DCIT Vs Adani Wilmar Ltd. (ITAT Ahmedabad)
The issue under consideration is whether the CIT(A) correct in deleting the addition made on account of disallowance of prior period expenses?
In the instant case, the assessee in the year under consideration has claimed an expense under the head prior period item in its profit and loss account. Such prior period item was representing the excise duty with respect to waste i.e. Spent Earth generated during the manufacturing process. The assessee during the assessment proceedings admitted that such expenses pertains to the earlier year but the same is allowable on payment basis under section 43B of the Act. However, the AO disagreed with the contention of the assessee by observing that the assessee was very much aware about such liability in the year of its incurrence. Therefore the assessee should have claimed the deduction of such expenses in the year in which it was crystallized. Accordingly the AO disallowed the claim of the assessee and added the sum to the total income of the assessee.
ITAT states that, there is no ambiguity to the fact that such item of prior period expenses represents the excise duty paid by the assessee in the year under consideration. Similarly, the provisions of section 43B, being overriding section, provides to allow the deduction to the assessee on payment basis with respect to certain items including the excise duty. As the assessee has paid the excise duty, pertaining to the earlier year, in the year under consideration, ITAT are of the view that such payment of excise duty is eligible for deduction in the current year. In view of the above, ITAT do not find any infirmity in the order of the learned CIT (A) and accordingly they decline to interfere in his order. Thus the ground of appeal of the revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-1, Ahmedabad, dated 26/04/2016 (in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”). The assessee has filed C.O No.133/Ahd/2916 in Revenue’s appeal bearing ITA No.1761/Ahd/2016 relevant to the Assessment Year 2015-2016.
2. The Revenue has raised the following grounds of appeal:
1. That the ld.CIT(A) erred in law and on facts in deleting the addition o f Rs.2,11,98,182/- made u/s.14A r.w.r. 8D of the Act.
2. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.8,35,560/-made on account of disallowance of prior period expenses.
3. That the ld.CIT(A) erred in law and on facts in deleting the addition o f Rs.2,36, 63,532/- made u/s. 41(1) of the Act on account of cessation of liability.
4. That the ld.CIT(A) erred in law and on facts in deleting the addition o f Rs.46, 98,154/- considering the professional fees as revenue expenditure.
On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit.
The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary.
3. The 1st issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 2,11,98,182 under section 14A read with rule 8D of Income Tax Rule.
4. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of manufacturing/refining, export and trading of edible oil, seeds and cakes, pulse and grains. The assessee during the year has earned dividend income amounting to ₹ 11,37,500/- which was claimed as exempted from tax under section 10(34) of the Act. The assessee during the assessment proceedings claimed that it has not incurred any expense against such exempted income. However the AO disagreed the contention of the assessee and invoked the provisions of section 14A read with rule 8D of Rules for making the disallowance against such exempted income. The AO has made the disallowance of ₹ 2,11,98,182/- as detailed under:
