Tribunal allows assessee's claim for commission expenses, overturning CIT(A) decision. Appeal successful. Order dated 25/08/2020.

The Tribunal allowed the claim of the assessee for commission expenses in the relevant year, setting aside the CIT(A)'s order. The appeal was allowed, and the order was pronounced on 25/08/2020.

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Issues Involved:
1. Ignoring the fundamental accounting assumption of accrual.
2. Disallowance of selling and marketing expenses.
3. Deduction of disallowed expenses in subsequent years.

Issue-wise Detailed Analysis:

1. Ignoring the Fundamental Accounting Assumption of Accrual:
The assessee argued that the CIT(A) erred by ignoring the fundamental accounting assumption of accrual, which states that "revenues and costs are recorded when they are earned incurred (and not as money is received or paid) in the periods to which they relate." The assessee contended that the commission expenses should be allowed in the year they were incurred, regardless of whether the revenue from the sale of FSI was recognized in that year.

2. Disallowance of Selling and Marketing Expenses:
The primary issue was the disallowance of Rs. 1,20,19,260/- in selling and marketing expenses. The AO disallowed these expenses on the grounds that the receipt from the sale of FSI was not offered to tax in the current year, thus the corresponding expenses could not be allowed. The assessee argued that the commission expenses were accrued and the liabilities towards such expenses were created as soon as the deal took place between the assessee company and the party. The Tribunal referenced the case of Mysore Tobacco Co. Ltd. Vs. CIT (1978) 115 ITR 698 (Kar), which held that revenue expenses are to be claimed and allowed in the year they are incurred or the liability towards such expenses accrued. The Tribunal found the disallowance unjustifiable and allowed the claim of commission expenses in the relevant year.

3. Deduction of Disallowed Expenses in Subsequent Years:
The assessee alternatively argued that if the expenses were disallowed for the current year, they should be allowed as a deduction in the subsequent year when the revenue for the sale of FSI is recognized. However, since the Tribunal allowed the claim of commission expenses in the current year, this issue became moot.

Delay in Pronouncement of Order:
The Tribunal explained the delay in pronouncement of the order due to the nationwide lockdown imposed by the Government of India in response to the COVID-19 pandemic. The Tribunal referred to Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, which allows for an extension of the pronouncement period in exceptional and extraordinary circumstances. The Tribunal also cited the decision in DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018), which supported excluding the lockdown period from the computation of the 90-day pronouncement period.

Conclusion:
The Tribunal set aside the CIT(A)'s order and allowed the claim of the assessee for the commission expenses in the relevant year. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 25/08/2020.

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