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TMI Blog2010 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure in assessment year 2003-04. Held that - if the assessee had shown the prior period income and the Assessing officer had not excluded it while working out the current year's taxable income then there was no reason on part of the Assessing Officer to disallow only one part of the prior period adjustment. The addition made by Assessing Officer could not be sustained. - 288 of 2010 - - - Dated:- 8-9-2010 - DIPAK MISRA C. J. and MANMOHAN J. Ms. Prem Lata Bansal for the appellant. Ms. Shashi M. Kapila with Siddharth Kapil, Pranav Bhaskar and Pranesh Sharma for the respondent. JUDGMENT The judgment of the court was delivered by 1. Manmohan J.-The present appeal by the Income-tax Department has been filed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in the earlier assessment year. According to the Income-tax Appellate Tribunal, the liability of the assessee under the agreement had arisen and accrued in August 2002, when the agreement was executed. It was under the said agreement that the liability to pay for the period January 2002 to March 2002 arose. Thus, the assessee could only have claimed the liability as expenditure in assessment year 2003-04. 5. Ms. Prem Lata Bansal, learned counsel for the Revenue submitted that the Income-tax Appellate Tribunal had erred in law in deleting the addition of Rs. 1,34,34,500 made by the Assessing Officer on account of prior period expenses by holding that the expenditure was incurred in the assessment year under consideration though it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in Nonsuch Tea Estate Ltd. v. CIT [1975] 98 ITR 189 (SC) ; Saurashtra Cement and Chemical Industries Ltd. v. CIT [1995] 213 ITR 523 (Guj) and Addl. CIT v. Farasol Ltd. [1987] 163 ITR 364 (Raj). 9. We have considered the submissions made by both the counsel. The reliance placed by the Revenue's counsel on Bharat Earth Movers v. CIT [2000] 245 ITR 428 (SC) is misconceived. In the said case, the assessee-company had two sets of employees. One set of employees was covered by the Employees' State Insurance Scheme and was generally known as "staff". The other set of employees not so covered was known generally as "officers". The company had floated beneficial schemes for its employees for encashment of leave. The officers were entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erturned and it was held that "the provision made by the assessee-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by the employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, was entitled to deduction out of the gross receipts of the accounting year during which the provision is made for the liability. The liability was not a contingent liability". In our opinion, the Supreme Court in the said case decided about the issue of contingent liability which is not the issue in the present case. Consequently, the judgment relied upon by the Revenue's counsel has no application to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval. On appeal to the Supreme Court, it was held that in view of section 326 of the Companies Act, 1956, which contained an absolute prohibition against the appointment or reappointment of a managing agent before approval of the Central Government was obtained, the assessee-company's liability to pay the remuneration of the managing agents arose only when the Government conveyed its approval by its letter dated September 2, 1957, and not prior to that date. The sum of Rs. 97,188 was therefore deductible in computing the profits for the period ending on June 30, 1958. 12. In the case of Saurashtra Cement and Chemical Industries Ltd. v. CIT [1995] 213 ITR 523 (Guj) it was held that merely because an expense related to a transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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