ITAT ‘G’ Bench, Mumbai
Before A. L. Gehlot (AM) and
R. S. Padvekar (JM)
ITA No. 5297/Mum/2004
A.Y. : 1998-99. Decided on : 28-7-2009
Counsel for revenue/assessee : S. B. Prasad/
J. D. Mistry
S. 115JA — Stock borrowing charges not debited to P & L
Account as required under Schedule VI of the Companies Act can be claimed as
revenue expenditure even in the case of an assessee who is mandatorily bound
to follow the accounting standards as prescribed.
Per R. S. Padvekar :
Facts :
The total income of the assessee, assessed u/s.143(3) of
the Act, was a loss of Rs.55,37,760. Subsequently vide order passed u/s.143(3)
r.w. S. 147 the AO inter alia disallowed Rs.53,55,000 towards stock
borrowing charges incurred by the assessee and claimed in its computation of
total income but were not debited to its Profit & Loss Account. The AO held
that not debiting the expenditure to P & L Account was in violation of clause
(xii)(b) of Rule 3 of Part II of Schedule VI and hence the same was not
allowable.
The CIT(A) allowed the appeal filed by the assessee.
Aggrieved, the Revenue preferred an appeal to the Tribunal.
Held :
The Tribunal noted that the provisions of Minimum
Alternate Tax as contained in S. 115J were considered by the Apex Court in the
case of Apollo Tyres Ltd. It observed that the scheme of S. 115JA is identical
with that of S. 115J. It held that if the P & L Account prepared by the
assessee was not in accordance with the provisions of Part II and Part III of
Schedule VI to the Companies Act, 1956, then to that extent the AO can make
the corrections and adjustments, but the AO cannot make disallowance in
respect of expenses which are otherwise allowable but are not debited to P & L
Account. The Tribunal held that the stock borrowing charges were rightly
allowed as a deduction by the CIT(A).
The appeal filed by the Revenue was dismissed.
