2021 (6) TMI 756 - AT - Income Tax

Addition u/s.35D by treating the amount as pre-operative expenses - HELD THAT - As decide in own case 2019 (11) TMI 1633 - ITAT PUNE DR was required to submit a report on the granting or otherwise of deduction of such expenses in the earlier years. A copy of the report from the AO has been placed on record by the ld. DR. As per this report, a deduction was claimed for the first time in the return for the A.Y. 2009-10 which was not granted, but the ld. CIT(A) accepted the assessee s claim and the Revenue s appeal has been dismissed, albeit on low tax effect. No assessment was taken up u/s. 143(3) of the Act for the A.Y. 2010-11, meaning thereby that the deduction got allowed. From the above report of the AO, it is ostensible that the assessee has been consistently allowed deduction of ₹ 9.00 lakh in the assessments for the A.Ys 2009-10 and 2010-11. The assessment year 2011-12, under consideration, is a consecutive 3rd year in line. The deduction for similar amounts has been allowed in the immediately two preceding assessment years, following the principle of consistency, hold the assessee to be entitled to deduction in the year under consideration as well. The impugned order is overturned on this score and the deduction is granted. - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition of ?9,00,000 disallowing claim u/s.35D of the Act.

Analysis:
The appeal pertains to the confirmation of the addition of ?9,00,000 by the Ld. CIT(Appeals) disallowing the claim under section 35D of the Income Tax Act, 1961. The assessee, engaged in manufacturing automobiles & auto parts, filed its return of income declaring total income at Rs. Nil for the assessment year 2012-13. During scrutiny, the Assessing Officer disallowed ?5,82,110 deposited as employee's PF contribution beyond specified dates under section 36(1)(va) r.w.s.2(24)(x) of the Act. Additionally, the Assessing Officer disallowed ?9,00,000 claimed as preliminary expenses under section 35D, as it did not qualify under the provisions of the Act.

The Ld. Counsel for the assessee argued that the matter is covered by a decision of the Pune Bench of the Tribunal in the assessee's own case for the assessment year 2011-12. The Tribunal in the earlier case held that since the deduction of ?9,00,000 was consistently allowed in the assessments for the AYs 2009-10 and 2010-11, the assessee is entitled to the deduction for the consecutive 3rd year in line, i.e., the assessment year 2011-12. Following the principle of consistency, the Tribunal allowed the deduction of ?9,00,000 for the year under consideration as well.

The Tribunal, in line with its earlier decision, allowed the grounds raised by the assessee and overturned the impugned order, granting the deduction of ?9,00,000. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 21st June 2021.