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In the instant case, revenue is in appeal against the order of ITAT wherein CIT has deleted the additions made on account of provisions of performance related pay to director and staff amounting to 1,77,87,000/-. This amount related to the performance related pay to the Director and other employees of the Company. Assessing Officer objected to such expenditure on the ground that, the liability had not crystallized. The tribunal deleted the additions stating that there is no reason for disallowing the expenses claimed regarding payment of PRP to the Director since records of the assessee show that they are bonafide expenses which was crystallized. Held that—The principle that when a liability has accrued but the computation thereof with precession, is not possible presently, the provision could be made on the basis of actuary by applying some scientific method or procedure, is well established principle. Reference in this respect may be to the decision of the Supreme Court in case of M/s. Rotork Controla India Pvt. Ltd.,v/s. Commissioner of Income Tax reported in 314 ITR 62. In the present case, in fact, the facts are even better. Not only that the liability had crystallized, the computation thereof was also readily available. Payment could not be made simply, because, the approval of Board of Directors which was necessary, was awaited. The liability had thus, crystallized. On the principle of accrued liability, the Assessee was well within its right to claim the expenditure.

Shanti Prime Publication Pvt. Ltd.

Section —In the instant case, revenue is in appeal against the order of ITAT wherein CIT has deleted the additions made on account of provisions of performance related pay to director and staff amounting to 1,77,87,000/-.

This amount related to the performance related pay to the Director and other employees of the Company. Assessing Officer objected to such expenditure on the ground that, the liability had not crystallized.

The tribunal deleted the additions stating that there is no reason for disallowing the expenses claimed regarding payment of PRP to the Director since records of the assessee show that they are bonafide expenses which was crystallized.

Held that—The principle that when a liability has accrued but the computation thereof with precession, is not possible presently, the provision could be made on the basis of actuary by applying some scientific method or procedure, is well established principle. Reference in this respect may be to the decision of the Supreme Court in case of M/s. Rotork Controla India Pvt. Ltd.,v/s. Commissioner of Income Tax reported in 314 ITR 62.

In the present case, in fact, the facts are even better. Not only that the liability had crystallized, the computation thereof was also readily available. Payment could not be made simply, because, the approval of Board of Directors which was necessary, was awaited. The liability had thus, crystallized. On the principle of accrued liability, the Assessee was well within its right to claim the expenditure.[THE PR. COMMISSIONER OF INCOME TAX-6 VERSUS M/S. CREDIT ANALYSIS AND RESEARCH LTD.,] [2018] [7] [ITCD Online] [82] [ BOMBAY HIGH COURT]