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TMI Blog2011 (3) TMI 1808X X X X Extracts X X X X X X X X Extracts X X X X ..... without appreciating that the said liability for expenses was actually crystallized during the current assessment year and hence, were allowable. 2. Without prejudice to the above and on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not giving a direction that the above expenses should be allowed in the relevant assessment year." 2. The assessee is a company engaged in the business of import and trading of chemicals. The AO noticed that clause 22(b) of the Tax Audit Report furnished in form No.3CD and filed along with return of income it has been mentioned that a sum of ₹ 4,90,314/- was debited to P&L Account on account of prior period expenditure. Since the expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234,79,16,880 Expenses under various heads …. 242,10,97,248 Prof. or loss for the year --- (-) 7,31,80,368 Prior period transactions … 4,90,314 Profit/loss before taxation …. (-) 7,36,70,681 In Schedule 14, the prior period credits(expenses) were ₹ 12,82,846/- whereas prior period debits(income) were ₹ 17,73,160/- . Thus the prior period income was more to the extent of ₹ 4,90,314/-. It was this excess [prior period income ₹ 17,73,160 - prior period expenses ₹ 12,82,846] income of ₹ 4,90,314/- which was debited by appellant in the P&L account. It was an undisputed fact that all the items of expenses / income (shown above) were pertaining to previous assessment year and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to Schedule 14 of prior period items of the P&L Account and submitted that the expenses were more and the income was less and difference was claimed as expenses in the P&L Account and, therefore, the conclusions of the CIT(A) that income was more and expenses was less was erroneous. The ld. D.R relied on the order of the CIT(A). 6. We have considered the rival submissions. Schedule 14 to the P&L Account regarding prior period transactions is as follows: Schedule 14: Prior period transactions: Credits: Purchase …. 9,42,621 Commission & Brokerage …. 3,40,225 12,82,846 Debits: Sales …. 12,53,966 Storage charges …. 1,75,339 Interest income …. 1,35,692 Survey fee …. 76,891 Transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession". The capital expenditure reported in Annexure -8 of Form 3CD has been considered by the assessee company for claiming depreciation u/s. 32 of the IT Act. Therefore, the provisions of section 40(a)(ia) are applicable in respect of the said sum of depreciation claimed on the capital expenditure in respect of which the provisions of Chapter XVII-B have not been complied with. Considering the above, the depreciation of ₹ 1,07,541/- claimed on the capital expenditure reported in Annexure -8 was disallowed u/s. 40(a)(ia) of the Act and the same was added to the total income of the assessee company. Fixed Asset Amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attracted. The deduction claimed should be of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services. The claim for depreciation made by the assessee does not fall within any of the categories mentioned in the aforesaid provision. Therefore, it is not possible to make the impugned disallowance by resorting to the provisions of section 40(ia) of the Act. The learned D.R. however submitted that provisions of Sec.40(a)(i) of the Act were held to apply even to capital expenditure by the ITAT Mumbai in Spaco Carburetors (I) Ltd. Vs. ACIT 2005 (3) SOT 798 (Mum). We find that the said decision was rendered in the context of deduction of capital expenditure while computing income, claimed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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