Tribunal rules for assessee: Disallowances deleted, deductions allowed under Sections 36(1)(va) and 37(1)

Ocimum Bio Solutions India Limited Versus Income Tax Officer, Ward-16 (1), Hyderabad

Ocimum Bio Solutions India Limited Versus Income Tax Officer, Ward-16 (1), Hyderabad - TMI Issues:
1. Disallowance of prior period expenditure.
2. Disallowance under Section 36(1)(va) for employees' provident fund.

Analysis:

Issue 1: Disallowance of Prior Period Expenditure
The assessee's appeal challenged the disallowance of prior period expenditure of &8377; 47,50,000 by both lower authorities on the grounds that it did not pertain to the assessment year in question. The CIT(A) upheld the disallowance stating that the expenditure related to an earlier year and was not incurred during the relevant previous year. The appellant contended that the expenditure was crystallized in the current assessment year and was wholly and exclusively for the purpose of business, thus eligible for deduction under Section 37(1) of the Income Tax Act. The Tribunal, considering the Gujarat High Court's decision in PCIT Vs. Adani Enterprises Ltd., held that the disallowance of prior period expenditure should not be made as it is a revenue-neutral instance. Consequently, the Tribunal directed the Assessing Officer to delete the disallowance, accepting the assessee's argument.

Issue 2: Disallowance under Section 36(1)(va) for Employees' Provident Fund
The second issue pertained to the disallowance of &8377; 6,22,182 under Section 36(1)(va) for employees' provident fund made in both lower proceedings. The assessee argued that it had already suo motu disallowed the same expenditure in the corresponding computation, leading to double addition of the claim. The Tribunal directed the Assessing Officer to delete the disallowance under Section 36(1)(va) for employees' provident fund, as it amounted to double addition. No other grounds were pressed before the Tribunal, and the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, directing the Assessing Officer to delete the disallowances of prior period expenditure and employees' provident fund under Section 36(1)(va). The judgment emphasized the eligibility of prior period expenditure for deduction under Section 37(1) and the prevention of double addition in the case of employees' provident fund disallowance.