Deputy Commissioner of Income-tax, V. Force Motors Ltd., Pune

ITA 1382/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2883 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: MUKESH M PATEL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 1381 TO 1384/PN/2014 %' ( ')( / ASSESSMENT YEARS : 2006-07 TO 2009-10 DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE ....... / APPELLANT ' / V/S. FORCE MOTORS LTD., BOMBAY PUNE RAOD, AKURDI, PUNE 411035 PAN : AAACB7066L / RESPONDENT ASSESSEE BY : SHRI MUKESH M. PATEL REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 07-01-2016 / DATE OF PRONOUNCEMENT : 08-01-2016 * / ORDER PER VIKAS AWASTHY, JM : THESE SET OF FOUR APPEALS FOR THE ASSESSMENT YEARS 2006 -07, 2007-08, 2008-09 AND 2009-10 HAVE BEEN FILED BY THE REV ENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE FOR THE RESPECTIVE ASSESSMENT YEARS. ALL THE IMPUGNED ORDERS A RE DATED 04-03-2014. SINCE, THE ISSUES INVOLVED IN ALL THE APPEALS A RE IDENTICAL, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 2 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 2. THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE FOLLOWING GROUNDS IN ASSESSMENT YEAR 2006-07: 1A). WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANC E OF RS.10,08,597/- BEING EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF TAXES AND FEES NOT PERTAINING TO THE YEAR UNDER CONSIDERATION? 1B). WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN NOT APPRECIATING THE PRO VISIONS OF SECTION 43B OF THE IT. ACT AND IN IGNORING THE CLEAR LANGUAGE OF T HE SECTION 43B, AS PER WHICH ANY EXPENDITURE HAS TO BE OTHERWISE ALLOWABLE BEFORE APPLYING THE PROVISIONS OF SECTION43B? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWAN CE OF RS.45,72,474/- MADE OUT OF EXPENDITURE ON FREE SERVICE TO CUSTOMER S PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F ROTORK CONTROLS LTD [314 ITR 62] WHEN SCIENTIFIC BASIS OF THE PROVISION OF WARRANTY IS NOT CONCLUSIVELY ESTABLISHED ? SIMILAR GROUNDS HAVE BEEN RAISED BY THE REVENUE IN THE A PPEALS FOR THE OTHER IMPUGNED ASSESSMENT YEARS. 3. THE ASSESSING OFFICER DURING THE COURSE OF SCRUTINY ASS ESSMENT PROCEEDINGS IN THE IMPUGNED ASSESSMENT YEARS INTER ALIA DISALLOWED THE EXPENDITURE TOWARDS TAXES AND DUTIES PAID BY THE ASSES SEE AND EXPENDITURE ON FREE SERVICES TO THE CUSTOMERS. AGGRIEVED BY THE ASSESSMENT ORDERS, THE ASSESSEE FILED A PPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMM ISSIONER OF INCOME TAX (APPEALS) BY PLACING RELIANCE ON THE ORDER O F TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 DELETED THE ADDITION ON BOTH THE COUNTS. NOW, THE REVENUE IS IN APPE AL ASSAILING 3 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALL THE IMPUGNED ASSESSMENT YEARS. 4. SHRI MUKESH M. PATEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ISSUES RAISED IN THE A PPEALS BY THE REVENUE ARE SQUARELY COVERED BY THE ORDER OF CO-ORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1483/PN/2007 AND ITA NO. 1522/PN/2007 FOR THE ASSESSMENT YEAR 2003-04 DECIDED ON 21-01-2010. THE LD. AR PLACED ON RECORD A COPY OF ORDER OF THE TRIBUNAL DATED 21-01-2010 (SUPRA). 5. SHRI MUKESH JHA REPRESENTING THE DEPARTMENT VEHEMEN TLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. THE LD. DR S UBMITTED THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE EXPENDITURE TOWARDS TAXES AND DUTIES CLAIMED BY THE ASSESSEE ARE PREPAID EXPENSES NOT RELATING TO THE RESPECTIVE ASSESSMENT YEARS. IT IS ONLY WHEN THE EXPENDITURE IS INCURRED FOR THE RELEVANT YEAR THE EXPENDITURE CAN TO BE ALLOWED ON PAYMENT BASIS. THE ASS ESSEE OUGHT TO HAVE MADE PROVISIONS FOR THESE EXPENSES UNDER MERC ANTILE SYSTEM OF ACCOUNTING AND SHOULD HAVE CLAIMED THE SAME IN THE YEAR TO WHICH THEY RELATE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. DR PLACED RELIA NCE ON THE DECISION RENDERED IN THE CASE OF CIT VS. KERALA SOLVENT EX TRACTIONS LTD. REPORTED AS 306 ITR 54 (KERALA). IN RESPECT OF EXPENDITU RE ON FREE SERVICE TO THE CUSTOMERS, THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSE E BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF ROTORK CONTROL INDIA (P) LTD. VS. CIT REPORTED AS 223 CTR 425 (SC ). HOWEVER, THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS ADOPTED SCIENTIFIC METHOD FOR CREATING SUCH A PROVISION. THE ASSESS ING OFFICER 4 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 HAS SPECIFICALLY MENTIONED THIS FACT IN THE ORDER. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (A PPEALS) ON BOTH THESE ISSUES. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH BOTH THE SIDE S HAVE PLACED RELIANCE. WE HAVE OBSERVED THAT THE ISSUE RELATING TO EX PENDITURE TOWARDS TAXES AND FEES WAS CONSIDERED BY THE TRIBUNAL IN ITA NO. 1522/PN/2007 FILED BY THE ASSESSEE AS GROUND NO. 5. THE CO-ORDINATE BENCH OF THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. REPORTED AS 107 ITD 343 HAS ACCEPTED THE CLAIM OF ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL IS AS UNDE R: 6. GROUND NO. 5 RAISED BY THE ASSESSEE IS AGAINST THE DECISION OF THE LEARNED CIT(A) IN HOLDING THAT THE EXPENSES OF RS.1 0,07,803/- TOWARDS TAXES AND FEES, THOUGH NOT DEBITED TO PROFIT & LOSS ACCOUNT (BEING PREPAID EXPENSES) BUT WHICH WERE ACTUALLY PAID IN T HE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2003-04 WERE NOT ALLOWA BLE U/S. 43B OF THE ACT. 6.1 FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE COMPANY HAS IN ITS BOOKS OF ACCOUNT SHOWN CERTAIN TAXES AND DUTIES AMO UNTING TO RS.10,07,803/- AS PREPAID EXPENSES WHICH WAS NOT DE BITED TO PROFIT & LOSS ACCOUNT THESE EXPENSES WERE CLAIMED AS DEDUCTI ON U/S. 43B OF THE ACT ON PAYMENT BASIS. IT WAS CONTENDED BEFORE THE A SSESSING OFFICER THAT THESE EXPENSES WERE INCURRED AND PAID DURING THE .P REVIOUS YEAR 2002- 03 AND THEREFORE, THESE AMOUNTS ARE ELIGIBLE FOR DE DUCTION U/S. 43B IRRESPECTIVE OF METHOD OF ACCOUNTING FOLLOWED BY TH E COMPANY. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE AR GUMENTS OF THE ASSESSEE AND DISALLOWED THE AMOUNT HOLDING THAT THE IT IS ONLY WHEN THE, EXPENDITURE IS INCURRED FOR THAT YEAR THE EXPENDITU RE NEEDS TO BE ALLOWED ON PAYMENT BASIS. THE ASSESSEE COMPANY HAS NOT MADE THE PROVISION OF 5 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 THESE EXPENSES AND THEREFORE, IN THE MERCANTILE SYS TEM IT IS NOT ALLOWED ON PAYMENT BASIS. 6.2 BEFORE THE CIT(A) THE ASSESSEE DISPUTED THE ACT ION OF THE ASSESSING OFFICER STALING THAT THE EXPENDITURE HAS BEEN INCUR RED BY THE APPELLANT COMPANY DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2 003-04. THE TAXES AND DUTIES PAID DURING THE YEAR 2000-01 (A.Y. 2001- 02) ARC ELIGIBLE FOR DEDUCTION U/S. 43B IRRESPECTIVE OF THE METHOD OF AC COUNTING FOLLOWED BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE ASS ESSING OFFICER SHOULD HAVE ALLOWED THESE EXPENSES AS DEDUCTION ON PAYMENT BASIS THOUGH THE SAME HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCO UNT. HOWEVER, THE CIT(A) DISAGREED WITH THE CONTENTIONS OF THE ASSESS EE AND CONFIRMED THE ACTION OF THE ASSESSEE BY HOLDING THAT IF THE EXPEN DITURE IS NOT INCURRED FOR THE RELEVANT PREVIOUS YEAR, IT CANNOT BE ALLOWE D AS DEDUCTION UNDER THE I.T. ACT. HE FURTHER HELD THAT THE ISSUE WAS CO VERED AGAINST THE ASSESSEE BY THE ORDER OF THE CIT(A) IN ASSESSEES O WN CASE IN A.Y. 1998-- 99. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 6.3 BEFORE US THE ASSESSEE CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENC H (CHANDIGARH) IN THE CASE OF DY. CIT V. GLAXO SMITHKLINE CONSUMER HEALTH CARE LTD., 107 ITD 343 WHEREIN THE SPECIAL BENCH HAS TAKEN A VIEW THAT THE DEDUCTION IS TO BE ALLOWED ON ACTUAL PAYMENT BASS U/S. 43B IRRESPEC TIVE OF THE YEAR IN WHICH THE LIABILITY TO PAY WOULD BE INCURRED. 6.4 WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE SIDES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND ALSO THE CASE LAW CITED BEFORE US. WE FIND THE SPECIAL BENCH OF THE CHANDIGARH TRIBUNA L IN THE CASE OF DY. CIT V. GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD., 1 07 ITD 343 HAS HELD AS UNDER: '37. SECTION 43B HAS BROUGHT IN A CHANGE IN THE NOR MAL RULE OF DEDUCTION OF EXPENSE BASED ON THE ACCOUNTING METHOD FOLLOWED BY AN ASSESSEE. THE NORMAL PRINCIPLES AND PRACTICES AR E DONE AWAY. ACCORDINGLY, THERE IS NO FORCE IN THE ARGUMENT OF T HE REVENUE THAT THE DEDUCTION CAN BE GRANTED ONLY IF THE 'LIABILITY HAS INCURRED DURING THE PREVIOUS YEAR, EVEN WHEN THE PAYMENT WAS MADE BY THE ASSESSEE. THE POINT COMING OUT OF THE ABOVE DI SCUSSION IS THAT THE RULE OF DEDUCTION UNDER SECTION 43 IS THE ACTUA L PAYMENT OF THE LIABILITY. THE NATURE OF THE ACCOUNT-CURRENT ALREAD Y EXAMINED 6 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 BRINGS HOME THE POINT THAT THE ADVANCE PAYMENT OF E XCISE' DUTIES ARE ACTUAL PAYMENTS OF DUTIES. THEREFORE, WHEN THE PAYMENTS ARE UNDERSTOOD AS ACTUAL PAYMENTS, THOSE PAYMENTS EVEN IF MENTIONED AS ADVANCE PAYMENTS NEED TO BE ALLOWED AS DEDUCTION UNDER SECTION 43B. 38. THE ABOVE POSITION IS EMERGING OUT OF THE LANGU AGE OF THE STATUTE ITSELF. SECTION 43B PROVIDES FOR THE DEDUCT ION OF SUMS PAYABLE MENTIONED IN CLAUSES (A TO (F), ONLY IF ACT UALLY PAID; BUT SHALL BE ALLOWED IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE. THE INTENTION OF THE LEGISLATURE IS APPARENT IN THE ABO VE LANGUAGE USED IN SECTION 43B, THAT THE DEDUCTION IN RESPECT OF TAX OR DUTY, WHICH WAS ACTUALLY PAID BY THE ASSESSEE HAS TO BE A LLOWED AS DEDUCTION- WITHOUT LOOKING INTO THE YEAR OF INCURRI NG LIABILITY. THE GUJARAT HIGH COURT HAS EXAMINED THE TRUE MEANING OF THE ABOVE STATUTORY LANGUAGE IN THE CASE OF LAKHANPAL NATIONA LLTD. (SUPRA). THE COURT HAS HELD THAT DEDUCTION OF TAX OR DUTY PA ID BY AN ASSESSEE HAS TO BE ALLOWED AS DEDUCTION IN THE YEAR OF PAYMENT IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIAB ILITY TO PAY SUCH SUM WAS INCURRED ACCORDING TO THE METHOD OF ACCOUNT ING REGULARLY EMPLOYED BY THE ASSESSEE. 39. AS ARGUED BY THE ID. COUNSEL APPEARING FOR THE ASSESSES, THE EXPRESSION 'IRRESPECTIVE OF THE PREVIOUS YEAR' DISP ENSES WITH THE CONCEPT OF PREVIOUS YEAR, IN THE MATTER OF SUMS COV ERED BY SECTION 43B. THE EXPRESSION 'IRRESPECTIVE' MEANS LACKING RE LATION, REGARDLESS OF WHAT IS MENTIONED. HERE THE SUBJECT M ENTIONED IS 'PREVIOUS YEAR'. IT MEANS THE DEDUCTION HAS TO BE AL LOWED REGARDLESS OF THE PREVIOUS YEAR. ANY REFERENCE TO T HE TIME OF INCURRING OR ACCRUING OF THE LIABILITY IS DISPENSES WITH BY THE STATUTE WHILE CONCENTRATING IS MADE ON THE POINT OF ACTUAL PAYMENT OF THE SUM TO THE TREASURY OF THE GOVERNMEN T. '52. THEREFORE, WE HOLD THAT THE DEDUCTION FOR TAX, DUTY ETC., IS ALLOWABLE UNDER SECTION 43B OF THE INCOME-TAX ACT, 1961 ON PAYMENT BASIS BEFORE INCURRING THE LIABILITY TO PAY SUCH AMOUNTS. ACCORDINGLY, THE FIRST QUESTION IS ANSWERED IN AFFI RMATIVE AND IN FAVOUR OF THE ASSESSEE.' 7 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 6.5 RESPECTFULLY FOLLOWING THE DECISION OF THE SPEC IAL BENCH OF THE TRIBUNAL CHANDIGARH BENCH CITED ABOVE, THE GROUND R AISED BY THE ASSESSEE IS ALLOWED. WE FIND THAT IDENTICAL ISSUE HAS BEEN RAISED BY THE REVENU E IN ALL THE FOUR APPEALS BEFORE US. RESPECTFULLY FOLLOWING THE DECISIO N OF CO- ORDINATE BENCH, WE DISMISS THE FIRST GROUND RAISED IN THE A PPEALS OF THE REVENUE. 7. THE SECOND GROUND IN THE APPEALS BY THE REVENUE IS WITH RESPECT TO EXPENDITURE AND FREE SERVICES TO THE CUSTOMERS. TH IS ISSUE HAS ALSO BEEN CONSIDERED IN THE ASSESSEES OWN CASE IN ITA NO. 1 483/PN/2007 FILED BY THE REVENUE. THE TRIBUNAL BY PLACING RELIANCE ON THE JUDGMENT RENDERED IN THE CASE OF BHARAT EARTH MOVERS VS. CIT, 24 5 ITR 428 (SC) REJECTED THE CONTENTIONS OF THE REVENUE AND UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN FAVOUR OF THE ASSESS EE. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL ADJUDICATING THIS ISSUE READS AS UNDER: 11. GROUND NO. 1 RELATES TO ACTION OF THE CTT(A) I N HOLDING HOLDING THAT THE BASIS FOR MAKING PROVISION IS REASONABLE AND SC IENTIFIC AND THEREFORE, THE PROVISION CREATED IS AN ALLOWABLE EXPENDITURE. RELEVANT DISCUSSION, FACTS AND SUMMARY OF THE DECISION OF THE ASSESSING OFFICER ON THE FINDING OF THE CIT(A) ARE NARRATED IN PARA 12 OF THE IMPUGN ED ORDER. FOR THE SAKE OF COMPLETENESS THE SAME IS REPRODUCED AS UNDER: '12. THE NINTH GROUND OF APPEAL IS AGAINST THE ACTI ON OF THE ASSESSING OFFICER IN HOLDING THAT THE EXPENDITURE A MOUNTING TO RS.17,52,545/- INCURRED BY THE APPELLANT COMPANY ON FREE SERVICE TO THE CUSTOMERS IS A CONTINGENT LIABILITY. 12.1 FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS MADE PROVISION FOR FREE SERVICE CHARGES AMOUNTING T O RS.1,47,76,665/- AND CLAIMED IT AS EXPENDITURE BY F URNISHING THE FOLLOWING DETAILS. 8 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 PARTICULARS AMOUNT (RS.) OPENING LIABILITY AS ON 1.4.2002 83,36,260 ADD: PROVISION DURING THE YEAR 1,47,76,665 2,31,12,925 LESS: PAID DURING THE YEAR 1,19,93,780 CLOSING BALANCE AS ON 31.3.2003 1,11,19,145 12.2 BEFORE THE ASSESSING OFFICER IT WAS SUBMITTED BY THE ASSESSEE THAT OUT OF TOTAL LIABILITY OF RS.1,11,19, 145/- THE COMPANY HAS ALREADY PAID A SUM OF RS.93,66,600/-IN THE SUBSEQUENT YEAR. 12.3 THE ASSESSING OFFICER HELD THAT OUT OF THE CLO SING LIABILITY OF RS.1,11,19,145/- ONLY RS.93,66,600/- HAS BEEN PAID BY THE ASSESSEE COMPANY AND THEREFORE, THE BALANCE LIABILI TY OF RS.17,52,545/- REPRESENTED EXCESS PROVISION. THE SA ME WAS, THEREFORE, DISALLOWED BY HIM. 12.4 THE APPELLANT HAS DISPUTED THE AFORESAID DISAL LOWANCE STATING THAT THE LIABILITY TOWARDS FREE SERVICE COU PONS IS INCURRED BY THE APPELLANT COMPANY IMMEDIATELY AFTER SALE OF VEHICLES THOUGH THE ACTUAL PAYMENT MAY BE MADE AT A LATER DA TE. THE APPELLANT SUBMITTED THAT AT THE YEAR END THE COMPAN Y CALCULATES THE LIABILITY FOR UNENCASHED COUPONS WHICH ARE VALI D FOR THE FREE SERVICING AND THE PROVISION IS MADE FOR SUCH UNENCA SHED COUPONS. THE APPELLANT ADDED THAT DURING THE YEAR, THE PAYME NTS/CREDIT NOTES ARE ISSUED TO THE DEALERS FOR SERVICES RENDER ED TO THE CUSTOMERS AGAINST SUCH COUPONS FOR WHICH THE PROVIS IONS ARE MADE. FURTHER, THE DEALER IS ALSO REIMBURSED FOR FR EE SERVICES RENDERED BY HIM AGAINST THE SALE OF THE CURRENT YEA R. THUS, AT THE END OF THE YEAR, WHEN THE PROVISIONS FOR UNENCASHED COUPONS IS MADE IT IS ONLY FOR THE COUPONS VALID FOR AVAILING OF SERVICES. THIS AUTOMATICALLY NETS OFF THE BALANCE PROVISION, IF AN Y, MADE IN THE EARLIER, YEARS. AT THE BEGINNING OF THE NEXT YEAR, THE PROVISION SO MADE IS REVERSED AND A SIMILAR PROVISION FOR THE FO LLOWING YEAR IS MADE BASED ON THE VALIDITY OF UNENCASHED COUPONS. 9 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 12.5 THE APPELLANT SUBMITTED THAT THIS METHOD OF AC COUNTING IS BEING CONSISTENTLY FOLLOWED BY THE APPELLANT FROM S EVERAL YEARS. THE APPELLANT CLAIMED THAT THE PROVISION IS MADE AN D QUANTIFIED ON A SCIENTIFIC BASIS AND IS NOT CONTINGENT IN NATU RE. MINOR BALANCE PROVISION, IF ANY, ARE AUTOMATICALLY WRITTEN BACK I N THE SUBSEQUENT YEAR AND ARE OFFERED FOR TAXATION. 12.6 AFTER CAREFUL CONSIDERATION, I FIND MERIT IN T HE SUBMISSIONS OF THE APPELLANT. FROM THE APPELLANT'S SUBMISSION, IT IS SEEN THAT THE PROVISION MADE BY THE ASSESSEE CANNOT BE SAID T O BE WITHOUT ANY BASIS. THE QUANTIFICATION OF THE PROVISION IS D ONE ON THE BASIS OF UNENCASHED VALID COUPONS AND THEREFORE, THE BASI S FOR MAKING PROVISION APPEARS TO BE REASONABLE AND SCIENTIFIC. MOREOVER, THE FACT THAT THE APPELLANT HAS BEEN CONSISTENTLY FOLLO WING THIS METHOD OF ACCOUNTING FOR SEVERAL YEARS, ALSO GIVES STRENG TH TO THE CASE OF THE APPELLANT. FURTHER, I ALSO FIND FORCE IN APPELL ANT'S SUBMISSION THAT MINOR BALANCE PROVISION, IF ANY, IS AUTOMATICAL LY WRITTEN BACK IN THE SUBSEQUENT YEAR AND OFFERED FOR TAXATION. CO NSIDERING THESE ASPECTS, I DO NOT FIND ANY JUSTIFICATION IN THE ACT ION OF THE ASSESSING OFFICER IN DISALLOWING THE BALANCE PROVIS ION OF RS.17,52,545/- AND ADDING TO THE INCOME OF THE ASSE SSEE-. THE DISALLOWANCE IS DELETED.' 11.1 FROM THE ABOVE IT IS EVIDENT THAT THE CIT(A) H AS ALLOWED THE CLAIM OF THE ASSESSEE CONSIDERING THE FACT THAT THE PROVISIO N WAS DONE ON THE BASIS OF UNENCASHED VALID COUPONS AND THEREFORE, CO NSTITUTES A REASONABLE AND SCIENTIFIC BASIS. THE EXCESS OF RS.1 7,52,545 OVER AND ABOVE THE ACTUAL PAYMENT OF RS.93,66,600/- PAID BY THE ASSESSEE SHOULD NOT QUESTION THE REASONABLENESS OF THE PROVI SION CREATED. DURING THE PROCEEDINGS BEFORE US THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESSEE FILED A COPY OF THE JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAJESTIC AUTO LTD., 156 TAXMAN 460 FOR THE PROPOSIT ION THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION OF A LIABILITY IN TH E ACCOUNT PG YEAR ALTHOUGH SUCH LIABILITY MIGHT HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE AND SUCH A LIABILITY WAS TO BE TREATED IN PRESENT TIME AND WOULD NOT BE A CONTINGENT LIABILITY. IT WAS SO DECI DED RELYING ON A SUPREME COURT JUDGEMENT IN THE CASE OF BHARAT EARTH MOVERS LTD., 245 ITR 428 (SC). 10 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 11.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AS WELL AS THE JUDGEMENT CITED BY THE ASSES SEE. THE FINDING OF THE CIT(A) THAT THE PROVISION WAS CREATED BASING ON THE UNENCASHED COUPONS IS NOT CONTESTED WITH A VALID DOCUMENT OR S UPPORTIVE EVIDENCES BEFORE US. THIS IS A DECIDED ISSUE AT THE LEVEL OF THE APEX COURT THAT THE LIABILITY QUANTIFIED WITH A REASONABLE BASIS THOUGH DISCHARGED AT A LATER DATE IS AN ALLOWABLE CLAIM OF THE ASSESSEE AND IT A MOUNTS TO AN ASCERTAINED LIABILITY. WE BORROW RELEVANT PARAGRAPH FROM THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LTD. (SUPRA) WHICH IS AS UNDER: TO BE PROVIDED BY SIR. 11.3 CONSIDERING THE SETTLED POSITION ON THIS ISSUE , WE ARE OF THE OPINION THAT THE DECISION OF THE CIT(A) DOES NOT CALL FOR A NY INTERFERENCE IN THIS REGARD. ACCORDINGLY GROUND NO. 1 OF THE REVENUE IS DISMISSED. THE HON'BLE APEX COURT IN THE CASE OF BHARAT EARTH MOV ERS VS. CIT (SUPRA) HAS HELD: THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DE FINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED AL THOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTUR E DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SH OULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH TH E ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIR EMENTS ARE SATISFIED THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE AN Y DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN. THE HON'BLE COURT AFTER DISCUSSING THE JUDGMENTS RENDE RED IN THE CASE OF METAL BOX COMPANY OF INDIA LTD. VS. THEIR WORKMEN 73 ITR 53 (SC) AND IN THE CASE OF CALCUTTA CO. LTD. VS. CIT 37 ITR 1 (SC) CONCLUDED AS UNDER: APPLYING THE ABOVESAID SETTLED PRINCIPLES TO THE F ACTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVISION MADE BY T HE APPELLANT COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED B Y EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, IS ENTITLED TO DEDUCTION 11 ITA NOS. 1381 TO 1384/PN/2014, A.YS. 2006-07 TO 2009-10 OUT OF THE GROSS RECEIPTS FOR THE ACCOUNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY IS NOT A CONTINGENT LIABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING T HE VIEW TO THE CONTRARY. 8. THE LD. DR HAS NOT BEEN ABLE TO SHOW ANY DISTINGUISHIN G FACTOR IN THE PRESENT SET OF APPEALS. SINCE, THE ISSUE RAISED BY THE REVENUE IN THE PRESENT SET OF APPEALS HAS ALREADY BEEN DECIDED IN FA VOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH IN THE ASSESSMENT Y EAR 2003-04, WE FIND NO REASON TO TAKE A DIFFERENT VIEW. ACCORDINGLY, GROUN D NO. 2 RAISED IN THE APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEALS OF THE REVENUE FOR ASSESSM ENT YEARS 2006-07 TO 2009-10 ARE DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON FRIDAY, THE 08 TH DAY OF JANUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 08 TH JANUARY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE