2021 (6) TMI 444 - AT - Income Tax

Disallowance on account of society commission by treating the same as prior period expenditure - commission was paid under the statutory provision in view of the UP Sugarcane (Regulation of Supply and Purchase) Act, which was crystalized under order dated 19.06.2012 passed by Collector District Magistrate, Bijnor, Uttar Pradesh - HELD THAT - Keeping in view all the facts and circumstances mentioned above and also by relying upon the decision relied by the assessee we are of the view that the claim of the assessee is liable to be allowable and accordingly we set aside the finding of the CIT(A) on these issues and allowed the claim of the assessee.

Summary

Issues: Disallowance of society commission as prior period expenditure.

The appellate tribunal ITAT Mumbai heard an appeal against the order passed by the Commissioner of Income Tax (Appeals) relevant to the assessment year 2013-14. The appellant contested the disallowance of society commission amounting to ?4,25,53,711 as prior period expenditure. The appellant argued that this commission was a statutory liability under the UP Sugarcane (Regulation of Supply and Purchase) Act, 1953, and should be allowed as per Section 43B(a) of the Income Tax Act on a payment basis. The appellant also cited relevant case laws to support their claim. The tribunal considered the statutory nature of the commission paid to the Cane-growers' Co-operative Society and the legal obligations under the UP Sugarcane Act. Referring to precedents, the tribunal concluded that the liability for prior period expenses, when crystallized and paid in the subsequent year, should be allowed. Therefore, the tribunal set aside the CIT(A)'s decision and allowed the claim of the assessee.

The primary issue revolved around the disallowance of society commission paid to the cane growers Cooperative society as prior period expenditure. The appellant contended that the commission was a statutory liability under the UP Sugarcane Act and should be allowed as per relevant provisions of the Income Tax Act. The tribunal considered the legal obligations arising from the order passed by the Collector & District Magistrate, Bijnor, Uttar Pradesh, and the statutory nature of the commission payment. Citing case laws, the tribunal emphasized the allowance of liabilities for prior period expenses when paid in the subsequent year. Relying on the legal framework and precedents, the tribunal held in favor of the appellant and allowed the claim for society commission disallowance.