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2013 (6) TMI 427 - AT - Income TaxPrior period expenses disallowed - Held that - CIT(A) has examined the claim of the assessee in respect of each of the item of expenditure included under the head Prior period expenditure and accordingly taken a decision that it cannot be said that expenses got crystallized during the year in which the accounting error was corrected. No material was placed on record by assessee to contradict the clear findings given by CIT(A) - Against assessee. Assessment of Undistributed Vethapalisa amount - Held that - The accounting treatment adopted by the assessee, the status of the settlement of accounts of the concerned subscriber, the terms and conditions regarding payment of Vethapalisa amount to the subscriber, particularly when there is a default in payment of instalment/instalments, any other terms and conditions relating to payment of Vethapalisa etc., were not brought on record. The taxability of Vethapalisa amount can be determined only upon examination of the various factors hence unable to agree with the view taken by CIT(A) that the annual accretion to Vethapalisa account would automatically become income of the assessee - restore the issue to the file of AO with the direction to examine the issue afresh. Disallowance made u/s 40(a)(ia) - delayed remittance of the tax deducted at source - Held that - Though the CIT(A) did not adjudicate this issue, yet this issue requires fresh examination at the end of the AO in view of the subsequent amendments brought in sec. 40(a)(ia). Levy of interest u/s 234A - as per assessee return of income was filled on 28.11.2006 & as per AO it is 31.12.2006 - Held that - Since the fact relating to the date of filing of return requires verification at the end of the AO,this issue is also remitted to file of AO for reconsideration.
Issues Involved:
1. Disallowance of claim of payment of "Service charges to the Kerala State Government" 2. Disallowance of prior period expenses 3. Assessment of part of "undistributed Vethapalisa" as income 4. Disallowance made under Section 40(a)(ia) of the Act 5. Levy of interest under Section 234A of the Act Detailed Analysis: 1. Disallowance of Claim of Payment of "Service Charges to the Kerala State Government": The revenue contested the deletion of the disallowance of Rs. 9,44,29,834/- paid by the assessee to the Kerala State Government. The assessee claimed this payment as a business expenditure under Section 37(1) of the Income Tax Act. The assessing officer (AO) disallowed this claim, viewing it as an application of income rather than an expenditure. However, the appellate authority (Ld CIT(A)) deleted the disallowance, following a precedent set in the assessee's own case for the assessment years 2001-02 to 2003-04, and supported by a decision from the Hon'ble Kerala High Court in CIT Vs. M/s Travancore Titanium Products Ltd. The Tribunal upheld the decision of Ld CIT(A), finding no reason to interfere. 2. Disallowance of Prior Period Expenses: The AO disallowed Rs. 1,20,96,967/- claimed by the assessee as prior period expenses, following the Supreme Court decision in Madras Industrial Investment Corporation Vs. CIT. The Ld CIT(A) examined the details provided by the assessee and allowed expenses that crystallized during the year under consideration while disallowing those due to accounting errors from previous years. The Tribunal confirmed the Ld CIT(A)'s decision, agreeing that the expenses disallowed were due to errors in earlier years and not crystallized in the current year. 3. Assessment of Part of "Undistributed Vethapalisa" as Income: The AO assessed undistributed Vethapalisa from terminated chitties as income, relying on various judicial precedents. The Ld CIT(A) affirmed this view but reduced the assessed amount from Rs. 10 crores to Rs. 4.29 crores for the assessment year 2005-06, based on annual accretion. The Tribunal found that the Vethapalisa constitutes a liability until settled with the subscriber and directed the AO to re-examine the issue, considering the terms of the chit scheme and the accounting treatment followed by the assessee. 4. Disallowance Made Under Section 40(a)(ia) of the Act: The assessee contested the disallowance under Section 40(a)(ia) for delayed remittance of tax deducted at source. Although the Ld CIT(A) did not adjudicate this issue, the Tribunal remanded it to the AO for fresh examination in light of subsequent amendments to Section 40(a)(ia). 5. Levy of Interest Under Section 234A of the Act: For the assessment year 2006-07, the assessee disputed the levy of interest under Section 234A, claiming the return was filed on 28.11.2006, while the AO recorded it as 31.12.2006. The Tribunal remanded this issue to the AO for verification of the filing date and appropriate decision. Conclusion: - The revenue's appeal for the assessment year 2005-06 was dismissed. - The assessee's appeals for the assessment years 2005-06 and 2006-07 were partly allowed for statistical purposes. - The assessee's appeal for the assessment year 2007-08 was allowed for statistical purposes. Pronounced on 07-06-2013.
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