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2024 (4) TMI 52 - AT - Income TaxDisallowance of prior period expenditure - Mercantile system - Matching principles of accounting - AO found that assessee was following mercantile system of accounting and had debited prior period expenses in its Books of Accounts and held that expenses accrued during the year under consideration were allowable, that as per the matching principles of accounting prior period expenses could not be allowed while computing the income for the AY 2008-09 - HELD THAT:- As decided in assessee's own case [2013 (3) TMI 876 - ITAT NAGPUR] wherein as held Prior period expenses are not a new phenomenon in the filed of accounting or taxation laws. Courts are of the view that if the expenditure incurred in particular year are crystalised in a subsequent year because of certain reasons, same cannot be dis-allowed only on the ground that assessee is following Mercantile system of Accounting. If assessee is following a particular system of accounting and it is not distorting income, treatment of prior period expenses loses its importance. In the case under consideration, assessee was following the same system for the last so many years and the AO was allowing the prior period expenses for the relevant years. AO/FAA has not challenged the claim made by the assessee that it was following this practice consistently. They have also not held that because of prior period expenses, the taxable income of the assessee remained un-taxed. The issue can be seen from another angle – expenditure incurred by the assessee is not in doubt. It is not the case of the Revenue Authorities that expenditure was never incurred. The allowability of such expenditure in a particular year has to be decided in pragmatic manner. Deferred revenue expenditure - The Co-ordinate Bench in assessee’s own case for A.Y. 2008-09 [2013 (3) TMI 876 - ITAT NAGPUR] has discussed the decision of the Hon'ble Bombay High Court in the case of Taparia Tools Ltd. [2003 (1) TMI 83 - BOMBAY HIGH COURT] - After considering the said decision, the ITAT Nagpur Benchin own case of assessee has allowed the appeal of the assessee. Therefore, there is no merit in Ground No.2 of the Revenue, accordingly, Ground No.2 is dismissed.
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