INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Assessee-AOP engaged in civil construction business undertook contract for construction of metro lines - Provisions for future expenses, whether allowable

Assessee was an AOP carrying on business of civil construction. It claimed provisions for future expenses, which was disallowed by AO on allegation that such type of contingent liabilities were not deductible. Assessee contended that similar provision was made for expenditure in previous assessment years and was allowed. Held: Nature of provisions considered by Tribunal in preceding years were not similar to future claim provided for by assessee during relevant year under consideration. Assessee submitted details of work for which amount was incurred by assessee in preceding year, against which provision was made. Assessee also demonstrated that provisions were subsequently debited at the end of the year as expenditure were incurred by assessee in respect of the same. In interest of justice, issue was remanded back to AO to verify the submissions of assessee in light of the contract entered for construction of metro lines in Bangalore with BMRCL.