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2017 (7) TMI 533 - ITAT MUMBAI

2017 (7) TMI 533 - ITAT MUMBAI - TMI - Disallowance of prior period expenditure - Held that:- One point which clearly emerges is that there is no dispute insofar as the nature of the expenditure is concerned, as being relatable to the business of the assessee. It is also correct that the assessee is following the mercantile system of accounting, so however, the impugned expenses may relate to an earlier period, but they cannot be said to arise in the preceding year. Quite clearly, the expenses h .....

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eductibility of the total expenses over a period of time. Considering the aforesaid, we find no reason to deny the claim of assessee for deduction of the impugned expenditure.- Decided in favour of assessee. - ITA No. 2388/MUM/2012 - Dated:- 29-5-2017 - Shri G. S. Pannu, Accountant Member And Shri Amarjit Singh, Judicial Member Appellant by : Shri Girish Dave Respondent by : Shri Ajai Pratap Singh ORDER Per G. S. Pannu, AM The captioned appeal by the assessee is directed against the order of CIT .....

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corporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of marketing research, serving clients within India as well as outside India. The appellant is a subsidiary of its foreign company based in USA. In the course of assessment proceedings, the Assessing Officer noted that the Tax Auditor s report revealed prior period expenses of ₹ 24,84,082/- which were in the nature of Compensation, Staff Welfare, Travel, Conveyance, etc. The Assessing Off .....

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ve for the assessee has referred to the relevant discussion in the assessment order wherein in para 4.2, the Assessing Officer has inter-alia, reproduced the written submissions of the assessee. In terms of the said submissions, it is quite clear that assessee canvassed that in terms of the consistent practice followed in the past, assessee closed its accounts each year on 30th April itself, i.e. within one month from the end of the relevant accounting year 31st March. Assessee has several offic .....

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fter 30.4.2007 and thus has been accounted for in the current previous year ending on 31.3.2008 corresponding to the instant assessment year. It was, therefore, explained that this was a regular practice followed over the years and that such expenditure could not be disallowed as prior period expenses. 5. The learned representative further explained that initially in Assessment Year 1996-97, such a dispute was raised by the Assessing Officer for the first time, which had been decided by the CIT( .....

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ot readily available on account of change in management and change in Tax Consultants over the years. However, the assessee had made efforts to obtain such material by approaching the Assessing Officer on more than one occasion. In this regard, he filed copies of the communications addressed to the Assessing Officer dated 18.12.2015, 25.4.2016, 25.5.2016 and 4.10.2016. Even otherwise, on merits also, the learned representative pointed out that the disallowance was impermissible and in this conte .....

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explaining before the lower authorities the reasons for which such expenses have been debited in the Profit & Loss Account for the year under consideration. It has been explained that it s accounts for the year ending 31.3.2007 are closed on 30.4.2007, to be in line with the practice followed by its holding company in USA and, therefore, the bills/details of expenditure of certain expenses, which pertain to 31.3.2007 ending, were received from its Branches after 30.4.2007 and, thus debited .....

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