Income Tax Appellate Tribunal - Mumbai
Tata Motors Body Solutions Limited ... vs Deputy Commissioner Of Income Tax ... on 8 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" BENCH, MUMBAI
SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
ITA No.5756/MUM/2025
(Assessment Year:2017-2018)
Tata Motors Body Solutions Limited
(Formerly known as Tata Marcopolo Motors Limited)
Bombay House, Homi Mody Street, 24
Mumbai - 400001. Maharashtra
[PAN:AACCT5547J]............. Appellant
Vs
Deputy Commissioner of Income Tax
Circle 1(3)(2), Mumbai
Aayakar Bhavan, Maharshi Karve Road,
Mumbai - 400020. Maharashtra. ............. Respondent
Appearance
For the Appellant/Assessee : Shri Rajan Vora & Shri Nikhil Tiwari &
Shri Lekh Mehta
For the Respondent/Department : Shri Hemanshu Joshi
Date
Conclusion of hearing : 06.02.2026
Pronouncement of order : 08.04.2026
[
ORDER
Per Rahul Chaudhary, Judicial Member:
1. The present appeal preferred by the Assessee is directed against the order, dated 15/07/2025, passed by the National Faceless Appeal Centre (NFAC), [hereinafter referred to as 'the CIT(A)'] whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 21/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] for the Assessment Year 2017-2018.
2. The Assesseehas raised following grounds of appeal :
"General:
1. erred in confirming the action of the learned assessing officer in disallowing Rs.2,35,50,370 (Rs. 28,55,999 pertaining to disallowance of provision made for Bhavishya Kalyan Yojana and Rs 2,06,94,371 pertaining to provision of expenses).ITA No.5756/Mum/2025
Assessment Year 2017-2018 Disallowance of provision made for Bhavishya Kalyan Yojana:
2. erred in upholding the order of the learned assessing officer on the basis that the liability under the Bhavishya Kalyan Yojana is contingent upon the occurrence of a future event and not yet crystallized and therefore, the same is not allowable under section 37(1) of the Act.
3. failed to appreciate that the provision has been recognized basis an independent actuarial valuation report prepared using scientific methods and therefore, the provision is an ascertained liability allowable under section 37(1) of the Act.
4. the Appellant had inadvertently claimed provision for Bhavishya Kalyan Yojana of Rs.28,55,999, whereas some part of the provision (i.e. negative provision of Rs. 6,05,000) was charged to the other comprehensive income and therefore, claim for the net provision of Rs. 22,50,999 [Rs. 28,55,999 (-) Rs. Rs. 6,05,000) should be allowed:
Disallowance of provision of expenses: Rs. 2,06,94,371:
5. erred in upholding the order of the learned assessing officer on the basis that the Appellant has not sufficiently demonstrated that the liabilities in respect of which the provisions have been created have crystallized during the captioned assessment year and therefore, upheld the disallowance made by the learned assessing officer under section 37(1) of the Act;
6. failed to appreciate that the provisions made for various expenses pertains to current year and are fully allowable expenditure as incurred wholly and exclusively for the business operations of the current year and therefore, such provisions are allowable under section 37(1) of the Act
7. failed to appreciated that the Appellant's books of accounts are prepared basis Ind-AS and therefore, the provisions recognized in the books of accounts are in respect of expenditure crystallized during the year and therefore, such provisions are allowable under section 37(1) of the Act.
8. failed to appreciate that the disallowance made by the learned assessing officer ought to have been deleted since the provisions recognized during the year are reversed in the next year and consequently, offered to tax by the Appellant and therefore, upholding the disallowance tantamounts to double taxation.
9. without prejudice to the above, failed to appreciate that the learned assessing officer himself has allowed provision for expenses on 2 ITA No.5756/Mum/2025 Assessment Year 2017-2018 which tax has been deducted at source under section 192 of the Act and therefore, the provisions amounting to Rs. 1,34,48,711 [Superior Performance Award-Rs. 1,15,17,862, Salary Allowances Rs. 11,29,983 and OT/ Double Pay - Rs. 8,00,866) on which tax has been deducted at source should be allowed as deduction.
10. without prejudice to the above, failed to appreciate that the provision for penalties and interest on tax duties (Rs. 7,413) and provision for CSR expenses (Rs. 200) have been suo-moto disallowed by the Appellant in its return of income and upholding the disallowance of the same amount tantamounts to double taxation and therefore, the disallowance in respect of the same ought to have been deleted:
Additional Grounds of appeal
11. ought to be directed to allow the Appellant's claim of measurement loss amounting to Rs.21,39,000 in respect of the Medicare scheme maintained by the Appellant which was been recognized in 'Other Comprehensive Income' and which has inadvertently not claimed by the Appellant."
3. The relevant facts in brief are that the Assessee is a company engaged in the manufacture and sale of bus bodies including spare parts and was initially formed as a Joint Venture between Tata Motors Limited from India and Marcopolo, SA of Brazil.For the Assessment Year 2017- 2018, the Assessee filed return of income on 09/11/2017 declaring 'Nil' income under the normal provisions of the Act after claiming set-off of losses of earlier years. The Assessee also disclosed 'Nil' Book Profits under the section 115JB of the Act. The aforesaid income tax return filed by the Assessee was selected for scrutiny and assessment was completed under Section 143(3) of the Act vide Assessment Order, dated 21/12/2019. The Assessing Officer assessed the total income of the Assessee at INR.25,61,32,711/- after making, inter alia, the following disallowances - (a) Disallowance of INR.28,55,999/- rejecting Assessee's claim for deduction in respect of provision made for BKY, and (b) Disallowance of INR.2,06,94,371/- rejecting Assessee's claim for deduction for provision created for business expenses.
4. The grounds raised by the Assessee in appeal before the Learned CIT(A) challenging the above disallowances, were rejected by the 3 ITA No.5756/Mum/2025 Assessment Year 2017-2018 Learned CIT(A) affirming the reasoning given by the Assessing Officer vide Order, dated 15/07/2025, passed under Section 250 of the Act.
5. Being aggrieved by the above decision of the Learned CIT(A), the Assessee has preferred the present appeal on the grounds/additional grounds reproduced in paragraph 2 above.
Ground No.1:
6. Ground No. 1 raised by the Assessee is dismissed as being general in nature since the same does not require separate adjudication in view of the specific grounds raised by the Assessee which are adjudicated upon hereinunder.
Ground No. 2 to 4 and Ground No. 11 (Additional Ground)
7. We would first take up Ground No. 2 to 4 raised in the memorandum of appeal along with Ground No. 11 raised by the Assessee as additional ground vide letter dated 04/11/2025.
8. We have heard both the sides on admission of additional ground raised by the Assessee vide Latter, dated 04/11/2025, and have considered the rival submissions.
8.1. At the relevant time, the Assessee was operating an unfunded defined benefit plan for the eligible employees of the Assessee-Company under the name Bhavishya Kalyan Yojna [for short 'BKY'].The Assessee was also running a Medicare Scheme for its employees. The Assessee created provision for the aforesaid schemes on the basis of report of an independent actuary. The Assessee accounted for the said provisions in the books of accounts on the basis of Indian Accounting Standard (Ind- AS) 19 - Employee Benefits.The provisions created for BKY and Medicare Scheme Expenses as per the actuarial valuation report were disclosed as (a) amount debited to the Profit &Loss Account and (b) amount disclosed as 'Other Comprehensive Income' (not debited to Profit & Loss Account).
4 ITA No.5756/Mum/2025Assessment Year 2017-2018 8.2. Accordingly, during the relevant previous year, the Assessee has recognized provision for BKY amounting to INR.26,78,000/- and the provision for Medicare Scheme amounting to INR.46,14,000/- in the following manner:
Particulars Amount Account Total
recognized in recognized in
Profit & Loss Other Comprehensive
Account Income
Bhavishya Kalyan 32,83,000 (6,05,000) 26,78,000
Yojana
Medicare Scheme 24,75,000 21,39,000 46,14,000
8.3. In the return of income the Assessee claimed deduction in respect of the expenses debited to the Profit & Loss Account (as opposed to the aggregate/net amount of the provisions to be created as per the actuarial valuation report). Therefore, by way of Ground No. 4 raised in the present appeal, the Assessee has now revised downwards its claim for provisions for BKY expenses from INR.32,83,000/- to INR.26,78,000/- by taking into account the negative provision amounting to INR.6,05,000/- recognized under the head 'Other Comprehensive Income'. The Assessee had also raised additional ground vide Letter, dated 04/11/2025, to make additional claim for deduction in respect of provisions of INR.21,39,000/- for Medicare Scheme expenses recognized under the head 'Other Comprehensive Income'. There is no dispute as to the facts relevant for adjudication of additional ground now raised by the Assessee and the same form part of the record.It is not disputed by the Revenue that the actuarial valuation reports were filed before the Learned CIT(A) and the same were admitted as additional evidence. Accordingly, keeping in view of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT: 229 ITR 383we admit the additional ground raised by the Assessee (numbered as Ground No. 11) and proceed to adjudicate grounds under consideration on merits.
Ground No. 2 & 3
9. By way Ground No. 2 & 3 the Assessee had challenged the order 5 ITA No.5756/Mum/2025 Assessment Year 2017-2018 passed by the Learned CIT(A) confirming the disallowance of INR.28,55,999/- made by the Assessing Officer in respect of provisions for BKY.
9.1. The Assessing Officer has dealt with this issue in paragraph 6 to 6.6 of the Assessment Order. On perusal of the same we find that during the course of assessment proceedings the Assessee was asked to explain why the Provision for BKY of INR.32,82,298/- debited to the Profit & Loss Account should not be disallowed as the same represented an ad- hoc provision created by the Assessee in respect of unascertained & contingent liability to make payments to eligible employees under BYK. In response, the Assessee filed Submission, dated 16/12/2019, stating that BKY was unfunded defined benefit plan for the employees of the Assessee Company. The benefits of the BKY Scheme also included pension payable in respect of deceased/permanent disabled employee up to date of his normal superannuation date; had such employee been in service. It was further submitted that Assessee accounted for the liability for the BKY on the basis of independent actuarial valuation and provision was created accordingly. It was submitted that the liability to make payments under BKY was a contractual and ascertained liability and therefore, the provision created for the same was allowable as deduction under Section 37 of the Act. The aforesaid submissions did not find favour with the Assessing Officer, as the Assessing Officer was of the view that the liability to make payment under BKY was contingent in nature and the same had not crystallized during the relevant previous year. The Assessing Officer rejected Assessee's claim for deduction for provision for BKY of INR.32,83,289/- holding that the same was not allowable under Section 37 of the Act. However, the Assessing Officer allowed deduction for the actual payment of INR.4,27,290/- made by the Assessee under BKY during the relevant previous year and thus, disallowed deduction for the balance amount of INR.28,55,999/- [INR.32,83,289 Less INR.4,27,290/-].
9.2. Being aggrieved, the Assessee carried the issue before the Learned 6 ITA No.5756/Mum/2025 Assessment Year 2017-2018 CIT(A). Before the Learned CIT(A) Assessee retreated the submission made before the Assessing Officer and made submissions [which have been reproduced by the Learned CIT(A) at Page 11 to 13 of the order impugned]. The Learned CIT(A) did not find merit in the aforesaid submissions and concluded that the provision for BKY created by the Assessee was in respect of unascertained liability since the amount payable to the employees covered by BKY was contingent upon the future event being death or permanent disablement of employee. The Learned CIT(A) distinguished the judgment of Hon'ble Supreme Court in the case of Metal Box Co. of India Ltd. (73 ITR 53) and Bharat Earth Movers Ltd. (245 ITR 428) observing that the same dealt with the provisions for gratuity and leave encashment where, unlike the present case, the liabilities were certain to arise upon retirement/resignation of the employee.
9.3. Being aggrieved by the above order of the Learned CIT(A), the Assessee has carried the issue in appeal before this Tribunal.
9.4. The Learned Authorized Representative for the Assessee reiterated the stand taken before the authorities below and placed on record decisions of the Tribunal rendered in the cases of group companies wherein the Tribunal was pleased to allowed deduction for provisions of expenses incurred by BKY Scheme operated/run by the group companies. It was submitted that the sole reason for making disallowance by the Assessing Officer was that the liability to make payment to employees under BKY was contingent in nature. It was contended that the liability to make payment to the employees was a contractual liability and the same could not be regarded as contingent in nature. Further, the provision created by the Assessee was based upon actuarial valuation and the same could not be regarded as an ad-hoc provision. The disclosure made by the Assessee under the head provision debited to the Profit & Loss Account and under the head 'Other Comprehensive Income' to comply with the requirements of the applicable accounting standards was of no consequence and the same would not change the 7 ITA No.5756/Mum/2025 Assessment Year 2017-2018 nature of liability from ascertained liability to unascertained liability.
9.5. Per contra, the Learned Departmental Representative placed strong reliance upon the order passed by the Assessing Officer and the CIT(A). It was submitted that payout under BKY was contingent upon occurrence of a future event and therefore, the Assessing Officer was correct in classifying the liability to make payment under BKY as a contingent liability.
9.6. We have considered the rival submissions.The Revenue has not disputed that the BKY was being operated by the Assessee for the benefit of its employees. It has also not been disputed by the Revenue that the provision for BKY was created on the basis of actuarial valuation. The stand taken by the Revenue is that the liability arising under BKY in respect of which provision was created during the relevant previous year is contingent in nature.
9.7. During the course of hearing reliance was placed on behalf of the Assessee on the decisions of the Co-ordinate Bench of the Tribunal in the case of Tata Motor Finance Ltd. - a group company of the Assessee to support the claim for deduction for provision created for BKY. It was submitted that similar schemes are being operated by the Tata Group companies for the benefit of employees and identical issue had come up for consideration before the Co-ordinate Bench of the Tribunal in case of Tata Motors Finance Limited[ITA No.4353/MUM/2013, Assessment Year 2007-2008, dated 19/09/2018].The Tribunal allowed deduction for provision for expenses created by the assessee in that case holding as under:
"18. Assessee is also aggrieved for disallowance of provision for post retirement benefits under Section 43B(b) of the Act. It was contention of learned AR that this is an amount provided by the Assessee, after a scientific determination based on an actuarial valuation, towards it's contractual non-statutory liability to provide post retirement benefits to it's employees. He further contended that the provisions of section 43B(b) of the Act have no application as this has been claimed only on the basis of a 8 ITA No.5756/Mum/2025 Assessment Year 2017-2018 scientifically determined actuarial valuation and not as a contribution to any fund.
19. We have considered rival contentions and found that issue is squarely covered by the decision of Delhi High Court in the case of Ranbaxy Laboratories Ltd., wherein Hon'ble High Court held that the pension scheme of the assessee did not envisage any regular contribution to any fund or trust or any other entity. The pension scheme provided that pension would be paid by the assessee to its employee on his or her attaining the retirement age or resigning after having rendered services for a specified number of years. Thus, where the liability on this account accrued from year to year, it was payable on retirement/resignation of the eligible employees. It could not be disallowed under section 43B.
20. We have considered rival contentions and also gone through the decision of Delhi High Court wherein Hon'ble Delhi High Court observed that the pension scheme of the assessee does not envisage any regular contribution to any fund or trust or any other entity. The pension scheme provides that pension would be paid by the assessee to its employees on their attaining the retirement age or resigning after having rendered services for specified years. Thus, where the liability on this account accrues from year to year, the same is payable on retirement/resignation of the eligible employees. In view thereof, the ratio of the judgment of the Supreme Court in Metal Box Company of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC) and Bharat Earth Movers v. CIT [2000] 245 ITR 428 (SC) would clearly get attracted. Respectfully following the decision of the Delhi High Court, we do not find any merit for the disallowance so made by the lower authorities."
9.8. The above decision was followed by the Mumbai Bench of the Tribunal in the case of Deputy Commissioner of Income Tax 1(3)(2), Mumbai Vs. Tata Motors Finance Ltd. [ITA No.2640/Mum/2019[Assessment Year 2013-2014, Common Order dated 13/04/2022].The Co-ordinate Bench of Tribunal dismissed the following grounds raised in appeal by the Revenue(while allowingidentical claim for deduction for provision for BKY expenses):
"1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow the provision of Rs.75,67,000/- created towards 'Bhavishya Kalyan Yojna' and Medicare Scheme without appreciating that the disallowance made by the Assessing Officer is as per the provision of section 43B(f) of the Income Tax Act, 1961."9 ITA No.5756/Mum/2025
Assessment Year 2017-2018 The relevant extract of the above Common Order, dated 13/04/2022, passed by the Tribunal in ITA No.2640/Mum/2019, reads as under:
"019. The Ld. Assessing Officer made the following adjustment to the returned income of the assessee.
a. disallowed the provision made in the books of employees welfare in respect of Bhavishya Kalyan Yojna amounting to Rs.49,74,000/- and provision for medicare of Rs.25,93,000/-.
b. Disallowed provision of doubtful debts of Rs. 49,94,83,557/-
c. xx xx d. xx xx
020. Assessee preferred an appeal against the order of learned Assessing Officer before the learned CIT (A). The learned CIT(A) passed the order on 26.09.2018 wherein he allowed the provision of Rs. 75,67,000/- towards Bhavishya Kalyan Yojna and Medicare Scheme following decision of the coordinate bench in assessee's own case for assessment year 2007-08. He also deleted disallowance with respect to the dealers commission of ₹9,498,849/- and further Rs.1,91,45,842/- following the decision of the coordinate bench in assessee's own case for assessment year 2007 - 08. He also deleted the disallowance/addition of ₹262,340,000 with respect to the delinquency support based on noted number 25 of the annual accounts.
021 to 25. xx xx
026. On the appeal of the learned AO, we find that ground number 1 is with respect to the direction of the learned CIT-A 12 the provision of ₹7,567,000 created towards the employee benefit schemes. The learned CIT-A followed the order of the coordinate bench in assessee's own case for assessment year 2007-08 for allowing the above claim. As the learned CIT-A has followed the decision of the coordinate bench which is not been challenged by the revenue before the higher forum, we do not find any infirmity in the order of the learned CIT-A in deleting the above provision of ₹75,67,000/- towards Bhavishya Kalyan Yojana and Medicare scheme. Accordingly, ground number 1 of the appeal of AO is dismissed."
9.9. Thus, we note that that the Co-ordinate Benches of the Tribunal had 10 ITA No.5756/Mum/2025 Assessment Year 2017-2018 allowed deduction for provision created for BKY in the year in which the same was debited to the Profit and Loss Account and had rejected the contention of the Revenue to allow deduction for the same on paid basis by invoking provision contained in Section 43B of the Act. In the present case also the Assessing Officer had allowed deduction for actual expenses paid by the Assessee during the relevant previous year under BKY and had disallowed deduction claimed by the Assessee in respect of Provision for BKY expenses observing that the provision was created on an ad-hoc basis for a liability which had not crystallized during the relevant previous year. The Assessee had submitted the actuarial valuation report before the Learned CIT(A). We find that the actuarial valuation was done after taking into account the number of employees/beneficiaries, benefit patterns, salary increase and actuarial discounting factor. Therefore, we reject the contention of the Revenue that the amount debited by the Assessee was an ad-hoc amount. We note that on the basis of the report furnished by independent actuary, amount of INR.32,83,000/- was debited to the Profit & Loss Account for BKY expenses. During the course of hearing, the Learned Authorized Representative for the Assessee had placed reliance upon following judgments of the Hon'ble Supreme Court wherein provisions created on the basis of actuarial valuation were allowed as deduction under section 37 of the Act- (a) Bharat Earth Movers vs. Commissioner of Income- tax [2000] 112 Taxman 61 (SC)/[2000] 245 ITR 428 (SC)/[2000] 162 CTR 325 (SC)[09-08-2000] (b) Metal Box Co. of India Ltd. v. Their workmen [1969] 73 ITR 53 (SC) and (c) Rotork Controls India (P.) Ltd. vs. Commissioner of Income-tax, Chennai [2009] 180 Taxman 422 (SC [12-05-2009]. We note that the Learned CIT(A) had sought to distinguish the aforesaid judgments on the ground that the same dealt with the provisions for gratuity and leave encashment where, unlike the present case,the liabilities were certain to arise upon retirement/resignation of the employee; whereas in the present case the liability to make payment was contingent upon a future event being death/disablement of the employee. We are not in agreement with the 11 ITA No.5756/Mum/2025 Assessment Year 2017-2018 aforesaid observations/reasoning of the Learned CIT(A). In the present case an employee becomes eligible to be covered under the employee benefit schemes (such as BKY) on account of employment contract and the applicable employee benefits schemes. The Actuarial valuation is done on the basis of the contractual obligation of the Assessee. The amount so determined constitutes ascertained liability computed based on the scientific method. The liability to make payment to employees in terms of BKY is a 'liability in praesenti though it will be discharged at a future date'. In the case of Bharat Earth Movers vs. Commissioner of Income-tax [2000] 112 Taxman 61 (SC)/[2000] 245 ITR 428 (SC)/[2000] 162 CTR 325 (SC)[09-08-2000], the Hon'ble Supreme Court had held that deduction for should be allowed for such liability based upon actuarial valuation even though the liability would be discharged at the future date. The relevant extract of the judgment of the Hon'ble Supreme Court is set out herein under:
"4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.
5. In Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC), the appellant-company estimated its liability under two gratuity schemes framed by the company and the amount of liability was deducted from the gross receipts in the profit and loss account. The company had worked out on an actuarial valuation its estimated liability and made provision for such liability not all at once but spread over a number of years. The practice followed by the company was that every year the company worked out the additional liability incurred by it on the employees putting in every additional year of service. The gratuity was payable on the termination of an employee's service either due to retirement, death or termination of service - the exact time of occurrence of the latter two events being not determinable with exactitude beforehand. A few principles were 12 ITA No.5756/Mum/2025 Assessment Year 2017-2018 laid down by this Court, the relevant of which for our purpose are extracted and reproduced as under :
(i) For an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid;
(ii) Just as receipts, though not actual receipts but accrued due are brought in for the income-tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business;
(iii) A condition subsequent, the fulfilment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; and
(iv) A trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated.
6. So is the view taken in Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1, wherein this Court has held that the liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case.
Applying the above-said settled principles to the facts of the case at hand, we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is 13 ITA No.5756/Mum/2025 Assessment Year 2017-2018 made for the liability. The liability is not a contingent liability. The High Court was not right in taking a view to the contrary.
7. The appeal is allowed. The judgment under appeal is set aside.
The question referred by the Tribunal to the High Court is answered in the affirmative, i.e., in favour of the assessee and against the revenue."
9.10. In view of the above, we accept the contention of the Assessee that the provision for BKY amounting to debited to the Profit & Loss Account is allowable asdeduction under Section 37 of the Act. Accordingly, Ground No.2 and 3 raised by the Assessee are allowed.
Ground No.4
10. In the return of income the Assessee claimed deduction in respect of the expenses debited to the Profit & Loss Account (as opposed to the aggregate/net amount of the provisions to be created as per the actuarial valuation report). Therefore, by way of Ground No. 4 raised in the present appeal, the Assessee has now revised downwards its claim for provisions for BKY expenses from INR.32,83,000/- to INR.26,78,000/- by taking into account the negative provision amounting to INR.6,05,000/- recognized under the head 'Other Comprehensive Income'. The Revenue did not object to the downward revision of claim for provision for the BKY and therefore, Ground No.4 raised by the Assessee is allowed.
As a result, Ground No.2, 3 and 4 raised by the Assessee are allowed and the deduction claimed by the Assessee in respect of provision for BKY expenses stands allowed to the extent of INR.26,78,000/-.
Ground No.11 (Additional Ground)
11. Ground No.11 raised by the Assessee pertains to the additional claim raised by the Assessee in respect of provision created for Medicare Expenses during the relevant previous year and recognized under the head 'Other Comprehensive Income'. As was the case for provision for BKY expenses, the provision created for Medicare Scheme was also created on the basis of actuarial valuation report. We have already 14 ITA No.5756/Mum/2025 Assessment Year 2017-2018 noted in Paragraph 8.2 above that the during the relevant previous year, the Assessee has recognized provision for Medicare Scheme amounting to INR.46,14,000/- in the following manner:
Particulars Amount Account Total
recognized in recognized in
Profit & Loss Other Comprehensive
Account Income
Medicare Scheme 24,75,000 21,39,000 46,14,000
11.1. As regards, deduction for amount of INR.24,75,000/- is concerned, the Assessing Officer accepted the deduction of INR.24,75,000/- claimed by the Assessee for Provision for Medicare Scheme debited to the Profit & Loss Account. For amount of INR.21,39,000/-, the Assessee had claimed that amount related to relevant previous year though not debited to the Profit & Loss Account and was disclosed separately under the head 'Other Comprehensive Income'. On perusal of the actuarial valuation report that we find that the above amount of INR.21,39,000/- representedactuarial (gains)/losseson account of Defined Benefit Obligation (DBO) during the relevant previous year which has been disclosed as under in the actuarial valuation report:
AOCI under Ind AS 19 TMML (INR) Development of Accumulated Other Comprehensive Income
1. Accumulated OCI as of the Prior Period End Date (loss is positive) (552,000)
2. Actuarial (Gain)/Loss on DBO Arising during Period 2,139,000
3. Return on Plan Assets (Greater) /Less than Discount Rate 0
4. Return on Reimbursement Rights (Greater) / Less than Discount Rate 0
5. Change in irrecoverable Surplus in Excess of Interest 0
6. Increase/ (Decrease) in AOCI Following Subsidiary Transfers 0 7. Reclassification of AOCI within Equity 0 8. Other 0 9. Currency (Gain)/Loss 0 10 Accumulated OCI as of the Period End Date (loss is positive) 1,587,000 11.2. From the above, it is clear that the INR.21,39,000/- represents actuarial loss on DBO for the relevant previous year.The Assessee has adopted consistent approach by revising downwards it claim for deduction for Provisions for BKY Expenses by taking note of actuarial gain of INR.6,05,000/- on DBO arising during the relevant previous year. We note that vide Assessment Order dated 29/01/2026 for the 15 ITA No.5756/Mum/2025 Assessment Year 2017-2018 Assessment Year 2024-2025, the Assessing Officer has accepted identical claim of the Assessee for deduction in respect of actuarial loss disclosed under the head 'Other Comprehensive Income'.As noted hereinabove, for the Assessment Year 2017-2018 the Assessing Officer has not made any disallowance in relation to provision created for Medicare Expenses (accepting the same as provision for ascertained liability). Therefore, we accept Assessee's additional claim for deduction of INR.21,39,000/- pertaining to actuarial loss on DBO in relation to Medicare Expenses for the relevant previous year and direct the Assessing Officer to grant deduction to the Assessee in respect of the same. Thus, Ground No. 11 raised by the Assessee is allowed.
Ground No.5 to 10
12. Ground No.5 to 10 raised by the Assessee pertains to disallowance made in respect of provision for expenses aggregating to INR.2,06,94,371/-debited to the Profit & Loss Account for the relevant previous year.
13. During the assessment proceedings the Assessing Officer noted that the Assessee had debited to the Profit & Loss Account INR.13,53,67,478/- as Provision for Expenses. Vide notice dated 16/11/2019, the Assessee was asked to explain why the aforesaid Provision for Expenses should not be disallowed. In response the Assessee filed submission, 17/12/2019 giving break-up of Provision for Expenses aggregating to INR.13,53,67,478/- alongwith the explanation.
SNo Particulars Amount Remarks
1 TDS has been deducted during the
Provision for Salary & Wages 7,05,63,417
payment of Salary
2 No TDS applicable since it relates to
Raw Material Consumption 1,97,17,094
education cess
3 Covered under 43B included in Annexure
Bonus 1,80,67,955
8 of the Tax Audit Report
TDS has been deducted during payment
4 Superior Performance Award 1,15,17,862
of salary
5 Reimbursement to Marcopolo 53,49,932 TDS deposited on 28.04.2017
Campaign/Retro Fitement No TDS applicable since invoice for
6 32,03,688
Expenses materials include VAT
16
ITA No.5756/Mum/2025
Assessment Year 2017-2018
No TDS applicable since Modvat credit
7 Relinquishment - Modvat Credit 15,91,594 has been reversed on account of
obsolete stock
TDS has been deducted during the
8 Salary allowances 11,29,983
payment of salary
9 Reimbursement of transport 8,93,183 No TDS applicable
TDS has been deducted during the
10 OT /double pay 8,00,866
payment of salary
No TDS applicable as this reversal of
11 Expenses Recoverable 5,07,944
expenses. Does not pass through P/L
Canteen/refreshment exps/Food
12 4,56,259 No TDS applicable since SBC and KKC
subsidy
13 PF Admin/Inspection Charges 3,83,549 No TDS applicable
14 Travel reimbursement 2,94,909 No TDS applicable
15 Interest others 2,41,490 No TDS applicable since payable to Govt
Reimbursement of staff welfare
16 1,27,154 No TDS applicable
expenses
17 Contract labour charges 1,26,563 No TDS applicable since SBC and KKC
18 IT Services 83,016 No TDS applicable since payable to govt
19 Misc. contract jobs 78,055 No TDS applicable since SBC and KKC
20 Security expenses 73,985 No TDS applicable since SBC and KKC
21 Expenditure on car/Hire of car 46,036 No TDS applicable since SBC and KKC
22 Stipend 28,473 No TDS applicable since SBC and KKC
Reimbursement of recruitment
23 24,285 No TDS applicable
expenses
Repairs and maintenance of land
24 11,100 No TDS applicable since SBC and KKC
and Building
Penalties and interest on
25 7,413 Disallowed in computation of income
tax/duties
26 Conservancey Expenses 7,234 No TDS applicable since SBC and KKC
27 Transport charges 5,341 No TDS applicable since SBC and KKC
28 Consultancy charges 5,288 No TDS applicable since SBC and KKC
Co's Contribution to Karnataka
29 4,722 No TDS applicable since SBC and KKC
Labour Welfare
30 Mobile Phone Expenses 4,050 No TDS applicable since SBC and KKC
31 Hotel Expenses 3,100 No TDS applicable since SBC and KKC
32 Inspection & Testing Charges 2,880 No TDS applicable since SBC and KKC
33 Guest House Expenses 1,750 No TDS applicable since SBC and KKC
34 General expenses 1,700 No TDS applicable since SBC and KKC
Repairs and maintenance -plant
35 1,498 No TDS applicable since SBC and KKC
and machinery
36 Disposal of hazardous waste 1,377 No TDS applicable since SBC and KKC
37 Gardening expenses 1,279 No TDS applicable since SBC and KKC
38 Travelling expenses 800 No TDS applicable
39 Courier charges 504 No TDS applicable since SBC and KKC
40 CSR expenses 200 Disallowance in computation of income
Total 13,53,67,478
14. The Assessing Officer noted that the Assessee had booked expenses aggregating to INR.1,34,48,711/- under specific heads and had deducted TDS thereon. Therefore, the Assessing Officer concluded that the aforesaid expenses were allowable as deduction. As regards balance amount of INR.2,06,94,361/- is concern, the Assessing Officer 17 ITA No.5756/Mum/2025 Assessment Year 2017-2018 noted that the Assessee had failed to deduct tax on the same and therefore, the same were disallowed.
15. Being aggrieved, the Assessee carried the issue the before the Learned CIT(A). Before the Learned CIT(A) it was submitted that the amount of INR.2,06,94,371/- debited to the Profit & Loss Account consisted of provision created for (a) expenses of INR.1,34,48,711/- (being in the nature of salaries) on which tax was deductible at source under Section 192 of the Act only on payment and, therefore, the same fell outside the purview of Section 40(a)(ia) of the Act, and (b) expenses of INR.72,45,660/- on which no tax was required to be deducted at source. It was further submitted that without granting the Assessee to provide above explanation and in violation of principles of natural justice, the Assessing Officer made disallowance of INR.2,06,94,371/- observing that the Assessee had failed to deduct at source in respect of the same. However, the aforesaid submission did not find favour with the Learned CIT(A). The disallowance of INR.2,06,94,371/- made by the Assessing Officer was confirmed by Learned CIT(A) observing that the provision was made for expenses which represented contingent liabilities of the Assessee which had not crystallized during the relevant previous year.
16. Being aggrieved, the Assessee is now in appeal before the Tribunal on this issue.
17. We have heard both the sides on the Ground No.5 to 10 raised by the Assessee in the present appeal. On perusal of material on record, we find that during the relevant previous year Assessee had debited Provision for Expenses aggregating to INR.13,53,67,478/-. The Assessing Officer disallowed Provision for Expenses aggregating to INR.2,06,94,371/- on the ground that the Assessee had failed to deduct tax at source from the same. The Learned CIT(A) confirmed the disallowance observing that provision was created in respect of liabilities of contingent nature. During the course of hearing the 18 ITA No.5756/Mum/2025 Assessment Year 2017-2018 Learned Authorized Representative for the Assessee submitted that the Provision for Expenses aggregating to INR.2,06,94,371/- consisted of the following:
SNo Particulars Amount Remarks
TDS has been deducted during payment
1 Superior Performance Award 1,15,17,862
of salary
Campaign/Retro Fitement No TDS applicable since invoice for
2 32,03,688
Expenses materials include VAT
No TDS applicable since Modvat credit
3 Relinquishment - Modvat Credit 15,91,594 has been reversed on account of
obsolete stock
TDS has been deducted during the
4 Salary allowances 11,29,983
payment of salary
5 Reimbursement of transport 8,93,183 No TDS applicable
TDS has been deducted during the
6 OT/Double Pay 8,00,866
payment of salary
Canteen/refreshment exps/Food
7 4,56,259 No TDS applicable since SBC and KKC
subsidy
8 Travel reimbursement 2,94,909 No TDS applicable
No TDS applicable since payable to
9 Interest others 2,41,490
Govt
Reimbursement of staff welfare
10 1,27,154 No TDS applicable
expenses
11 Contract labour charges 1,26,563 No TDS applicable since SBC and KKC
12 Misc. contract jobs 78,055 No TDS applicable since SBC and KKC
13 Security expenses 73,985 No TDS applicable since SBC and KKC
14 Expenditure on car/Hire of car 46,036 No TDS applicable since SBC and KKC
15 Stipend 28,473 No TDS applicable since SBC and KKC
Reimbursement of recruitment
16 24,285 No TDS applicable
expenses
Repairs and maintenance of land
17 11,100 No TDS applicable since SBC and KKC
and Building
18 Penalties and interest on tax/duties 7,413 Disallowed in computation of income
19 Conservancey Expenses 7,234 No TDS applicable since SBC and KKC
20 Transport charges 5,341 No TDS applicable since SBC and KKC
21 Consultancy charges 5,288 No TDS applicable since SBC and KKC
Co's Contribution to Karnataka
22 4,722 No TDS applicable since SBC and KKC
Labour Welfare
23 Mobile Phone Expenses 4,050 No TDS applicable since SBC and KKC
24 Hotel Expenses 3,100 No TDS applicable since SBC and KKC
25 Inspection & Testing Charges 2,880 No TDS applicable since SBC and KKC
26 Guest House Expenses 1,750 No TDS applicable since SBC and KKC
27 General expenses 1,700 No TDS applicable since SBC and KKC
Repairs and maintenance -plant
28 1,498 No TDS applicable since SBC and KKC
and machinery
29 Disposal of hazardous waste 1,377 No TDS applicable since SBC and KKC
30 Gardening expenses 1,279 No TDS applicable since SBC and KKC
31 Travelling expenses 800 No TDS applicable
32 Courier charges 504 No TDS applicable since SBC and KKC
33 CSR expenses 200 Disallowance in computation of income
Total 2,06,94,371
18. It was submitted that the provision was created for specific expenses.
19 ITA No.5756/Mum/2025Assessment Year 2017-2018 The Assessing Officer had made the disallowance solely for the reason that the Assessee had failed to deduct tax from such expenses. It was submitted that the Assessee was not under obligation to deduct tax in respect of provision created for above expenses. Reliance was placed by Learned Authorized Representative for the Assessee on the submission filed before Learned CIT(A) wherein nature of expenses in respect of which provision was created alongwith supporting documents and reasoning for not withholding tax at source was placed before the Learned CIT(A).
19. After taking into consideration the material forming part of record, we find that the Assessee had deducted tax at source in respect of provision created for the following salary expenses under Section 192 of the Act at the time of payment:
SNo. Particulars Amount (INR. ) Remarks
1 Superior Performance Award 1,15,17,862 Tax deducted at source at the time of
2 Salary allowances 11,29,983 payment of salary as per Section 192 of the
3 OT /Double pay 8,00,866 Act.
Total 1,34,48,711
In our view, it cannot be said that the provision created by the Assessee in respect of above expenses represented unascertained or contingent liability. In any case, the Assessing Officer had made disallowance only on the ground of non-deduction of tax at source. Since the tax was to be deducted at the time of payment and the Assessee had duly deducted tax in terms of Section 192 of the Act, the Assessing Officer was not justified in making disallowance on the ground of non-deduction of tax at source. Accordingly, the disallowance of INR.1,34,48,711/- made by the Assessing Officer cannot be sustained and is hereby deleted.
20. We note that the provision for CSR Expenses of INR.200/- and the provision for Penalties and Interest on tax/duties of INR.7,413/- was disallowed by the Assessee in the computation of income. Therefore, no further disallowance of INR.7,613/- was warranted.
20 ITA No.5756/Mum/2025Assessment Year 2017-2018
21. As regards provision of INR.32,03,688/- created for Campaign/Retro Fitment Expenses is concerned we note that the Assessee is a manufacturer of busses. During the year under consideration, the Appellant purchased some goods required for retro fitment of busses from PMI Coaches Private Limited. The provision was created in respect of the aforesaid purchases made during the relevant previous year since the invoices were received in the subsequent year. Thus, the provision was in respect of purchase of goods required for retrofitement of buses manufactured by the Assessee in its normal course of business. Therefore, no tax was required to be deducted at source. Accordingly, we overturn the decision of Learned CIT(A). The disallowance of INR.32,03,688/- made by the Assessing Officer on the ground of non-deduction of tax at source cannot be sustained and is hereby deleted.
22. We note that the Assessing Officer had also made disallowance of INR.15,91,594/- in respect of relinquishment of MODVAT/CENVAT Credit. The Assessee has identified stock amounting to INR.1,39,16,240/- as obsolete on account of design changes and discontinuance of model. The realizable value of said stock was calculated at INR.12,42,791/-. A provision of INR.15,84,181/- was created to provide for relinquishment of MODVAT credit in relation to said obsolete stock and a further, provision of INR.7,413/- for CENVAT surrender. The Assessing Officer disallowed the aforesaid provision without appreciating that no tax was required to be deducted at source. Further, we are of the view that the reversal of MODVAT/CENVAT Credit pertained to relevant previous year on account of recognition of obsolescence of the closing stock of INR.1,39,16,240/- during the relevant previous year. In view of the aforesaid we delete the disallowance of INR.15,91,594/- related to provision for relinquishment of MODVAT/CENVAT Credit.
23. As regards disallowance of INR.4,04,935/- made by the Assessing Officer in respect of Swach Bharat Cess (SBC) and Krishi Kalyan Cess 21 ITA No.5756/Mum/2025 Assessment Year 2017-2018 (KKC) is concerned, we accept the contention of the Assessee that the Assessee was not required to withhold tax on SBC/KKC payable in respect of service tax payable on various expenses. Accordingly, we delete the disallowance of INR.4,04,935/- made by the Assessing Officer on the ground of non-deduction of tax at source.
24. As regards disallowance made by Assessing Officer in respect of (a) Provision for Interest (others) of INR.2,41,490/-, (b) Provision for Reimbursement of Transport Expenses of INR.8,93,183/- and (c) Other Provision of INR.4,47,148/- is concerned, we are of the view that while the material on record supports the contention of the Assessee that no tax was required to be deducted in respect of the expenses in relation to which the aforesaid provisions were created, the same is not sufficient to conclude the issue in the favour of the Assessee. Accordingly, given the facts and circumstances of the present case we deem it appropriate to remand the issue back to the file of Assessing Officer with the directions to the Assessing Officer to verify the nature of specific expenses in respect of which provisions has been created. All the rights and contention of the Assessee are left open.
25. In terms of above, (a) Ground No.5 to 8 raised by the Assessee are partly allowed, and (b) Ground No. 9 & 10 raised by the Assessee are allowed.
26. In result, the present appeal preferred by the Assessee is partly allowed.
Order pronounced on 08.04.2026
Sd/- Sd/-
(Prabhash Shankar) (Rahul Chaudhary)
Accountant Member Judicial Member
मुंबई Mumbai; िदनां कDated : 08.04.2026
Milan, LDC
22
ITA No.5756/Mum/2025
Assessment Year 2017-2018
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. आयकरआयु / The CIT
4. धान आयकर आयु / Pr.CIT
5. िवभागीय ितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानु सार/ BY ORDER, स ािपत ित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai 23