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2020 (7) TMI 174 - AT - Income TaxDisallowance of professional and legal expense, miscellaneous expenditure and travelling expenses - provision of expenses payable - concept of accounting on accrual basis - HELD THAT:- The provision of expenses payable account is naturally shown under the head sundry creditors/ expenses payable/ liabilities etc in the balance sheet at the close of the year. On the first day of next year, this account of Expenses payable is credited to the respective Expenses account of the next year. As and when those bills are received for, which provision was made in the last year, for which provision of Expenses payable reversed by crediting expenses account of next year, assessee debits the amount of invoices to that respective expenditure account. Thus, there is no impact on the profit and loss account of the next year. Reversal of the provision is merely a control account. Assessee also deducts tax at sources at the close of the year on such provisions, If it is not deducted same is disallowed u/s 40 (a) (ia) of the act. Assessee is a company and therefore it has to mandatorily maintain its books of accounts of Accrual basis of accounting. Accrual means Revenues and costs are accrued, that is, recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate. The lower authorities have failed to understand the concept of accounting on accrual basis and practice followed by the assessee. Provision made by the assessee on accrual basis was on basis of reasonable estimates. It cannot be an unascertained and contingent liability. Similar is the fact of disallowance of legal and professional expense, miscellaneous expense and travelling expenses. Disallowance confirmed by the ld CIT (A) deserves to be deleted. Accordingly, we reverse the orders of the lower authorities and direct the ld AO to delete the disallowance of professional and legal expense, miscellaneous expenditure and travelling expenses. Nature of stamp duty paid in relation to the leased business premises - Revenue or capital expenditure - lease was for a period of 10 years - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of the Honourable Bombay High Court in CIT versus Reliance Industrial Infrastructure Ltd [2015 (8) TMI 1215 - BOMBAY HIGH COURT] wherein the assessee in that case took a land on lease for a period of 30 years and paid stamp duty in respect of deed of lease. Honourable Supreme Court in case of Taparia Tools Ltd versus The Joint Commissioner Of Income Tax [2015 (3) TMI 853 - SUPREME COURT] also held that same is also not a deferred revenue expenditure. In view of this, we direct the lower authorities reversing the decision to allow the stamp duty charges paid by the assessee as an expenditure for the current year holding it to be revenue expenditure in nature allowable u/s 37 (1) of the act.
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