- (1.) THIS is an application under S. 256 (2) of the IT Act, 1961 filed on behalf of the CIT, Meerut. Two questions have been proposed in the application, namely, (1) whether, on the facts and circumstances of the case, the Tribunal was legally correct in cancelling the order passed by the CIT, Meerut under S. 263 on the view that the assessment order passed by the ITO was not erroneous and prejudicial to the interest of revenue, (2) whether the Tribunal was right in taking the view that the liability of the estimated expenditure of Rs. 4,25,000 claimed in the accounts are not in the nature of contingent liability.
(2.) THE respondent-assessee in the asst. yr. 1986-87 to which the dispute pertains was a firm. It was engaged in the development of the plots as a colonizer, at Meerut. The assessee returned a taxable income of Rs. 2,07,480 after providing for a liability for intended expenditure of Rs. 4,25,000 and that amount was carried to the balance sheet. The ITO allowed the claim of the assessee. However, the CIT in his purported exercise of power under S. 263 set aside the assessment order on the ground that the assessee had not actually incurred the expenditure but only a provision was made which could not have been allowed in computing the taxable income for the said assessment year. On appeal by the assessee to the Tribunal the order under S. 263 was set aside and the assessment order was restored. The Tribunal relying upon a decision of this Court in CIT vs. Development Trust (P.) Ltd. (1991) 99 CTR (All) 207 : (1991) 189 ITR 504/55 Taxman 200 held that the liability to incur the expenses on account of development work and electrification of the colony was certain as per the sale agreements entered into by the assessee. The mere fact that the expenditure was incurred in the subsequent assessment years would not make the liability as contingent. The sale proceeds recovered on the sale of land were liable to tax subject to deduction on account of certain liabilities towards incurring the expenditure on development and electrification of the colony. It is not the case of the Revenue before this Court nor it was the case before the Tribunal that the expenditure claimed by the assessee was excessive or unreasonable. The question whether or not on the facts obtaining the liability to incur the expenditure should have been allowed as deduction in computing the taxable income, the law laid down by this Court in the case referred hereinabove applies with full force. The Tribunal in its order has referred to certain other decisions of other High Courts in support of the view it has taken but it is not necessary to multiply decisions. Suffice it to say that in Calcutta Co, Ltd. vs. CIT (1959) 37 ITR 1 (SC) , the Supreme Court has also expressed a similar view as taken by this Court and by the Tribunal. That was also a case of development.
(3.) IN view of the decisions cited above, in our opinion, no statable question of law arises from the order of the Tribunal. The application is, accordingly, rejected.;