2011 (3) TMI 1808

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....90,314/- towards prior period expenses, without appreciating that the said liability for expenses was actually crystallized during the current assessment year and hence, were allowable. 2. Without prejudice to the above and on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not giving a direction that the above expenses should be allowed in the relevant assessment year." 2. The assessee is a company engaged in the business of import and trading of chemicals. The AO noticed that clause 22(b) of the Tax Audit Report furnished in form No.3CD and filed along with return of income it has been mentioned that a sum of Rs. 4,90,314/- was debited to P&L Account on account of prior....

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....20,800   4,90,314 Profits & Loss account:   Income under various head ...... 234,79,16,880 Expenses under various heads .... 242,10,97,248 Prof. or loss for the year --- (-) 7,31,80,368 Prior period transactions ... 4,90,314 Profit/loss before taxation .... (-) 7,36,70,681 In Schedule 14, the prior period credits(expenses) were Rs. 12,82,846/- whereas prior period debits(income) were Rs. 17,73,160/- . Thus the prior period income was more to the extent of Rs. 4,90,314/-. It was this excess [prior period income Rs. 17,73,160 - prior period expenses Rs. 12,82,846] income of Rs. 4,90,314/- which was debited by appellant in the P&L account. It was an undisputed fact that all the items....

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....A) are erroneous. In this regard he brought to our attention to Schedule 14 of prior period items of the P&L Account and submitted that the expenses were more and the income was less and difference was claimed as expenses in the P&L Account and, therefore, the conclusions of the CIT(A) that income was more and expenses was less was erroneous. The ld. D.R relied on the order of the CIT(A). 6. We have considered the rival submissions. Schedule 14 to the P&L Account regarding prior period transactions is as follows: Schedule 14: Prior period transactions: Credits:   Purchase .... 9,42,621 Commission & Brokerage .... 3,40,225   12,82,846 Debits:   Sales .... 12,53,966 Storage charges .....

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....ct. Section 40 opens with the phrase 'Notwithstanding anything to the contrary in Section 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession". The capital expenditure reported in Annexure -8 of Form 3CD has been considered by the assessee company for claiming depreciation u/s. 32 of the IT Act. Therefore, the provisions of section 40(a)(ia) are applicable in respect of the said sum of depreciation claimed on the capital expenditure in respect of which the provisions of Chapter XVII-B have not been complied with. Considering the above, the depreciation of Rs. 1,07,541/- claimed on the capital expenditure reported in Annexure -8 was disallowed u/....