9911796707
TMI Blog2012 (12) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 2. The assessee has raised various grounds of appeal No.1 to 7, however, the assessee has also filed revised grounds of appeal which are as under : " 1. The ld. CIT(A) erred in upholding the disallowance of Rs.13,63,450/- being the Power Lines Service charges excluded in the valuation of the current assets. 2. The ld. assessing authority and the appellate authority erred in not appreciating the notes on account and significant accounting policy as explained by the assessee. 3. The ld. CIT(A) ought to have accepted the explanation and allowed the deduction of Rs.13,63,450/- as claimed by the appellant. 4. The ld. CIT(A) ought to have appreciated that the Hon'ble Tribunal in the first round has allowed he clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of current assets as per the decisions of the Corporation and the expenditure incurred during the year for this purpose was Rs.19,85,527/- while the expenditure relating to prior years was Rs.13,53,460/-. The assessee's explanation with regard to the same was called for. The assessee explained that it had incurred expenditure from the financial year 1993-94 towards provision of power line infrastructure facilities to shed allottees in industrial estates which has accumulated to Rs.13,63,460/- and was shown as work in progress in the accounts and classified as current assets. It was submitted that the Corporation has never written off the expenditure in the accounts with the intention of recovering the amount from Karnataka electricity Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that the claim of prior period expenditure of Rs.13,53,460/- cannot be allowed during the relevant assessment year because the assessee was following mercantile system of accounting. He further held that in the earlier years, the expenditure which was treated as current assets in the respective financial years, cannot be written off in a subsequent year on account of retrospective change in the method of accounting and that if at all any change in the method of accounting has to be effected, it is to be effected from the previous year under consideration and not from earlier year period as it chooses. He thus disallowed the claim of prior period of expenditure 13,46,163/- and brought it to tax. 4. The assessee preferred an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come earned from the shed allottes was always offered as income, in the relevant years. He submitted that in the relevant previous year, the assessee had to handover the power lines to KEB and, therefore, it was necessary to claim the entire expenditure for the relevant assessment year only. He submitted that when there is change in accounting, there is bound to be such dispute relating to the allowability of earlier years expenses but as held by the Hon'ble Supreme Court of India in the case of CIT VS. Belahari Investment (P). Ltd., reported in 299 ITR 1, (SC) every assessee is entitled to change the method accounting unless it results in distortion of profits of the particular year. He also placed reliance upon the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be allowed during the year as it has already been taken to the current asset account and if the same is allowed during the relevant assessment year, it would amount to double deduction. As regards the decisions relied upon by the learned counsel for the assessee, the learned DR submitted that they are distinguishable on facts. 8. Having heard both the parties and having considered the rival contentions, we find that while remitting the issue back to the AO, the Hon'ble Karnataka High Court has directed the AO to consider the question before them i.e whether expenditure of Rs.13,65,450/- incurred by the assessee over the asset which was debited to the profit and loss account and also credited to closing stock and as working in progress a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not claimed this expenditure as deduction in the earlier years. As held by the Hon'ble Courts in the decisions relied upon by the learned counsel for the assessee (though on a different set of facts) wherever there is a change of method of accounting, for genuine reasons, there is every chances of claim of double deduction arising during the year on change of accounting. As held by the Hon'ble High Courts in the cases cited (Supra), the necessity and the crystallization of the liability during the relevant period is to be consider for allowing the expenditure. In the case before us, the assessee has not claimed the expenditure in the earlier years and there is no claim of double deduction in the relevant assessment year. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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