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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 ..... th these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. 2. We will first address to the appeal of the assessee in ITA No. 6561/DEL/2018. The grievances of the assessee read as under: "1. That on facts and in law in the Commissioner of Income Tax (Appeals) ('Ld. CIT(A)') erred in upholding the disallowance of Rs. 3,97,28,446 on account of payment of octroi expenses. 2. That on facts and in law the Ld. CIT(A) erred in not following the principle laid down by jurisdictional High Court in case of CIT v. Vishnu Industrial Gases Pvt Ltd (ITR No. 229/1998) (2008) that the year of deductibility is not a relevant factor when the rate of tax is identical in both the years. 3. Witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards 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 Rs. 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 Rs. 3,97, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to allow the claim of Rs. 3,79,28,446/-. Addition is, accordingly, deleted. Ground Nos. 1, 2 and 3 are allowed. 11. Facts relating to Ground Nos. 4 and 5 show that during the year under consideration, the assessee received incentives/benefits amounting to Rs. 6,94,85,100/- from lessors. The assessee had taken these premises on lease to run Zara Stores in Surat, Jaipur and Chennai and entered into an agreement with the lessors alongwith other covenants. The lessors have agreed to pay/compensate the fit out cost to the lessee [assessee] as per the terms and conditions set forth in the agreement as a part of lease incentive to the assessee. 12. The assessee booked the said amount as lease incentive in the books of account and amortized in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has amortized in the profit and loss account only Rs. 34,05,526/- and balance has been spread over the entire lease period. 19. It is also not in dispute that the 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. 20. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year and the actual sales return is booked during the year and, therefore, the effect of excess or short provisioning gets absorbed in the profit and loss account. Being convinced with the accounting method, the ld. CIT(A) deleted the addition. 31. Before us, the ld. DR strongly supported the findings of the Assessing Officer and the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 32. We have carefully considered the orders of the authorities below. We find that the sales return policy of the company is in-built into the agreement or agreed by the assessee at the time of sales, which means that the obligation to accept sales returns arises on the date of sale. The assessee's sales return policy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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