TaxTMI 
TaxTMI 
2019 (1) TMI 1969
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.... 3.The learned CIT(A) erred in fact and in law in confirming the action of AO in disallowing Sales Promotion expenses of Rs. 30,11,573/-. 4.Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. 2. The AO in his order has stated as under: Sales Incentives and Sales Promotion Expenses: On perusal of the P& L account of the company It was gathered that the assesses had debited Rs. 69,32, 808/- under the head Sales Incentive Expenses and Rs. 30,11,574/- under the head Sales Promotion Expenses, The assesses was asked to sub/nit the details In respect of the said expenses, The assesses submitted the ledger account in respect of sales Incentive expenses and Sales promotion expenses. 4.1 Sales Incentive Expenses: On verification of the Sales Incentive Expenses ledger (Submitted by the assesses vide letter dated 26.12.2013) It was gathered that part of the expenses pertains to the period not relevant to the current Assessment year, The same was verified by the bills submitted by the assessee ( vide his, submission dated 22/01/2014) which carried the information that i....
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....able. The provisions of section 145 of the Income tax Act reads as under: '[Method of accounting 145(1) Income chargeable under the head " Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee, (2) The central Government may notify In the Official Gazette form time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub section (1) or accounting Standards as notified under sub section (2), have not been regularly followed by the assessee, The assessing Officer may make an assessment In the manner provided in section 144] The assessee is observing Mercantile System of accounting. Under the mercantile system of accounts the income and expenditure are required to be accounted for in the relevant assessment year. The expenditure Is all....
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....re, the expenses related to earlier year cannot be granted in the current financial year. 7. In support of its contention, ld. A.R. cited a judgment of Hon'ble Gujarat High Court in the matter of CIT-1 vs. Indian Petrochemicals Corporation Ltd. [2016] 74 taxmann.com 163 (Gujarat) wherein it has been held by the Hon'ble High Court: "Section 37(1), read with section 145, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Prior period expenses) - Assessment year 1999-2000 -Whether prior period expenses quantified and paid during current year would be allowed as business expenditure in relevant assessment year even though assessee was following mercantile system of accounting - Held, yes [Para 3] [In favour of assessee]". 8. Since the Hon'ble Gujarat High Court has granted relief in the same matter, we allow this ground of appeal. 9. Now we come to next ground related to confirming the action of A.O. in disallowing Sales Promotion expenses of Rs. 30,11,573/-. 10. In order to fact Sales Promotion, assessee incurred expenses of Rs. 30,11,573/. On Ethical promotion- Propaganda, Over the counter i.e. advertisement of medicine and apart from that appe....
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....ion to employees' account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i. e., prior to filing of return under section 139(1) - Held, yes - Assessee State transport corporation collected a sum being provident fund contribution from its employees - However, it had deposited lesser sum in provident fund account -Assessing Officer disallowed same under section 43B - However, Commissioner (Appeals) deleted disallowance on ground that employees contribution was deposited before filing return - Whether since assessee had not deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1)(va), disallowance made by Assessing Officer was just and proper - Held, yes [Para 8] [In favour of revenue] 15. In the meanwhile, it is noticed that on this issue appeal is pending before the Hon'ble Supreme Court and recently Hon'ble Gujarat High Court in Tax Appeal No. 1186 of 2018 has held that two clear ways are possible to enable the appellant-assessee to get benefit of the judgm....