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The ITAT set aside the revision under section 263, holding that the PCIT erred in disallowing the deduction of tax on provisional expenses, as these provisions complied with the Mercantile System of Accounting mandated by the Income Tax Act and Companies Act. The tribunal noted that the provisions were reversed on the first day of the subsequent financial year, negating any tax deduction failure. Additionally, the ITAT upheld the depreciation claim on an intangible asset with a nil acquisition cost, ruling that the TDS paid on the premium became part of the block of assets and could not be separately disallowed. Consequently, the AO's disallowance of depreciation was quashed, and the appeal was allowed in favor of the assessee.
The ITAT set aside the revision under section 263, holding that the PCIT erred in disallowing the deduction of tax on provisional expenses, as these provisions complied with the Mercantile System of Accounting mandated by the Income Tax Act and Companies Act. The tribunal noted that the provisions were reversed on the first day of the subsequent financial year, negating any tax deduction failure. Additionally, the ITAT upheld the depreciation claim on an intangible asset with a nil acquisition cost, ruling that the TDS paid on the premium became part of the block of assets and could not be separately disallowed. Consequently, the AO's disallowance of depreciation was quashed, and the appeal was allowed in favor of the assessee.
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