2020 (10) TMI 284 - AT - Income Tax

ITAT upholds Commissioner's decisions in favor of assessee, dismissing Revenue's appeal.

ADDL. COMMISIONER OF INCOME TAX, SPECIAL RANGE-6, NEW DELHI Versus M/s NATIONAL TEXTILE CORPORATION LTD.

The Income Tax Appellate Tribunal (ITAT) upheld the decisions of the Commissioner of Income Tax (Appeals) in favor of the assessee, dismissing the ... Prior period expenses - allowable u/s. 37(1) - HELD THAT:- AO wrongly added especially when it has been duly accepted by department in almost all years and solely additions made during AY 2009-10 were duly struck down by CIT(A)-XVI and later on CIT(A) order was accepted by the ITAT also. Nature of these expenses clearly shows that these might pertain to earlier years but crystallized only in current AY 2006- 07. Respectfully following the ITAT order on the same issue alongwith adjudication that these aren’t expenses pertaining to earlier year’s fully allowable u/s. 37(1) addition made by AO is deleted. CIT(A) has deleted the addition by respectfully following the order of the ITAT in assessee’s own case. No contrary decision has been brought to our notice by the Ld. DR. Therefore, the issue involved in ground no. 1 is decided in favour of the assessee and against the revenue by dismissing the ground no. 1 raised by the Revenue. Bond Issue Expenses - HELD THAT:- This issue is also covered in favour of the assessee by the order of the Ld. CIT(A)-XVI, New Delhi in which Ld. CIT(A) has deleted the similar addition for assessment year 2007-08. The order is placed on record. No contrary decision has been brought to our notice by the Ld. DR. The nature of these expenses are that these are expenses incurred every year to meet the statutory requirements of issue of bonds and are Trustee Annual Fees, Rating Agencies Annual Fees, NSDL/CDSL Annual Fees, C/o stamp papers, Registrar and Transfer agents fees etc. Exactly similar expenses has been allowed by the Department in the Assessment year 2007-08. - Decided against revenue. Issues Involved:1. Disallowance of prior period expenditure2. Treatment of bond issue expenditure as revenue expense3. Reliance on earlier order for relief on prior period and bond expenses4. Applicability of principle of res-judicata in Income Tax proceedingsAnalysis:Issue 1: Disallowance of prior period expenditureThe appeal by the Revenue challenged the deletion of disallowance of prior period expenditure amounting to Rs. 10,50,324 by the Ld. CIT(A). The AO had made this addition during the assessment under section 143(3) of the Income Tax Act, 1961. The Ld. CIT(A) based the deletion on the fact that the expenditure had been accepted by the department in previous years and that the nature of the expenses indicated they pertained to earlier years but crystallized in the current assessment year. The ITAT, after reviewing the arguments, upheld the decision of the Ld. CIT(A) and dismissed the appeal by the Revenue.Issue 2: Treatment of bond issue expenditureThe second issue revolved around the treatment of bond issue expenditure as a revenue expense. The Ld. CIT(A) had deleted a similar addition in a previous assessment year, and the ITAT found that the nature of these expenses, which included Trustee Annual Fees, Rating Agencies Annual Fees, and other statutory requirements for issuing bonds, were allowable expenses. The ITAT, after considering the submissions and lack of contrary decisions, dismissed the Revenue's appeal on this issue as well.Issue 3: Reliance on earlier order for reliefThe ITAT noted that the Ld. CIT(A) had relied on earlier orders in the case of the assessee for relief on both prior period and bond expenses. The ITAT found no contrary decisions presented by the Revenue and upheld the Ld. CIT(A)'s decisions based on the precedents set in previous assessment years.Issue 4: Applicability of res-judicata in Income Tax proceedingsThe Revenue raised a question regarding the applicability of the principle of res-judicata in Income Tax proceedings, arguing that each assessment year should be treated as a separate entity. However, the ITAT did not find merit in this argument and upheld the decisions based on the specific circumstances and precedents established in the case of the assessee.In conclusion, the ITAT upheld the decisions of the Ld. CIT(A) in favor of the assessee, dismissing the Revenue's appeal on all grounds. The judgment was pronounced on 26.08.2020.