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TMI Blog2014 (8) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in respect of food grains which were sold and unsold and also the interest proportionate to the food grains sold which were of the previous year. There was no double claim. The authorities proceeded with an assumption that there is a double benefit claim. They also proceeded on the assumption that once mercantile system is adopted, the assessee looses the benefit of claiming deductions of interest which should have been claimed in the previous year. The denial of the appellant’s claim by the authorities is not justifiable. The assessee is entitled to the benefit of claiming the said deductions relatable to the previous year i.e., for the assessment year 1985-86 - Decided in favour of the assessee - ITRC NO. 2/2008 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash and mercantile system of accounting. For the assessment year 1985-86, the assessee claimed total interest expenditure of ₹ 5,15,65,580/-, out of which ₹ 1,07,12,452/- was stated to be of the nature of deferred interest of the last year. The Assessing Authority held that there is no concept of allowing the deferred revenue expenditure under the Income Tax Act. Accordingly, he disallowed the claim of the assessee in respect of the claim of ₹ 1,07,12,452/-. Aggrieved by the same, assessee preferred an appeal. The Commissioner of Income Tax (Appeals) found that immediate to the preceding year the assessee was following a mixed system of accounting for the liabilities incurred towards interest during the year. A part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order, the assessee preferred an appeal before the Tribunal. The Tribunal on re-appreciation of the entire material on record held that the interest amount of ₹ 1,07,12,452/- which pertains to the assessment year 1984-85, was not actually claimed as expenses in that year. Had it been so claimed, the entire amount should have been again added to the cost of the food grains as an element of cost in the matter of procurement of the food grains. The closing stock would also have been required to be increased by the corresponding amount and the net revenue results for the assessment year 1984-85 would have therefore been nil, even if the entire amount had been claimed in that year. In such a case, when the entire stock for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and no case for interference is made out. 5. From the aforesaid facts, it is clear that the assessee in order to purchase food grains was getting government aid. However, they were claiming deductions of the interest proportionate to the food grains sold and in respect of the interest relatable to the food grains unsold was carried forward to next year and after the sale of food grains, deductions was claimed. This is the practice which was followed by the assessee. However, from 1985-86, they switched on to mercantile system of accounting. In that year, they claimed deductions of interest in respect of food grains which were sold and unsold and also the interest proportionate to the food grains sold which were of the previous year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh basis in the past after the end of the accounting period and the same modality was adopted in the year under consideration. Therefore, to state that this was payment relatable to earlier year is not absolutely correct. 8. In view of the aforesaid judgments, the denial of the appellant s claim by the authorities is not justifiable. The assessee is entitled to the benefit of claiming the said deductions relatable to the previous year i.e., for the assessment year 1985-86. Accordingly, (a) the questions of law are answered in favour of the assessee and against the revenue. (b) The impugned orders passed by all the three authorities are hereby set aside. (c) Directions are issued to the Assessing Authority to give the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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