TMI Blog2023 (7) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ng grounds stands allowed. Disallowance of Deferred Revenue Expenditure - Due to severe technical issues, the expenditure incurred on raw material, power and consumable etc. during the intervening period between the date the project was ready to commence commercial production and the date on which commercial production actually began was treated as deferred revenue expenditure in the books of account and same was written-off over a period of 5 years - HELD THAT:- From the computation of income of subsequent years as placed on record, it could be seen that the expenditure in those years has been reversed in the computation of income and the deduction of the same has not been claimed by the assessee. The action of the assessee is in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two folds i.e., (i) disallowance of customs duty for Rs. 9.53 Lacs; (ii) disallowance of deferred revenue expenditure. The impugned order has been passed by learned Commissioner of Income Tax (Appeals)-3, Chennai [CIT(A)] on 07-01-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 05-03-2013. The grounds taken by the assessee read as under: - 1. The order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred in confirming the disallowance of Rs. 9,53,573/- being customs duty paid as prior period expenses. 2.1. The Commissioner of income tax (Appeals) ought to have appreciated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen deduction is claimed on the basis of section 43B, assessee must satisfy the twin test of both providing actual payment of the due tax or cess in the previous year in question, as well as satisfying the Department that due provision had been made in the books in regard to such duty or tax for which payment was made later on. To introduce this double test would be writing words into the Section which neither the Tribunal nor the Court is entitled to do. 3. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of miscellaneous expenditure amounting to Rs. 4,94,32,000/-. 3.1 The Appellant submits that as it is expenditure in the nature of revenue, and the entire expenditure is laid out and expended wholly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms duty if the said material is used in manufacturing process and the goods are ultimately exported. Such savings in customs duty is accounted for as income in the year when the raw material is imported. In this year, the assessee could not export the finished goods and consequently, asked to pay impugned customs duty for Rs. 9.53 Lacs. The assessee could not perform the obligation of export and accordingly, claimed the sum so paid as prior period items. The Ld. AO disallowed the same on the ground that the expenditure was not related to previous year. The Ld. CIT(A) upheld the disallowance against which the assessee is in further appeal before us. 2.2 From the facts itself, it emerges that the expenditure has been crystallized only dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in further appeal before us. 3.2 The undisputed facts that emerges are that the expenditure is revenue in nature. However, the expenditure incurred during intervening period when the project was ready to commence commercial production and the date on which commercial production actually began was treated as deferred revenue expenditure in the books of account. The same has been written-off over a period of 5 years in the books of account. However, in the computation of income, the assessee has chosen to claim the same in the first year itself. From the computation of income of subsequent years as placed on record, it could be seen that the expenditure in those years has been reversed in the computation of income and the deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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