2010 (1) TMI 10

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....ievance before the Tribunal was that the Commissioner of Income Tax (Appeals) had erred in deleting the addition of Rs 3,16,64,463/- made by the Assessing Officer by making a disallowance of expenses on the ground that the said expenses related to the year prior to the previous year relevant for the assessment year in question. In other words, the addition was made in respect of prior period expenses. The said expenses were in the nature of fees paid to a foreign entity for rendering technical services to the assessee. The said technical fee was payable from time to time. However, the same had not been shown as payable in the books of accounts of the assessee in the year prior to the assessment year 2003-2004 because the parties had mutuall....

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....m in the year in which the expenditure was incurred, the same could not be allowed under the provisions of the said Act. The Commissioner of Income Tax (Appeals), after considering the contentions of the assessee and the view taken by the Assessing Officer, came to the conclusion that merely not making an entry in the accounts would not disentitle the assessee from its claim of deduction provided the same was allowable under the Act. According to the Commissioner of Income Tax (Appeals), the deduction could be claimed in view of the provisions of Section 40(a)(i) only in the year in which the tax was actually paid. Thus, the Commissioner of Income Tax (Appeals) took the view that even if the hypothetical situation was to be considered that ....

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....tion of such tax, it has not been paid before the expiry of the time prescribed under sub-section (1) of Section 200 and in accordance with that provisions of Chapter XVI-B of the Act. In the case of ABN Amro Bank, the ITAT has observed that when a deduction is not allowable because of the statutory provisions, it would make no difference whether the same was claimed or not by the assessee. Because of Section 40(a)(i) of the Act, the deduction has to be allowed in computing the income of previous year in which such tax deducted at source has been paid. This section 40(a)(i) starts with a non-obstante clause which implies that section 40, overrides the provisions of Section 30 to 38 of the Act. The amounts which may otherwise be allowable as....