Wheatons Design Private Limited Vs ACIT/DCIT (ITAT Jaipur)
ITAT Jaipur held that claim on account of provision of future expense is allowable under section 37(1) of the Income Tax Act as per matching principle of accountancy. Accordingly, appeal is allowed.
Facts- The assessee company is a construction contractor and also engaged in the business of manufacturing and trading of furniture and fixtures. The present appeal has been preferred by the assessee mainly contesting against disallowance of claim of provision for future expenses of Rs. 34,60,713/-under section 37(1) of the IT Act by treating the same as contingent liability.
Further, appellant has also contested against initiation of assessment proceedings under section 148 of the Income Tax Act.
Conclusion- Held that claim of Rs.34,60,713/- on account of provision of future expense is allowable u/s 37(1) of the Act in as much as such provision is made by the assessee against the construction contract revenue on year to year basis and the actual expenditure incurred in the subsequent year is adjusted from such provision. From paper book page 17, we find that upto 31.03.2018 the provision has been utilized. Thus, the expenditure claimed in the construction account under the head Provision for Future Expenses is allowable under section 37(1) of the IT Act, 1961. Such provision made in course of carrying out the business as per the matching principal of accountancy is not disallowable under any provisions of the Act, whether the various Courts referred supra has held that such provision is allowable u/s 37(1) of the Act. Hence even on merit the ground of the assessee is allowed.
