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2020 (9) TMI 63 - AT - Income TaxAccrual of expenditure liability - correct year of assessment - Disallowance of expenses claimed through computation of total income though not accounted in this year but in preceding previous year - Whether expenditure incurred by the assessee has accrued as a liability in financial year 2011 – 12 or 2012 – 13? - HELD THAT:- In the present case on reading of the agreement executed by the assessee, disclosure of notes as discussed above in the financial statements, clearly shows that provision of expenses made by the assessee for assessment year 2012 – 13 is in conformity with proper accounting principles, where according to the assessee itself, the above liability arose in that year, correctly shows that expenditure was incurred by the assessee is accrued liability for assessment year 2012 – 13 and not assessment year 13 – 14. On perusal of the order of AO who has given the detailed finding that why the above liability did not accrue in assessment year 13 – 14 but in assessment year 12 – 13, based on the appreciation of the agreement shown by the assessee cannot be found fault with. In view of this, we confirm the actions of the lower authorities in disallowing the expenditure of ₹ 33.92 crore is claimed by the assessee in this assessment year i.e. assessment year 2013 – 14 as it does not pertaining to this year. Accordingly, ground of the appeal is dismissed. Disallowance of utilization of the provisions for obsolescence - assessee has reduced in the computation of total income sum from its income on account of users of provision for obsolescence claimed to have been offered to tax in the prior years - HELD THAT:- As before the AO the assessee has not furnished the details of treatment given to it to the provision of obsolescence created by the assessee and utilized by the assessee. Assessee also did not substantiate with adequate evidence about the disallowance of the provision made in the earlier years. Also not established that how the utilization of provision of the inventory is allowable as deduction in this year - provision has been made by the assessee for obsolescence of inventory applying the provisions of the accounting standard 29 related to the provisions, contingent liabilities and assets. It is also required to be appreciated that the order passed by the learned CIT – A on the merits of the issue where the assessee could not represent its case before her. Whole issue has not been examined by any of the lower authorities in the right perspective. Even the assessing officer has stated that in note number 11 – inventory being note to account for assessment year 2013 – 14 the assessee has used the entire provision in assessment year 2012 – 13 and nothing was left to be carried forward is completely erroneous. Differential interest income as per profit and loss account and amount as per Form No 26 AS for the subject year - HELD THAT:- Interest income is chargeable to tax in the year in which it accrues. It cannot be an excuse that assessee has offered the income in subsequent assessment year. Therefore, as there is no clarity that what is the amount of interest income booked by the assessee with respect to all the parties from womb interest has been earned and which has disclosed in form number 26AS before the subject assessment year, we set aside the whole issue to the file of the learned assessing officer with a direction to the assessee to show with proper evidence that what is the amount of income that has been credited in the books of account for the subject assessment year and what is the amount of interest shown in form number 26AS for the subject AY. AO is directed to examine the same, after giving the proper opportunity of hearing to the assessee, decide the issue on the merits afresh. Accordingly, ground number three of the appeal is allowed with above direction.
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