IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 8TH JUNE 2009 / 18TH JYAISHTA 1931 ITA.No. 97 of 2009() -------------------- ITA.483/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT ----------------------------- KERALA MINERALS AND METALS LIMITED, SANKARAMANGALAM,CHAVARA, KOLLAM. BY ADV. SRI.A.KUMAR RESPONDENT(S): --------------- COMMISSIONER OF INCOME TAX APPEALS, TRIVANDRUM. BY SC SRI. JOSE JOSEPH THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 08/06/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & C. K. ABDUL REHIM, JJ. -------------------------------------------- I.T. A. No. 97 OF 2009 -------------------------------------------- Dated this the 8th day of June, 2009 JUDGMENT Ramachandran Nair,J. Standing counsel for the Revenue took notice on admission. 2. Heard counsel for the appellant and standing counsel for the respondent. Appellant is a company under the control of Government of Kerala. During the assessment year 2004-05 appellant claimed deduction of an amount of above Rs. 20 crores being arrears of wages payable to the employees for four years that is from 2001-04. The claim was based on settlement between the management and employees for wage revision on 8.10.2003. However, the claim was rejected by the assessing officer for the reason that Govt.'s approval was only in the subsequent year, that is relevant for the assessment year 2005-06. Admittedly company was under the control of Government of Kerala and without Govt.'s approval wage settlement could not be given effect to. Government granted approval on 17.6.2004 which falls in the accounting year 2004-05. Therefore we are of the view that the claim should be allowed in the assessment year 2005-06. Counsel for the appellant submitted that department declined the benefit for 2004-05 2 and for 2005-06 as well. We do not think the claim could be rejected for 2005-06 because assessee is following mercantile system of accounting and once wage increase settlement between the management and employees is approved by Govt., the balance is only payment. Liability got crystalised in the accounting year when the Govt. granted approval. The assessee should have created provision in the accounts only for the accounting year 2004-05 and claimed deduction in the assessment for the year 2005-06. We therefore dismiss the appeal, but with an observation that the claim should be allowed for the next year. Even though standing counsel submitted that the assessee has not provided for liability in the accounts for the next year, we do not think that is a ground for disallowing the claim because provision is made this year, and once disallowance is made assessee is entitled to write back and provide the same for claim in the next year. Assessee is therefore free to move rectification or other remedy for getting the claim allowed for subsequent or any later year. (C.N.RAMACHANDRAN NAIR) Judge. (C. K. ABDUL REHIM) kk Judge. 3