9911796707
TMI Blog2015 (7) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account; if the prior period expenditure is disallowed on the ground that it does not pertain to this year, the assessing officer cannot blow hot and cold and accept the prior period income as pertaining to this year. In short his contention is that even prior period income should be excluded if it is not crystalised in this year. Similar issue was considered by us in the appeal for the assessment year 2007-08. For the reasons given therein, we uphold the order of the CIT(A) with regard to prior period expenses but direct the assessing officer to consider the plea of the assessee with regard to the prior period income. - Decided partly in favour of assessee. - ITA Nos.102&103/Vizag/2012,ITA Nos.107&108/Vizag/2012 - - - Dated:- 28-7-2015 - Shri D. Manmohan and Shri B.R. Baskaran, JJ. For the Petitioner : Shri G.V.N. Hari, Advocate For the Respondent : Shri G. Gurusamy, CIT(DR) ORDER Per D. Manmohan, Vice President:- These cross appeals are directed against the orders passed by CIT(A), Visakhapatnam and they pertain to the assessment years 2007-08 and 2008- 09. Issues involved in both the years being common, we proceed to dispose of these appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India had approved a capital restructuring package, which envisages write off of Government of India loans and interest thereon. As per the Government of India letter, the HSL had brought the effect of capital restructuring in its books in the year 2006-07 as a prior period adjustment. Similar explanation is given with regard to the interest of GOI loans, government guarantee fees, etc. It may be noticed that the assessee having not specifically mentioned that the prior period income was also impliedly offered to tax, by virtue of the method followed by it, the assessing officer had no occasion to consider the taxability of prior period income. He merely observed that there is no provision in the Act for claiming prior period expenditure in the subsequent years and accordingly he disallowed the claim of the assessee. Ld. CIT(A) accepted the view of the assessing officer and in this regard observed that only net prior period expenditure was offered to tax because the total expenditure minus the prior period income offered to tax was shown as expenditure. He also observed that waiver of GOI loans, interest and guarantee fees are items related to Government restructuring plan. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 crores was already disallowed the addition was restricted to ₹ 8.21 lakhs. Similarly in the case of other expenditure the Ld. CIT(A) observed that the expenditure has not been crystalised during the year under consideration. 4. Aggrieved, assessee contended before us and both the income and expenditure of the prior period was taken into consideration in this year and when the expenditure has to be disallowed the income also should not have been taken into consideration since it pertains to the prior year. In this regard, he relied upon the order of the ITAT Visakhapatnam in the assessee s own case for the assessment year 2002-03, where the bench observed as under: The assessing officer has accepted the prior period income in this year but disallowed the prior period expenditure. This action of the assessing officer is not proper as he has to take into the account the status as a whole and not to make a pick and choose . 5. We have also heard the Ld. D.R. and carefully perused the record. The facts clearly show that the expenditure claimed as deduction do not pertain to this year; either it was not crystalised or it pertains to the earlier years. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by various agencies are not certified by various departments in the assessee company, due to delay in verification of various work orders, quality check, etc. Assessee s contention is that it got crystalised only during the previous year relevant to the assessment year under consideration. In this regard, the Ld. CIT(A) observed as under:- It is but natural that some of the approvals/finalisation etc get delayed and spill over to the next year. The said expenditure, thus, can be said to be crystalised during the year under consideration. The decisions cited by the assessee are applicable to these expenses as it is beyond the control of the assessee to claim these expenditures in the year of billing. Assessee also admitted prior period income of ₹ 1.21 crores on account of ship repair. Considering all these aspects it is held that the said expenditure having been crystalised during the year under consideration is an allowable expenditure in the assessment year 2007-08. Assessing Officer is thus directed to delete the addition made of ₹ 216.66 lakhs. 8. Ld. D.R. did not bring any material to contradict the findings of the Ld. CIT(A). We therefore do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for the Asst. year 2002-03. However, an appeal has been filed u/s 260A of the Act against the aforesaid decision of the jurisdictional ITAT and the same is pending before the Hon ble High Court. 11. Both the parties admitted that the facts in both the issues are identical to the assessment year 2007-08. For the reasons given therein we hold that demurrage charges cannot be considered as in the nature of penalty and hence the same should be allowed as deduction u/s 37(1) of the Act. So far as the plea of the revenue that a sum of ₹ 3.76 crores are relatable to prior period expenses, the Ld. CIT(A) observed that the expenditure is identical to the expenditure claimed in the assessee s own case for the assessment year 2007-08. In other words, the expenditure got crystalised in this year. For the reasons given by us in para-7 above, we uphold the order of the Ld. CIT(A) and reject ground no.3 of the revenue. In the result, the appeal filed by the revenue is dismissed. 12. In summary, the appeals filed by the assessee for both the years are treated as partly allowed, whereas appeals filed by the revenue for both the years are dismissed. Pronounced in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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