ACIT Vs Green Environment Services Co-op Society Ltd. (ITAT Ahmedabad)
ITAT Ahmedabad held that provision for Solid Waste Disposal Expenses made by the assessee is not a contingent liability but is an accrued liability and therefore claim of assessee is allowable.
Facts- AO noted that the assessee had claimed an amount of Rs.7,77,73,600/- as provision for expenses of solid waste disposal.
Since, as per the AO, the assessee did not submit any documentary evidence clarifying whether the amount for which provision was made was based on actual incurrence of expenses and inquiry revealed that expenses actually incurred in subsequent years i.e. financial years 20 15-16, 20 16-17 & 20 17-18 fell short of the amount provided for, the AO held that the provision related only to a contingent liability and disallowed the same. He held that only actual liability could be allowed to be considered as expenditure.
Conclusion- We find that the ld.CIT(A) has held the provision created by the assessee to be allowable as an accrued liability taking note of the fact that income in relation to the solid waste disposal under taken by the assessee was already accounted for in the impugned year, and since the assessee could not carry out the disposal of solid waste on account of non-availability of proper site and had kept the waste at temporary site, it had booked the expenses for the disposal of the waste at the permanent site ,commensurate to income accounted for by it ,on the basis of the actual estimation of expenditure which were required to be incurred.
We find no infirmity in the findings of the Ld.CIT(A) that the provision made by the assessee was not a contingent liability but an accrued liability, and therefore was allowable claim of the assessee. The order of the ld.CIT(A) is accordingly upheld, and the appeal of the Revenue is dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the Revenue against order passed by the Commissioner of Income Tax (Appeals)-3, Ahmedabad [hereinafter referred to as “the ld. CIT(A)”] dated 28.12.2018 passed under section 250(6)of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short]for the Asst. Year 2015-16.
2. Sole ground raised by the Revenue reads as under:
“1. The ld.C1T(A) has erred in law and on facts in deleting the addition of R. 7,73,73,600/- made by the AO on account of provision for Solid Waste Dispsal Expenses.”
3. Facts relating to the case are that during assessment proceedings the AO noted that the assessee had claimed an amount of Rs.7,77,73,600/- as provision for expenses of solid waste disposal. The said amount comprised of provision for such expenses as under:
