TMI Blog1984 (10) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... yarn. It follows calendar year for the purpose of books of accounts maintained in mercantile system of accounting. 2.1. While finalising the assessment, the ITO observed as follows: "It is noticed that the firm has paid Rs. 11,893 as finance commission for obtaining the loans for the investment in the business. As decided in the earlier assessment by my predecessor, it is a capital expenditure and, therefore, I disallow the sum of Rs. 11,893. It is also noticed that the assessee firm has paid Rs. 75,000 as expenditure of office compensation. The amount was paid M/s P Co., the owner of the business premises. This office compensation amount was paid by the assessee for the use of its office for three C. Ys. i.e. 1977, 1978 and 1979. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for service charges for occupation of premises, etc., he directed the ITO to allow 1/3rd of the amount of Rs. 1,22,615 i.e. Rs. 40,871 in place of Rs. 25,000 being 1/3 rd of Rs. 75,000 provided in the accounts. He disallowed the amount in respect of the previous two years on the basis that the assessee following the mercantile system, was aware of the liability of payment and since no provision was made in the earlier years, the claim now made could not be allowed. Besides the debit note was dt. 13th Dec., 1979 and the same could not have been received on the same date as the receiving firm was having office at Bombay and, therefore, it could not have given rise to the liability on accrual basis also during the previous year. 3. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges, drawing our attention to the compilation containing in debit note raised against the assessee firm, it was stated that the xerox copy attached was duplicate one and the same was dt. 31st Dec., 1979. It is not known what has happened to the original debit note. Besides, the actual settlement might have taken place in January 1980 and, therefore, there was no reason to grant further more deduction. 5. We have considered the submissions and have gone through the orders of the authorities below. In respect of the claim for commission payment of Rs. 11,893, we do not find any justification of disallowance. It is a known fact that brokerage is paid to the brokers in the commercial world whenever the deposits received through them are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he office premises and utilising the other services from the recipient firm right from the accounting year 1977. It is the submission of the assessee that because of the relation between the partners of assessee firm and the recipient firm probably no claim was made in the earlier two years and the assessee was also under the impression that no claim would be made. However, it was only in 1979 that oral claim was made and, therefore, the liability arose in the year 1979. There is no reason to disbelieve this position because, the assessee itself has made a provision on ad hoc is of Rs. 75,000 while closing the books of accounts for 1979. The variation in the amount of provision and the actual liability also suggests that though the claim wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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