2026 (4) TMI 571

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..../'Tribunal'), dated 30.04.2012, for assessment year (AY) 2004 - 2005. 2. We have heard the submissions of Mr.A.S.Sriraman, learned counsel for the appellant and Dr.S.Sathiyanarayanan, learned Senior Standing Counsel for the first respondent. 3. The substantial questions of law admitted on 04.02.2013 are as follows:- 1. Whether the Appellate Tribunal is correct in law in sustaining the disallowance of expenses incurred amounting to Rs. 1,64,47,348/- in the assessment year 2003-04 and debited to the profit and loss account in the assessment year 2004-05, claimed as a deduction in the computation of taxable total income based on the rejection of the plea for reimbursement of such expenses by the Government of Tamil Nadu which fa....

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....% 6. The appellant, in line with the above mandate, had been debiting expenditure to the extent permitted, in computing taxable income. While so, the appellant was advised that it was preferable that the expenditure be debited on actual basis to obviate financial prejudice. Hence, memoranda were submitted to the Board on 27.10.2003 and 10.04.2003 seeking that the Board take necessary action to consider revising the G.O., and permit debiting on actual basis instead of imposing a cap on the expenditure. 7. The Government did not originally reject the proposal. In fact, it had sought particulars from the appellant in regard to its request, thus giving it hope that the proposal would ultimately be accepted. Various letters dated 03.12.200....

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.... only during this year. The Board meeting, in which it was decided to charge the entire expenditure to profit and loss account, was held on 07.09.2004, which was in the subsequent assessment year. In the circumstances, even if the contention of the appellant is accepted that in the absence of favourable orders, it was decided to debit the profit and loss account, the same took place only in the next year. Thus, there is no justification for claiming the expenditure in this year. I cannot direct the AO to allow deduction in the earlier year or in the next year as only the proceedings for the relevant assessment year is pending before me. The assessment proceedings for each assessment year is separate and I find that the expenditure is not al....

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....ncurred on Government owned industrial estates. As per GO.Ms.No.877 dated 01.07.1982 the Company is entitled to receive only 4% of the capital cost based on the original value of the assets. The Company has accounted the entire expenditure incurred on such maintenance as income contrary to the Government orders. This resulted in overstatement of income and profit by Rs. 1.64 Crore. 12. The assessee has replied to the audit objection and indicated the action taken by them. The reply reveals the hope that they had fostered, that their request would be considered favourably. The reply reads as follows:- Addendum to the Directors Report Reply to the comments of the Comptroller and Auditor General of India 1. Balanc....

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.... Total 1 Pay and Allowances 9136923.25 8798780.75 17935704.00 2 Employee Provident Fund 738451.01 847373.93 1585824.94 3 Medical Charges 258483.74 194999.05 453482.79 4 Staff Welfare Expenses 105320.00 134231.92 239551.92 5 Electricity Charges 1655537.12 2124172.56 3779699.68 6 Property Tax 9570.88 74281.59 83852.47 7 Water charges Paid 0.00 2176748.14 2176748.14 8 Legal Fees Paid 0.00 22059.90 22059.90 9 Insurance Charges 332.25 1414.65 1746.90 10 Office Contingencies 18654.97 9997.65 28652.62 11 Conveyance Charges 4572.31 4393.13 8965.44 12 Travelling Allowances 40593....