Expenses Of Solid Waste Disposal Is An Accrued Liability As It Was Disposed At Temporary Site: ITAT Allows Claim Worth Rs. 7.77 Crores

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the assessee’s claim of Rs. 7,77,73,600 as a provision for expenses of solid waste disposal.

The two-member bench of Siddhartha Nauthiyal (judicial member) and Annapurna Gupta (accountant member) has noted that the assessee had booked the expenses for the disposal of the waste at the permanent site commensurate to the income that it had accounted for, on the basis of the actual estimation of the expenditures that were incurred. The assessee had been unable to dispose of solid waste due to the lack of a suitable site.

The assessee/respondent is in the business of disposing of solid waste generated by its member units in the GDIC Industrial Estate, Vatva, where 540 member units are located. The procedure for dumping and disposing of solid waste was also explained to the AO, and it was pointed out that the assessee had collected solid waste totaling 70,703.500 MT.

The assessee submitted that since the existing site of the assessee for disposal of waste at Vinzol was filled, the assessee was looking for a new site that also could not be opened, and therefore, solid waste was collected and stored at a temporary site for safe disposal in the future.

The assessee submitted that since the assessee had booked income on account of the disposal of waste, the liability for incurring expenses for disposal of waste had also accrued, which the assessee had to provide for in its accounts. Accordingly, provision for this expenditure had been made as per the mercantile system of accounting adopted by the assessee. The provision was based on actual estimates, and the same is evident from the fact that in the subsequent years, the assessee actually incurred these expenses. The provision has been made on the basis of Section 145 as per the prescribed accounting policy and accounting standards.

The CIT(A) has held the provision created by the assessee to be allowable as an accrued liability.

The tribunal held that there was no infirmity in the findings of the CIT(A) that the provision made by the assessee was not a contingent liability but an accrued liability, and therefore was an allowable claim of the assessee.

Case Title: ACIT Versus The Green Environment Services Co-op Society Ltd.

Citation: ITA No.343/Ahd/2019

Date: 06/03/2023

Counsel For Appellant: S.N. Soparkar

Counsel For Respondent: A.P. Singh

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