TMI Blog2021 (4) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Bill and submitted that bill was processed finally on 19/01/2009 by the finance division, before travelling through various Department of the assessee company. Regarding other bills of ₹ 43,491/-; ₹ 50,000; and ₹ 23,021 also similar submissions have been made by the learned Counsel of the assessee. We find that Tribunal Jaipur bench in the case of State Bank of Bikaner and Jaipur [ 2014 (11) TMI 264 - ITAT JAIPUR] held that expenses of the previous year are allowable in the respective year to which they pertained but information as regard to such expenses with evidence was received by the assessee from the various branches after closing of books of accounts, and hence same are allowable during the year under consideration. Before us also, the genuineness of the expenses has not been doubted by the lower authorities. Since in the instant case the bills for expenses under consideration have been processed by various divisions of the assessee and finally approved in the year under consideration, and thus, respectfully following the decision of the Tribunal in the case of State Bank of Bikaner and Jaipur (supra), the liability for the expenses was finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors, shockers, railway equipment etc. and other trading activities. For the year under consideration, the assessee filed return of income on 30/09/2009, declaring nil income under regular provisions of the Income-tax Act, 1961 (in short the Act ) and book profit of ₹ 27,77,81,818/- in terms of section 115JB of the Act. The return of income filed by the assessee was selected for scrutiny assessment. The Assessing Officer noticed international transactions entered into by the assessee with Associated Enterprises (AEs), and accordingly he referred the matter of determination of the arm s-length price of those international transactions to the learned Transfer Pricing Officer (TPO). The learned TPO proposed an addition of ₹ 1,55,00,000/- to the value of the international transaction reported by the assessee. The Assessing Officer passed a draft assessment order on 28/02/2013, wherein he proposed transfer pricing addition of ₹ 1,55,00,000/-, addition on account of disallowance of royalty expenses of ₹ 1,39,00,000/- and other additions . As the assessee did not file objection before the Learned Dispute Resolution Panel (DRP), within the stipulated period of 30 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant material on record. We find that the Assessing Officer has disallowed prior period expenses of ₹ 1,58,512/- on the ground that same pertain to earlier years. Out of the prior period expenses disallowed, the expenses of ₹ 1,35,491/- pertain to RED division and ₹ 23,021/- pertain to ASP Division. Before the Ld. CIT(A), the assessee made detailed submission with breakup of the expenses and justifying as how the expenses crystallized in the year under consideration. The Ld. CIT(A) following the order of the his predecessor and sustained the disallowance. The relevant finding of the Ld. CIT(A) is reproduced as under: 8.1 The appellant made the following submissions during the course of appellate proceedings:- The statutory auditors in their Tax Audit Report mentioned prior period expenditure of ₹ 1,58,512/- pertaining to the following divisions of the company i) RED - ₹ 1,35,491/- ii) ASP - ₹ 23,021/- The division-wise details of such expenses were filed along with photocopies of relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (ASP) The expenditure of ₹ 23,021/- pertains to various small value purchases made at the ASP division of the company towards the end of the accounting year 2007-08. As per procedure, such bills are verified, processed and then approved for payment The approval for these expenses was received by the finance department during the assessment year 2009-10 and accordingly booked in the accounts during the assessment year 2009-10. As already explained above, there is vast magnitude of small value transactions and it is always not possible to create liability for such expenditure at the close of the financial year due to nonreceipt of approved bills in the finance department. There is no case for any disallowance of this amount. 8.2 I have perused the order of the Assessing Officer who has observed as follows:- From the tax audit report it is observed that the assessee has debited a sum of ₹ 1,58,512 being prior period expenses in the P and L account where as the assessee has been following the mercantile system of accounting. Therefore, the assessee was asked to file the details of prior period expenses. In response to which the assessee has filed its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the same in the instant year also. In accordance with the principle of consistency and respectfully following the order of the CIT(A) in AY 2011-12, the addition made by the AO is confirmed . The ground of appeal is dismissed. 8.3 The assessee is following Mercantile system of accounting. Prior period expense are generally those expenses which are relating to the current year in the sense they are crystallized during the year, though relating to activities of an earlier year. For accounting purposes these are generally known as prior period items and required to be shown separately. Normally, where mercantile system of accounting is followed, expenses relating to relevant year are accounted for in that year. However, prior period expenses had to be allowed in subsequent years if those expenses are crystallized in that year. 8.4 In the submission before the Learned CIT(A), which have been reiterated before us, the assessee has contended that bill in respect of professional charges of ₹ 42,000/-was received on 30/04/2008 . The Learned Counsel before us referred to page No. 7 of the paper-book, which is a copy of the said Bill and submitted that bill was proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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