2024 (4) TMI 52

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....ue has raised the following grounds of appeal : Submission of ld.AR : 2. The ld. Authorised Representative(ld.AR) of the assessee explained that the ld.CIT(A) has decided the assessee's appeal regarding issue of prior period expenses following the decision of ITAT in assessee's own case in ITA No.42/PUN/2012 order dated 13.03.2013. The ld.AR filed copy of the said order. The ld.AR pleaded that there is no merits in the case of the Revenue. Submission of ld.DR: 3. The ld. Departmental Representative(ld.DR) for the Revenue relied o the order of the Assessing Officer(AO). Findings & Analysis : 4. We have heard both the parties and perused the records. The ld.CIT(A) in para 7.2 has discussed the issue and allowed the assessee'....

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....see preferred an appeal before the First Appellate Authority (FAA).After considering the reply of the assessee-company, FAA held that issue of the claim of expenditure under the mercantile system of accounting was considered by the Hon'ble Jurisdictional High Court in the case of Taparia Tools Ltd., (260 ITR 102), that the claim for expenses of particular year should be made against the income of the same period, that the assessee by accounting prior period expenses pertaining to an earlier year had not adhered to the principles of mercantile system of accounting, that claim of this nature resulted in distorting the profit of the year. Finally, following the principles laid down by the Hon'ble Bombay High Court in the case of Taparia Tools ....

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.... treatment of prior period expenses loses its importance. In the case under consideration, assessee was following the same system for the last so many years and the AO was allowing the prior period expenses for the relevant years. AO/FAA has not challenged the claim made by the assessee that it was following this practice consistently. They have also not held that because of prior period expenses, the taxable income of the assessee remained un-taxed. The issue can be seen from another angle - expenditure incurred by the assessee is not in doubt. It is not the case of the Revenue Authorities that expenditure was never incurred. The allowability of such expenditure in a particular year has to be decided in pragmatic manner. We have perused th....

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....ious years it cannot be disallowed as deduction merely on the basis of the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. The true profits and gain of a previous year are required to be computed for the purpose of determining tax a liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relate, the mercantile system does not call for adjustment in the books of account on estimate basis. It is actually known income or expenses, the right to receive or the liability to pay which has come to be crystallized, which is to be taken into....