JUDGMENT :

Sanjeev Narula, J.

1. This appeal under Section 260A of the Income Tax Act, 1961 (herein after referred to as the “Act”) filed by the Housing and Urban Development Corporation Ltd - HUDCO (hereinafter referred to as “the appellant”) assails the order dated 21st December, 2018 passed by Income Tax Appellate Tribunal, Delhi Bench ‘C’: New Delhi (hereinafter referred to as “ITAT”) in ITA No:- 5705/Del/2014 for the Assessment Year (AY)2007-08(herein after “the impugned order”).

2. On 6th November, 2019, after hearing the learned counsels for the parties, the following questions of law were framed:

“1. Whether the Hon'ble ITAT erred in confirming the disallowance of the claim of provision for salary of Rs. 1,60,00,000/- on the ground that it did not accrue and the same was merely a contingent liability without appreciating the legal precedents as well the facts of the case.

II. Whether the Hon'ble ITAT erred in confirming the disallowance of the claim of provision for salary of Rs. 1,60,00,000/-- without appreciating that pay revision of the employees of the Appellant being a Public Sector Enterprise is due every 10 years and with the expiry of one wage settlement or agreement, invariably, there is a time lag when another fresh wage revision agreement is negotiated and entered and this Hon'ble Court in the case of in the case of CIT v. Bharat Heavy Electricals Ltd. 352 ITR 88 (Del) while dealing with a similar provision made on account of wage revision, held, that the deduction claimed for that period cannot 'be termed as contingent because the wage and the probable revision or rates of revision would be within the fair estimation of the employer.

III. Whether the Hon'ble ITAT erred in confirming the addition of Rs. 1,28,00,000/- on account of change in accounting policy of revenue recognition for application fee, front end fees, administrative fee and processing fee of loans from the date of signing of loan agreement to the date of realization on the ground that the same was not in accordance with the provisions of the Act without appreciating the legal precedents as well the facts of the case.”

3. The factual background of the case giving rise to the present appeal is that the appellant, a Public Sector Undertaking (PSU), filed its return of income for the AY 2007-08 on 30th October, 2007 declaring an income of Rs. 351,93,26,019/-. The same was revised on 24th October, 2008 wherein the income of Rs. 331,58,74,360/- was declared. Appellant’s case was selected for scrutiny and an assessment order under Section 143(3) of the Act was passed on 30th December, 2009, assessing the total income of the appellant as Rs. 355,28,96,515/-. The Commissioner of Income Tax [herein after referred to as “CIT (A)”] examined the records and vide order dated 24th February, 2012 exercised his jurisdiction under Section 263 of the Act, directing the Respondent to reframe the assessment inter alia on the ground that Assessing Officer (AO) had not disallowed the provision for salary of Rs. 1.60 crores and has erred in not making an addition of Rs. 1.28 crores on account of the financial impact due to change in the accounting policy with respect to revenue recognition for application fee, front end fees, administrative fee and processing fee of loans from the date of signing of the loan agreement to the date of realization.

4. Pursuant to the aforesaid directions, the AO framed the assessment order dated 28th March, 2013 under Section 263/143(3) of the Act, and made certain additions/disallowances which inter alia includes the disallowance of the claim for provision of salary of Rs.1.60 crores and addition of Rs. 1.28 crores on account of financial impact due to change in accounting policy. In the appeal, CIT (A) vide order dated 28.08.2014 upheld the order of the AO and sustained the disallowance and the addition.

5. The appellant challenged the or