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iii) The AO has not examined the details of NUCA, the provision for surrender value. That business development expenses of Rs.12.96 crores, consists of insurance premium of Rs.5.67 crores and the AO has not enquired into the genuineness and allowabilities of these expenses with respect to inter alia matching concept.

iv) That the AO in the assessment order has not discussed the various issued raised by the CIT in his 263 proceedings and the order is stereo type and mechanical.

x) that the AO failed to take into consideration the decision of the Tribunal in the case of Sterling Holiday Resorts (India) Ltd. vs. ACIT 295 ITR 162 (AT), order dated 19th January, 2007, which was a decision applicable at the time of passing of the assessment order, wherein the Bench held that there is absolutely nothing in the Act to permit the assessee to treat part of the income as deferred income and hence the order is prejudicial.

xi) that the AO has not examined the abnormal result thrown up in the profit & loss account, for the reason that the matching concept has not been followed. For the principles of matching concept, reliance is placed on the judgment of Hon'ble Bombay High Court in the case of Tparia Tours Ltd. 260 ITR 102 and the order of the Hyderabad Bench of the Tribunal in the case of Treasure Island Resorts (P) Ltd. vs. DCIT (supra). In this order, emphasis was placed on the finding that the issue whether the amount is refundable or not, is not relevant. Reliance is also placed on the decision in the case of DCIT (IT) vs. Speco Electric Power Construction Corpn. Ltd. 126 TTJ 539. Reliance is placed on the decision of Chennai Bench of the Tribunal in the case of ACIT vs. Mahindra Holidays & Resorts (India) Ltd. 131 TTJ 1 and submitted that even in the case of Mahindra Holidays & Resorts (India) Ltd. there was a refund clause and to demonstrate, attention was drawn to para 13 and 22 of the order. In this case, law was also relied upon for the proposition that there is no basis for recognizing of income in the ratio of 40s to 60s. Reliance was also placed on para 30 and 31 of that order.

(i) In the case of Taparia Tools Ltd. v/s JCIT, (2003), 260 ITR 102 (Bom.), the Hon'ble Jurisdictional High Court was considering the matching concept. It held that under the mercantile system of accounting, in order to determine the net income of accounting year, the revenue and other incomes are matched with the cost of resources consumed (expenses) and the sale is required to be done on accrual basis. It held that the revenues and income earned during an accounting period, irrespective of the actual cash flow is required to be compared with the expenses incurred for the same period irrespective of the cash out flow. It held that if the matching cost is not applied, then the profits get distorted. The learned Departmental Representative relied heavily on this aspect of matching concept. When there is no income, the question of recognizing a particular portion as income under the matching concept does not arise. It has to be first seen if there is an income. Just because expenditure is claimed, the receipt which is not income does not become income. Matching concept talks about apportioning income, when there is corresponding expenditure which is spread over a period of time. A capital receipt does not become a revenue receipt, just because some expenditure is incurred on the capital receipt and claimed by the assessee. Thus, we do not agree on this issue with the learned CIT as well as the learned Departmental Representative.

(viii) In JCIT v/s Tirumalai Chemicals Ltd., (2006) 9 SOT 744 (Mum.), the Mumbai Bench of the Tribunal considered the matching concept and it held that the assessee had adopted a scientific and had written off and allocated the expenditure proportionately for the entire period of life of the equipment and that in differing the remaining expenditure to the years corresponding to their income years the assessee had sought to match the expenditure to the corresponding revenue earning years. The Tribunal held that the expenditure in question should be allocated to over the period of five years.