TaxTMI 
TaxTMI 
2020 (12) TMI 1181
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The assessee in the year under consideration has claimed deduction of Rs. 23,27,520/- in the computation of income on account of prior period items. The details of such prior period items stand as under: 30.04.2005 35,927 Rep sales promotion expenses of prior period 31.03.2006 20,41,593 Int on DRS prior to 2005 TFR 2 prior period 31.03.2006 2,50,000 Cost recovered of CHPL April 05 Total 23, u/s. 271(1)(c) of the Act, 520 3.1. The assessee regarding the prior period sales promotion expenses of Rs. 35,927/- submitted that, it represents the advance given to the sales representative who left the organization without settling the same. Therefore, these expenses were considered as pertaining to the year under consideration. 3.2. The assessee regarding the amount of interest on the debtors submitted that it was rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essees appeal is allowed but for statistical purposes." In view of the above, the assessee in the set aside proceedings before the learned CIT(A) submitted as under: The assessee regarding the interest reversal on late recovery of debtors for Rs. 20,41,593/- claimed that the impugned amount has already been offered to tax in the earlier year and therefore the same has to be allowed in the year under consideration as the same is not recoverable. The assessee regarding the cost of rental income reversed within the financial year amounting to Rs. 2,50,000/- claimed that the amount was offered to tax by making accounting entry in the books of accounts in the month of April 2005, the year under consideration under the Income Tax Act which was reversed in the month of March 2006. Thus the reversal of rental income does not represent the prior period expenses. However the auditor in his audit report has classified the same as prior period expenses under the Companies Act in view of the fact that the previous year (2004-05) was for a period of 13 months beginning from April 20004 till April 2005. But under the Income Tax Act, the month of April 2005 is part and parcel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear i.e. 13 months (up to 30th April) whereas the year under consideration was less than 12 months i.e. 11 months only. Thus the entry reversed as on 31-3-2006 was in fact is not prior period adjustment under the Income Tax Act as the same was made as on 30-4-2005 i.e. within the same financial year. 8.1. The ld. AR also contended that even the same are treated as the prior period expenses, then also the same are allowable for deduction in view of the judgment of the Hon'ble Gujarat High Court in the case of CIT versus Adani Enterprises Ltd. in the tax appeal No. 566 of 2016. 9. On the other hand the learned DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case in dispute have already been elaborated in the preceding paragraph, therefore we are not inclined to refer the same for the sake of brevity and convenience. The issue in the present case relates to the claim of the assessee for the prior period expenses under 3 categories amounting to Rs. 23,27,520/- as discussed above. 10.1. Prior period expenses arise in the current period a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arned CIT(A) in his order dated 4th June 2015. 10.4. It is also important to note that on perusal of the financial statements prepared under the companies Act for 11 months, the assessee has shown prior period adjustments amounting to Rs. 22,91,593/- but it has not filed the financial statements prepared under the Income Tax Act. To our mind, the financial year adopted under the companies Act, 1956 (i.e. May 2005 to March 2006) cannot be equated with the previous year defined under section 3 of the Income Tax Act (April to March). Under the Companies Act, 1956 a financial year can be more/less than of 12 months whereas the previous year under the Income Tax Act cannot exceed more than 12 months. In our considered view where the assessee has adopted a different period under the companies Act than the previous year defined under the Income Tax Act, it is to file separate financial statements under the Income Tax Act. But we note that the assessee has not filed such financial statements prepared under the Income Tax Act. Thus in the absence of sufficient documentary evidence by the assessee even in the set-aside proceedings, we are not inclined to disturb the finding of the authori....