CASE LAWS
2019-TIOL-520-HC-MUM-IT
POOJA PAPER TRADING COMPANY PVT LTD Vs ITO BOMBAY HIGH COURT (Dated: February 25, 2019)
Income Tax - Sections 69C, 143(3) & 147
Keywords - Bogus transaction - Extent of disallowance - Hawala transactions.
The assessee company is engaged in the business of trading in paper and paper products. Upon filing the return for relevant AY 2011-2012, it was processed u/s 143 (1). Afterwards, on the information received from the Sales Tax Authorities, the assessment was reopened for AYs 2010 to 2012. The AO found that the assessee made bogus purchases from various parties which were Hawala parties. The AO disallowed the purchases and added the same as unexplained expenditure u/s 69C.
The CIT (A) found that even if the purchase transactions are not verifiable what is taxable is only the income component and not the entire purchase. Therefore on finding that the gross profit ratio for the subject AY was much less than the average gross profit of earlier three AYs, the CIT(A) sustained the addition of the profit/income element and deleted the remaining amount. The Revenue approached the Tribunal which partly allowed the Revenue appeals and upheld the view of CIT(A) that the dis-allowance could only be of the income/profit attributable to the bogus purchases. The Tribunal found fault with the CIT (A) blindly applying the gross profit ratio declared by the assessee for the earlier AYs, ignoring the factual aspect that the assessee was in hawala transactions during the relevant AY. Thus the Tribunal enhanced the disallowance of the bogus purchases.
On hearing the appeals, the High Court held that,
Whether once the findings of the CIT(A) regarding bogus transaction go unchallenged before the Tribunal, the assessee is not allowed to refute its stance by contending that no opportunity of cross examination was provided - YES: ITAT
++ only issue on which there is a divergence of views between the authorities is in respect of extent of disallowance. This conclusion of the purchases being bogus is on the basis of appreciation of entire evidence on record. It is important to bear in mind that the assessee had not filed any appeal from the order of the CIT (A), holding that disallowance on account of bogus purchases has to be 3.67%. The assessee accepted the findings of facts by the CIT (A) that there was bogus purchases. Therefore the grievance now raised of no cross examination being offered to the assesssee, when the order of CIT(A) is not challenged before the Tribunal, could not have been raised by the assessee. Moreover, there is no mention of this grievance by the assessee or even with regard to non-consideration of various documents by the AO in the order of the Tribunal. The submission of the assessee that the same was urged before the Appellate Tribunal, but was not considered, cannot be accepted. This is particularly so if the Tribunal had failed to make a note of the submission of a party in its order, then the appropriate remedy for the party was to move the Tribunal for rectification of the order ensuring it that the submissions made by it are recorded in the order. However, given the factual matrix that the assessee had not challenged the finding of bogus purchases, the issue could not have been raised by it before the Tribunal. Thus, the extent of disallowance in the present facts do not give rise to any substantial question of law.
Assessee's appeals dismissed
2019-TIOL-519-HC-MUM-IT
KALSHA BUILDERS PVT LTD Vs ACIT: BOMBAY HIGH COURT (Dated: February 08, 2019)
Income Tax - Section 147
Keywords - Bogus accommodation entries - Live link - Sufficient material
The assessee company is engaged in the business of developing real estate. For the relevant AY 2011-12, the assessee filed its return which was taken in scrutiny by the AO. The assessment order was passed order u/s 143(3). Afterwards, a search action was conducted on one Mr. Shirish C. Shah for provinding bogus accomodation entries. It was noted that one M/s. Prabhav Industries Ltd., controlled by Mr. Shah had made an investment in the assessee which was unproven and was unexplained cash credit. Thus, reopening notice was issued beyond 4 years from the date of original assessment. Upon being supplied the reasons, the assessee raised objections which were rejected by the AO. Hence, the petition.
On writ, the High Court held that,
Whether when additional materials indicate that the disclosures made in the return were not true, mere non-recitation of detailed reasons would not vitiate the re-assessment - YES: HC
++ firstly, merely because the AO had examined the transactions during the original assessment proceedings, would not preclude him from subsequent inquiry. It is shown on the strength of additional material establishing prime facie that the disclosures made by the assessee were not true. If the entire claim is bogus and so established to be, the assessee would fail the test of true and full disclosure. Requirement of true and full disclosure runs through the entire assessment and it does not end on filing of return. The search action against Mr. Shirish C. Shah provided certain information which was also processed by the AO before forming the belief that income chargeable to tax had escaped assessment. Secondly, the entire reasons when read as a whole, more than sufficiently demonstrate the belief of the AO that the entire assessment goes on bogus claim of share application money having been received by the assessee company. Therefore, lack of true disclosures is writ large on the face of the reasons. Mere non-recitation of such expression would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars.
Assessee's petition dismissed
2019-TIOL-518-HC-MUM-IT
ENVISION INVESTMENT AND FINANCE PVT LTD Vs DCIT: BOMBAY HIGH COURT (Dated: February 27, 2019)
Income Tax - Business income - LTCG - Sale of shares - SCTG
The assessee company filed return and declared STCG from sale of shares for the AY 2007-2008. The AO, during the assessment, questioned the treatment of the gain earned by the assessee out of the sale of shares. The AO held the gain to be business income and compeleted the assessment. In so far as the shares held in excess of one year, the CIT(A) held in favour of the assessee and treated the gain as LTCG. However, with respect to those shares, which the Assessee had sold within a period of one year, the gain was treated as arising out of business. The Tribunal confirmed the view of the CIT(A).
On hearing the appeals, the High Court held that,
Whether just because the AO acts inconsistently in taking different view in subsequent AY, the relevant assessment does not become impermissible if the factors in reaching the views are different for the respective AYs - YES: HC
++ the Tribunal noted frequency of purchase and sale of shares, quantum of sale and purchase of shares and the relevant gains besides other factors in order to come to a conclusion that the assessee had intended to engage itself in the business of buying and selling the shares. There is no error in the view taken by the Tribunal, since the Tribunal had noted in its Judgment all the factors in coming the conclusion, which are factual in nature, and with respect to which no perversity is demonstrated. The assessee however contended that in the later year the assessee had suffered loss in the process of selling the shares which was declared as capital loss. The assessee then contended that the AO in the assessment after scrutiny accepted this declaration and therefore the department is acting inconsistently which is not permissible. The issue of the assessee suffering loss in the subsequent year arose after the assessment in the present year was completed. If in the later year, the assessee had declared a loss on capital side, we wonder whether going against such a self declaration of the assesee, the AO had to foist upon the assessee the conclusion that the loss was a business loss. If at all, it was up to the assessee to claim it as business loss if the assessee was satisfied with the gain being taxed as business income. Be that as it may, this would not be determinative factor in so far as the present appeals are concerned.
Assessee's appeals dismissed
2019-TIOL-517-HC-MUM-IT
PR CIT Vs VISHINDA DIAMONDS: BOMBAY HIGH COURT (Dated: February 27, 2019)
Income tax - marked to market loss - notional loss - revaluation of forex contract
The Revenue Department preferred the present appeal challenging the action of ITAT in holding that “Mark to Market” loss of Rs.1,62,98,847/- arising on revaluation of forward exchange contract on the closing date of the previous year was not a notional loss and therefore allowable.
On appeal, the HC held that,
Whether losses incurred on account of revaluation of forex are allowable as business loss, if forward forex contract is incidental to carrying on business of export - YES: HC
++ the counsel for Revenue has stated that the issue under present appeal stands concluded against the Revenue by the decision of this Court in Income Tax Appeal No.278 of 2014 in the matter of Commissioner of Income Tax-16 Mumbai v/s. M/s. D Chetan & Co - 2016-TIOL-2620-HC-MUM-IT and decision in Income Tax Appeal No.843 of 2016 in the matter of Pr. Commissioner of Income Tax-19 v/s. M/s. Polar Star. In view of above, the question that is raised does not give rise to any substantial question of law.
Revenue's appeal dismissed
2019-TIOL-516-HC-DEL-IT
GV INFOSUTIONS PVT LTD Vs DCIT: DELHI HIGH COURT (Dated: January 24, 2019)
Income Tax - section 119(2)(b)
Keywords - Condonation of delay - Inadvertent mistake - Omission by the auditor - TDS.
The assessee company filed its return for the relevant AY 2013-2014. Its return reflected the TDS but a larger amount escaped the attention of the assessee and it was not claimed. For the purpose of consequent refund, the assessee paid the amounts due in terms of its calculation. The assessment was framed u/s 143(1). The period for revising the demands ended for the relevant AY, however the error that had crept in while furnishing the returns was not rectified through an application or a refund undertaken. The assessee applied to the Chief Commissioner, for condoning the delay for filing the application for refund on the ground that its Chartered Accountant had inadvertently overlooked the TDS amounts. The application u/s 119(2)(b) was rejected by the Commissioner. Hence, the petition.
On writ, the High Court held that,
Whether inadvertant oversight by the CA in filing the return is a good ground to allow an application for condonation of delay u/s 119(2)(b) - YES: HC
++ the rejection of the application u/s 119(2)(b) is only on the ground that according to the Chief Commissioner's opinion the plea of omission by the auditor was not substantiated. It is difficulty to understand what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the order is in effect that the assessee's claim of inadvertent mistake is sought to be characterised as not bonafide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. "Bonafide" is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the assessee raises (concededly belatedly), there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The assessee did not urge any other grounds such as illness of someone which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bonafide reasons why the refund claim could not be made in time.
Assessee's petition allowed
2019-TIOL-515-HC-MAD-IT
PR CIT Vs J JAY TV PVT LTD MADRAS HIGH COURT (Dated: January 30, 2019)
Income Tax - Section 143(2)
Keywords - Additional ground
The assessee company did not file their return for the relevant AY 1995-96. the The AO served the notice u/s 142(1) directing the assessee to file their return on due time. The notice which was issued on 08.1.1996 was served on the assessee on 24.1.1996. The chartered accountant of the assessee filed a letter requesting one month's time to file full and correct return. However, no such return was filed according to the letter. The AO, then served a second notice for compliance of filing of return on 04.10.1997. On March 24, 1998, the assessee filed its return. The AO then completed the assessement order u/s 144 on 30.3.1998. The CIT(A) upheld the assessement order.
The matter was carried to the Tribunal where the assessee seeked to introduce additional ground of non-issuance of notice . The assessee contended that notice was not issued u/s 143(2) before completion of the assessment and the notice served after delay was issued without considering the circumstantial evidence because the assessment order was getting time barred. The Tribunal noted that such ground was not raised before the CIT(A) but relying on the decision of the Apex Court in National Thermal Power Co. Ltd. Vs. CIT, remanded the matter to the CIT(A) to consider the additional ground. The Revenue appealed.
On hearing the appeal, the High Court held that,
Whether a remand order is valid on the basis that additional ground which was raised for the first time before the Tribunal, needs further consideration by the CIT(A) - YES: HC
++ if the assessee, a company registered under the Companies Act, has failed to adhere to the commitment made through their chartered accountant, there is no reason as to why the AO should wait for more than 20 months and issue another letter to the assessee. The reason for not taking any action since February 1996 till October 1997 remains unexplained. The AO is bound to know that the assessment will get time barred. There is no explanation given in the assessment order for such an indulgence shown to the assessee. The Tribunal, after admitting the additional ground, has not adverted to any of the contentions advanced by the Revenue and it is pleaded that the Revenue had not been given sufficient time to meet the point. In any event, the Tribunal, having admitted the additional ground, should have considered the contentions advanced by the Revenue by giving reasonable time and recorded its satisfaction as to why the matter should be remanded to the CIT(A). Therefore, the CIT(A) is directed to give full opportunity to the Revenue to canvass all the grounds raised.
Revenue's appeal partly allowed
2019-TIOL-514-HC-MAD-IT
CIT Vs ARVINTH CHARITABLE TRUST: MADRAS HIGH COURT (Dated: January 30, 2019)
Income Tax - Sections 2(15) & 12AA(1)(a)
Keywords - Charitable purpose - Objects of the trust deed - Proviso to sec 2(15).
The assessee-Trust runs a nursing college and applied for registration u/s 12AA. This application was rejected by the CIT after analysing the various clauses in the trust deed and the nature of the activities. The CIT was of the view that the activities of the trust are niether charitable nor the funds of the trust were invested for the benefit of the trust. The assessee carried the matter to the Tribunal which held that at the time of the consideration of application u/s 12AA, the CIT can only examine the objects stated in the trust deed and not other matters which could be considered during assessment. The Tribunal set aside the order and directed the CIT to grant registration to the trust. The Revenue appealed.
On hearing the appeal, the High Court held that,
Whether approval of registration of trust for charitable purposes u/s 12AA is only possible when activities of trust match with statement laid down in the object of trust - YES: HC
++ the CIT has examined the objects of the trust and after taking into consideration all the factual aspects, held the activities of the trust as not charitable and the funds of the trust are not invested for any charitable purpose. If the Tribunal was of the view that the order passed by the CIT needs to be reversed, then the Tribunal requires to give a factual finding as to how the CIT erred in appreciating the materials and how the CIT erred while recording his satisfaction in terms of section 12AA(1)(a). The Tribunal made a remark that running of a nursing college itself is charitable. Such findings cannot be accepted because, the CIT while rejecting the application found that the trust collects fees from the candidates, who are admitted to the nursing course. Therefore, the burden is heavily on the assessee to prove that the objects of the trust are bona fide and there is bona fide charitable activity being done;
Whether a trust becomes eligible for registration u/s 12AA only when the genuineness of its activities is satisfied as per the inclusive conditions laid down in section 2(15) - YES: HC
++ the definition of charitable purpose as defined u/s 2(15) is an inclusive definition to qualify for a registration u/s 12AA. The CIT should be satisfied about the genuineness of the activities of the trust and is entitled to make such an enquiry, as he deems necessary in this behalf. In the opinion of the CIT, the assessee did not satisfy the requirements. The proviso to section 2(15) provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Therefore, the Tribunal failed to properly examine the contentions advanced by the Revenue and by a non-speaking order, allowed the appeal filed by the assessee. Therefore, Tribunal's order set aside.
Revenue's appeal allowed
2019-TIOL-513-HC-ALL-VAT + Case Story
TARGET CENTRE Vs CCT: ALLAHABAD HIGH COURT (Dated: March 01, 2019)
Uttar Pradesh Value Added Tax Act, 2008 - Air Gun - Air Pistol - Arms & Ammunition - Pellet guns - Toys excluding electronic toys
THE issue at hand is whether 'air gun' and 'air pistol' can be taxed under Entry 124 of Schedule II as 'toys excluding electronic toys' or else under heading of 'arms and ammunition' under Entry 2 of Schedule IV. When this issue first arose before the Single Judge of the High Court, the same was referred to the larger bench. It was also seen that a similar question had been answered by the Single Bench of the same court in M/s Agarwal Brothers, Faizabad Versus Commissioner of Sales Tax, Uttar Pradesh wherein it was held that air-gun is capable to inflict bodily injuries & so the same is covered by a Notification dated March 23, 1971 regarding arms and ammunitions.
On hearing the revision petition, the High Court held that,
Whether the definition of 'arms' as per the Arms Act 1959, is applicable to determine classification of air-guns or air-pistols under the UPVAT Act 2008, considering that the former legislation was enacted with a specific objective & background, which is not applicable to the latter Act - NO: HC
Whether such air-guns & air-pistols are classifiable as toys, even where they resemble firearms and are capable of causing lethal injury, and are pre-dominantly used to hunt birds & small animals and are advised to be used under expert supervision - NO: HC
Whether therefore, such air-guns & air-pistols are more appropriately covered under taxing entry of arms and ammunition, occurring in Serial No 2 of Schedule IV of the UPVAT Act, 2008 - YES: HC
++ no definition of "ammunition" is given even under the Act, 1959. At the threshold, it is stated that the definition of "arms" as given under the Act, 1959 may be useful to examine the purpose and use of designing and manufacturing air-guns to a limited extent and that cannot be the sole criteria to determine nature of the article concern, in view of settled principle of interpretation given in one statute which is enacted with a specific object, purpose and scheme cannot be applied mechanically to another statute with different objects, purpose and scheme. The Arms Act, 1959 was enacted by the Parliament to regulate classification of arms by classifying the different equipment and items, which were declared as arms in colonial era under the Arms Act, 1878. The Act, 1878 was intended to disarm the entire country. The Parliament, after independence noticed that the Arms Act and the rules made thereunder, if allowed to be continued, it would be different for law abiding citizens to possess firearms for self defence vis a vis terrorist, dacoits, dacoits gangs, anti-social and anti-national elements who are using those arms. The Legislature also intended to bring out several sharp-edged items from the ambit of "arms" which are essentially domestic equipment. The object of the Act, 1959 being absolutely different than the Act, 2008, it would not be appropriate to accept the definition of arms given therein ipse dixit in the instant matter and it would also be appropriate to look into the definition of "air-gun", "air pistol" and "pellet guns" as available in different dictionaries and the literature relevant;
++ perusal of the entire literature available and the judgments referred by different High Courts, makes it clear that the air-guns or air pistols are not simple toys or a pure sports equipment. These guns though are not firearm but are capable of causing bodily injuries and those in certain circumstances can be fatal too. These guns/pistols are also frequently used for hunting purposes. Looking to the mechanism used in these equipments, experts have advised cautious use of these articles. In popular sense too, the air-guns are not understood as sports equipment but as a gun frequently used for hunting birds and other small animals. True it is, there is no need to have license to possess an air-gun but merely, on that count, it cannot be brought out from the term "arms". There may be several other articles too which are deadly weapon and falls within the definition of "arms" but there is no need to have license to possess those. It would also be appropriate to state that several experts have also opined to make it mandatory to have a license for keeping air-gun/ pistol;
++ being not a toy and being an equipment that can be used to cause a lethal injury, which is also in use for causing bodily injuries and also being required to be used with all necessary caution and also being advised to be used under supervision of expert and also being having absolute resembles that of firearm and also having a mechanism of spreading the projectiles with force that may cause hurt, the air-gun/ air pistol is an arm and, therefore, it is required to be considered as an item under entry 2 Schedule-IV appended with the Act, 2008. the law laid down by this Court in M/s Agarwal Brothers, Faizabad Versus Commissioner of Sales Tax, Uttar Pradesh is a good law and air-gun/ air pistol does not fall in the entry "toy excluding electronic toys". The air-gun/ air pistol is an item covered by taxing entry "arms and ammunition" occurring in Schedule-IV at Sr. No. 2 of the Act, 2008.
Revision petition disposed of
2019-TIOL-512-HC-MAD-VAT
VEEYEL ENTERPRISES Vs STATE OF TAMIL NADU: MADRAS HIGH COURT (Dated: January 31, 2019)
Tamil Nadu Value Added Tax Act, 2006 - Sections 19, 27(2), 30(1) & (2)(b) & 60(1)
Keywords - Exemption notification - G.O.Ms. No.79 Commercial Taxes & Registration (B2) - Input tax credit on purchase - Purchase of cement.
The assessee company is a manufacturer of RCC pipes which in turn uses cement in manufacturing process. The assessee availed input tax credit on the purchase of cement in terms of the notification issued by the Government in G.O.Ms. No.79 Commercial Taxes & Registration (B2) dated 23.3.2007, by which the rate of tax payable by any dealer on the sale of certain goods under the TNVAT Act was reduced. In the said notification, the reduced rate of tax in respect of 26 products to 4%. This notification was issued in accordance with Section 30(1). The AO held that the assessee has wrongly availed the input tax credit as the case fall u/s 27(2) and levied penalty u/s 27(4). The Commissioner(A) upheld the order of the AO.
The matter was carried to the Sales Tax Appellate Tribunal. The assessee contended that u/s 30, the Government cannot restrict the claim of input tax credit on the purchase of cement used for the manufacture of RCC as the notification speaks only of sale of goods and not purchase. Such plea was rejected by the Tribunal upholding the order of the AO. Matter was carried to the High court on revisions.
On revisions, the High Court held that,
Whether the court is empowered to substitute the wordings of the government's discretion recorded in the government notifications - NO: HC
++ the short issue involved in these revisions is whether the input tax credit availed by the assessee on the purchase of cement used for the manufacture of RCC pipe can be curtailed, while they availed the benefit of a notification issued by the Government in G.O.Ms.No.79, Commercial Taxes and Registration (B2), dated 23.03.2007 whereby, the Government reduced the rate of tax payable by any dealer on the sale of certain goods under the TNVAT Act. Firstly, the power conferred on the Government to notify the exemption or reduction of tax is exercise of discretion by the Government. Therefore, the Court has to interpret the exemption notification or remission notification strictly without substituting any words;
Whether in considering the interpretation of exemption notification issued u/s 30 and the restriction of power of government to issue such notification, the answer would always lean in favour of the interpretation - YES: HC
++ secondly, sub-Clause (b) of Section 30(2) clearly states that any exemption from tax, or reduction in the rate of tax, notified under sub-Section (1) may be subjected to such restrictions and conditions as may be specified in the notification. For the assessee to be entitled to the reduced rate of tax at 4%, the assessee should not avail the input tax credit on the purchase of cement. This is a restriction or a condition specified in the notification. Very recently, the Apex Court has held that strict interpretation has to be given to any exemption notification and the interpretation should lean in favour of the Revenue. Therefore, substantial questions of law in revisions are answered against the assessee.
Revisions answered against the assessee
2019-TIOL-511-HC-KAR-VAT
WHITEFIELD REFRACTORIES PVT LTD Vs ACCT: KARNATAKA HIGH COURT (Dated: February 21, 2019)
Karnataka VAT Act - Writ - Section 45
Keywords - freezing of bank account - garnishee notice
The assessee company preferred present petition challenging notices issued by ACCT attaching the assessee's bank accounts with the SBI, and inter alia sought for a direction to the Manager, SBI not to freeze the assessee's bank accounts as they were not defaulters as named in the notice issued u/s 45 of the Karnataka VAT Act.
On Writ, the HC held that,
Whether when no garnishee notice u/s 45 of VAT Act was issued to the dealer, then it is for the dealer to clarify his banker in case his bank a/c was attached & frozen by relying on such notice - YES: HC
++ it is the grievance of assessee that the defaulter company M/s Vishal Concrete Works is no way concerned with them. On the notice issued u/s 45 of the VAT Act in as much as recovery of tax arrears against M/s Vishal Concrete Works, the bankers have issued the communication to freeze the accounts of the assessee's herein. The Revenue's counsel fairly submits that no garnishee notice was issued to the assessee and any communication by the bankers has to be clarified by the assessee;
++ it is not in dispute that the garnishee notice u/s 45 of the VAT Act has been issued to the Directors and Partners of M/s Vishal Concrete Works. If the bankers of these assessee's have issued any communication to freeze the accounts of the assessee herein, then the assessee themselves are required to clarify the same with the bankers. However, considering the totality of the circumstances of the case, this Court directs the bankers not to proceed with the assessee's accounts.
Case disposed of
2019-TIOL-510-HC-MUM-IT
GRACE SHELTER Vs ACIT: BOMBAY HIGH COURT (Dated: February 26, 2019)
Income tax - crystallization of liability - mercantile system of accounting
The Assessee is a partnership firm. During the year under consideration, the Assessee was awarded a contract for slum redevelopment project by Slum Rehabilitation Authority. Under such contract, the assessee in addition to developing assigned plot, would also construct 1140.52 sq. mtr of built up premises for municipal staff quarters and 54.99 sq.mtrs towards road depot. Accordingly, the assessee claimed an expenditure of Rs. 1.22 Crores towards this liability on mercantile system of accounting, contending that, the liability had crystallized and that, the cost estimation was accurate. The AO, CIT(A) as well as the Tribunal concurrently held that the liability in question was contingent and that, therefore, could not be claimed by way of an expenditure in the return filed by assessee.
On appeal, the HC held that,
Whether a liability which is contingent and which has not crystallized, cannot be allowed as expenditure even under mercantile system of accounting - YES: HC
Whether liability of a developer to carry out construction is contingent upon the authorities giving vacant possession of disputed plot of land, and hence cannot be claimed till allotment of plot - YES: HC
++ it is noticed that the Revenue Authorities and the Tribunal disallowed assessee's claim of expenditure on the ground that, liability in question had not crystallized since the same was contingent upon the Slum Rehabilitation Authority, handing over the vacant possession of a part of land where such construction would be carried out. The Tribunal, in particular, noted that, till date, such possession was not handed over to the assessee. Thus, the view of the Tribunal was that, the liability was a contingent one, depending upon assessee being put in vacant possession of land where construction would be carried out. Thus, the Tribunal has committed no error;
++ it is undoubtedly true that, in case of an assessee following mercantile system of accounting, any liability which even though may not have been discharged during the financial year relating to A.Y in question, would yet be an allowable expenditure as long as same is crystallized and the expenditure allowable to such liability can be estimated on the basis of some scientific estimation. However, it is well settled that, a liability which is contingent and which has not crystallized, would not be allowed as an expenditure. It is in this context, the Tribunal found that the assessee's liability to carry out construction, free of cost had not yet crystallized since it was contingent upon the authorities being able to give vacant possession of the portion of the plot on which, such construction would be carried out. The record suggests that such portion was occupied by the slum dwellers who were resisting their eviction. Whatever be the reason, the Slum Rehabilitation Authority was unable to put assessee of vacant possession in said area for years together.
Assessee's appeal dismissed
