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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 ..... ny bags payable to Food and Supplies Department, Govt. of Haryana being payable for procurement of gunny bags by the said department. 2. We shall first take up Ground No. 2 raised by the assessee which is against the upholding of the addition of Rs. 80,18,000/- on account of provision of service charge on gunny bags payable to Food and Supplies department Government of Haryana, for the procurement of gunny bags. 3. The facts relating to the issue are that during the course of assessment proceedings the AO noted that the assessee had made a provision for service charge on gunny bags amounting to Rs. 80,18,000/-. On being asked to explain the same, the assessee submitted that on the procurement of gunny bags service charge @ 1% was payable to Food & Supplies department, Government of Haryana and the expenditure had been debited to wheat since the same related to it. The AO rejected the assessee's contention on the ground that in the first place the provision made was not allowable as per the Income Tax Act as no liability had been incurred by the assessee on this account. The AO further held that in any case the expenditure was allowable in the year of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Here, it is relevant to mention that section 145 of the Act obliges every assessee to maintained, subject to accounting standards which may be notified by the Central Government, books of account on cash or mercantile basis. But section 145A of the Act begins with non-obstante clause and prescribes that the value of good shall be further adjusted to include the amount of any tax, duty, cess or fee actually paid. 7.3 it is worthwhile to quote section 145-A dealing with method of accounting in certain cases which reads as under:- "145 A- Notwithstanding anything contrary contained in section 145- (a) the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head "Profits and gains of business or profession " shall be - (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee(by whatever name called)actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation- For the purpose of this section, any tax, duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income or loss to be computed as to be in accordance with the provisions of the I.T. Act. In view of above judicial pronouncements, any direction of Government of Haryana or the C&AG cannot over ride the taxability of income in accordance with the provisions of Income Tax Act. 7.5 In view of above facts of the case, applicability of provisions of section 145A regarding the valuation of goods and judicial pronouncements relied upon, I am of the opinion that the provision made for service charges on procurement of gunny bags amounting to Rs. 20.11 lacs is not allowable as it does not give the true picture of the taxable profit during the year. Hence, this ground of appeal is dismissed. 5. Aggrieved by the same the assessee filed the present appeal before us. 6. Before us Ld. AR reiterated the contention made before the AO / CIT(A) while the Ld. DR relied upon the order of Ld. CIT(A) 7. We have heard the rival submissions and perused the material placed on record before us. 8. We find that this issue has already been dealt with by us in the case of the assessee for Assessment year 2010-11 in ITA No. 164/Chd/2014 wherein the provision created for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any allowance on account of provision created for service charge and we therefore uphold the order of Ld. CIT(A) in this behalf. The facts in the present case, we find, are identical to that in the preceding year. 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 respectfully following the same we hold that the provision for service charge amounting to Rs. 80,18,000/- is not allowable. This ground of appeal of the assessee is thereby dismissed. 9. Ground No. 1 raised by the assessee is against the addition of Rs. 39,21,960/- on account of financial assistance provided by the assessee. 10. Brief facts relating to the issue are that during assessment proceedings the AO noted that as per Item No. 9 of the Audit Report, the assessee corporation had made provision of Rs. 39.22 lacs with respect to financial assistance payable to dependents of deceased employees. The assessee was issued show cause notice as to why the same be not disallowed. On dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. If a business liability has definitely arisen in the accounting year, the deduction should be allowed. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty. If these requirements are satisfied the liability is firm in praesenti and thus deductible. Contingent expenditures on the other hand, which may or may not arise, are not allowable. Bharat Earth Movers Vs. CIT(2000) 245 ITR 428(SC). 17. The facts emerging in the present case are that as per the notification of the Government of Haryana, the assessee was required to provide financial assistance to the family of employees on the death of the employee equivalent to the pay and other allowances drawn by the deceased employee in the normal course. Para number 5 of the notification which outlines criteria for financial assistance is reproduced here under: 5. (1) on the death of any Government employee, the family of the employee would continue to receive 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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