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TMI Blog2019 (10) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and Kinetic Engineering Ltd. that the assessee depicted the amount of ₹ 124.53 lakh as expenditure and claimed deduction during the year. Under the mercantile system of account, a deduction is allowed when contractual liability to pay finally arises. Hon ble Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED) vs. CIT [ 2011 (6) TMI 14 - DELHI HIGH COURT] has held that a contractual liability is incurred when enforceable liability of the assessee to pay is determined. Unless there is a contrary separate provision, the amount becomes deductible at that time, even if it pertains to earlier years. When we view the facts of the instant case, it clearly emerges that the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by the assessee is excessive or unreasonable. CIT(A) has simply treated 50% of the same as excessive without showing as to how the same was so. In the given circumstances, we are satisfied that no addition is called for. - ITA No.2184/PUN/2013, ITA No.1131/PUN/2014 - - - Dated:- 16-9-2019 - Shri R.S. Syal, Vice President And Shri S.S. Viswanethra Ravi, Judicial Member For the Appellant(s) : Shri M.K. Kulkarni For the Respondent : Shri Sudhendu Das ORDER PER R.S.SYAL, VP : These two appeals by the connected but different assessees relate to the assessment year 2008-09. Since a common issue has been raised in bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Kinetic Engineering Ltd. were slashed down, which reduced the bill amount to ₹ 124.53 lakh for the A.Y. 2007-08 and ₹ 87.06 lakh for the A.Y. 2008-09. Credit note of ₹ 42.47 lakh, being, the difference in two amounts for both the years was received. The assessee recorded payment of ₹ 211.59 lakh (₹ 124.53 lakh plus ₹ 87.06 lakh) in its books of account for the year under consideration. The Assessing Officer made addition of ₹ 42.47 lakh, which came to be deleted by the ld. CIT(A). However, the ld. first appellate authority held that the amount of ₹ 124.53 lakh pertaining to the assessment year 2007-08 was a Prior period expenditure and hence not deductible in the year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amount of ₹ 124.53 lakh as expenditure and claimed deduction during the year. 7. Under the mercantile system of account, a deduction is allowed when contractual liability to pay finally arises. The Hon ble Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED) vs. CIT (2011) 338 ITR 36 (Del) has held that a contractual liability is incurred when enforceable liability of the assessee to pay is determined. Unless there is a contrary separate provision, the amount becomes deductible at that time, even if it pertains to earlier years. When we view the facts of the instant case, it clearly emerges that the assessee did not accept the liability of ₹ 144.99 lakh on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record, it is observed that the genuineness of the expenditure has been established because the ld. CIT(A) accepted the same and the Revenue is not in appeal on this issue. Now comes the question of disallowance u/s.40A(2). In this regard, it is seen that the assessee furnished the details and rates at which job charges were paid by it to the sister concerns. Section 40A(2)(a) states that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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