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TMI Blog2021 (12) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e either paid or it is accrued. If the expenditure is not accrued merely on the basis of matching principle any amount cannot be provided. The case laws referred by the Ld.CIT(A) also deal with the expenditures which have actually accrued. The Hon ble Courts have held that expenses can be said to have been incurred only if they have accrued. Nowhere, it is provided that without accrual expenditure should be provided merely on matching concept. We note that Ld.CIT(A) has not at all given a finding that the quantum of the expenditure worked by the assessee had actually accrued. Merely because the expenditure is incurred in the next year, on the plank matching principle assessee cannot book a good portion of the expenditure during the year to adjust the profit as per its desire. Expenditure can be provided only, if the expenditure has actually accrued. Since in this case, Ld.CIT(A) has not given any finding that the expenditure has accrued, we deem at appropriate to remit the issue to the file of the Ld.CIT(A). The Ld.CIT(A) shall examine the issue afresh and give a finding whether the expenditure allowed by him can be considered to be the expenditure which is accrued during thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a found that identical issue has decided by ITAT in assessee s own case for AY 2011-12. The order of Ld.CIT(A) in this regard is as under:- The copy of agreement of leave*anc3' license' entered into between the appellant company and Smt Shobha Jain for the period 01.05.2012 to 31.10.2013 is brought on record. On perusal thereof, it is noted that the purpose for which the premises are to be used is mentioned in the terms and conditions thereto, as under:- The Licensor agrees to give on leave and license basis the Drawing Room and Kitchen as a pantry, three/four times in a day at Flat No.1, Jai Villa, Dev Shakti Building, Tilak Road, Santacruz (West), Mumbai-400054, hereinafter referred to as the said tenement to be used by the Licensee for office purposes and for holding business meetings with Contractors, Suppliers, Architect, B.M.C. Officers, Bank's Officers, Customers, etc. The Licensor further agrees to provide furniture, eg. Tables, chairs, sofa. etc. for office use and holding business meetings and conferences Further, the copy of agreement of leave and license entered into between the appellant company and Mrs Sudha Gupta for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare of the Flats owned by these two persons. It was explained that these premises were utilized as office(s) of the assessee and for organizing strategic business meetings and carrying out other day to day functioning also from these premises. The assessee placed before the lower authorities, details and evidences in the form of confirmation, agreements, copies of income tax returns of these payees and other details to show business use of these premises as well as confirmation of transaction and genuineness of payments. Thereafter nothing was brought on record by the AO to negate these facts and details/evidences. Further, this fact cannot be ignored that the payments made to these persons have always been allowed in past by the AO. The rental income has been assessed by the income tax department in the hands of these payees. Under these circumstances, the AO was expected to maintain consistency in his approach and should not have disallowed the claim merely on the basis of his doubts. Further, the AO invoked provisions of section 40A(2)(b), which do not permit full disallowance of expenditure. Only that part of expenditure can be disallowed which is in excess of mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de impugned addition. The order of AO in this regard as under:- During the course of assessment proceeding, it is seen that the assessee has claimed ₹ 14,31,40,000/- towards provision for construction expenses. In order to verify the verification of assessee claim, assessee was asked vide order sheet noting dated 03.03.2016, to show cause why provision for construction cost made should not be disallowed. In response to this, assessee submitted its reply vide letter dated 16.3.2016, which is placed on record. Assessee stated that all these expenses in total ₹ 16,72,76,000/- incurred and paid in next year. However, in order to comply with matching concept of accountancy Provision for ₹ 14,31,40,000/- was made during the year under review. The above submission of the assessee were carefully perused but not found to be acceptable. It is to be noted that provisions made in accountancy to comply with accounting standard is made on the basis of estimation which is only hypothetical value determined by the management. The convincing evidence to justify the basis of provision were not submitted also it is only a provisions made for next year expenses which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les have already been recognized during the year, and the claim of expenses has been made in accordance with the matching principle of accountancy, i.e. direct expenses relating to the sales should be debited in the period when the corresponding sales are credited to the accounts. Hon'ble Supreme Court in the case of Metal Box Co. of India Ltd. Vs Their Workmen (1969)(73 ITR 53)(SC) has held that in the case of an assessee maintain his accounts on mercantile system, a liability already accrued though to be discharged at a future date would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid. Just as actual receipts as well as those accrued due are brought in for income-tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business. Similar issue was involved in the case of Calcutta Co. Ltd. Vs CIT (1959) (37 ITR 1) (SC). In that case, the assessee was dealing in land and property and carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal does not have any merit as no prejudice is caused to appellant merely by initiation of penalty proceedings. Penalty is a separate proceedings and appellant is entitled to an opportunity of being heard before any levy of penalty. Therefore, this ground of appeal is premature and the same is hereby dismissed. The next ground of appeal is that the appellant craves leaves to add, to alter, delete from or substitute the grounds of appeal. No such option has been exercised by the appellant during the appeal proceedings and hence, does not require any adjudication. In the result, the appeal is allowed. 10. Further, Ld.CIT(A) placed reliance upon the decision of Hon ble Supreme Court in the case of Metal Box Co. Of India Ltd. vs Their Workmen (1969)(73 ITR 53) (SC) and Calcutta Co. Ltd. vs CIT (1959) (37 ITR 2) (SC). 11. Against the above order, revenue is in appeal before us. 12. We have heard both the parties and perused the records. We note that on this issue, assessees claim is that actually the expenditure is incurred in the next year, however in order to comply with matching principle/concept of accountancy, it has recognized proportionate expenditure during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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