TaxTMI 
TaxTMI 
2017 (3) TMI 202
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....in law and on facts and in the circumstances of the case in confirming the treatment of prepaid expenses as prior period expenses; 2.2. The l.CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of prepaid expenses of Rs. 21,64,800/- in respect of commission and brokerage which was paid in advance in the FY 2005-06 amounting to Rs. 27,06,000/-, and out of which Rs. 5,41,200/- was allowed in assessment year 2006-07; 3. The order of the Commissioner (Appeals) being contrary to law, evidence and facts of the case should be set aside, amended or modified." 3. Facts of the case are that the assessee filed return of income on 29.10.2007 declaring NIL income. The assessee company is engaged in the business of production and sale of television software, rendering technical services and imparting training courses in advance cinematic. During the course of assessment proceedings, the AO found that the assessee has purchased two computer-software from different parties i.e. M/s Saptagiri Impex Pvt Ltd and M/s Satguru Trading Pvt Ltd for a consideration of Rs. 23,92,000/-each aggregating to Rs. 47,84,000/- on which the assessee claimed depr....
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....sment by the AO. The Ld AR, in support of his argument, strongly relied on the decision of the Hon'ble Jurisdictional High Court in the case of H.R. Mehta V/s ACIT in IT APPEAL NO. 58 OF 2001, DATED, June 30, 2016 [2016] 72 taxmann.com 110 (Bombay). Finally, the ld.AR submitted that the purchases being genuine and the payment thereof were paid through banking channels and thus the assessee has discharged onus cast upon it by filing all the necessary documents before the AO and the AO without further verification and confronting the inspector report to the assessee came to the conclusion that the purchases were bogus. The ld. AR further submitted that mere fact that the suppliers could not be served with the notices as they were not available at the given address, it could not be held that the none of suppliers existed. The ld Counsel argued that the assessee has duly discharged its primary onus by filing the necessary invoices, details of payment and bank statements and PAN of the suppliers. The ld. AR further submitted that the ld.CIT(A) has also not considered all these facts on records and hence the order of the ld.CIT(A) should be reversed and the AO should be directed to allow....
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.... the material used against him and without allowing the cross-examination by the department to the assessee. In the present case also, the report of the Inspector has been used against the assessee and the assessee was not allowed to rebut the finding of the Inspector. In view of this factual aspect are of the opinion that the order of the ld.CIT(A) deserves to be set aside. Accordingly, we set aside the order of the ld.CIT(A) and direct the AO to allow depreciation as prayed by the assessee. 8. The second issue raised by the assessee is against the confirmation of addition made on account of prepaid expenses which was charged under the head prior period expenses. During the course of assessment proceedings, the AO found that the assessee debited expenses under the head prior period expenses (i) debits relating to earlier years (Note B10 to accounts) amounting to Rs. 1,98,159/- and (ii) commission and brokerage amounting to Rs. 21,64,800/- aggregating to Rs. 23,62,959/-. Accordingly, a show cause notice was issued to the assessee calling upon the assessee to show cause as to why these expenses should not be disallowed and be added to the total income of the assessee. With refere....
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....t year but incurred in the previous year. We find from the facts before us that the assessee has incurred and paid commission and brokerage expenses which were rightly accounted for by the assessee by debiting partly in the financial year 2005-06 and showing the balance under the head prepaid expenses which were duly charged to the profit and loss account though under wrong head "prior period expenses". The depiction of expenses in the profit and loss account under wrong head would not disentitle the assessee from claiming the expenses when the expenses pertain to the current year. Accordingly, we are inclined to set aside the order of the ld.CIT(A) and direct the AO to allow the claim of the assessee of commission and brokerage expenses etc of Rs. 21,64,800/-. 10. Grounds of appeal no.3, 4 and 5 are general in nature and do not require any adjudication. ITA No.813/Mum/2014 11. Grounds of appeal raised in this appeal are as under : 1. "On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of Rs. 36,03,439/- made on account of lease rent paid to the subsidiary; 2. On the facts and in the circums....
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....which interest of Rs. 59.20 lakhs was received. It is further seen that the subsidiary company has purchase an immovable property during FY. 06-07 located at Malad (W), Mumbai which was taken by the appellant on annual lease rental of Rs. 95.23 lakhs. Therefore, the AO was of the view that how the lease rental of Rs. 95.23 lakhs was allowable as the appellant has parted with its own fund and paid lease rental on the property. Accordingly, the AO made disallowance of Rs. 36.03 lakhs being rental amount of Rs. 95.23 lakhs less interest received from subsidiary company at Rs. 50.20 lakhs, treating the transactions as sham transaction. I find the contention -of-the-appellant as-correct thattf1e-ADnas not referred any section under which the said disallowance has been made. The appellant company has taken business decision to purchase Dorian, as it wanted to acquire office space, hence, same could not be altered by the AO. The appellant company was required a office space but that office space could be required only with a rider that the appellant has to acquire the said company to whom the office premise belongs. Therefore, the subsidiary company Dorian had obligation which had to be d....
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.... of appeal is in respect of deleting the disallowance of Rs. 5,42,65,010/- as made by the AO on the ground that the assessee postponed the recognition of the revenue thereby violating the matching principle of accountancy. 16. The assessee was engaged in imparting training to the students in cinematic course under the brand name MAAC. Upto financial year ended 31.3.2006, the assessee used to recognize income from training courses on billing basis. However, from the financial year 2006-07 the assessee changed income recognition method to accrual meaning thereby threat only that part of the fee on which the company has actually rendered training to the students were shown as income. Accordingly, the assessee out of total system's billing of Rs. 36.89 crores in the education division (MAAC) during the financial year 2006-07 carried forward 22.60 crores to the ensuing financial years on the analogy that the services were rendered in that year. Accordingly, the AO raised query on the assessee which was replied by the assessee by submitting that revenue recognition has been changed by following AS-9 which provides for recognition of revenue over a period of time to which the said fees....
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.... has every right to change the method of accounting provided the same is consistently following the subsequent years. Moreover, the ld. CIT(A) called for the remand report from the AO which confirmed that the assessee was following the said system of accounting in the subsequent years. We are therefore in agreement with the conclusion drawn by the ld. CIT(A) that the AO was not right in rejecting the method of accounting followed by the assessee and therefore we uphold the same. Accordingly, the ground taken by the revenue is rejected by upholding the order of the ld. CIT(A) on this issue. ITA No.507/Mum/13 19. Grounds of appeal taken by the assessee reads as under: "1. The Learned CIT CA) erred in law and on facts and in the circumstances of the case in confirming the disallowance of prior period expenses of Rs. 1,06,307/- in respect of Foreign Travel on the ground that the liability was ascertained and stood incurred during the Financial Year 2007-08. 2. The Learned CIT CA) erred in not adjudicating the claim of prior period expenses of Rs. 3,06,387/- incurred on advertising and marketing. 3. The Learned CIT CA) erred in law and on facts and in the circumstances of....
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....for bad and doubtful debts, as provided in section 36(l)(vii) of the Act, in the light of the decision of Honourable Supreme Court in the case of Vijaya Bank V/so CIT reported in 323 ITR 166 which is relied upon by the appellant in this appeal. The said deduction for provision for doubtful debts remained to be claimed by the appellant in the return of income on account of bonafide ignorance of law. 20. The ld. AR submitted before us that the additional ground raised qua deduction in respect of Rs. 85,98,557/- vide application dated 7.10.2014 is arising out of the decision of the Hon'ble Apex Court in the case of Vijaya Bank V/so CIT reported in 323 ITR 166 (SC) and therefore, the assessee was within its right to raise the issue by way of additional ground before this Tribunal since the issue emanated and arose from the order of ld.CIT(A) and therefore should be admitted for adjudication by the Bench. The ld. DR while strongly opposing the admission of additional ground for the reasons that the assessee has neither raised this issue before the AO nor before the ld. CIT(A) and also not before the Tribunal at the time of filing of the appeal. 21. We have heard the rival contenti....
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....e FAA by observing and holding as under : "3.3 I have considered the facts and find that the AO has made disallowance of prior period expenses of Rs. 18,92,500/- as the appellant failed to justify the same. However, during the appellate proceedings, the appellant has filed detailed submission in respect of prior period expenses amounting to Rs. 18,92,499/- in para 3.2 above. It is seen that most of the expense have been crystallized during the year and therefore incurred during the year, therefore same are allowable as deduction. However, expenses relating to repairs & maintenance amounting to Rs. 1,38,537/-, I find that these were raised in earlier years but the appellant disputed the liability. Hence, same were debited in the current year on settlement of dispute. However. since the liability was arose earlier and it was known to the appellant. Therefore, the appellant could have made provision for the same. Hence, disallowance of such expenditure amounting to Rs. 1,38,537/- is sustained. As regards foreign travel expenses of Rs. 1,06,307/ pertaining to FY. 07-08, of which liability was ascertained and same were stands incurred during the same period. Hence, same cannot be all....
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....Similarly, as regards the debit notes raised on franchisees Rs. 4,09,175/-, the ld. AR submitted that in the financial year 2005-06, 2006-07 and 2007-08 the assessee incurred some expenses on advertisement part of which was to be borne by the franchisees and therefore the assessee issued a debit notes for the amount of share of each franchises. However, due to inability to pay the full amount of such expenses by the franchisees on the ground that they were not doing good business and hence the expenses could not be recovered in full and therefore the amount was charged to the profit and loss account as being incurred wholly and exclusively for the purpose of business as the same was crystallized during the year. Qua the expenses of business partnership amounting to Rs. 8,57,781/-, the assessee incurred these expenses on advertisement and part of which was to be borne by some franchisees. However, when the franchisees failed to meet requirement, the assessee treated these expenses as incurred wholly and exclusively for the purpose of business and charged to profit and loss account during the year accordingly. Finally, the ld. AR prayed before the Bench that all the expenses were inc....