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TMI Blog2021 (1) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... in confirming the disallowance rejecting the contention of the assessee that the bonus payable being an ascertained liability, the same is allowable in the year under consideration. (iii) That the learned CIT(A) has confirmed the disallowance misinterpreting the terms of Comprehensive Service Agreement between the GE International Ltd. and the assessee. 3(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 12,99,68,406/- on account of bonus payable to GE International Ltd., while computing Minimum Alternate Tax (MAT) under Section 115JB of the Act. (ii) That the learned CIT(A) has erred both on facts and in law in holding the bonus payable to be a provision for unascertained liability despite the same being an ascertained liability and a revenue expenditure incurred during the year." ITA No. 2952/DEL/2019 (A.Y. 2013-14 Revenue's appeal) "1. On the facts and under the circumstances of the case, the Ld.CIT(A) has erred in law and facts in giving relief to the assessee of Rs. 2,15,05,00,000/- on account of interest attributed to work in progress only relying upon the order of his predeces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear to year basis and will be finally settled on closure of the contract. However, the Assessing Officer was not satisfied with the submissions of the assessee and held that the assessee failed to produce the agreement with the GE International Ltd. to prove the Business Expediency. Further, the assessee failed to prove the basis of calculation of bonus payable and also that the amount of bonus pertains to the current year. Thereafter, the assessee preferred an appeal before the CIT(A), and filed the copy of long term Comprehensive Service Agreement (CSA) with GE International dated 20.06.2009 vide an application u/r 46A. The Ld. AR pointed out that in the remand report the Assessing Officer has reiterated the contents of the assessment order and observed that the liability is an unascertained liability. On the perusal of the written submissions and the rejoinder to the remand report, the CIT(A) held that the bonus payment to GE International is subject to certain terms and conditions in the contract and therefore, the liability cannot be considered to be an ascertained liability. The Ld. AR submitted that the assessee has entered into a long term Comprehensive Service Agreement (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailability bonus from the purchaser of the power. In the first condition, where the assessee is not entitled to availability bonus from the purchaser of the owner, the assessee has been given an option for the payment of bonus. The assessee may choose either to pay in cash to the contractor or it may keep the bonus amount as payable to the contractor which may be adjusted of against any amount due from the contractor i.e. GE International under the given agreement. The second condition is where the assessee is entitled to availability bonus from the purchaser of the power, in this condition the assessee shall pay off amount of bonus through Letter of Credit within the stipulated time of 30 days. The Ld. AR submitted that the liability of bonus has to be discharged by the assessee in both conditions stated above. The only option given to the assessee is with respect to the payment / settlement of bonus in the condition where assessee is not entitled to recover any bonus from the purchaser of the power. The Ld. AR submitted that there is no uncertainty about the incurrence of the expenditure The assessee becomes liable to pay the bonus to the contractor as soon as the contractor ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with GE, the party has to ensure 90% availability of the Power Plant for operation and if they ensure availability above 90% then they are eligible for Bonus otherwise they are liable for penalty. This will accrue on year to year basis and will be finally settled on closure of the contract. During the year under consideration, the contractor has ensured the 90% availability of the power plant to the assessee. Accordingly, the assessee booked an expenditure of Rs. 12,99,68,406/- on account of bonus payable to the contractor. These facts were not disputed by the revenue at any point of time. There was no uncertainty regarding the incurrence of the expenditure and assessee becomes liable to pay the bonus to the contractor as soon as the contractor fulfills the conditions of annual availability of power plant in terms of the factors given under the said contract. Thus, the assessee has established that a business liability has definitely arisen in the accounting year which is year to year basis. The assessee is following the mercantile system of accounting which is not disputed by the revenue. Therefore, the liability is ascertained liability and is allowable u/s 37(1) of the Act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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