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TMI Blog2020 (9) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... .24 crore for under 31 heads of expenses for one month expenses (March 2015). The assessee has made provision in respect of expenditure pertaining to the previous year ending 31 March 2015. The Assessing Officer issued show-cause notice, if any tax was deducted (TDS) on such provisions or such provisions are disallowed for computation of income under the normal provision as well as under the provision of section 115JB (para-4.2 of assessment order). 2. The assessee filed its reply vide reply dated 27.11.2017. In the reply, the assessee submitted that none of the provision made by assessee represents adhoc provision or for any unascertained liability, the provision has been made in respect of expenditure pertaining to previous year ending March 31st 2015 and accounted for in accordance with the Accounting Policy consistently followed by the assessee. The assessee also stated that these are ascertained liabilities which are paid at actual rate in subsequent year and are not subject to disallow under section 37 or for the purpose of computing Minimum Alternative Tax (MAT) under section 115JB. The provisions are made in conformity with the Companies Act. The assessee also furnished th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the recipient of the income. Further, the amount of payment should also be exactly quantified. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before this Tribunal. The revenue has raised the following grounds of appeal: 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO of Rs. 10.24 crore being a provision of average of one month expense of total expenses covered under thirty one heads as on 31.03.2015, by holding that it is an accrued liability, without appreciating the fact that no evidence was furnished by the assessee before the AO to substantiate that the same is an ascertained liability as such allowable u/s 37(1) of the Act." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 10.24 crore to the book profit by holding that the provision made by assessee is ascertained liability covered by Explanation 1 to sec. 115JB of the Act." 4. We have heard the submission of ld. Departmental Representative (DR) for the revenue and ld. Authorised Representative (AR) of the assessee and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in Abad Builders (P.) Ltd. vs ACIT reported in [2014] 43 taxmann.com 128 (Cochin Trib.). The ld. DR finally submits that the assessee was following the same practice from last various years. This was a wrong practice adopted by assessee which is not permissible under the law. The policy and practice which is adopted by assessee, if not permissible by law; the assessee cannot take the plea that such practice was never questioned by the revenue. The case of assessee was selected for scrutiny for the first time in the year under consideration. The ld. DR prayed for reversing the decision of ld. CIT(A) and to restore the order passed by Assessing Officer. 6. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submits that the assessee is engaged in the business of marketing and selling of home loans, Life Insurance product, Corporate Agency Services and promoting and marketing of general insurance, mutual funds and financial products and carrying out operation of HDFC Group. The ld. AR of the assessee further submits that the amount of provision does not represent adhoc provision. The head of expenses for which provisions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions: * Aditya Birla Nuvo Vs DCIT (ITA No. 8427/Mum/2010 dated 17.09.2014), * Pfizer Ltd. Vs ITO in ITA No. 1667/Mum/2010, * CIT Vs Triveni Engineering and Industries Ltd. [2011] Taxman 94 (Delhi HC), * Bharat Earth Movers Ltd. Vs CIT 245 ITR 428 (SC), * Rotrock Controls India (P.) Ltd. Vs. CIT (314 ITR 62 (SC), * CIT Vs Hindtron Services Ltd. (328 ITR 263 (SC) and * CIT Vs Excel Industries Ltd. (358 ITR 295 (SC). 7. We have considered the rival submission of both the parties and carefully gone through the orders of lower authorities. We have also deliberated on various case laws cited by ld. Representative of the parties. The AO disallowed the provision of expenses by taking view that the provisions made by assessee are adhoc provisions made at the end of the year. These provisions are contingent in nature and have to be disallowed in computing the income. The ld. CIT(A) granted relief to the assessee by taking view that the assessee is regularly following the practice of making provision for various expenses for the month of March, which is reversed on 1st April of next year and that expenses are considered on the basis of actual payment in the subsequent year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I find that the AO has also required the appellant to explain whether TDS was deducted on such provisions and if not, whether such provisions have been disallowed in the computation of income. In this regard, the appellant has submitted that no disallowances can be made in the context of Sec. 40(a)(ia) of the Act since the scheme of TDS proceeds on the assumption that the person whose liability is to pay an income knows the identity of the beneficiary or the recipient of the income. Further, the amount of payment should also be exactly quantified. I am inclined to agree with the above submission of the appellant in the light of the decision of Mumbai ITAT in the case of Aditya Birla Nuvo Vs. DCIT (ITA No.8427/Mum/2010) dated 17.09.2014. 6.2 In view of above discussion, I find that the addition made by the AO, by treating the provisions of Rs. 10,24,36,819/-, as contingent in nature is not justified and the same is hereby deleted. 8. Before us the ld. DR for the revenue in his submissions vehemently submitted that the projected estimation of the provisions of expenses is projected purely on estimation and that there is mismatch of projected figures of expenses and the actual exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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