2014 (7) TMI 1338 - ITAT JAIPUR

Disallowance of prior period expenses - difference between the Members - Third member nominated u/s. 255(4) - HELD THAT:- The deductibility of expenses needs to be tested on the touchstone of the principle laid down by the Tribunal in its order for the A.Y. 1995-96 in respect of each item of expenditure claimed under the head 'prior period expenses'. As the Assessing Officer has failed to examine the details of expenses, in my considered opinion, the view taken by the learned J.M. needs to be upheld with a direction to the AO to consider the deductibility of expenses as per the view taken by the Tribunal for A.Y. 1995-96. Therefore, answer the question in negative by holding that the learned CIT(A) was not justified in sustaining the disallowance of prior period expenses. As such agree with the view taken by the learned J.M. in restoring the matter to the file of the Assessing Officer instead of the ld. AM upholding the disallowance.

Disallowance of extra ordinary items - HELD THAT:- As both the learned Members have agreed on the point than there can be no bar on allowing deduction of expenses in respect of a closed business against the income of other businesses, when it is a case of composite business Both the learned Members have also agreed that it was a case of composite business and hence the deductibility of expenses could not be marred by such considerations. It is observed that the Assessing Officer has based the disallowance of expenditure simply on the ground that it was in respect of written off amounts of a closed business and hence not deductible. In view of the above decision of the tribunal, the foundation for the AO's view, does not stand. The AO did not examine the details of such expenses as to whether these were capital or revenue.

Since the stand taken by the Assessing Officer has been rejected by both the learned Members, in my considered opinion, the proper course should be to restore the matter to the file of the Assessing Officer for considering the deductibility or otherwise of such amounts as per law. It is simple and plain that the Appellate Authorities are required to adjudicate upon the orders of the authorities having original jurisdiction which appreciate the material and then decide about the point. Adverting to the facts of the instant case, I find that since the Assessing Officer did not have any occasion to apply his mind from the perspective as discussed above, it would be more appropriate to send the matter back to the file of the Assessing Officer for considering deductibility of expenses or otherwise as per law, instead of taking up the details of such expenses and rendering decision at the Tribunal's end. therefore, agree with the view taken by the learned J.M. on this point and hold that the learned CIT(A) was not justified in confirming the disallowance on account of disallowance of extraordinary items.

Disallowance on account of mine development expenses - HELD THAT:- On perusal of the Tribunal order for A.Y. 1996-97, it is seen that the Tribunal did not delete the disallowance as made by the Assessing Officer but restored the matter to the file of the Assessing Officer for taking a fresh decision in conformity with the directions given by it. As the learned A.M. has also restored the matter to the file of learned CIT(A)/Assessing Officer, I find myself in agreement with the view taken by the learned A.M. in restoring the matter to the authorities below. The obvious reason is that for the immediately preceding two years, the Tribunal has restored the matter and the ld. AM has followed such view. There can be no question of deviating from the opinion expressed by the Tribunal on this issue in earlier years. As the orders of the tribunal for earlier two years have not been modified by the Hon'ble High Court, would prefer to go with the wisdom of the Division bench for the earlier two years.

In the final analysis, we agree with the view taken by the learned A.M. and hold that the learned CIT(A) was not justified in deleting the disallowance on account of mine development expenses.

Addition of welfare expenses u/s. 40A(9) - HELD THAT:- Tribunal for the immediately two preceding assessment years has restored the matter with the necessary direction. It is also seen that such disallowance came up for consideration by the Hon'ble High Court in assessee's own case for A.Y. 1994-95. The Hon'ble High Court also remitted the matter for fresh consideration. In view of the fact, that the Hon'ble High Court for the A.Y. 1994-95 and the Tribunal for the A.Ys. 1996-97 and 1997-98 have sent the matter back the learned A.M. was justified in following the precedents by remitting the matter for fresh decision to be decided in conformity with the view expressed by the Tribunal for immediately two preceding assessment years.