COMMISSIONER OF INCOME TAX AND THE ASSISTANT COMMISSIONER OF INCOME TAX Vs. KARNATAKA STATE CONSTRUCTIONS CORPORATION LTD.

JUDGEMENT

(1.) THE revenue has come up in this appeal challenging the legality and correctness of the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No. 9/Bang/2008 dt.26,9.2008. The questions of law that arises for our consideration in this appeal is:

(2.) IT is not in dispute that the assessee indulging in the construction activities had obtained contract from the Central Government. The assessee in turn entrusted the work to a Sub -contractor. A dispute arose between the assessee and its Sub -contractor and the matter was referred to an Arbitrator. In the Arbitration proceedings, an Interim award is passed directing the assessee to pay a sum of Rs. 52.84 lakhs. In view of the Interim award the assessee claimed deduction during the relevant assessment year to an extent of Rs. 52.84 lakhs. The contention of the assessee was rejected by the Assessing Officer on the ground that the assessee can recover the said amount from the Central Government, therefore, the same cannot be permitted to be deducted. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), which appeal came to be dismissed. Against which the assessee filed a second appeal before the Income Tax Appellate Tribunal, Bangalore. The Income Tax Appellate Tribunal after considering the fact held that the amount of Rs. 52.84 lakhs has been paid by the assessee pursuant to an Interim order passed by the Arbitration and the said amount is allowable deduction. It was also brought to the notice of the Income Tax Appellate Tribunal that the assessee in turn had made a claim before the Central Government. When the Central Government has turned down such requests as the Interim order has to be honoured and if such amount paid pursuant to an Interim order, the department cannot contend that such payment cannot be allowed as deduction since final award is yet to be passed.

(3.) IN the result, we do not see any substantial questions of law that arises in this appeal.