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2020 (12) TMI 1150 - AT - Income TaxDisallowance u/s 40(a)(i)/(ia) - assessee has claimed the amount of provision for expenses so reversed as deduction - A.R. submitted that the assessee had voluntarily disallowed a sum in AY 2006-07 u/s. 40(a)(i)/(ia) of the Act for non-deduction of tax at source - HELD THAT - As per the provisions of the Act, if the assessee has got any benefit from an amount, which was claimed as deduction in an earlier year, then such benefit is taxable. When the assessee has not claimed the amount as deduction at all in an earlier year, any benefit obtained from it cannot be subjected to tax under the Act. In the instant case, the assessee has disallowed the provision amount of ₹ 9.71 crores while computing total income for AY 2006-07, meaning thereby, the assessee has not claimed the amount of ₹ 9.71 crores as deduction in AY 2006-07. The assessee has reversed the entire amount of ₹ 9.71 crores in the year relevant to AY 2007-08 by crediting the same to expenditure account/P L a/c. Out of the amount so reversed, the assessee has incurred expenses to the tune of ₹ 4.17 crores. The assessee has not incurred expenses for the balance amount of ₹ 5.54 crores and hence it has increased the profit/total income of the assessee. Since it was not claimed as deduction in AY 2006-07, the same cannot be subjected to tax during the year under consideration. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the disallowance - Decided in favour of assessee.
Issues:
Challenge to deletion of addition under section 40(a)(i) of the Income-tax Act, 1961 for assessment year 2007-08. Analysis: 1. The revenue appealed against the deletion of an addition of ?5,53,30,473 made by the AO under section 40(a)(i) of the Income-tax Act, 1961 for the assessment year 2007-08. 2. The original assessment was revised by Ld CIT (LTU) under section 263 of the Act, leading to a re-assessment by the AO. The dispute arose from the addition of ?5,53,30,473 made by the AO, which was challenged by the revenue. 3. The Ld CIT (LTU) found discrepancies in the assessee's claims and ordered a re-examination by the AO. The AO disallowed a portion of the claimed amount due to lack of evidence, resulting in the addition to the total income. 4. In the appellate proceedings, the assessee explained that the reversed provisions from the previous year were not taxable in the current year. Detailed explanations were provided, and the Ld CIT(A) accepted the arguments, deleting the disallowance. 5. The Ld D.R. supported the AO's decision, emphasizing the lack of evidence provided by the assessee for the disallowed amount. 6. The Ld A.R. clarified that the disputed amount was part of provisions made in the previous year, which were voluntarily disallowed by the assessee. The provisions were reversed in the current year, and the amount was claimed as deduction as per the Act. 7. The Ld A.R. further explained the accounting treatment of provisions and reversals, highlighting that the unclaimed amount from the previous year should not be taxed again in the current year to avoid double taxation. 8. Upon review, it was established that the disallowed amount was part of provisions voluntarily disallowed in the previous year, and since it was not claimed as a deduction, it should not be taxed in the current year. 9. The Tribunal concluded that since the unclaimed amount from the previous year was reversed and not claimed as a deduction, it should not be subjected to tax in the current year, affirming the Ld CIT(A)'s decision to delete the disallowance. 10. Consequently, the appeal by the revenue was dismissed, upholding the decision to delete the addition under section 40(a)(i) for the assessment year 2007-08.
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