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2013 (10) TMI 697 - AT - Income TaxAllowability of expenses shown in P&L Account only - Assessee had claimed 50% of reimbursement expenses in the P&L Account and 50% amounting to Rs.34,59,78,545/- were claimed in the computation of income - The disallowance was calculated after considering the fact that assessee had not claimed entire expenditure in the P&L Account As per Assessing Officer, allowable expenses @ 3% work out to Rs.15,25,81,675/- as against Rs.79.98,76,204/- claimed by the assessee. Thus balance expenses to the tune of Rs.64,10,96,533/- are disallowed. However, since total amount debited to P&L Account is Rs.44,76,99,661/- (Rs.34,59,78,545/- Rs.10,17,81,116/-, addition in computation of income will be made at Rs.29,51,17,988/- (Rs.44, 76,99,661/- - Rs.15,25,81,875/- - Held that - Since the Assessing Officer started his computation in the assessment order from the profit as per P&L Account, therefore, the claim of the assessee made in the computation of income amounting to Rs.34,59,78,545/- remained unadjusted. The Assessing Officer in the original assessment order did not give credit for claim of this amount as he started for making computation of income by taking first figure as per P&L Account. Had assessee claimed full claim in P&L Account, the assessed income of the assessee would have been lower by the same amount Decided in favor of Assessee.
Issues:
- Disallowance of expenses claimed by the assessee in the computation of income. - Assessment of taxable income based on P&L Account figures. - Rectification application under section 154 of the Income Tax Act. - Directions given by the CIT(A) to the Assessing Officer for appeal effect order modification. Issue 1: Disallowance of expenses claimed by the assessee in the computation of income: The case involved an appeal by the revenue against the order of the CIT(A) regarding disallowance of expenses claimed by the assessee in the computation of income. The assessee had claimed service charges and reimbursement of expenses totaling Rs.79,36,78,206/-. The Assessing Officer disallowed a portion of these expenses, leading to a dispute. The CIT(A) allowed relief of Rs.29,51,17,988/-, but the Assessing Officer did not consider the full claim of Rs.34,59,78,545/- made by the assessee in the computation of income. The ITAT upheld the CIT(A)'s decision, stating that the Assessing Officer did not give credit for the full claim amount, leading to the correct allowance of the appeal by the CIT(A). Issue 2: Assessment of taxable income based on P&L Account figures: The Assessing Officer calculated the disallowance based on the figures in the P&L Account, starting the computation from the profit as per the P&L Account. This approach led to the exclusion of the amount claimed by the assessee in the computation of income. The ITAT noted that if the assessee had claimed the full amount in the P&L Account, the assessed income would have been lower. The CIT(A) correctly analyzed the facts and allowed the appeal, finding no error in the order. Issue 3: Rectification application under section 154 of the Income Tax Act: The assessee filed a rectification application under section 154 seeking clarification on the relief granted by the CIT(A). The CIT(A) disposed of the application, stating that the relief had already been granted, and there was no mistake in the order. The Assessing Officer rejected a subsequent rectification application filed by the assessee, leading to further appeals and directions given by the CIT(A) to modify the appeal effect order. Issue 4: Directions given by the CIT(A) to the Assessing Officer for appeal effect order modification: The ITAT set aside the matter to the file of the Assessing Officer with directions to pass a speaking order. Subsequently, the CIT(A) directed the Assessing Officer to allow the deduction of Rs.34,59,78,545/-. The revenue filed an appeal against this order, which was ultimately dismissed by the ITAT, upholding the CIT(A)'s decision. In conclusion, the ITAT upheld the decision of the CIT(A) in allowing the appeal filed by the assessee regarding the disallowance of expenses claimed in the computation of income. The assessment based on the P&L Account figures was found to be incorrect, and the directions given by the CIT(A) for appeal effect order modification were deemed appropriate. The ITAT dismissed the appeal filed by the revenue, affirming the decision of the CIT(A) in favor of the assessee.
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