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TMI Blog2014 (6) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... is provision can also be allowed. Reliance has been placed by the CIT on the decision of Rotork Controls [ 2009 (5) TMI 16 - SUPREME COURT ] which was also relied on by the A.O. Therefore, we would like to restore the entire issue to the file of the A.O. Therefore, we do the same and restore the issue to the file of the A.O. with the direction that he shall decide this issue afresh by considering each and every aspect of the arguments raised on behalf of the assessee and after taking into consideration various aspects of the issue - Allow ground raised for statistical purpose. - Shri Hari Om Maratha, Judicial Member And Shri N.K. Saini, Accountant Member For the Assessee : Shri U.C. Jain Shri Gauthan Baid. For the Department : Shri N.A. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its appeal. Now the assessee is further aggrieved and has filed second appeal by raising the following grounds: 1. That on the facts and in the circumstances of the case, Ld. CIT (A) erred in confirming the addition made by the AO for Rs. 60,67,000/- being fund set apart for the security of the salary of the managers of the primary agricultural societies without appreciating the fact that the fund was set apart in compliance to the direction of Registrar of cooperative society, Rajasthan. 2. That on the facts and in the circumstances of the case, Ld. CIT (A) erred in blindly following the appellate order of Ld. CIT (A) in appeal no. 330/2009-10 while upholding the addition of Rs. 60,67,000/- for fund set apart for the security of the sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, Ld. CIT (A) erred in That on the facts and in the circumstances of the case, the ld. AO ought to allow Rs. 10.50 Lacs being the actual payment of gratuity as against the provision of Rs. 7.50 Lacs made by the assessee since the same was disallowed in earlier year on provision basis u/s 40A(7). 8. That the petitioner may kindly be permitted to raise any additional or alternative ground at or before the time of hearing. 9. That the appellant prays for justice. 3. An additional ground was also raised and which was found to be legal ground for which no further investigation of facts was required and after hearing the ld. D.R., we have allowed this additional ground to be raised which reads as under: O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from the registrar. This liability would not arise at the time of execution of agreement, say in the month of May, 2003, as it was subject to approval by the Registrar. The assessee-bank was not considered the provision / liability belonging to the prior period. The Auditors have also not considered this provision as such. This issue seems to be covered by the decision of the Hon ble Apex Court rendered in the case of Nonsuch Tea Estate Ltd. Vs CIT 98 ITR 189 (SC). In this case it has been held that where any payment is subject to approval, the liability to pay crystallizes in the year of approval. Similar view has been taken by Hon ble Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. 213 ITR 523 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning that Provision is a liability which can be measured only by using a substantial degree of estimation. He has also referred to the meaning of present obligation and possible obligation. He has further stated that AS-29 issued by the ICAI mandate to recognize a provision in the books of account when a provision fulfills the following conditions: (a) An enterprise has a present obligation as a result of a past event. (b) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) A reliable estimate can be made of the amount of the obligation 8. According to the ld. A.R., all the three conditions stated above are found satisfied in this case of the assessee and the provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the ld. D.R. has supported and defended the order of the ld. CIT(A). 11. We have heard the rival submissions and have carefully perused the entire material on record in the light of obtaining facts of this case as well as the oral and written submissions made by the parties. We have found force in the submissions of the ld. D.R. that liability in question was not crystallized during the year. At the same time, we also find force in the submissions of the ld. A.R. that in view of the fact that the assessee has been following mercantile system of accounting and the system of accounting as approved by AS-29 issued by the ICAI. This provision can also be allowed. Reliance has been placed by the CIT on the decision of Rotork Controls [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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