CIT V. PAWAN HANS HELICOPTERS LTD

ITA/1273/2011

AI Insights

The case involves appeals by the Revenue against Pawan Hans Helicopters Ltd concerning the allowance of maintenance costs as an expense under Section 37 of the Income Tax Act for the assessment years 2003-04 and 2005-06. The Tribunal had previously allowed these expenses, citing consistency in accounting practices over several years and acceptance by the Auditor and the Income Tax Department. The Revenue's appeal was based on challenges to this established accounting treatment. However, the court found no merit in disturbing the long-standing accounting principle followed by the assessee, especially since the method had been accepted in earlier and later years without dispute.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 720386 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 02-02-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HUSNAL SYALI
• Assessee Lawyers: ANUPAM TRIPATHI
• Keywords: Provision; Maintenance costs; Accounting principle; Expense claim
• Section: 37; 260A

Judgement Text

"t'' 'L' o/\" $-6 &7 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITAT273/2OII. ITA T274I2OIT CIT ..... Appellant Through: Mr. Anupam Tripathi, Sr. Standing Counsel versus PAWAN I{ANS I{ELICOPTERS LTD ..... Respondent Through: Mr. Husnal Syali, Adv. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V.EASWAR ORDER 02.02.2012 The present appeals by the Revenue under Section 260A of the Income Tax Act relate to assessment years 2003-04 and 2005-06. The only contention and issue raised is whether the provision for maintenance costs can be claimed as an expense under Section 37 of the Income Tax Act, 1961('Act' for short). The reasoning given by the Tribunal reads as under: \"On due consideration of the facts and circumstances, we do not find any merit in the grounds raised by the revenue. The assessee has been following same principle of accountancy in all the asstt. Years. AO himself accepted it in a number of years prior to these asstt. years and subsequent to these asstt. years. It is not advisable to Digitally Signed By:AMULYA Signature Not Verified ' t\" disturb the principle of accountancy followed by the assessee for one ot two years unless it is established that true income of the assessee cannot be worked out on that principle. The details of maintenance cost reserved from asstt. year 2002-03 up to 2005-06 has been placed by the assessee in a tabular form. Similarly, assessees has placed on record the opening balance of maintenance cost, provision created udirng the year, the amount utilized and the closing balance for asstt. Year starting from 2002-03 upto 2007-08 in a tabular form atpage 3 of the paper book. We find that there is decreasing trend in the closing balance on this provision. The accounting treatment as well as allowability of such maintenance expense on accrual basis was accepted in the past by the Auditor including CAG as well as by the income Tax Department. There is no sound reasoning assigned by the AO in the asstt. Orders for disturbing this method of accountancy. Thus following the principle of consistency, we upholdthe order of Ld. CIT (A).\" On the last date of hearing learned counsel for the Revenue was asked to obtain instructions whether the provision for maintenance costs was allowed in the earlier assessment years and whether Revenue had prefened any appeal against adverse orders passed by the appellate forum. Learned counsel for the Revenue accepts that the Revenue did not prefer appeals and have accepted order passed by the CIT (Appeals) in the earlier assessment years. We may note that similar additions were made in the financial year 1994-95,1995-96 and 1996-97 by the Assessing Officer but were deleted by the CIT (Appeals) Learned counsel for the Revenue submits that with effect from ; assessment year 2007-08 the respondent-assessee has changed the method of accounting and is no longer making any provision for maintenance cost. Learned counsel for the respondent-assessee states that change was made to l avoid further confusion or litigation and it was not making any difference in the taxable income. It is therefore'clear that this issue does not have any recurring effect in view of the change made by the respondent-assessee. r After examining the reasoning given by the Tribunal we are not inclined to admit the present appeal. The provision for maintenance was made on the basis of flying hours undertaken in the year in question. The aircrafts require periodical maintenance after prescribed flying hours. Income is earned on basis of flying hours undertaken. Moreover, interfering with the accounting practice followed throughout on piece meal basis, in some years, will create its own difficulties and problems. The appeal is dismissed. l/ ?t( SANJIV KHANNA, J 1a l'U\"-'1\" R.V.EASWAR' J FEBRUARY 02,2012 mm "