Taxc/49/2011 Of Asst.commis. Of Income Tax-1 ,Bhilai v. M/S Kulkarni And Sahu Associates

IN THE HIGHCOURT OF JUDICATim£ATBILASPUR.CHHATTESeARHftUn^O^ ^8nlLt-9TAXCASENO. /^I^z^\\APPELLANT^Assistant Commissioner of fncome Tax-1,^Bhilai, DistrJct- burg (C'G.)VERSUSR^PONDENT^A/sKulkarni & Sahu Associates,20-A/10. Nehru Nagar,Bhilai, Distfict- Durg(C.G.)^'••'^'^'^^•^'V^W^L--""""".'•^^":V^'^••••"' ^...^rQCOME TAX APPEAL UNDER SECTION 26Q-AOF THEINCOMETAX. 1961 ^^ HIGH COURT OF CHHATnSGARH AT BILASPUR CORAM:HON'BLE SHRI YATINDRA SINGH, C.J.HON'BLE SHRI MANINDRA MOHAN SHRIVASTAVA, J. • :\""^^: ,<,<' h^ Appeals under Section 26Q-A Of the Income Tax Act, 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)in respect of different AssessmentYears (AYs) (see below)1 is, 'Whether the provision made by the Assessees 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 communjcation from the Executive Engineer/Sub 1 The details of Tax case number, name of the Assessee and AYs are asfollows: Divisional Officer, failing which repairs were to[ be][ carried][ out][ by][ the]Department 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 of the 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 TaxAppellate 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 of AY 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. THEDECISION 9. We have heard counsel for the parties. 10. These appe^ils 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/arftit 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. THEDECISION 9. We have heard counsel for the parties. 10. These appe^ils 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/arftit 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 Tribunalhadtakenintoconsideration 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 recdgnitionthere must be not only present obligation butalso the probability of an outflpw of resources tosettle that obligation....." 13. It is a common knowledge that the roads gets deteriorated with thepassage of time 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.