TMI Blog2018 (10) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the business of dairy marketing, which undisputedly is not going to distort the determination of true profit/loss, such consistent claim of expenditure should not be disturbed. Where this is the first year of claim of such an expenditure and in which case, the principle of consistency will not apply and infact, the stand taken for the year will set the precedent for the subsequent years. We therefore, set aside the matter to the file of the Assessing Officer for the limited purpose of verifying as to whether the assessee have been claiming similar expenditure towards insurance premium in the past in the year of incurrence and where the same is found to be correct, the AO is directed to allow the same following the principle of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and in law the ld. CIT(A) has erred in confirming the action of ld. AO of making ad-hoc disallowance of ₹ 25,000/- out of the total maintenance expenses of ₹ 1,82,480/- claimed by the assessee. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of ₹ 25,000/-. 2. Regarding Ground No. 1, briefly stated the facts of the case are that during the course of assessment proceedings, the AO observed that the assessee has paid an amount of ₹ 91,950/- towards insurance premium on 04.07.2013 and 04.03.2014 and a significant part of these payments pertain to the next financial year. Accordingly, he disallowed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m that premium for a period exceeding 12 months had been claimed in the year consideration and has been paid on the basis of demand notice raised by the insurance company. In this situation, we do not find any flaw in the approach of the ld. CIT(A). Under the mercantile system of accounting, the assessee is entitled to claim deduction on the basis of incurring the liability irrespective of the date of payment. Even such liability can be claimed on the basis of provisions where such liability is not qualified. On the other hand, under the cash system of accounting, the assessee is entitled to claim deduction on the basis of payment irrespective of the date of incurring of liability. Under the mercantile system of accounting, in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, we may refer to a decision of the Hon ble Madras High Court in the case of CIT Vs. Southern Roadways Ltd.,282 ITR 379(Mad) in respect of similar claim in respect of telex rent, telephone rent, postal franking machine rent, rates and taxes. Hon ble High Court, relying upon their earlier decision held that The above issues are squarely covered by a Division Bench decision of this court in the case of CIT v. Southern Roadways Ltd. reported in [2004] 265 ITR 404, wherein it has been held as follows (page 407) : The assessee paid a sum of ₹ 26,729/- out of which a sum of ₹ 22,034/- has been paid towards postage, telegram, telephone, etc., and a sum of ₹ 4,695/- has been paid as rates and taxes. The assesse e-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure actually incurred and revenue in nature relating to the business is allowable. Any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of the business or profession should be allowed. Hence, we are of the view that the actual expenditure incurred has to be allowed notwithstanding the method of accounting the assessee followed. 5.1 In view of the foregoing and in the light of aforesaid decision, the assessee is entitled to claim this amount as a legitimate deduction in the year of account in question and consequently, in the assessment for the relevant assessment year. Therefore, we have no hesitation in upholding the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited purpose of verifying as to whether the assessee have been claiming similar expenditure towards insurance premium in the past in the year of incurrence and where the same is found to be correct, the AO is directed to allow the same following the principle of consistency and in light of the decision of the Co-ordinate Bench referred (supra) which supports the case of the assessee. 8. Regarding Ground No. 2, ld. AR has not pressed during the course of hearing. Therefore, the same is dismissed as not pressed. 9. Regarding Ground No. 3, we find that the addition of maintenance expenses is purely an adhoc disallowance which cannot be sustained in the eyes of law and the same is hereby deleted and the ground so raised by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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