PCIT Vs LTI Mindtree Ltd. (Karnataka High Court)
Conclusion: Assessee’s claim for this provision had been consistently allowed by the Tribunal in its own case for earlier assessment years and Revenue department could not present any new facts to contradict this established pattern for the current year, therefore, “provision for discount” was an allowable business expenditure under Section 37(1).
Held: Revenue filed an appeal under Section 260A challenging the ITAT’s order allowing deduction of provision for discount claimed by the assessee (a software company) for AY 2014-15. AO disallowed the claim treating it as contingent. CIT(A) deleted the disallowance relying on ITAT decisions in assessee’s own case for earlier years. ITAT upheld the allowance, noting that the provision was created on a scientific basis linked to sales volume, was consistently accepted in earlier years, and was fully discharged in subsequent years. High Court held that the Revenue itself had accepted the provision in earlier years and not disputed it even before the jurisdictional High Court in appeal for AY 2009-10. Since the provision was scientific and actually discharged, no substantial question of law arose. Accordingly, the appeal was dismissed. It was held that assessee had made provision for discount on a scientific basis linked to sales volume, which was fully discharged in subsequent years. Similar claim had been accepted in assessee’s own case for earlier years and was not assailed by the Revenue even before the jurisdictional High Court. In the absence of any change in facts, the Revenue’s stand treating the provision as contingent was untenable. No substantial question of law arose. The appeal was, therefore, dismissed.
