn by the deceased employee in the normal course without raising a specific claim:- (a) for a period of fifteen years from the date of death of the employee, if the employee at the time of his death had not attained the age of thirty five years; (b) for a period of twelve years or till the date the employee would have retired from Government service on attaining the age of superannuation, whichever is less, if the employee at the time of his death had attained the age of thirty five years but had not attained the age of forty eight years; During the impugned Assessment year the assessee created the provision on account of financial assistance to be provided to four employee as per the detail of the voucher as follows: Detail of Financial assistance Name of the employee Liability Smt. Hema Chetal 14,66,289/- Smt. Malkeet Kaur 4,63,739/- ..... 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