Case Law Details
TANFAC Industries Ltd Vs ACIT (ITAT Chennai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Chennai has issued an order in the case of TANFAC Industries Ltd Vs ACIT, ruling in favor of the assessee regarding the disallowance of prior period expenses for Customs Duty. The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-3, Chennai.
Analysis: The assessee, TANFAC Industries Ltd, claimed the deduction of Customs Duty as prior period expenses in the relevant year. The company was eligible for exemption from customs duty if the imported raw materials were used in the manufacturing process and the resulting goods were ultimately exported. However, due to the failure to export the finished goods, the company was required to pay the Customs Duty.
The Assessing Officer disallowed the deduction, stating that the expenditure was not related to the previous year. The Commissioner of Income Tax (Appeals) upheld the disallowance. However, the ITAT Chennai disagreed with their decision.
The tribunal observed that the liability to pay the Customs Duty had crystallized during the relevant year, as the company could not fulfill its export obligation. Therefore, the deduction of the Customs Duty was allowable in the same year. The ITAT Chennai cited Section 43B of the Income Tax Act, which allows deductions for statutory dues in the year of payment, irrespective of the accounting method followed by the assessee.
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