Rolex Hosiery Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1474/DEL/2013

• Counselvise Citation: 147420114 RSA 2013
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: UMESH GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.1474/DEL/2013 ASSESSMENT YEAR : 2009-10 ROLEX HOSIERY PVT. LTD., 27, COMMUNITY CENTRE, VASANT VIHAR, NEW DELHI. PAN: AAACR3190F VS. DCIT, CIRCLE 15(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI UMESH GUPTA, CA DEPARTMENT BY : SHRI VIKRAM SAHAY, SR. DR DATE OF HEARING : 13.03.2015 DATE OF PRONOUNCEMENT : 13 .03.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 18.12.2012 IN RELATION TO THE ASSESSM ENT YEAR 2009-10. ITA NO.1474/DEL/2012 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAI NST THE UPHOLDING OF ADDITION TO THE EXTENT OF RS.9,84,053/- MADE BY THE AO ON ACCOUNT OF PRIOR PERIOD EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CLAIMED DEDUCTION FOR PRIOR PERIOD EXPENSES AMOUNTING TO RS .14,84,170/-. IN THE ABSENCE OF ANY DETAILS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE ADDITION FOR THE EQUAL SUM . DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, THE ASSESSEE FURNISHED CERTAIN DETAILS CLAIMING THE DEDUCTIBILITY OF SUCH EXPENSES IN THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) SENT SUCH DETAILS TO THE AO FOR REMAND REPORT. ON CONSIDERATION OF THE ENTIRE MATERIAL IN CLUDING THE REMAND REPORT AND THE REJOINDER OF THE ASSESSEE, THE LD. C IT(A) ALLOWED DEDUCTION FOR A SUM OF RS.5,00,116/-, THE LIABILITY IN RESPECT OF WHICH WAS INCURRED DURING THE YEAR. HOWEVER, THE REMAININ G EXPENSES AMOUNTING TO RS.9,84,053/- WERE NOT ALLOWED. THE AS SESSEE IS AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION TO THIS EXTENT. ITA NO.1474/DEL/2012 3 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED FROM THE IMPUGN ED ORDER ITSELF THAT THE LD. CIT(A) ADMITTED THAT: THE EXPENSES OF RS.9,84, 053/- AS PER THE VOUCHERS RELATE TO THE PERIOD BEFORE THE RELEVANT P REVIOUS YEAR, BUT, WERE SETTLED DURING THE PREVIOUS YEAR. THIS FACT IS ALSO BORNE OUT FROM THE REMAND REPORT DATED 22.11.2012, A COPY OF WHICH IS AVAILABLE AT PAGES 633 ONWARDS OF THE PAPER BOOK. THE AO IN THE LAST PARA OF THE SECOND PAGE OF THE REMAND REPORT ADMITTED THAT: THE EXPENSES WERE CRYSTALLIZED AND SETTLED DURING THE PREVIOUS YEAR 2008-09 ONLY . THUS IT IS APPARENT THAT BOTH THE AUTHORITIES HAVE MADE AND SUSTAINED T HE ADDITION BY KNOWING FULLY WELL THAT THOUGH THE EXPENSES RELATED TO EARLIER YEAR BUT THE LIABILITY GOT CRYSTALLIZED IN THIS YEAR BY MEAN S OF SETTLEMENT OF DISPUTE. 5. UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, AN EXPENDITURE BECOMES DEDUCTIBLE WHEN LIABILITY IS INCURRED. IN SO FAR A S A CONTRACTUAL LIABILITY IS CONCERNED, IT IS SAID TO BE INCURRED AND CRYSTAL LIZED WHEN THE CLAIM IS FINALLY SETTLED. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ITA NO.1474/DEL/2012 4 SWADESHI COTTON AND FLOUR MILLS PVT. LTD. (1964) 53 ITR 134 (SC) HAS HELD THAT UNDER THE MERCANTILE SYSTEM OF ACCOUNTING THE CLAIM OF PROFIT BONUS FOR EARLIER YEAR SETTLED BY AN AWARD IN A LAT ER YEAR IS DEDUCTIBLE IN SUCH LATER YEAR WHEN THE LIABILITY AROSE IN THE YEA R IN WHICH THE CLAIM WAS FINALLY SETTLED BY WAY OF AWARD. 6. COMING BACK TO THE FACTS OF THE INSTANT CASE , WE FIND IT AS AN ADMITTED POSITION THAT THE CLAIMS QUA THE ABOVE SUM WERE FINALLY SETTLED IN THE YEAR IN QUESTION. IN THAT VIEW OF THE MATTER , WE SEE NO REASON TO SUSTAIN ANY DISALLOWANCE IN RESPECT OF THIS LIABILI TY. OVERTURNING THE IMPUGNED ORDER, WE DIRECT TO ALLOW DEDUCTION FOR A SUM OF RS.9,84,053/- 7. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.201 5. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 13 TH MARCH, 2015. DK ITA NO.1474/DEL/2012 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.