COMMISSIONER OF INCOME TAX Vs. MODIPON LTD.

JUDGEMENT

(1.) This appeal concerns the assessment year 2004-05. In the return filed by the Assessee, it had claimed certain expenses allowable as business expenditure. The Assessing Officer (AO) was of the view that out of those expenses to the tune of Rs. 41,95,719 related to the prior period and did not pertain to the financial year 2003-04 relevant to the assessment year 2004-05, as the Assessee company was following the mercantile system of accounting and therefore, the said expenses should have been claimed in the previous year. The Commissioner of Income-tax (Appeals) confirmed this view of the Assessing Officer. However, in further appeal preferred by the Assessee before the Income-tax Appellate Tribunal ("the Tribunal" in short), the Tribunal has reversed the order of the Assessing Officer as well as the Commissioner of Income-tax (Appeals) and allowed those expenses.

(2.) We may point out at this stage that even when the Assessee is following the mercantile system of accounting, the explanation furnished by the Assessee before the Assessing Officer and the Commissioner of Income-tax (Appeals), which was reiterated before the Tribunal was that the expenses were not booked due to non-receipt of details, information thereof on time, which was beyond the control of the Assessee. It was also explained that the aforesaid expenses to the tune of Rs. 41.95 lakhs were marginal as compared to enormous size of the Assessee-company. It was also explained that as per the accounting policy followed by the Assessee, such expenses are booked in the year in which they are settled for payment. The Tribunal went into details of each and every such expense and recorded the finding of fact that all these expenses were settled during this year. It was also recorded that more than 50 per cent, of expenses could be claimed only on actual expenses, as they were covered under Section 43B(d) of the Act. Detailed discussion in this behalf is contained in paragraph 8 of the order of the Tribunal, which reads as under:

(3.) That apart, a specific query was put to the learned Counsel for the Appellant that whether the return filed in the earlier assessment year showed profit or loss in so far as the Assessee-company is concerned. Learned Counsel for the Appellant was not in a position to answer to this. Learned Counsel for the Respondent informed that even in the earlier year, the Assessee had shown positive income and paid tax thereon. If that is the situation, in any case, there is no loss of revenue. Had this expense been allowed in the previous year, the Assessee would have paid lesser tax. On this ground also, we do not find it to be a fit case to interfere with the order of the Tribunal.