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2021 (2) TMI 733 - AT - Income TaxDeduction towards prior period expenditure - crystalization of work/services rendered in earlier year - mercantile system of accounting followed - CIT-A deleted the addition - HELD THAT:- It is not in dispute that the accounts of the assessee have been prepared in accordance with the mandate provided under the Electricity Act. The clear statutory mandate issued by the Government with regard to maintenance of accounts enabled the assessee company, being a Public Sector Undertaking (PSU), to disclose the prior period expenses and prior period income separately in its accounts. CIT(A) had duly recognised the method of accounting regularly followed by the assessee in the instant case. We find that the ld. CIT(A) had taken due cognizance of each and every item pertaining to prior period expenses and had understood the modus operandi thereon and duly appreciated the fact of assessee company conducting its operations with huge net work which eventually explains the time taken for accounting of various expenses contributing to the delay and slippage of an annual accounting year. CIT(A) also took note of the accounts of the assessee company getting scrutinized by Statutory Auditors, Internal Auditors and also by the Controller of Auditor General of India. It is pertinent to note that none of them had given any adverse remarks about the aspect of prior period expenditure. We find that the ld. CIT(A) had categorically given a finding that all the expenses reflected in the prior period expenses except the one which were voluntarily disallowed by the assessee in the return of income, though debited to prior period expenditure during the year, got crystallised during the year under consideration and hence, becomes allowable expenditure. None of these findings given by the ld. CIT(A) were rebutted by the Revenue before us. We also find that the Hon’ble Jurisdictional High Court in the case of yet another Public Sector Undertaking in CIT vs. Mahanagar Gas Ltd.[2013 (7) TMI 118 - BOMBAY HIGH COURT] had an occasion to go through the same issue. Thus we find no infirmity in the order of the ld. CIT(A) granting relief to the assessee in respect of prior period expenditure. Accordingly, the grounds raised by the revenue in this regard are dismissed
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