Different treatment in books of accounts cannot deprive claiming of entire expenditure

PCIT Vs Sriram Chita Pvt Ltd (Karnataka High Court)

Karnataka High Court held that bid loss claimed by the assessee cannot be disallowed merely because a different treatment was given in the books of accounts. Entries in the books of accounts are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act.

Facts- The assessee, for A.Y. 2014-15, debited a sum of Rs.14,13,48,676/- as loss on own chits bidding and also claimed bid loss of Rs.18,65,72,307/-. From the aforesaid amount, the assessee reduced an amount of Rs.14,13,48,676/- being bid loss and claimed reduction of Rs.4,52,23,631/- on account of bid loss.

The assessee filed ROI on 30.09.2014 declaring a loss of Rs.4,77,49,534/-. Thereafter, the assessee filed revised return on 29.10.2014 in which the assessee claimed bid loss of Rs.14,13,48,676/-. The Assessing Authority, by an order dated 21.12.2016, held that method of accounting and bid loss claimed as an expenditure in the year of pricing, was not in consonance with system of accounting and therefore, disallowed the claim.

The assessee thereupon filed an appeal before the CIT(A) and the same was allowed. Accordingly, revenue preferred an appeal before ITAT which was dismissed. Being aggrieved, the present appeal is filed by revenue.

Revenue mainly contested that the assessee had claimed bid loss in two ways namely, one debited in profit and loss account under the head ‘other expenses’ which relates to the period ending 31.03.2009 and the other one is reduced in the computation of income representing bid loss relating to the chit groups that extend to the subsequent years. It is therefore urged that the Assessing Authority had rightly held that the claim of the assessee that there is no scope to apportion any portion of bid loss to the remaining period of chit, cannot be accepted.

Conclusion- Hon’ble Supreme Court in the case of Taparia Tools held that merely because a different treatment was given in the books of accounts cannot be a factor which would deprive the Assessee from claiming the entire expenditure as a deduction. It has been held repeatedly by this Court that entries in the books of accounts are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act.

Held that it is evident that the substantial question of law involved in this appeal is no longer res integrate and the same is already answered against the revenue.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT