2010 (5) TMI 849 - AT - Income Tax

Tribunal confirms deductions for prior period expenses, dismisses Revenue's appeals

The D.C.I.T., Circle-1, Versus Adani Wilmar Ltd.,

The Tribunal upheld the CIT(A)'s decision in both assessment years, allowing deductions for prior period expenses where liabilities had crystallized ... - Issues Involved: The judgment involves challenges to the deletion of additions of prior period expenses for assessment years 2003-04 and 2004-05.Assessment Year 2003-04: In this assessment year, the AO disallowed a claimed amount of prior period expenses by the assessee as no evidence was produced to show expenses crystallized during the year. The claim was rejected by the AO, but the CIT(A) allowed the deduction after finding that the expenses had crystallized during the assessment year under appeal. The CIT(A) based the decision on the material on record, including the certificate of completion of dismantling/erection work given in May 2002, which pertained to the assessment year under appeal. The CIT(A) held that the liability for the expenditure had crystallized during the relevant assessment year and allowed the deduction.Assessment Year 2004-05: Similarly, in this assessment year, the AO denied the claimed amount of prior period expenses by the assessee. However, the CIT(A) found that the liability for the expenditure, related to payment of employees for incentives and performance rewards, had crystallized during the assessment year under appeal. The working for these incentives was done in July 2003 based on the performance of employees in the earlier year. The CIT(A) held that since the liability crystallized during the relevant assessment year, the addition was deleted.The Tribunal upheld the CIT(A)'s decision in both assessment years, citing legal precedents such as the decision of the Hon'ble Supreme Court in the case of Metal Box Company and the Hon'ble Gujarat High Court in the case of Saurastra Cement & Chemical Industry Ltd. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeals of the Revenue.In conclusion, the Tribunal confirmed the CIT(A)'s findings and dismissed both appeals of the Revenue.Separate Judgment: No separate judgment was delivered by the judges in this case.