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2022 (3) TMI 519 - AT - Income TaxDisallowance of prior period expenses - Deduction of TDS in the current year - Application of first proviso to section 40(a)(ia) - scope of amendment to section 40(a)(ia) - whether assessee is entitled for claiming deduction in the assessment year under consideration? - contention of the ld. AR before us is that these two expenditure were actually incurred by the assessee in the assessment year under consideration as this expenditure crystallised in the year under consideration and the same has to be allowed in view of the proviso to section 40(a)(ia) - HELD THAT:- The amendments to section 40(a)(ia) are made to alleviate the genuine hardships and unnecessary financial liabilities imposed on the taxpayers by refusing to give deductions of bona fide expenditure only for the reason of technical non-compliance of TDS provisions. Such an attempt was earlier also made by making the amendments to the provisions of section 40(a)(ia) by the Finance Act, 2008 and the said amendments were consciously made with retrospective effect from 1-4-2005 keeping in view that the same were made with a view to mitigating the hardships caused to the assessee. The amendments made again to the provisions of section 40(a)(ia) by the Finance Act, 2010 to tone down the rigour of law with the same intention, however, are made with effect from 1-4-2010. This proviso will come to the rescue of the assessee, only when the expenditure was claimed by the assessee as a deduction in the earlier assessment year which was disallowed by the AO by invoking the provisions of section 40(a)(ia) of the Act on the reason of non-deduction of tax at source or remitting the same to the Government after deduction. But in this case, the assessee has not claimed this expenditure as deduction in the earlier assessment year on account of nondeduction of tax by invoking the provisions of section 40(a)(ia) of the Act. Being so, when it was not allowed disallowed by the AO in the earlier assessment year by invoking the provisions of section 40(a)(ia), the assessee in the subsequent assessment year cannot claim it as a deduction on payment basis by resorting to first proviso to section 40(a)(ia) of the Act. More so, it is settled law that deduction can be permitted in respect of only those expenses which are incurred in the relevant accounting year for the purpose of computing yearly profits and gains. We find that the claim of the assessee on the above two heads of expenses pertaining to earlier period cannot be accepted as it has crystallised in the year and the bills were raised in the earlier assessment year. Being so, the said expenditure cannot be allowed as deduction in this assessment year, which is prior period expenses and first proviso to section 40(a)(ia) has no application in the present case.
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