9911796707
TMI Blog2020 (10) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... Gurgaon ['Ld. CIT(A)'], has grossly erred in upholding the order of the Deputy Commissioner of Income-tax Circle-l(l), Gurgaon ('the Ld. AO') in disallowing the provision for professional cost amounting to INR 94,97,000. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the above provision represents the liability incurred for the period and hence is an allowable deduction. 3. That the Ld. CIT(A) has erred in not adjudicating on the fact that the benefit has been conferred n the Appellant from the use of consulting technique and know-how including consulting toolkits and insights developed and maintained by Bain USA for which the royalty was paid by the Appellant. 4. The Ld. CIT(A) has er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985]56ITR585(SC) and Indian Molasses Co Ltd v CIT 371TR66(SC) he held that contingent liabilities are to be disallowed. He accordingly added back the amount of Rs. 94,97,000/- being provision for professional cost. 4. In appeal Ld. CIT(A) upheld the action of the AO by observing as under :- "7.2 I have given careful consideration to the arguments of the appellant and find that the allowability of any provision is dependent upon the fact that whether such liability has been fully ascertained and the appellant has been adopting consistent accounting principle on year to year basis. It is not open to the appellant to claim the expense on provision basis in one year and in the other year on actual basis. In the present case it is indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of professional support cost payable to its group companies. This provision made pertains to services availed from the group companies during the period January to March, 2010. He submitted that the provision was made on scientific and realistic estimate. Ld. Counsel for the assessee referring to the Support Service Agreement dated 1st April, 2010 with its AE i.e M/s. Bain & Company India Private Ltd. submitted that services availed under the agreement are detailed in Annexure A clause 1.1. and compensation payable under rule thereof in prescribed Annexure B therein as per clause No. 2.1. He drew the attention of the Bench to the compensation clause which reads as under :- "Compensation 2.1 Bain India agrees that in case, it avails, Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered by overseas group companies till the month of December as invoicing is done in calendar year. Accordingly for the year under consideration a provision of Rs. 94,97,000/- was recognised and the same was based on the invoice received for 2009. 7. He submitted that during the subsequent years the assessee has followed the same basis of recognizing the provision for the period January to March. He submitted that the provision made during the year under consideration are reversed in the financial year and expenses on actual basis are recognized by the assessee based on the invoice received from the companies . He submitted that this policy is being consistently followed by the assessee in the subsequent years. He submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily relied on the order of the Ld. CIT(A) . He submitted the assessee is not following uniform policy for making / claiming the provision . Therefore the Ld. CIT(A) was fully justified in rejecting the claim of the assessee and thereby upholding the addition / disallowance made by the AO. 8. We have heard the rival arguments made by both the sides, perused the order of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case disallowed the provision of professional cost amounting to Rs. 94,97,000/- debited to the profit and loss account on the ground that the assessee could not substantiate the basis for making the said provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel for the assessee that inadvertently owing to clerical error no provision was made in financial year 2008-09 relevant to assessment year 2009-10. It is pertinent to mention here that the accounts of the company are audited by reputed CA firm and therefore it cannot be said that it is an inadvertent error. Even if the same is considered as an inadvertent error, the assessee has not taken any step to revise the return of income. Therefore, we fully concur with the findings of the Ld. CIT(A) that assessee has not adopted consistent accounting principle on year to year basis and it is not open to the assessee to claim the expense on provision basis in one year and on accrual basis in the other year. 10. The decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
