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TMI Blog2013 (4) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... o be adjusted in the books of account of that previous year. There is no finding as to why the liability for the expenses accrued to the appellant by any of the authorities. It is the case of the appellant that liability for expenses for which claim was made in the profit and loss account of the year under consideration had crystallized only during the year and as such, no claim towards the same was made in the account of the earlier years. There is also no finding as to why the claim of the appellant for prior years for the reasons aforesaid was not allowable. Under these circumstances, the matter remitted back to the Tribunal for recording a finding of fact as to whether the expenditure which has been claimed by the assessee in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses incurred in previous year are not to be allowed under assessment year as the assessee has adopted mercantile system of accounting. The said order was assailed by the assessee by filing an appeal which was rejected. Thereafter a second appeal was filed which too was rejected, including the additional ground with regard to confirmation of dis-allowance of prior year expenses to the tune of Rs.35,11,687/- as the assessee has been following mercantile system of accounting. Being aggrieved thereof the instant appeal has been preferred by the Corporation under Section 260-A of the Act. During the course of hearing it has been brought to the notice of the Court that the amount which has been claimed in the account books while following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relate, the mercantile system does not call for adjustment in the books of account on estimate basis. It is actually known income or expenses, the right to receive or the liability to pay which has come to be crystallized, which is to be taken into account under the mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as a contingency item but not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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