2. The foreseeable loss determined in respect of incomplete contract as per the Accounting Standard – 7 is an allowable expenditure Recently, the Mumbai Income-tax Appellate Tribunal (the Tribunal) in the case of Jacobs Engineering India Pvt.Ltd.1 allowed the foreseeable loss determined in respect of incomplete contract as per Accounting Standard (AS) – 7 issued by the Institute of Chartered Accountants of India (ICAI). Facts of the case  The taxpayer was a company engaged in the business of consulting engineers in the field of chemicals, petrochemicals, fertilisers, cement, etc.  The taxpayer was following a percentage completion method as prescribed under AS-7 issued by ICAI for the purpose of accounting of revenues and expenditure. The taxpayer charged foreseeable loss in respect of an incomplete contract in accordance with AS-7.  The Assessing Officer (AO) disallowed the provision made by the taxpayer in respect of foreseeable loss on the basis that the provision does not represent actual loss and the taxpayer was entitled for the actual liability and not for the future expected liability. The AO relied on the decision of Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd.2 to hold its contention.  The Commissioner of Income-tax (Appeals) validated the order of AO and held that the anticipated losses can not be allowed while computing the tax payable.
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