2016 (7) TMI 1564 - HC - Income Tax

High Court Upholds Tribunal Decision on Prior Period Expenditure Disallowance

Principal Commissioner Of Income Tax-I Versus Adani Enterprises Ltd.

The High Court upheld the Tribunal's decision to overturn the disallowance of Prior Period expenditure by the Revenue authorities, emphasizing uniform ... Disallowance of Prior Period expenditure - HELD THAT:- As decided in ADANI ENTERPRISES LTD. [2016 (7) TMI 1250 - GUJARAT HIGH COURT] expenditure of ₹ 67.88lacs is a fraction of the total income of the assessee company declared at ₹ 105.88 crores. Further, even the Revenue does not dispute that the company would be taxed at the same rate in the present assessment year or during earlier year. It is also not disputed that prior period income was declared by the assessee during the current year which is also accepted by the Revenue. No question of law therefore, arises Issues:1. Disallowance of Prior Period expenditure2. Disallowance of exemption claimed u/s. 10AA of the ActIssue 1: Disallowance of Prior Period expenditureIn this case, the Revenue filed an appeal questioning the disallowance of Prior Period expenditure of &8377; 3,07,53,106 by the ld. CIT(A). The High Court, in a separate tax appeal against the same assessee, observed that the main question revolved around the disallowance of a sum of &8377; 67.88 lacs as prior period expenditure. The Tribunal overturned the findings of the Revenue authorities, stating that the company was uniformly charged for all years, implying no revenue impact based on the recognition of the expenditure in the current or prior years. The Tribunal also noted that the Revenue had recognized the prior period income, making it unfair not to acknowledge the prior period expenditure. The High Court, after hearing arguments and examining the records, found no reason to interfere. The expenditure in question was a small fraction of the total income declared by the assessee, and there was no dispute that the company would be taxed at the same rate regardless of the assessment year. As the prior period income was declared and accepted by the Revenue, the High Court concluded that no legal issue arose. Therefore, the disallowance of Prior Period expenditure was not upheld.Issue 2: Disallowance of exemption claimed u/s. 10AA of the ActRegarding the disallowance of &8377; 50,31,149 out of the exemption claimed under section 10AA of the Act, the High Court noted that the Tribunal had simply remanded the issue without deciding on it. Consequently, the High Court found that no legal question arose in this regard and dismissed the tax appeal. The issue of disallowance of exemption claimed under section 10AA of the Act was not further addressed in the judgment.