Assistant Commissioner Of Income Tax, Bhilai v. M/S Sewa Singh Oberai & Company, Durg

WTHKHON'BEE mGHCOUROF JUDICATUREFORCHHATTISGASH AT BILSPtETaxCaseNo%(gof 2009APPELLANTCOMMISSIONEROFmCOMETAX/(Revenue)RAIPURVERSUSCSPONDENT: ^^GULAB CHAND IAIN(Assessee)Prop. M/s. Shrt Gulab Chand j^^^Jain, Pachpedi Naka,...-••^^^RingRoad-1,•<s».ei[^8]RAIPURAPPEALUNDER SECTION 260-A OF THE_JNCOME TAX ACT, 1961 :^i "<ai^-^ B'?».''.^^^^.ff.''&''"'> ^•-•1, .--y ^ HIGH COURT OF CHHATTISGARH AT BILASPUR CORAM:HON'BLE SHRI YATINDRA SINGH, C.J.HON'BLE SHRI MANINDRA MOHAN SHRIVASTAVA, J. 1. Tax Case No.16 of 2008 Appellant . Assistant Commissioner of Income Tax,Bhilai.VERSUS M/s Sewa Singh Oberai & Company, Durg. Respondent 2. Tax Case No. 26 of 2009 Appellant Commissioner of Income Tax, Bilaspur.VERSUSGulab Chand Jain Resoondent 3. Tax Case No. 36 of 2012 Appellant DeputyCommissionerofIncomeTax,Bhilai.VERSUS Respondent M/s. Kulkarni & Sahu Associates, Bhilai. 4. Tax Case No. 37 of 2012 Appellant Assistant Commissioner of Income Tax,Bhilai.VERSUS Respondent M/s. Kulkarni & Sahu Associates, Bhilai. 5. Tax Case No. 19 of 2008 Appellant Assistant Commissioner of Income Tax,Bhilai.VERSUS Respondent Jitendra Bhandari, Civil Contractor, Durg.6. Tax Case No. 49 of 2011 Appellant Assistant Commissioner of Income Tax,Bhilai.VERSUS R&spondent M/s. Kulkarni & Sahu Associates, Bhilai.7.TaxCaseNo.48of2011 ^.Assistant Commissioner of Income Tax,Bhilai.VERSUS Appellant Respondent M/s.Amar Builders. 'v-f. Appealsunder Section 2SO-A Of the Inwm? Tax A<?t, 1961 Appearance: Shri Anand Dadariya, counsel for the Appellant.Shri Shashank Dubey, Senior Advocate with Shri AnandMohan Tiwari and Shri MK Sinha, counsel for theRespondents. JUDGEMENT(12thNovember, 2013) 1. The main question involved in these seven Tax cases by the IncomeTax Department (the Department)inrespect of different AssessmentYears (AYs) (see below)1 is, 'Whether the provision made by theAssessees for therepair/maintenance of the roads constructed by them iscontingent liability, or is a liability that was capable ofbeing ascertained and required to be treated as a presentliability.' THE FACTS 2. The Assessees are civil contractors. They had taken contracts forconstruction of different roads in the State of Chhattisgarh in differentAYs for which agreements were entered into between them and theGovernment. 3.Under the terms of the contract agreement, the Assessees wereresponsible for performance of the work carried out by them for a periodof three years for which they were supposed to give performance securityand they were required to carry out all necessary repairs within 15 daysof the receipt of the communication from the Executive Engineer/Sub' The details of Tax case number, hame of the Assessee and AYs are as.responsible for performance of the work carried out by them for a periodof three years for which they were supposed to give performance securityand they were required to carry out all necessary repairs within 15 daysof the receipt of the communication from the Executive Engineer/Sub' The details of Tax case number, hame of the Assessee and AYs are as.follOWS:k ^\ •v"f. Divisional Officer, failing which repairs were to be carried out by theDepartment and the cost was to be recovered from the Bank Guaranteesgiven by the Assessees. 4. The Assessees made provisions for expenses towards maintenanceand repairs of the roads for a period of three years and they claimeddeduction ofthe provision made by them. 5. The Assessing Officer .(the AO) by his different orders held that theseexpensesweremerelyacontingentexpensesandassuch,theAssessees were not entitled to claim deduction. ^\ •v"f. Divisional Officer, failing which repairs were to be carried out by theDepartment and the cost was to be recovered from the Bank Guaranteesgiven by the Assessees. 4. The Assessees made provisions for expenses towards maintenanceand repairs of the roads for a period of three years and they claimeddeduction ofthe provision made by them. 5. The Assessing Officer .(the AO) by his different orders held that theseexpensesweremerelyacontingentexpensesandassuch,theAssessees were not entitled to claim deduction. 6. Aggrieved by the order passed by the AO, the Assessees filed appealsbefore the Commissioner of Income Tax (Appeals) (the CIT-A). Some ofthe appeals were dismissed by the CIT-A. However, those appeals wereremanded back for re-decision by the Income Tax Appellate Tribunal (theTribunal). 7. The appeals after remand as well as remaining appeals were allowedthe appeal of the Assessees on the basis of the decision given by theTribunal in respect of the Assessee M/s Sewa Singh Oberai & Companyand M/s Kulkarni & Sahu Associates (they are also respondents in someappeals) in respect ofAY 2003-04. The CIT-A held that the provision wasmade for liability which was capable of being ascertained with reasonablecertainty and was a liability in present time. 8, Aggrieved by the order of the CIT-A, the Department filed appeals.These appeals were dismissed by the Tribunal. Hence, the presentappeals by the Department.These appeals were dismissed by the Tribunal. Hence, the presentappeals by the Department. THE DECISION 9. We have heard counsel for the parties. 10. These appeals were admitted on different dates and the questionswere differently framed.However, the counsel for the parties agree thatthe basic questioninvolvedinall the appealsis one which wasmentioned in the opening paragraph. padma/amit 11. It is not disputed between the parties that in respect of AY 2003-04an appeal in case of M/s. Sewa Singh Oberai & Company was filedbefore this Court. However, it was dismissed on the ground of limitation.In thecase of M/s Kulkarni & Sahu Associates no appeal was filedagainst the order of the Tribunal in respect of AY 2003-04. 12.In the aforesaid two cases that are basis for deciding the casesunder appeal,the Tribunalhadtakeninto consideration thepastexpenses made by the Assessees and on the basis of those expenses, itcame to the conclusion that these estimates were correct estimates of theprobable liabilities.it is for this reason, the liabilities were held to beascertained with reasonable certainty and was held to be capable ofbeing the liability at present. 12. The Supreme Court in the case of M/s Rotork Controls India (P) Ltd.vs. Commissioner of Income Tax, Chennai (34 ITR 62), observed that: "12....For a liability to qualify for recognitionthere must be not only present obligation butalso the probability of an outflow of resources tosettle that obligation....." 13. It is a common knowledge that the roads gets deteriorated with thepassage oftime and repairs and maintenance is required. The Tribunalhas held that the liability for maintenance and repairs of the road isascertained with reasonable certainty and was a liability in present time.There was no difference in the preceding years.In-view of this, theorder of the Tribunal cannot be faulted. 14. The tax cases have no merit. They are dismissed.Sd/-Chief Justice Sd/-Manindra Mohan ShrivastavaJudge t» -V