9911796707
TMI Blog2018 (6) TMI 1502X X X X Extracts X X X X X X X X Extracts X X X X ..... ponents including maintenance services and computer educational services. It filed its return of income for AY 2011-12 on 29/09/2011 admitting 'NIL' income. AO completed the assessment u/s 143(3) of the Act on 27/03/2014 on a total income of Rs. 1,55,21,008/- by making disallowance of Rs. 1,23,01,088/- on account of commission to agents and Rs. 32,20,000/-, was on account of prior period expenses. 3. On appeal, the CIT(A) allowed the commission to agents of Rs. 1,23,01,088/- and confirmed the disallowance of Rs. 32,20,000/- on account of prior period expenses. 4. During the year under consideration, the assessee had debited the profit & loss account by an amount of Rs. 52.56 lakhs representing prior period items. Out of the said expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance amounting to Rs. 32,20,000 categorised as prior period expenditure by the appellant in its accounts, on the ground that the assessee failed to substantiate its claim. 4. The learned Commissioner of Income-tax (Appeals) erred in not appreciating that the expenditure accounted for in the current year is actually incurred during the previous year relevant to the A.Y.2011-12. 5. The learned Commissioner of Income-tax ( Appeals) erred in upholding the disallowance being prior period expenses on the ground that the appellant had failed to demonstrate the nature of the expenditure and the year of its crystallisation despite such facts having been presented to the learned AO. 6. For the above grounds and such other grounds that m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertained to the accounting periods prior to the financial year in question." 8. On the other hand, ld. DR relied on the orders of revenue authorities and submitted that case law relied by the ld. AR is distinguishable as the issue involved in the above case is statutory payments whereas in the case on hand, it is regular expenditure of the business. Since assessee is following mercantile accounting system, it should have claimed it in the year of actual expenditure. He relied on the decision in the case of Madras Fertilizers Ltd. Vs. CIT, 209 ITR 174 (Mad.) 9. Considered the rival submissions and perused the material on record. The issue before us is whether the prior period expenses of Rs. 32.20 towards material consumed and administrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m whether in one year or the other. 4. The point raised for determination turns on the words used in section 10, sub-section (2), clause (x), which allows a deduction in respect of bonus and section 10(5). Now, in section 10(2)(x), what is allowable as a deduction is "any sum paid to an employee as bonus". By itself this contemplates actual payment; but section 10(5) defines the word "paid" which appears in sub-section (2) as meaning "actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section". Therefore, an actual payment is not necessary for the purpose of this deduction; it is sufficient if the liability to bonus is incurred according to the method of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under this head that the assessee claimed Rs. 1,80,000 as the return in this case was made after the conciliation board had fixed the amount of bonus. Obviously, this amount of Rs. 1,80,000 is an allowable expense. Obviously, again, it has not been charged in arriving at the figure of profits according to the profit and loss account. Therefore, it was an amount that could legitimately be shown as a deduction under this part of the statutory form of return, and the assessee were, in our opinion, entitled to have this deduction or allowance. There is no dispute, and there can be none, as to the reasonableness of the quantum which might have been material if there had been no conciliation and an award in regard to the bonus. The only dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices income. As the business of the assessee is going concern and the tax rates are rationalized and same in the respective AY under consideration, there is no loss to the revenue to allow the prior period expenditure. In large organisation, there are chances of pending approval or some issue with administration, the expenses may be claimed in the subsequent year. As per disclosure norms, assessee is to disclose the same as prior period expenses but there are regular business expenditure and as long as these expenditures are matched with the income, then, expenses are allowable expenditure. In the given case, assessee has offered both income as well as expenses. Therefore, AO is not correct in disallowing expenses selectively. 9.2 Ld. DR r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
