2025 (2) TMI 494 - AT - Income Tax

Tribunal Allows Assessee's Appeal, Overturns Disallowance of Prior Period Expenditure Claim of Rs. 2.2 Crore

The Appellate Tribunal ITAT Delhi ruled in favor of the assessee, overturning the disallowance of a 'prior period' expenditure claim of Rs. 2,20,00,000. ... Disallowance of “prior period” expenditure claim - HELD THAT:-Assessee in fact is a company getting assessed at the maximum marginal rate all along. That being the case and in light of the fact that disallowance herein is that of “prior period” expenditure wherein the corresponding claim pertaining to the earlier assessment year has been recognized on the basis of its alleged crystalization in the relevant previous year. Case law PCIT v. Adani Enterprises [2016 (7) TMI 1250 - GUJARAT HIGH COURT] holds such an issue as an instance of revenue neutral expenditure which could not have been disallowed for it’s both the year of accrual as well as on crystallization, as the case may be. The same is directed to be deleted in very terms therefore. Assessee’s appeal is allowed. The appeal before the Appellate Tribunal ITAT Delhi involved the disallowance of the assessee's 'prior period' expenditure claim of Rs. 2,20,00,000. The Tribunal found in favor of the assessee, citing the case law PCIT v. Adani Enterprises, which held that such revenue-neutral expenditures cannot be disallowed for both the year of accrual and crystallization. As a result, the disallowance was ordered to be deleted, and the assessee's appeal was allowed. The order was pronounced in open court on 30.01.2025.