Case Law Details
TCP Limited Vs ACIT (ITAT Chennai)
Conclusion: Since assessee could not explain how the expenses which were claimed by assessee in the closing stock was allowable i.e., provision in regard to freight expenses payable and labour charges payable. Therefore, no deduction was allowable as assessee had not made any payment during the year and even there was no liability incurred for this, rather this was merely a provision.
Held: AO while framing assessment and on perusal of audited balance sheet and profit & loss account of the assessee noticed that assessee had reported a sum of Rs.61.24 crores under the head ‘current liabilities’. Assessee explained and filed details of sundry creditors for expenses of Rs.5,60,85,668/- out of which, assessee had created provision for Rs.2,52,68,564/- towards raw materials, stores and spares. According to AO, this was merely a provision for future liability and liability was contingent in nature and yet to be incurred. Hence, according to him, this was not an allowable deduction. AO disallowed the liability which was yet to be incurred for the provision of Rs.2,52,68,564/-. Aggrieved, assessee preferred appeal before CIT(A). It was held that assessee could not explain how these expenses which were claimed by assessee in the closing stock was allowable i.e., provision in regard to freight expenses payable and labour charges payable. Assessee had not made any payment during the year and even there was no liability incurred for this, rather this was merely a provision. Hence, there was no infirmity in the order of CIT(A) and the same was confirmed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
These cross appeals by the assessee and Revenue, are arising out of order of the Commissioner of Income Tax (Appeals)-18, Chennai in ITBA/APL/M/250/2021-22/1039396014(1) dated 04.02.2022. The assessment was framed by the ACIT, Company Circle III(1), Chennai, for the assessment year 2008-09 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 21.12.2010.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
