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2021 (4) TMI 1350 - AT - Income TaxExpenditure debited to the profit and loss account allowable to the extent it reduces the profit to Rs.NIL - CIT-A upholding the AO’s action invoking Section 40(a)(ia) disallowance with further directions to AO that the said expenses ought to be allowed only to the extent it reduces assessee's net profits to “Zero” only - HELD THAT:- We find no reason to sustain the same.There is no provision in the Act and more particularly in Chapter IV-D from Section 28 to 44BB dealing with profit and gains of a business or a profession which can suggest that an expenditure claim’s disallowance could be restricted to ‘zero’ income therein resulting in ‘loss’ figures as well. While holding so, it would not be out of context altogether if we refer to hon’ble apex court’s larger bench decision in CIT Vs. Manmohan Das [1965 (11) TMI 33 - SUPREME COURT] that an AO arriving at loss figure cannot restrict the same from being carried forward in earlier year since it is for the assessing authority of the subsequent year to deal with such an issue and if at all the former of them decides the same in such a manner, it is not binding on the assessee in the said subsequent year. We adopt the very reasoning herein as well mindful of the fact that if the impugned expenditure claimed results the assessee's income computed in ‘loss’, its expenditure claim which is otherwise allowable ought not to be accepted as not within the four corners of the fiscal statute. There is also no such restrictions clause in Chapter VI of the Act to this effect as well. Case law Commissioner of Customs Vs. Dilip Kumar & Co. & Others [2018 (7) TMI 1826 - SUPREME COURT] has settled the law that a fiscal statute has to be strictly interpreted whether dealing with taxing or exemption provisions. DR fails to rebut the fact that the CIT(A) impugned directions have not quoted any statutory provision at all that such a disallowance subsists till it reaches ‘NIL’ income only. We thus reverse the CIT(A) findings under challenge for this precise reason alone. The assessee’s sole substantive ground succeeds.
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