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TMI Blog2023 (7) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod Expenses under the provision of Section 115JB - Whether the said liability was crystallized and quantified during the year? - HELD THAT:- If the impugned expenses do not qualify as prior period expenses, we fail to understand how the same could be eligible for adjustment to the book profits of the assessee as being in the nature of prior period expenses. The findings of the ld.CIT(A) holding the impugned expenses to be not in the nature of prior period expenses, but confirming the adjustment made to the book profits of the assessee as being in the nature of prior period expenses, is nothing but contrary findings. Once the ld.CIT(A) has appreciated the nature of the expenses, categorized by the assessee as prior period expenses, to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum, did not represent any capital outlay for acquisition of new asset but was merely replacement cost of membrane cells in company's Baroda unit, therefore it is revenue expenditure. It be held so now and the expenditure as claimed be allowed in full. iii a) Without prejudice to the above, Claim of appellant was rightly allowed by CIT(A) in AY 2008-2009 to AY 2011-12 following the decision of Hon'ble ITAT Ahmedabad in appellant's own case in AY 199-2000, AY 2000-2001, AY 2003-04, AY 2004-05, and ITAT decision for AY 2012-13 & 2013-14. In Recent decision of CIT(A) - 1 for AY 2012-13, the ground in respect of Disallowance of Membrane Cell has been held in favor of the appellant, treating such expenses as of revenue in nature. iii b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee placed copies of all the orders before the us as under:- Sl.No. Decision ITA No./Reported in 1. CIT-I, Baroda vs. Gujarat Alkalies & Chemicals Ltd.( Supreme Court) 798/2010 2. Pr.CIT, Vadodara-1, vs. Gujarat Alkalies and Chemicals Ltd. (Gujarat High Court) Tax Appeal No.577 of 2016 3. Gujarat Alkalies & Chemicals Ltd. vs. DCIT (Cross-appeals)( ITAT A.Y 2010-11) ITA No.1684/2014 & 1794/Ahd/2014 4. Gujarat Alkalies and Chemicals Ltd. vs. DCIT (Cross-appeals)( ITAT A.Y 2011-12) ITA No.688/Ahd/2015 & 937/Ahd/2015 5. Gujarat Alkalies and Chemicals Ltd. & DCIT (Cross-appeals) (ITAT A.Y 2012-13) ITA 1455/Ahd/2016 & ITA No.1589/Ahd/2016 6. ACIT vs. M/s.Gujarat Alkalies & Chemicals Ltd.( ITAT A.Y 2013-14) ITA No.1425/Ahd/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held in favor or Appellant. The issue relates to the adjustment made to the book profits of the assessee computed in terms of provisions of Section 115JB of the IT Act for the levy of Minimum Alternate Tax (MAT) on the same on account of prior period expenses amounting to Rs. 4,63,88,745/-. 8. We have heard both the parties and gone through the orders of the authorities and have noted that the Assessing Officer had held the impugned expenses to be disallowable while computing the book profits of the assessee u/s. 115JB of the Act. The Ld.CIT(A), however, held the impugned expenses cannot be treated as prior period expenses as is evident from the paragraph Nos.5.3.3.3 and 5.3.3.4 of the order of the Ld.CIT(A), which read as under: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie, these 2 items of exp pertaining to prior period to FY 2010- 11 i.e. FY relevant to AY under consideration viz. AY 2011-12 seem to have crystallized during the year only and therefore are to be treated as expenses of prior period but arisen and crystallized during the year. The principle of crystallization of liability (i.e. when the amount became due and payable) is inherent in the Mercantile system of Accounting and is matching principle. This principle has been well accepted by the Courts also while allowing such claims. It is also none of the case of the Ld.AO that these expenses were not related to business of appellant company "wholly and exclusively". However, he went on to confirm the adjustment made to the book profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- made by the Assessing Officer on account of disallowance of prior period expenses in the computation of Book Profit u/s. 115JB of the I.T. Act, without appreciating the fact that the assessee has debited the amount of prior period expenses of Rs. 4,63,56,702/- in the Profit & Loss Account for the year under consideration and the same is not allowable as deduction of working out the Net Profit as per Profit & Loss Account for the purpose of computation of Book Profit u/s. 115JB of the I.T.Act. (2) On the facts and in the circumstances of the case and ion law, the Ld.CIT(Appeals) has erred in deleting the addition of Rs. 4,63,56,702/- made by the Assessing Officer on account of disallowance of prior period expenses in the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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