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2021 (8) TMI 509 - AT - Income TaxDisallowance relating to prior period expenses made - assessee is engaged in the business of design, development and testing of software - HELD THAT:- It is a fact that the assessee has offered no prior period income which has been arrived at after deducting prior period expenditure from the prior period income - Though the A.O. initially added both prior period income and prior period expenditure in the original assessment order, yet in the rectification order passed by the A.O. u/s 154 of the Act, he has deleted the disallowance relating to prior period income. The net effect of the action of AO resulted in disallowance of prior period expenses. As held in the case of Dishman Pharmaceuticals & Chemicals Ltd. [2019 (10) TMI 1195 - GUJARAT HIGH COURT] that once the prior period income is assessed to tax, then the corresponding prior period expenditure also should be allowed to be set off. Hence the action of the AO was contradictory to the decision rendered by Hon’ble Gujarat High Court in the above said case. We notice that the assessee has offered ₹ 16,86,334/- as per the principle laid down by the Hon’ble Gujarat High Court in the above said case. Thus we direct the AO to allow the prior period expenditure as deduction against prior period income. Accordingly, we direct the A.O. to delete the disallowance relating to prior period expenditure. - Decided in favour of assessee.
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