Expense cannot be disallowed for mere Non-debiting in books of account

Ernst & Young Ltd vs. ACIT (ITAT Delhi)

Non-debiting of the expenditure in the books of account is not relevant for allowability of the same as long as the expenditure is really incurred and is deductible as per law.

The Ernst & Young Ltd. vs. ACIT (International Taxation) [ITA Nos. 6561 & 6562/Del/2016, A.Y.s: 2012-13 & 2013-14, decided on 31.05.2018] case is of enormous use and has well elucidated the claim of expenditure as deduction where the same has not been debited in the books of accounts but the same has been claimed in computation of income.

Facts of the case, in brief, were that the assessee filed its return of income on 29.11.2012 declaring income of Rs.4,72,45,714/-. Ernst and Young Limited ‘the Company’ or the ‘Head Office’, incorporated in United Kingdom, established its India Branch office in New Delhi with the permission of the Reserve Bank of India in April 2008 vide order no. FE.CO.FID/10.83.137/2007- 08 to provide professional services to its parent and other member firms of Ernst & Young Global. The Branch provides Professional services which may be in the nature of technical assistance / advice in relation to expatriate tax and business tax compliance services including technical review and approval of income tax returns and other related work products, advice and technical assistance with respect to the production of income tax returns and other related work products; knowledge transfer on engagement specific matters to the Global Shared Services (GSS) personal working in the back office operations where US and UK returns are processed. The Branch is also engaged in providing professional services in the nature of on the job training and consultancy services to other EY network firms.