ACIT, New Delhi V. M/s Telecommunication Consultant India Pvt. Ltd., New Delhi

ITA 3609/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0374 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A; 37(1); 192; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: G NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO. 3609/DEL/2017 ASSESSMENT YEAR: 2011-12 ACIT, CIRCLE-25(1), NEW DELHI VS. M/S. TELECOMMUNICATION CONSULTANT INDIA PVT. LTD., TCIL BHAWAN, GREATER KAILASH- 1, NEW DELHI PAN :AAACT0061H (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER DATED 28/02/2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-15, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2011-12 RAISING FOLLOWING GROUNDS: 1. THE IMPUGNED ORDER OF THE CIT(A) IS BAD IN LAW AS WELL AS ON FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 3,96,72,870/- APPELLANT BY SH. PRAKASH DUBEY, SR.DR RESPONDENT BY SH. SUYASH SINHA, ADV. DATE OF HEARING 05.07.2021 DATE OF PRONOUNCEMENT 16.07.2021 2 ITA NO.3609/DEL/2017 MADE U/S 14A OF THE ACT IGNORING THE FACT THAT THER E IS DIRECT AND PROXIMATE NEXUS BETWEEN THE EXEMPTED INCOME, WHICH THE INVESTMENT SHALL GENERATE AND THE EXPENDITURE DIREC TLY OR INDIRECTLY INVOLVED IN EARNING THE SAID INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 8,17,696/- TO 2,87,351/- RESULTING IN DELETION OF RS. 5,30,345/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES IGNORING THE FACT THAT THE PRIOR PERIOD EXPENSES HAD NOT BEEN DEBITED TO PROFIT & LO SS ACCOUNT IN THE YEAR WHEN THOSE WERE INCURRED. 4. THE APPELLANT CRAVES, LEAVE OR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY OF THE GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A PUBLIC SECTOR UNDERTAKING OF GOVERNMENT OF INDIA UN DER THE ADMINISTRATIVE CONTROL OF MINISTRY OF INFORMATION T ECHNOLOGY. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RE TURN OF INCOME ON 29/09/2011, DECLARING TOTAL INCOME OF 1,45,96,030/- WHICH WAS FURTHER REVISED TO 8,16,09,300/- ON 20/03/2013. THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE INC OME-TAX ACT, 1961 (IN SHORT THE ACT) WAS COMPLETED ON 29/03/20 14 AFTER MAKING DISALLOWANCE OF RS. 3,96,72,870/- UNDER SECT ION 14A OF THE ACT AND DISALLOWANCE OF PRIOR PERIOD EXPENSES O F RS. 26,16,106/-. THE LD. CIT(A) DELETED BOTH THESE DISA LLOWANCES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIB UNAL, RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, THE PARTIES APPEARED THROUGH VIDEO CONF ERENCING FACILITY AND FILED DOCUMENTS ELECTRONICALLY. 4. THE GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE, WE ARE NOT REQUIRED TO ADJUDICATE UPON A ND THE SAME IS ACCORDINGLY DISMISSED. 3 ITA NO.3609/DEL/2017 5. THE GROUND NO. 2 RELATES TO DISALLOWANCE OF 3,96,72,870/- UNDER SECTION 14A OF THE ACT. THE LD. CIT(A) DELETE D THE DISALLOWANCE OBSERVING AS UNDER: 5. GROUND NO. 2: THIS GROUND RELATES TO THE DISALL OWANCE OF RS.3,96,72,870/- MADE U/S 14A OF THE ACT AND THE CO RRESPONDING ADDITION MADE TO THE BOOK PROFITS U/S 115JB. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT IS SUBMITTED BY THE AR OF THE APPELLANT THAT THE APPELLANT COMPANY DID NOT EARN ANY EXEMPT INCOM E DURING THE YEAR UNDER REFERENCE. FOR MAKING DISALLOWANCE U/S 1 4A IT IS SUBMITTED BY THE APPELLANT THAT THERE SHOULD BE NEX US BETWEEN THE EXEMPT INCOME AND THE EXPENDITURE INCURRED AND THER E SHOULD BE AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . IN THE ABSENCE OF ANY EXEMPT INCOME THE PROVISION OF SECTION 14A C ANNOT BE INVOKED. THE APPELLANT PLACED RELIANCE ON THE VARIO US JUDGMENTS AS MENTIONED IN HIS SUBMISSIONS. IT IS SUBMITTED THAT ENTIRE INVESTMENT WERE MADE FROM ITS OWN RESOURCES AND NOT FROM THE B ORROWED FUND. IT IS FURTHER SUBMITTED THAT NO INTEREST BEARING FU NDS ARE UTILIZED FOR MAKING THE INVESTMENT IN SHARES BY THE APPELLANT CO MPANY. THE LOANS AND OVERDRAFTS WERE TAKEN BY THE APPELLANT CO MPANY FOR EXECUTION OF VARIOUS PROJECTS IN INDIA AND ABROAD. MY ATTENTION IS ALSO DRAWN TO THE FACT THAT IN A.Y. 2007-08 AND 200 8-09 THE DISALLOWANCE MADE U/S 14A OF THE ACT WERE DELETED B Y THE CIT(A) VIDE ORDER DATED 27.11.2012 IN APPEAL NO. 33/09-10 FOR A.Y. 2007- 08 AND ORDER DATED 03.04.2012 IN APPEAL NO. 201/11- 12 FOR A.Y. 2008-09 IN APPELLANT'S OWN CASE. IT IS NOTED THAT D URING THE YEAR UNDER REFERENCE THE APPELLANT HAS NOT RECEIVED ANY DIVIDEND OR EXEMPT INCOME. IT HAS BEEN HELD BY THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT-VI IN I TA NO.749/2014 VIDE THEIR JUDGMENT DATED 02.09.2015 THAT FOR DISAL LOWANCES U/S 14A, THERE SHOULD BE RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR. PAR A 23 OF THE JUDGMENT IS REPRODUCED BELOW:- '23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME , DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR.' IN THE LIGHT OF ABOVE STATED FACTS AND FOLLOWING TH E JUDGMENT OF JURISDICTIONAL HIGH COURT AS GIVEN IN THE CASE OF C HEMINVEST LTD. (SUPRA), AND ALSO THE ORDER OF THE CIT(A) IN APPELL ANTS OWN CASE IN 4 ITA NO.3609/DEL/2017 A.Y. 2007-08 AND 2008-09 AS MENTIONED ABOVE AS FACT S ARE SIMILAR IN THIS YEAR AS WELL, THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THIS CASE IS HEREBY DELETED. 5.1 BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER, WHEREAS LEARNED COUNSEL OF THE A SSESSEE RELIED ON THE ORDER OF THE LEARNED CIT(A). 5.2 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. WE FIND THAT DURING THE YEAR, NO EXEMPT ED INCOME WAS RECEIVED BY THE ASSESSEE AND THEREFORE, FOLLOWING T HE FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CH EMINVEST LTD (SUPRA), THE LD. CIT(A) DELETED THE DISALLOWANCE. I N OUR OPINION, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A ) ON THE ISSUE IN DISPUTE AND ACCORDINGLY WE UPHOLD THE SAME. THE GRO UND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 6. THE GROUND NO. 3 RELATED TO PRIOR PERIOD EXPENSES WHEREIN THE LD. CIT(A) HAS REDUCED THE DISALLOWANCE OF 8,17,696/- TO RS. 2,87,351/-. THE LD. CIT(A) HAS DELETED THE DISALLOW ANCE OBSERVING AS UNDER:] 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND AL SO THE SUBMISSIONS FILED BY THE APPELLANT DURING THE COURS E OF APPELLATE PROCEEDINGS. THE GROUNDS RAISED IN THIS APPEAL ARE ADJUDICATED AS FOLLOWS:- GROUND NO. 1 :- THIS GROUND RELATES TO THE ADDITION OF RS.26,16,106/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. VIDE ORDE R DATED 16.06.2014 ACT PASSED UNDER SECTION 154 OF THE ACT. AO HAS RESTRICTED THE DISALLOWANCE TO RS.8,17,696/- HOLDIN G THAT AS PER THE SCHEDULE THE PRIOR PERIOD EXPENSES ARE OF RS.8,17,6 96/- ONLY. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED DETAILS IN RESPECT OF ADJUSTMENTS CARRIED OUT IN RE SPECT OF PRIOR PERIOD EXPENSES/INCOME. AS PER THE DETAILS SUBMITTE D BY THE APPELLANT IT IS SEEN THAT THE APPELLANT HAS OFFERED PRIOR PERIOD INCOME OF RS.34,33,802/- AND HAS CLAIMED EXPENSES P ERTAINING TO PRIOR PERIOD OF RS.8,17,696/-. IN NET RESULT THE AP PELLANT HAS OFFERED INCOME OF RS.26,16,106/- ON ACCOUNT OF PRIOR PERIOD ADJUSTMENT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT WAS ASKED 5 ITA NO.3609/DEL/2017 TO GIVE THE DETAILS OF PRIOR PERIOD EXPENSES CLAIME D DURING THE YEAR UNDER REFERENCE. IT IS SUBMITTED BY THE APPELLANT T HAT A SUM OF RS.3,74,490/- CLAIMED BY THE APPELLANT IN FACT RELA TE TO WORK CONTRACT TAX WHICH WAS CHARGED @ 4% INSTEAD OF 1% A ND PERTAIN TO THE F.Y. 2009-10. WHEN THE MATTER WAS TAKEN UP WITH THE COMMERCIAL TAX DIVISION IT GOT FINALLY RESOLVED IN THE YEAR UNDER REFERENCE. SINCE THE MATTER WAS RESOLVED IN A.Y. 20 11-12 THE DIFFERENTIAL WAS DEBITED TO THE PROFIT AND LOSS ACC OUNT IN A.Y. 2011- 12 AND THE CORRESPONDING PAYMENT WAS MADE TO THE SU B CONTRACTOR. WITH REGARD TO EXPENDITURE CLAIMED OF RS. 1,55,855/ - IN RESPECT OF STORES AND SPARES AND LOOSE TOOLS CONSUMED, IT IS S UBMITTED THAT THE MATERIALS WERE SUPPLIED BY THE SUPPLIER FOR RS.1,55 ,855/- WHO SUBMITTED THEIR BILLS ON 30.03.2010. THE SAID BILLS WERE VERIFIED BY THE APPELLANT'S ENGINEER AND FORWARDED TO THE ACCOU NTS DEPARTMENT IN APRIL 2010 AND THEREFORE THE EXPENDITURE WAS CLA IMED IN THE YEAR UNDER REFERENCE. THE APPELLANT HOWEVER COULD NOT FU RNISH DETAILS IN RESPECT OF OTHER EXPENSES OF RS.1,07,730/- AND NO D ETAILS FOR THE DEPRECIATION CLAIMED IN THE YEAR OF. RS.1,79,621/- WERE FURNISHED. AS THE APPELLANT HAS GIVEN DUE JUSTIFICATION FOR TH E EXPENSES DEBITED IN RESPECT OF STORES AND SPARES OF RS. 1,55,855/- A ND EXPENSES IN RESPECT OF SUB CONTRACT OF RS.3,74,490/-, I AM OF T HE CONSIDERED VIEW THAT THE SAME NEEDS TO BE ALLOWED TO THE APPELLANT. THE ADDITION TO THIS EXTENT IS HEREBY DELETED. AS APPELLANT HAS NOT BEEN ABLE TO JUSTIFY THE OTHER ITEMS OF EXPENDITURE CLAIMED, THE ADDITION OF RS.2,87,351/-(RS.1,07,730/- + RS.1,79,621/-) IS THE REFORE, CONFIRMED. 6.1 BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE F AILED TO DEMONSTRATE THAT LIABILITY CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. 6.2 ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSE SSEE RELIED ON THE ORDER OF THE LEARNED CIT(A) AND SUBMI TTED THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE BY THE TRIBUNAL IN ITA NO. 4129/DEL/2011 FOR ASSESSMENT YE AR 2005-06. 6.3 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES OF T HE ISSUE IN DISPUTE. THE LD. CIT(A) HAS ALLOWED RELIEF IN RESPE CT OF EXPENSES OF STORE AND SPARES AMOUNTING TO 1,55,855/- AND EXPENSES IN RESPECT OF THE CONTRACT OF 3,74,490/- HOLDING THAT SAME WERE 6 ITA NO.3609/DEL/2017 CRYSTALLISED IN THE YEAR UNDER CONSIDERATION. THE A SSESSEE HAS DEMONSTRATED THAT LIABILITY HAS BEEN CRYSTALLISED I N THE YEAR UNDER CONSIDERATION AND THEREFORE, THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE. FURTHER WE FIND THAT IDE NTICAL ISSUE OF PRIOR PERIOD EXPENSES ON CONTRACT HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL (SUPRA) IN ASSESSMENT YEAR 2005-06 OBSERVING AS UNDER: 9. WE HAVE CAREFULLY CONSIDERED RIVAL CONTENTIONS AS WELL AS THE PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE AS SESSEE IS A GOVERNMENT ORGANIZATION FOLLOWING THE MERCANTILE SY STEM OF ACCOUNTING WHERE THE EXPENSES ARE RECOGNIZED ONLY W HEN THEY ARE CRYSTALLIZED. IT WAS FURTHER STATED THAT THESE EXPE NDITURE HAVE BEEN CRYSTALLIZED DURING THE YEAR AND THEREFORE THERE BE EN ACCOUNTED SO. THE ASSESSEE IS ALSO EXPLAINED VARIOUS REASON WHY T HE EXPENDITURE HAVE BEEN CRYSTALLIZED DURING THE YEAR SUCH AS RECE IPT OF CLAIM FROM SUBCONTRACTORS A LATER DATE WHEN THE WORK WAS DULY CARRIED OUT IN COMPLETED IN EARLIER YEARS, ACCEPTANCE OF ADDITIONA L CLAIMS, RECEIPT OF INVOICES OF MATERIALS AND LATER DATE, MEASUREMENT O F WORK DONE BY THE CLIENT AFTER THE CLOSING OF THE ACCOUNTS, STAFF SALARY PAYMENTS REVISION OF PAY STRUCTURES ETC WITH RETROSPECTIVE E FFECT. THE IDENTICAL ISSUE AROSE IN THE CASE OF THE ASSESSEE WHEREIN FOR ASSESSMENT YEAR 2006 2007 THE LD. CIT APPEAL HAS ALLOWED THE CLAIM OF THE ASSESSEE RELYING UPON THE DECISION OF THE HON'BLE GUJARAT HI GH COURT IN CASE OF SAURASHTRA CEMENT AND CHEMICALS INDUSTRIES LTD V ERSUS CIT 213 1TR 523. THE LD. CIT APPEAL ALSO RELIED UPON HIS OW N ORDER FOR EARLIER YEARS WHEREIN IDENTICAL DISALLOWANCES BEEN DELETED. HONBLE GUJARAT HIGH COURT IN SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD VERSUS CIT 213 ITR 523 HAS HELD THAT:-. 9. QUESTION NO. 5 RELATES TO THE EXPENDITURE OF RS . 39,823 ACTUALLY INCURRED DURING THE PREVIOUS YEAR BUT WAS NOT ALLOWED AS DEDUCTION FROM THE PROFIT OF THE PREVIOU S YEAR ON THE GROUND THAT THE LIABILITY IN RESPECT OF VARIOUS EXPENSES INCLUDED IN THE AFORESAID SUM HAD ARISEN IN THE EAR LIER PREVIOUS YEAR AND NOT IN THE RELEVANT PREVIOUS YEAR AND AS THE ASSESSEE MAINTAINED THE ACCOUNTS ON MERCANTILE SYST EM, THE SAME WAS NOT ALLOWABLE EXPENSES OF THE PREVIOUS YEA R IN QUESTION. 10. FROM THE STATEMENT OF THE CASE AND THE ORDER OF THE TRIBUNAL IT APPEARS THAT THE CONTENTION OF THE ASSE SSEE WAS THAT THE EXPENDITURES IN DISPUTE WERE INCURRED IN T HE YEAR UNDER CONSIDERATION BECAUSE THEY WERE QUANTIFIED IN THE 7 ITA NO.3609/DEL/2017 PREVIOUS YEAR CONCERNED, AND THE COMMISSIONER (APPE ALS) REST CONTENDED BY SAYING THAT WHEN THE EXPENSES RELATED TO THE EARLIER ACCOUNTING YEARS, HOW EACH OF THESE EXPENSE S COULD BE QUANTIFIED IN THE YEAR OF CONSIDERATION. THE TRIBUN AL AFFIRMED THE DISALLOWANCE BY OBSERVING THAT THERE IS NO DISP UTE THAT THE ASSESSEE-COMPANY MAINTAINED ITS BOOKS OF ACCOUNT ON MERCANTILE BASIS. IT WAS OBSERVED THAT IF THAT IS S O, THERE WAS NO JUSTIFICATION IN CLAIMING THESE EXPENSES FOR THE ASSESSMENT YEAR UNDER APPEAL. HAVING CONSIDERED THE MATERIAL O N RECORD, WE DO NOT FIND ANY JUSTIFICATION FOR THE DISALLOWAN CE OF THE CLAIM OF THE ASSESSEE ON SUCH ABSTRACT PROPOSITION. MERELY BECAUSE AN EXPENSE RELATES TO A TRANSACTION OF AN E ARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLI ER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS DETERM INED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS O F MAINTAINING ACCOUNTS ON THE MERCANTILE BASIS, IN EACH CASE WHER E THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIABILI TY WAS CRYSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEA R SO AS REQUIRED TO BE ADJUSTED IN THE BOOKS OF ACCOUNT OF THAT PREVIOUS YEAR. IF ANY LIABILITY, THOUGH RELATING TO THE EARLIER YEAR, DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTAN CE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY C LAIMED AND PAID IN THE LATER PREVIOUS YEARS, IT CANNOT BE DISA LLOWED AS DEDUCTION MERELY ON THE BASIS THAT THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTION OF THE PREVIOUS YEAR. THE TRUE PROFITS AND GAINS OF A PREVIOUS YEAR ARE REQUIRED TO BE COMPUTED FOR THE PURPOSE OF DETERMINING TAX LIABILITY. THE BASIS OF TAXING INCO ME IS ACCRUAL OF INCOME AS WELL AS ACTUAL RECEIPT. IF FOR WANT OF NECESSARY MATERIAL CRYSTALLISING THE EXPENDITURE IS NOT IN EX ISTENCE IN RESPECT OF WHICH SUCH INCOME OR EXPENSES RELATES, T HE MERCANTILE SYSTEM DOES NOT CALL FOR AN ADJUSTMENT I N THE BOOKS OF ACCOUNT ON ESTIMATE BASIS. IT IS ACTUALLY KNOWN INCOME OR EXPENSES, RIGHT TO RECEIVE OR LIABILITY TO PAY WHIC H HAS COME TO BE CRYSTALLISED, IS TO BE TAKEN INTO ACCOUNT UNDER MERCANTILE SYSTEM OF MAINTAINING BOOKS OF ACCOUNT. AN ESTIMATE D INCOME OR LIABILITY, WHICH IS YET TO BE CRYSTALLISED, CAN ONLY BE ADJUSTED AS CONTINGENCY ITEM BUT NOT AS AN ACCRUED INCOME OR LIABILITY OF THAT YEAR. TO ILLUSTRATE, WE FIND FROM THE DETAILS OF THE EXPENSES THAT CERTAIN EXPENSES ARE RELATED TO T HE FEES PAID TO THE EXPERTS, OUT OF POCKET EXPENSES INCURRE D BY THE CONSULTATION FIRM AND DISCHARGE OF LIABILITY ON ACC OUNT OF DEMURRAGES CLAIMED BY THE PORT AUTHORITIES. SUCH IT EMS WITHOUT INVESTIGATION INTO THE FACT ABOUT THE CRYST ALLIZATION OF SUCH DUES CANNOT BE DISALLOWED MERELY ON THE GROUND THAT THEY RELATE TO THE TRANSACTIONS PERTAINING TO EARLI ER ACCOUNTING YEAR. IN THIS CONNECTION IT IS USEFUL TO REFER TO A DECISION OF THE 8 ITA NO.3609/DEL/2017 GAUHATI HIGH COURT IN THE CASE OF CIT V. NATHMAL TO LARAM F 19731 88 1TR 234 WHICH WAS A CASE ARISING UNDER THE INDIAN INCOME-TAX ACT, 1922, AS TO THE INTERPRETATION OF S ECTION 10(2) (XV) WHICH IS CORRESPONDING TO SECTION 37(1) OF THE 1961 ACT. THE QUESTION RELATED TO THE CLAIM OF DEDUCTION ON A CCOUNT OF THE SALES TAX LIABILITY PAID DURING THE YEAR 1957-5 8, WHEREAS THE LIABILITY RELATED TO THE ACCOUNTING YEAR 1949-5 0. THE DIVISION BENCH IN THAT CASE OBSERVED AS UNDER: '. . . UNDER SECTION 4 OF THE INCOME-TAX ACT, THE I NCOME THAT ACCRUES OR ARISES DURING ANY PREVIOUS YEAR ALONE IS TO BE TAKEN NOTE OF. THERE IS, THEREFORE, A BAR TO INCLUD E ANY INCOME THAT ACCRUES OR ARISES OUTSIDE THE PREVIOUS YEAR SU BJECT TO THE DEEMING PROVISIONS IN THE ACT. THERE IS, HOWEVER, N O EXPRESS BAR IN LAW,, NOR ONE BY NECESSARY IMPLICATION, REST RICTING THE POWER OF THE INCOME-TAX OFFICER TO EXCLUDE THE EXPE NDITURE LAID OUT OR EXPENDED UNDER SECTION 10(2) (XV) OF THE 192 2 ACT. WE ARE, THEREFORE, UNABLE TO ACCEDE TO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE DEPARTMENT. SECTION 10(2) (XV) , SHORN OF OTHER DETAILS FOR OUR PURPOSE, PROVIDES FOR MAKING ALLOWANCES OF ANY EXPENDITURE ' LAID OUT' OR 'EXPENDED'. THE WORDS 'LAID OUT' ARE WITH REFERE NCE TO THE MERCANTILE SYSTEM WHILE THE WORD 'EXPENDED' IS WITH REGARD TO THE CASH SYSTEM. ONCE THERE WAS THE SALES TAX DEMAN D IN THIS CASE, WHICH WAS AN ENFORCEABLE LIABILITY AND AS SUC H A REAL EXPENDITURE, FOR WHICH THE ASSESSEE LAID OUT THE AM OUNT BY DEBITING HIS ACCOUNT IN THE ACCOUNTING YEAR WHICH W AS ALSO THE YEAR OF DEMAND OF THE DEPARTMENT, DEDUCTION CAN BE LEGITIMATELY CLAIMED UNDER SECTION 10(2) (XV) . HER E IS A CASE, WHERE THERE IS NO DOUBT ABOUT THE GENUINENESS OF TH E EXPENDITURE. THERE IS ALSO THE COMPULSIVENESS IN TH E SALES TAX DEMAND WHICH CAN BE IGNORED ONLY AT PERIL OF THE AS SESSEE. THIS EXPENDITURE HAD NEVER BEEN TAKEN NOTE OF IN TH E EARLIER YEARS FOR ONE REASON OR THE OTHER. IN THE ABSENCE O F ANY LEGAL BAR IN THE WAY OF THE ASSESSEE CLAIMING THIS EXPEND ITURE IN THE YEAR OF DEMAND FOR WHICH PROVISION HAS ALREADY BEEN MADE IN HIS ACCOUNTING YEAR, DEDUCTION UNDER SECTIO N 10(2) (XV) IS PERMISSIBLE IN LAW AND HAS BEEN RIGHTLY ALL OWED BY THE TRIBUNAL. ' (P.238) WE ARE IN RESPECTFUL AGREEMENT WITH THE SAID VIEW E XPRESSED BY THE GAUHATI HIGH COURT. WE, THEREFORE, ANSWER QU ESTION NO. 5 IN THE NEGATIVE, I. E. , IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE FINDINGS OF THE LD. CIT APPEAL AS WELL AS COULD NOT PLACE BEFORE US 9 ITA NO.3609/DEL/2017 ANY REASON THAT THE EXPENDITURE HAS NOT BEEN CRYSTA LLIZED DURING THE YEAR. IN VIEW OF THIS GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 6.4 IN VIEW OF THE FACTS AND CIRCUMSTANCES, WE UPHOLD THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IN DISPU TE. THE GROUNDS OF THE APPEAL OF THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2021. SD/- SD/- (KULDIP SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 TH JULY, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI