Prior period expenditure claim denied in later year, but revised computation allowed for examination in the proper assessment year.

Prior period expenditure under the mercantile system could not be claimed as a deduction in the later assessment year merely because reimbursement from the Government had been pursued; the deduction was therefore disallowed for that year. However, because the expenditure was genuine and the alternate plea was confined to the proper year, the Court permitted the assessee to file a revised computation for the earlier assessment year so the claim could be examined by the Revenue. The principal legal issue was decided against the assessee, but limited relief was granted by allowing consideration of the claim in the correct assessment year.

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Issues: (i) Whether the expenditure relatable to an earlier year could be claimed in the relevant assessment year as a deduction; (ii) whether the Tribunal could grant relief by directing consideration of the claim for the earlier assessment year.

Issue (i): Whether the expenditure relatable to an earlier year could be claimed in the relevant assessment year as a deduction.

Analysis: The claim related to prior period expenditure and the assessee followed the mercantile system of accounting. The record showed that the expenditure was genuine and that the assessee had been pursuing reimbursement from the Government, but the actual debit of the amount to the profit and loss account arose in the later year. On that footing, the deduction could not be allowed in the assessment year in question as a matter of right.

Conclusion: The issue is answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the Tribunal could grant relief by directing consideration of the claim for the earlier assessment year.

Analysis: The Court accepted that the genuineness of the expenditure was not in dispute and that the alternate plea for appropriate consideration of the claim for the earlier year could be entertained. In that context, the Court considered it to permit the assessee to file a revised computation for the earlier assessment year so that the claim could be examined by the Revenue.

Conclusion: The issue is answered in favour of the assessee to the limited extent of a direction to consider the claim for the earlier assessment year on receipt of a revised computation.

Final Conclusion: The appeal failed on the principal questions of law, but limited relief was granted by permitting consideration of the expenditure in the earlier assessment year through a revised computation.

Ratio Decidendi: A prior period expenditure cannot be claimed in a later assessment year merely because reimbursement was sought, but where genuineness is undisputed, the Court may permit the claim to be examined in the proper year through a revised computation.

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