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2020 (1) TMI 987 - AT - Income TaxDisallowance of prior period expenses while calculating income under the normal provision of the Act - HELD THAT:- When the assessee followed the mercantile system of accounting, expenditure incurred during the previous year though pertaining to an earlier period is deductable. We have carefully considered the judgment passed in the matter of Kedarnath Jute Mfg. Co. Ltd.-vs-CIT [1971 (8) TMI 10 - SUPREME COURT] where it was held that where the assessee has followed mercantile system of accounting and distributing the liability to pay to sales tax and not making provision in its books of accounts particularly when the demand raised on the basis of the sales made during the accounting year the assessee entitled to deduct the amount of sales tax on the basis of the liability incurred and even in the absence of entries in the books of accounts, the same is admissible. The expenditure is not to be disallowed merely because it related to earlier previous year. In short under mercantile system of accounting the liability is allowable in the year it crystallized and thus the claim of the assessee seems to be justified and hence allowable See SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES [1994 (10) TMI 30 - GUJARAT HIGH COURT] . The addition made in this respect is, therefore, deleted. Addition towards amount received on account of advance against depreciation - CIT-A direct the AO to verify the claim of the appellant in the event the appellant is able to prove that any income has been taxed in the subsequent assessment year is in fact adjusted against advance such income would not be liable to be taxed in the year in which the appellant company has shown any income - HELD THAT:- It is the case of the assessee that such advances to be adjusted with the power so supplied in the future. We, thus, having regard to the facts and circumstances of the case find no infirmity in the order passed by the Learned CIT(A) in making such direction upon the Ld. AO with the guidelines framed therein in order to grant relief to the assessee if permissible under the law, so as to warrant interference. Hence, we confirm the order passed by the Ld. CIT(A).
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