INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Provision for professional cost - No consistent accounting principle followed by assessee on year-to-year basis -

Assessee claimed deduction of provision for professional cost made by it. AO disallowed deduction on the ground that assessee was not following uniform policy for making/claiming the provision and assessee failed to establish that provision for professional support cost was an ascertained liability and, therefore, it had to be treated as contingent liability. Held: Assessee had not adopted consistent accounting principle on year-to-year basis as regards provision for professional cost and as accounts of the company were audited by reputed CA firm, therefore, it could not be said that it was an inadvertent error. Accordingly, when assessee had not adopted consistent accounting principle on year-to-year basis, it was not open to assessee to claim the expense on provision basis in one year and on accrual basis in the other year and disallowance made by AO was justified.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2010-11

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