2021 (6) TMI 635 - HC - Income Tax

Disallowance of prior period expenses - HELD THAT - From communication dated 19.10.2010 addressed to the Assessing Officer it is evident that the claim was made with regard to prior period expenses before the Assessing Officer again. The assessee had filed the written submissions before the Commissioner of Income Tax (Appeals) in which claim with regard to prior period expenses was made. The Commissioner of Income Tax (Appeals) had passed the Assessing Officer to submit a remand report which was submitted by the Assessing Officer. On the basis of material available on record the Commissioner of Income Tax (Appeals) as well as the tribunal have allowed the claim with regard to the assessee s prior period expenses. The first substantial question of law is therefore answered against the revenue and in favour of the assessee.

Summary

Issues:
1. Applicability of section 115JB to the assessee
2. Acceptance of additional ground raised regarding section 115JB
3. Allowance of prior period expenses made by the assessee
4. Acceptance of expenses claimed by the assessee's employees and agencies

Analysis:

Issue 1: Applicability of section 115JB to the assessee
The appeal raised the question of whether section 115JB was applicable to the assessee for the Assessment Year 2006-07. The Tribunal held that the amendment to section 115JB was only effective from April 1, 2013, for the Assessment Year 2013-14. The Tribunal's decision was based on the interpretation of Explanation-3 to section 115JB. The Court upheld the Tribunal's decision, emphasizing the specific effective date of the amendment.

Issue 2: Acceptance of additional ground raised regarding section 115JB
The Tribunal accepted an additional ground raised by the assessee regarding the applicability of section 115JB, even though the assessee had not raised this issue before the Assessing Officer or the Appellate Commissioner. The Court noted that the assessee had admitted the applicability of section 115JB in its income tax return. The Court found that the Tribunal's decision to accept the additional ground was not in line with procedural requirements, as the assessee had not raised the issue at earlier stages.

Issue 3: Allowance of prior period expenses made by the assessee
The Tribunal allowed the prior period expenses of the assessee, including expenses towards coal transport agency and differential surface transport charges to coal suppliers. The revenue contended that the assessee had not submitted these claims before the Assessing Officer or the Commissioner of Income Tax (Appeals). However, the Court found that the assessee had indeed raised these claims at earlier stages, and the liability had crystallized during the relevant year. The Court upheld the Tribunal's decision to allow these expenses as deductions in computing the total income.

Issue 4: Acceptance of expenses claimed by the assessee's employees and agencies
The Tribunal directed the acceptance of the claim of expenses amounting to &8377; 82,43,612 made by the assessee's employees and other agencies. The revenue argued that the onus was on the assessee to prove the crystallization of liability, and the Tribunal's finding in this regard was perverse. However, the Court found that the Commissioner of Income Tax (Appeals) had obtained a remand report and audited the books of accounts of the assessee. The Court concluded that the tribunal's finding was not perverse, and the claim of expenses was rightly accepted.

In conclusion, the Court dismissed the appeal, finding no merit in the revenue's contentions, and upheld the decisions of the Tribunal regarding the various issues raised by the parties.