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TMI Blog2021 (7) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... SHRI KULDIP SINGH , JUDICIAL MEMBER For the Appellant : Prakash Dubey , Sr. DR For the Respondents : Suyash Sinha , Adv. ORDER Per O. P. Kant , AM This appeal by the Revenue is directed against order dated 28/02/2017 passed by the Learned Commissioner of Income Tax (Appeals)-15, New Delhi [in short 'the Ld. CIT(A)'] for assessment year 2011-12 raising following grounds: 1. The impugned order of the CIT(A) is bad in law as well as on facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 3,96,72,870/- made u/s. 14A of the Act ignoring the fact that there is direct and proximate nexus between the exempted income, which the investment shall generate and the expenditure directly or indirectly involved in earning the said income. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of ₹ 8,17,696/- to 2,87,351/- resulting in deletion of ₹ 5,30,345/- made on account of prior period expenses ignoring the fact that the prior period expenses had not been debited to Profit Loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking the investment in shares by the appellant company. The loans and overdrafts were taken by the appellant company for execution of various projects in India and abroad. My attention is also drawn to the fact that in A.Y. 2007-08 and 2008-09 the disallowance made u/s. 14A of the Act were deleted by the CIT(A) vide order dated 27.11.2012 in Appeal No. 33/09-10 for A.Y. 2007-08 and order dated 03.04.2012 in Appeal No. 201/11-12 for A.Y. 2008-09 in appellant's own case. It is noted that during the year under reference the appellant has not received any dividend or exempt income. It has been held by the Hon'ble jurisdictional High Court in the case of Cheminvest Ltd. vs CIT-VI in ITA No. 749/2014 vide their judgment dated 02.09.2015 that for disallowances u/s. 14A, there should be receipt of income which is not includible in the total income during the relevant previous year. Para 23 of the judgment is reproduced below:- 23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression does not form part of the total income in Section 14A of the envisages that there should be an actual receipt of income, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed expenses pertaining to prior period of ₹ 8,17,696/-. In net result the appellant has offered income of ₹ 26,16,106/- on account of prior period adjustment. During the course of appellate proceedings, the appellant was asked to give the details of prior period expenses claimed during the year under reference. It is submitted by the appellant that a sum of ₹ 3,74,490/- claimed by the appellant in fact relate to work contract tax which was charged @ 4% instead of 1% and pertain to the F.Y. 2009-10. When the matter was taken up with the commercial tax division it got finally resolved in the year under reference. Since the matter was resolved in A.Y. 2011-12 the differential was debited to the Profit and Loss Account in A.Y. 2011-12 and the corresponding payment was made to the sub contractor. With regard to expenditure claimed of ₹ 1,55,855/- in respect of stores and spares and loose tools consumed, it is submitted that the materials were supplied by the supplier for ₹ 1,55,855/- who submitted their bills on 30.03.2010. The said bills were verified by the appellant's engineer and forwarded to the Accounts Department in April 2010 and therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im from subcontractors a later date when the work was duly carried out in completed in earlier years, acceptance of additional claims, receipt of invoices of materials and later date, measurement of work done by the client after the closing of the accounts, staff salary payments revision of pay structures etc with retrospective effect. The identical issue arose in the case of the assessee wherein for assessment year 2006-2007 the Ld. CIT appeal has allowed the claim of the assessee relying upon the decision of the Hon'ble Gujarat High Court in case of Saurashtra cement and chemicals industries Ltd. versus CIT 213 ITR 523. The Ld. CIT appeal also relied upon his own order for earlier years wherein identical disallowances been deleted. Hon'ble Gujarat High Court in Saurashtra cement chemical industries Ltd. versus CIT 213 ITR 523 has held that:- 9. Question No. 5 relates to the expenditure of ₹ 39,823 actually incurred during the previous year but was not allowed as deduction from the profit of the previous year on the ground that the liability in respect of various expenses included in the aforesaid sum had arisen in the earlier previous year and not in the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis. It is actually known income or expenses, right to receive or liability to pay which has come to be crystallised, is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallised, can only be adjusted as contingency item but not as an accrued income or liability of that year. To illustrate, we find from the details of the expenses that certain expenses are related to the fees paid to the experts, out of pocket expenses incurred by the consultation firm and discharge of liability on account of demurrages claimed by the port authorities. Such items without investigation into the fact about the crystallization of such dues cannot be disallowed merely on the ground that they relate to the transactions pertaining to earlier accounting year. In this connection it is useful to refer to a decision of the Gauhati High Court in the case of CIT v. Nathmal Tolaram, [1973] 88 ITR 234 which was a case arising under the Indian Income-tax Act, 1922, as to the interpretation of section 10(2) (xv) which is corresponding to section 37(1) of the 1961 Act. The question related to the claim of deduction on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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