TaxTMI 
TaxTMI 
2023 (7) TMI 1147
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....) pertaining to Assessment Year ( AY )2010-11. 2. We shall first deal with the appeal of the assessee in ITA No.322/Ahd/2022 for AY 2010-11. 3. Ground No.1 raised by the assessee is a general ground and, therefore, the same is not being dealt with us. 4. Ground No.2 reads as under:- i) The learned CIT(A), NFAC has erred in confirming the net disallowance of Rs. 2,28,91,059/- (after allowing depreciation of Rs. 40,39,599/-) made by Ld.AO, being expenditure incurred of replacement of Membrane Cells, treating the same as of capital in nature. The appellant submits that the replacement were carried out in the ordinary course of business and hence it is rightly claimed as revenue expenditure. ii) It is also submitted t....
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.... us is that this expenditure has consistently been allowed to the assessee ,held as revenue expenditure by the ITAT, confirmed by the Hon'ble High Court and also by the Hon'ble Supreme Court, in preceding years. We have noted that this contention was raised by the assessee before the Ld.CIT(A) NFAC also as reproduced at page No.6 of the order, however without giving any cognizance to the same, the Ld.CIT(A)NFAC upheld the disallowance of impugned expenses and treated them to be capital in nature. 5. Before us, Ld.DR was unable to controvert the contention of the ld.counsel for the assessee that the issue was covered in favour of assessee by various orders of the ITAT, the Hon'ble Gujarat High Court and even the Hon'ble Apex Court in t....
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....der the provision of Section 115JB of the Act without ignoring the fact that the said liability was crystallized and quantified during the year. ii) It is also submitted that the aforementioned liability was crystallized during the year but only accounting of the same has been booked under the head prior period expenses and shown accordingly in the annual accounts.] iii) Moreover, the appellant would like to draw attention of your honour that, it is apparent from the copies debit note produced during the Appeal proceedings that the same was received during the year and accordingly claimed during the year. iv) Without prejudice to the above, the claim of appellant was rightly allowed by CIT(A) in the appeal proceed....
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....ant includes addition of these 2 items i.e. amount of depreciation of Rs. 23,42,581 and loss on Assets demolished Rs. 164377 or not? If they were added by appellant in computation of profit as per normal provisions of the Act only (related to which it was given relief perhaps by CIT appeal against original assessment order) it should also be added while computing book profit. But even if they were not added; items of expenditure of prior period would have to be added to Compute Book Profits as per following discussion:- 5.3.3.4 However let us now consider the main item of PRIO PERIOD EXPENSES as was submitted by the appellant. These are as under:- Manufacturing & operating expenses Rs. 4,63,88,745: 1. Debit notes ....
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....Once the ld.CIT(A) has appreciated the nature of the expenses ,categorized by the assessee as prior period expenses, to be not so and categorically held so, the expenses clearly as per the findings of the Ld.CIT(A) do not qualify as prior period expenses. Therefore, there is no question for making any adjustment of the same to the book profits of the assessee by treating them as period expenses. For this reason alone, the adjustment made confirmed by the Ld.CIT(A) of alleged prior period expenses amounting to Rs. 4,63,88,745/- is set aside. Ground No.3 of assessee's appeal is allowed. 10. In effect, the appeal of the assessee in ITA No.322/Ahd/2022 for AY 2010-11 is allowed. 11. Now we take up the Revenue's appeal in ITA No.319/Ahd/20....
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.... profit in terms of any of the clauses covered by Explanation to Section 115JA". Here in the instant case, the assessee has debited the above amount of prior period expenses of Rs. 4,63,56,702/- in the Profit & Loss Account for the year under consideration and the same is not allowable as deduction as per the provisions of the Companies Act and also in terms of clause (i) to (viii) of Explanation-1 to Section 115JB of the IT Act for working out the Net Profit for the purpose of computation of Book Profit u/s. 115JB of the IT Act. 10. The solitary grievance as is evident from the grounds raised above is against the deletion of adjustment made to the book profits of the assessee of prior period expenses in terms of the provisions of sectio....