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TMI Blog2016 (1) TMI 1456X X X X Extracts X X X X X X X X Extracts X X X X ..... im in part in his order. As AR has submitted that the issue may be sent back to the ld.AO for verification to an extent of ₹ 67,99,614/-. DR does not object to this preposition, d by the ld.AR. Accordingly we set aside this ground to the ld.AO for verification and to allow the same following the principle of consistency. This ground raised by the assessee therefore stands statistically allowed. Addition being in the nature of contingent claim without proper appreciation of facts or legal principles - HELD THAT:- As the amount has not been crystallized the same cannot be treated as income in the hands of the assessee. The assessee being a Government undertaking has been following a system of accounting as per which all items of income and expenditure are treated as accrued only after the approval is granted by competent authority. This system has been followed consistently in respect of both income and expenditure items which has not been disputed by the Revenue in any of the preceding years. Therefore, we are of the considered opinion that the addition confirmed by the CIT(A) is without any basis and needs to be deleted. Income had accrued or received during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore even though no such income had accrued or received during the year under reference. (ii) That in respect of IRAQ dues, assessee became entitled to interest of ₹ 48.87 crores on the basis of approval of the claim in AY 2009-10 and same was duly declared and subjected to tax in AY 2009-10. (iii) That the whole basis of addition is illegal, arbitrary and merely of duplicating nature based on presumption and surmises. 4. That order of the lower authorities are not justified on facts and same are bad in law. Grounds of Revenue s appeal are as under: 1. The ld. CIT(A) erred in law and on facts in deleting the major part of the addition made by the Assessing Officer on account of prior period expenses and in ignoring the fact that as per mercantile system of accounting the assessee has to make provisions for the expenses. 2. The ld. CIT(A) has erred in law and on facts in deleting the above addition relying on the decision of the ITAT on the issue and in ignoring the fact that the matter is subjudice before the Hon ble High Court and has not come to its finality. 3. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed the addition as the assessee did not produce any explanation. In respect of the interest on mobilization advance, as interest on BAAR Project, the ld. CIT(A) confirmed the addition made by the ld. Assessing Officer as the assessee was following mercantile system of accounting. 4. Aggrieved by the order of the ld. CIT(A) the assessee as well as the Revenue is in appeal before us. Ground No.1 5. The ld. AR submitted that the assessee is a Government undertaking providing engineering consultancy services, export of rolling stock, leasing services etc. The ld. AR further submitted that the assessee is engaged in executing various projects spread over different locations in India. The assessee had debited ₹ 2,35,08,000/- to the profit loss account relating to prior period expenses. The ld. AR submitted that the claims of prior period expenses and income are regular feature, which are processed, quantified after due process and approvals and thereafter these are recognized in the books of account. 5.1 The ld. AR submitted that such claims are being recognized in conformity with regular system, which are being followed consistently and the said claims of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for AY 2006-07 and 2007-08 has reproduced similar findings of the ld. CIT(A), in para 4 of the order. To avoid repetition the same is not reproduced herewith. 6.On the contrary, the ld. DR supported the orders of the ld. Assessing Officer and submitted that, as the assessee was following the mercantile system of accounting the Assessing Officer was right in considering the same as income in the hands of the assessee. 7. We have perused the records and considered the matter carefully. The assessee is a government undertaking. The assessee has been following mercantile system of accounting, as per which all items of income and expenditure are treated as accrued, only after the approval is granted by the competent authority. This system has been followed consistently in respect of both income and expenditure items. The system followed has been accepted by the department in the immediate preceding year. Therefore, in our view, it will not be appropriate to disturb the regular system being followed by the assessee. Moreover, the revenue has already accepted the same basis adopted regarding the accrual of income and, therefore, different standards cannot be followed in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r needs to be confirmed. 10. We have perused the relevant pages of the paper book and are convinced that as the amount has not been crystallized the same cannot be treated as income in the hands of the assessee. The assessee being a Government undertaking has been following a system of accounting as per which all items of income and expenditure are treated as accrued only after the approval is granted by competent authority. This system has been followed consistently in respect of both income and expenditure items which has not been disputed by the Revenue in any of the preceding years. Therefore, we are of the considered opinion that the addition confirmed by the ld. CIT(A) is without any basis and needs to be deleted. 10.1Accordingly, this ground of the assessee is allowed. Ground No. 3: 11. This ground is directed against the addition of 17.26 lacs as accrued interest income on dues from Iraq. The ld. AR submitted that the dues of ₹ 117.75 crores are a part of loans and advances as due from Government of India. It is submitted that with a view of resolve the liquidity related problems of the Indian Project exporters due to non realization of their project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has been awarded an interest of ₹ 48.87 crores as against ₹ 71.26 crores which has been added by the ld. Assessing Officer. 12. We have perused all the above pages of the paper book and are convinced that the assessee has only realeased a total amount of ₹ 166.62 crores at an interest of ₹ 6% p.a. We are, therefore, inclined to delete the addition confirmed by the ld. CIT(A) to an extent of ₹ 71.26 crores as interest on the basis of the above discussions. Ground no. 3 of the assessee s appeal, therefore, stands allowed. ITA no. 2660/D/2013: Now we take up the Department s appeal. 13. The only ground raised by the Department in its appeal is relating to the prior period expenses which has been allowed to an extent of ₹ 1,67,08,386/-. The ld. CIT(A) has relied upon the orders of this Tribunal for A.Y. 1998-99, 2006-07 and 2007-08, wherein the Tribunal has held as under: 3.3 We have perused the records and considered the matter carefully. The assessee is a government undertaking. The assessee has been following system of accounting as per which all items of income and expenditure are treated as accrued only after the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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