By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punja bi, Bhadresh Doshi Chartered Accountants
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Sections 28, 40(a)(ia) – Prior period expenses can be allowed as a deduction in the previous year in which tax is actually deducted and remitted to the Government.
Facts
The assessee company had incurred certain expenditure in earlier years but the actual payments were made to the parties in the financial year relevant to the assessment year under consideration after deducting and remitting necessary TDS. The assessee had, in its accounts, reflected this expenditure as prior period expenditure since it had not claimed this expenditure in the earlier years when it was incurred.
In the course of assessment proceedings, the Assessing Officer (AO) disallowed this expenditure on the ground that it was prior period expenditure.
Aggrieved, the assessee preferred an appeal to the CIT(A) who allowed the appeal filed by the assessee.
Aggrieved, the revenue preferred an appeal to the Tribunal.
Held
The Tribunal observed that in the present case though the expenditure related to earlier period, actually TDS was paid in the assessment year under consideration and therefore, in view of the second limb of section 40(a) (ia), since the tax was deducted and paid during the previous year relevant to the assessment year under consideration, the same is allowable in the assessment year under consideration.
The Tribunal noted that the same view has been taken by the Cochin Bench in ITA No. 410/Coch/2014 dated 12.12.2014 in the case of M/s. Thermo Penpol Ltd. vs. ACIT.
Following the decision of the Cochin Bench of the Tribunal as well as considering the provisions of the Act, the Tribunal dismissed the ground of appeal filed by the Revenue.
The appeal filed by the Revenue was dismissed.
