TaxTMI 
TaxTMI 
2015 (10) TMI 732
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....rief. The Assessee company is engaged in the business of trading in Steel, Financing and Building Construction. The return of income filed by the Assessee for the year under consideration was taken up for scrutiny. From the tax audit report, the AO noticed that the tax auditor has reported the following items of expenses as "prior period expenses" : Particulars Amt. (Rs.) Car Hire Charges 40,000/- Construction work-in-progress 1,98,300/- Motor Car Expenses 15,420/- Cost of Construction 29,23,276/- Total 31,76,996/- However, while computing the total income, the Assessee had disallowed the first three items shown in the table above, but did not add back the amount of Rs. 29.23 lakhs relating to the cost....
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....o these reasons, we were advised not to book these bills in the last year i.e. A. Y 2008-09. On the contrary, by not booking these bills in the last year the Assessee company has declared more income and paid more taxes and there is no revenue loss to the Government. So, due to the reason that the above liability was ascertained and quantified in the year under consideration so the liability accrued in the said accounting year 2008-09 and the assessee became entitled to claim deduction for that year in respect of that quantified amount. I would also like to mention that the same has been held by the Gujarat High Court in the case of Gujarat Financial State Corpn. Vs. CIT (195 ITR 518) that "earlier years expenses, though liabil....
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....ew that the Assessee could have booked these expenses in the immediately preceding year itself, since the accounts of that year were finalized subsequent to the receipt of the appeal. Accordingly, the AO disallowed the claim of Rs. 29.23 lakhs referred above. In the appeal filed by the Assessee, the ld. CIT(A) confirmed the disallowance. Hence, the Assessee has filed this appeal before us. 5. The ld. AR reiterated the same submissions as made before the AO. He submitted that the liability relating to the work carried out by the contractor, M/S A.M. Constructions finally got crystallized during the year under consideration and hence the said contractor has raised the bills also in the instant year only. Accordingly, he submitted....
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....lowing the impugned amount by treating the same as expenditure related to the prior period. 7. We have heard the rival contentions and carefully perused the record. The issue before us is whether the amount of Rs. 29.23 lakhs can be claimed as deduction during the year under consideration. Before us, the Ld A.R has furnished a paper book, wherein he has included correspondences exchanged between the assessee and the contractor about the quality of work. The assessee has written a letter dated 24.02.2008, wherein it has categorically stated that it will not pay any amount to the Contractor. In the letter dated 22.02.2008, the Contractor had acknowledged the defects in his works and has sought for a payment of Rs. 10.00 lakhs. According to L....