TMI Blog2020 (12) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has used the mix accounting system which categorically prohibits the allowability of prior period expenses unless it is proved that the expenses and the liability thereof is crystallized during the relevant year under consideration - CIT-A deleted the addition - HELD THAT:- CIT(A) has given a categorical finding that royalty payment is an additional payment and the same was not disputed by the Revenue. Once the royalty expenses of ₹ 14.95 crores have been crystallized in the present Assessment Year, the genuineness of the same is not questioned by the Revenue authorities. Hence, there is no need to interfere the findings of the CIT(A). Ground of the Revenue s appeal is dismissed. Addition of contingent liability, which do not constitute expenditure and not allowable u/s 37 (1) - DR submitted that in the present case the expenses on account of royalty payable to Government of Arunachal Pradesh Gujarat has been debited on estimated basis as assessee is not able to furnish any documentary evidence or explain basis as to how the expenditure on royalty has been crystallized - CIT-A deleted the addition - HELD THAT:- CIT(A) has given a categorical finding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C1T(A) has erred in making addition of ₹ 61,684/- while framing the assessment. ITA No. 4074/DEL/2016 (Revenue s appeal) (i) The Ld. CIT(A) has erred in deleting the addition of ₹ 1,79,41,000/- made by the AO on account of 14A of the Act. (ii) The Ld. CIT(A) has erred in not considering that the assessee has made huge expenditure under the head establishment and administrative expenses in his P L A/c., which has indirect nexus with the amount invested in mutual funds Shares. (iii) The Ld. CIT(A) has erred in deleting disallowance of ₹ 14,95,00,000/- made by the AO on account of Royalty payment to Assam Govt, in contravention of the accounting standards with regard to prior period expense. (iv) The Ld. CIT(A) has erred in deleting the addition of ₹ 38,97,00,000/- on account of contingent liability, which do not constitute expenditure and hence cannot be allowable u/s 37(1) of the Act. 3. There is a delay of 121 days in filing the present appeal of the assessee being ITA No.5591/Del/2016. The assessee filed application for condonation of delay along with the affidavit thereby explaining the reason for delay. The Ld. DR d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused all the relevant material available on record. From the perusal of records it can be seen that the assessee at this juncture has filed certain documents under Rule 46A to support justification of debit of expenses being made in the normal course of business respecting applicable Accounting Standards. In similar situation, the Tribunal in A.Y. 2009-10 and 2010-11 held as under: 13. AO disallowed expenditure of ₹ 5,94,00,000/- on the ground that the Assessee Board has failed to demonstrate that it fulfilled all terms and conditions of allowability of such expenditure u/s 36(1)(xii). CIT(A) confirmed the disallowance made by the AO for the sole reason that assessee has to establish that the expenditure claimed are in the nature of revenue expenditure and incurred wholly and exclusively for the aims and objects of the Assessee Board. 14. The ld. AR for the assessee addressed shot argument that when the assessee has created no assets nor any enduring benefit accrued to it rather the expenditure incurred are in the form of grants, sops, bounties, the same are revenue expenditure. When the Assessee Board has placed on record documents under Rule 46A to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that it is not necessary to pin point the expenditure in a case where assessee claims that no expenses has been incurred for earning exempt income. Thus, the CIT(A) was not correct it deleting the addition on account of Section 14A of the Act. 10. The Ld. AR submitted that the Assessing Officer was not correct in observing that the assessee board has made equity investment in the shares/securities amounting to ₹ 35,882 lacs and ₹ 35,882 lacs on 1st and last day of the year, thereby giving a new version to the brought forward investment of the preceding year thus, there is no reason of any expense, efforts or correlative nexus during the said assessment year for earning such income and moreover no dividend has been credited in the income statement of the year. The Ld. AR further submitted that during the assessment year, the assessee Board had not earned any exempt income and accordingly provisions of Section 14A have no application. The Ld. AR relied upon the order of the CIT(A). The Ld. AR further relied upon the following decisions: i) Cheminvest Ltd. v. CIT [2015] 378 ITR 33 (Delhi HC) ii) CIT v. Walfort Share and Stock Brokers (P.) Ltd. [2010] 326 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent Assessment Year, the genuineness of the same is not questioned by the Revenue authorities. Hence, there is no need to interfere the findings of the CIT(A). Ground No. 3 of the Revenue s appeal is dismissed. 15. As regards to Ground No. 4 relating to addition of ₹ 38,97,00,000/- on account of contingent liability, which do not constitute expenditure and not allowable u/s 37 (1) of the Act, the Ld. DR submitted that in the present case the expenses on account of royalty payable to Government of Arunachal Pradesh Gujarat has been debited on estimated basis as assessee is not able to furnish any documentary evidence or explain basis as to how the expenditure on royalty has been crystallized. Thus, the CIT(A) was not right in deleting the said addition. 16. The Ld. AR relied upon the order of the CIT(A). 17. We have heard both the parties and perused all the relevant material available on record. The CIT(A) has given a categorical finding that the Assessee Board is under an obligation of payment of royalty to the respective State Governments wherein oil wells are located. The amount payable on account of royalty is determined by the Government with regard to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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