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TMI Blog2022 (3) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has received incentives from the lessors - It is also not in dispute that the assessee has amortized in the profit and loss account only ₹ 34,05,526/- and balance has been spread over the entire lease period. Assessee is following the mercantile system of accounting and, therefore, was required to recognize all revenue receipts as income in the year of accrual. Lease agreement clearly indicates that the assessee is entitled to receive lease incentives at the time of the delivery of space/opening of stores which means that the right to receive the lease incentives accrued to the assessee at the beginning of the lease. Even in the lease agreement, there is nothing to show that the incentives accrued yearly. In fact, the assessee is not under any obligation to refund any part of the incentive to the lessor in case the lease is terminated before the completion of lease period. This also shows that the amount of incentive does not accrue yearly during the lease period. The findings of the Assessing Officer/ld. CIT(A) cannot be faulted with. Therefore, no interference is called for. Ground Nos. 4 and 5 are, accordingly, dismissed. - ITA No. 6561/DEL/2018 And I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase are that the assessee company is a joint venture of Inditex group and TATA group and is engaged in retail trading through Zara stores across the country. 4. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction of ₹ 5,49,29,271/- as exceptional item . The Assessing Officer found that this deduction was towards local state taxes for the Assessment Year 2014-15 as well as for earlier Assessment Years. The assessee was asked to give complete details of expenses with year-wise break-up alongwith supporting documents. 5. The assessee furnished complete break-up. From a perusal of the break-up, the Assessing Officer found that ₹ 3,97,28,446/- pertained to octroi expenses for Assessment Years 2012-13 and 2013- 14. The Assessing Officer was of the firm belief that this amount cannot be allowed as deduction because liability to pay this octroi expenses was incurred during F.Ys 2011-12 and 2012-13 and since the liability was not paid before the due date of filing return of income for the respective F.Ys, the Assessing Officer disallowed ₹ 3,97,28,446/-. 6. The assessee agitated the matter be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee did not find any favour with the Assessing Officer who was of the opinion that lease incentives received by the assessee are not on capital account. The Assessing Officer observed that these lease incentives have been recognized as revenue receipts by the assessee itself and the assessee has amortized these incentives over the period of lease and only proportionate amount has been recognized as revenue receipts during the year which has been reduced from lease rentals. 14. After referring to various judicial decisions, the Assessing Officer came to the conclusion that the assessee should have recognized the whole of the incentives amounting to ₹ 6,94,85,100/- and after reducing the part which has been accounted for by the assessee , the Assessing Officer made an addition of ₹ 6,60,79,574/-. 15. The matter was agitated before the ld. CIT(A) but without any success. 16. Before us, the ld. counsel for the assessee reiterated what has been stated before the Assessing Officer. 17. Per contra, the ld. DR strongly supported the findings of the Assessing Officer/ld. CIT(A). 18. We have carefully considered the orders of the authorities below. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions for Sales Returns made by the assessee in the profit and loss account, which is not proved to be computed on any scientific basis on past records. The Ld. CIT(A)has not dealt at all the inconsistencies in creation of provision from year to year pointed out in detail in the Assessment order in para 14 of the order. 24. The underlying facts relating to Ground No. 1 are identical to the facts considered by us in assessee s appeal vide Ground Nos. 4 and 5. For our detailed reasoning given therein, Ground No. 1 is allowed. 25. Ground No. 2 relates to the deletion of addition of ₹ 1,16,76,820/- to its profit and loss account towards provision for sales returns against sales effected during the month of March 2014. 26. The assessee was asked to justify the claim. 27. In its reply, the assessee stated that the said provision is governed by Accounting Standard 29 issued by ICAI which requires recognition of provision for liability where there exists an obligation resulting from past event and there is a probability of out flow of resources required to settle the obligation and a reliable estimate of the amount required to settle the obligation can be made. 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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