TMI Blog2022 (7) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... zed in the year under consideration - sale promotion and sale commission expenses pertaining to the earlier were not allowable in the year under consideration being prior period expenses and the deduction claimed by the assessee for the same is not allowable either in law or even in the facts of the case. We accordingly restrict the disallowance made by the AO and confirmed by the CIT(A) on account of prior period expenses. Unutilized CENVAT and Service Tax credit written off - HELD THAT:- Amounts in question representing the unutilized CENVAT and Service Tax credit cannot be considered as trade debts of the assessee and deduction for the same on being written off cannot be allowed under Section 36(1)(vii) r.w. Section 36(2) - Even the learned Counsel for the assessee has not been able to dispute this position. She, however, has contended that these two amounts having become irrecoverable, the same should be allowed as deduction under Section 37 of the Act being the business loss. She, however, has not been able to bring anything on record to establish that the unutilized CENVAT and Service Tax credit amount in question had become irrecoverable during the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14 and thus did not pertain to the year under consideration. iii) The assessee had claimed expenses of Rs. 39,402/- on 30/09/2014 in respect of visit of 03/01/2014 pertaining to year. iv) The assessee had debited sales promotion expenses of Rs.37,68,046/- out of which an amount of Rs.24,86,600/- in the name of IBO and Rs.3,50,646/- in the name of Swift Electrocamp Solutions Pvt. Ltd. pertained to commission on sales of earlier years. 4. The assessee, therefore, was called upon by the Assessing Officer to explain as to why the expenses, as pointed out by him as related to the earlier year, should not be disallowed. In reply, the assessee made its submission in writing as under:- In respect of commission payment made by us to IBO Gmbh and Swift Electrocomp Solution Pvt Ltd amounting to Rs.24,87,600/- and Rs.3,12,073/- respectively you have asked to explain why the same be no disallowed considering the same as expenditure of previous year in this regard we would like to submit that it is the policy of the company since its inception that commission to the agent is to be paid after realization of sales effected through them. Sometime it also happen w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2015 which comprise of secretarial work for FYs 2012-13, 2013-14 2014-15. In respect of professional fees also the company is accounting the expenditure as and when the bills is received and the same cannot be disallowed on the ground that it pertains to earlier year. Similarly, visit fees of Rs.39,402/- in respect of quality check of machines in earlier year and annual maintenance fees of Rs.60,379/- for period 01/01/2014 to 31/12/2014 by M/s. UL India Pvt Ltd, the bills in respect thereof received during the year be cannot be considered as previous year expenditure. 5. The Assessing Officer did not find merit in the submissions made by the assessee. According to him, the assessee-company was following the mercantile system of accounting; and, since the relevant expenses aggregating to Rs.32,25,523/- were related to the earlier year and not to the year under consideration, the same were not allowable as deduction in computing the income of the assessee for the year under consideration. He accordingly made disallowance of Rs.32,25,523/- on account of prior period expenses in the assessment completed under Section 143(3) of the Act vide order dated 27.12.2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (for 3 months) 3. Carrier Airconditioning Refrigeration Ltd AMC from 01.01.2015 to 30.06.2015 from 01.01.2014 to 30.06.2014 Total Invoice amounting to Rs.2,00,000 24.02.2015 1,00,000 (for 3 months) 4. Anish Kharidia, Company Secretary Professional work for FY 2012-13, 2013-14 and 2014-15 Total Invoice from 01.01.2014 to 30.06.2014 Total invoice amounting to rs.1,24,550 31.03.2015 72,000 (for FY 2012- 13 2013- 14) 5. UL India Private Limited Quality check Expenses Date of visit for Check is 03.01.2014 04.04.2014 39,402 8. As is clearly evident from the above details furnished by the learned Counsel for the assessee, the liability for the relevant expenses on account of AMC, professional fees and quality check expenses had arisen and crystallized in the year under consideration when the bills for the same by the concerned parties were raised on the assessee. We, therefore, find merit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is not allowable either in law or even in the facts of the case. We accordingly restrict the disallowance of Rs.32,25,523/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of prior period expenses to Rs.28,37,246/-. This ground of appeal of the assessee is thus partly allowed. 10. Ground No.2 taken by the assessee in this appeal involves the issue relating to addition of Rs.3,90,431/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of unutilized CENVAT and Service Tax credit written off. 11. During the course of assessment proceedings, the claim of the assessee for bad debts written off amounting to Rs.3,90,431/- was examined by the Assessing Officer. On such examination, he found that the unutilized CENVAT amounting to Rs.3,75,787/- and Service Tax credit of Rs.14,644/- were written off by the assessee and the same was claimed as bad debts written off. Since these two amounts did not represent trade debts of the assessee, the Assessing Officer held that the same was not allowable as deduction under Section 36(1)(vii) r.w. Section 36(2) of the Act. He also did not accept the alternate contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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