2015 (7) TMI 1128 - AT - Income Tax

ITAT Jaipur affirms CIT(A)'s decision on revenue appeal for assessment year 2009-10.

The Appellate Tribunal ITAT Jaipur upheld the ld CIT(A)'s order, dismissing the Revenue's appeal on all three issues related to prior period expenses, ... Allowability of prior period expenses - Held that:- The assessee is a government company. The genuineness of the expenses has not been doubted by the Assessing Officer. The ld CIT(A) had followed the Coordinate Bench decision passed on identical fact, therefore, we uphold the order of the ld CIT(A) holding prior period expenses as allowable expense Allowability of deduction for the contribution made to an unapproved gratuity fund - Held that:- The issue is identical to A.Y. 2006-07, in assessee’s own case. As the assessee has applied for its approval in time but formal approval had not been issued by the department, therefore, there is no fault on the assessee. The identical issue has been decided by the Coordinate Bench, which is squarely application on this year also. Therefore, we uphold the order of the ld CIT(A) allowing the deduction for contribution made to an unapproved gratuity fund. Allowability of contribution to state renewal fund - Held that:- As the State Govt. had set up a State Renewal Fund in the year 1995 with the object of providing a safety net for the workers likely to be affected by restricting in the State Public Enterprises, as a result of this process, these expenses have been correctly claimed by the assessee. Allow the expenses as being covered by the decision of the Hon’ble ITAT for A.Y. 2006-07. Issues:1. Allowability of prior period expenses not in accordance with accounting policies.2. Deduction for contribution to unapproved gratuity fund.3. Allowability of contribution to State Renewal Fund.Issue 1: Allowability of Prior Period ExpensesThe Revenue appealed against the order allowing prior period expenses by the ld CIT(A). The Assessing Officer disallowed prior period expenses claimed by the assessee, citing that expenses should be accounted for in the year they are incurred, not when paid. The disallowed expenses included purchases bills from a prior period. The ld CIT(A) allowed the appeal, referencing a previous ITAT order for A.Y. 2006-07 where prior period expenses were allowed as they crystallized during the year. The Coordinate Bench decision was followed, and the order of the ld CIT(A) was upheld.Issue 2: Deduction for Contribution to Unapproved Gratuity FundThe Revenue's appeal also challenged the deduction for a contribution made to an unapproved gratuity fund. The Assessing Officer disallowed the deduction, questioning the approval status of the fund. The ld CIT(A) allowed the appeal, noting that the assessee had applied for approval in time, and previous ITAT decisions supported the deduction. The Coordinate Bench's decision for A.Y. 2006-07 was cited, and the order of the ld CIT(A) was upheld.Issue 3: Allowability of Contribution to State Renewal FundThe third issue was the allowability of the contribution to the State Renewal Fund. The Assessing Officer disallowed the contribution, considering it an application of income, not diversion by overriding title. The ld CIT(A) allowed the appeal, relying on a previous ITAT order for A.Y. 2006-07, which deemed the contribution allowable under section 37(1). The Revenue appealed, arguing legal obligations and citing relevant case law. The Coordinate Bench's previous decision for A.Y. 2006-07 supported the allowance of these expenses, leading to the confirmation of the ld CIT(A)'s order.In conclusion, the Appellate Tribunal ITAT Jaipur upheld the ld CIT(A)'s order, dismissing the Revenue's appeal on all three issues related to prior period expenses, deduction for unapproved gratuity fund contribution, and the contribution to the State Renewal Fund for the assessment year 2009-10.