TMI Blog2015 (6) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of hearing. Nor has it placed on record any evidence disputing payment made in preceding assessment years. - Decided against revenue. - ITA No. 2715/Ahd/2011 - - - Dated:- 9-6-2015 - S/Shri N. S. Saini, A.M. and S. S. Godara, J.M. For the Appellant : Shri D. C. Mishra, Sr. D.R. For the Respondent : Shri S. R. Shah, AR ORDER PER Shri S. S. Godara, Judicial Member. This Revenue s appeal for AY 2004-05 arises from the order of CIT(A)-I, Baroda dated 17.8.2011 passed in case No.CAB-I/329/06- 07 deleting prior period expenses disallowance/addition of ₹ 16,65,118/-, in proceedings under section 143(3) of the Incometax Act 1961(in short the Act). 2. The assessee company is engaged in manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of its prior period expenditure in the relevant Financial Year. He also rejected all the assessee s contentions stated herein above for want of proof and necessary evidence. This resulted in the impugned disallowance/addition of prior period expenditure amounting to ₹ 16,65,118/-. 4. The CIT(A) has reversed the AO s finding as under :- 2. First ground of appeal is regarding addition of ₹ 16,65,118/-for prior period expenses. 2.1 In appeal, submissions as under were made: 1. Addition of ₹ 1665118 for Prior Period Expenses: In this connection we have to submit as follows; During the year under review the company had debited following expenses under the head prior period expenses, details as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year relevant to the previous year in which the dispute is finally adjudicated upon or settled, to claim a deduction in that behalf. In Saurashtra Cement Chemical Industries ltd. V CIT (1995) 213 ITR 523, Gujarat High Court had pronounced that , the allowability of a liability, relating to earlier years, depends upon several fact like making a demand its acceptance by the assessee and whether such liability has been actually claimed and paid in later previous years, it cannot be disallowed merely on the basis of the accounts maintained on the mercantile basis and that it related to a transaction of the earlier year. It is well settled that if the assessee follows the mercantile system of accounting and the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion crystallized during financial year under consideration and as per mercantile system of accounting, prior period expenses were not allowable. During appellate proceedings, Board Resolution dt. 15.9.2003 has been submitted by the appellant as per which payments of ₹ 16,65,118/- made directly to contractors' workers in earlier years on behalf of contractors were debited to contractor's account in FY 2003-04. This was done after discussion of appellant company with the contractors due to which they accepted the payment made by the appellant company on contractor's behalf as payment made to them. As such, appellant has been able to justify crystallization of liability in FY 2003-04. As far as year in which payments were mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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