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(Full texts of the following Tribunal decisions are available
at the Society’s office on written request. For members desiring that the
Society mails a copy to them, Rs.30 per decision will be charged for
photocopying and postage.)
13 ITO v. Premier Automobiles Ltd.
ITAT ‘E’ Bench, Mumbai
Before K. C. Singhal (JM) and
Abraham P. George (AM)
ITA No. 2049/Mum./2005
A.Y. : 2001-02. Decided on : 17-1-2008
Counsel for revenue/assessee : S. C. Gupta/
Jayesh Dadia
S. 37(1) of the Income-tax Act, 1961 — Business expenditure —
Year of allowability — Expenditure pertaining to the earlier year period claimed
by the assessee in the year when demand for the same received — On the facts
expenditure claimed was allowed.
Per Singhal :
Facts :
During the year under consideration, the assessee had claimed
deduction of Rs.9.4 crore being compensation paid to Fiat India Pvt. Ltd. for
the use of the business premises and certain other facilities by the assessee
during the period from 1-0-1997 to 31-12-2000. According to the AO, the expense
related to earlier years, hence he disallowed the sum of Rs.8.78 crores,
allowing part of the expenditure which related to the year under appeal. On
appeal, the CIT(A) allowed the appeal of the assessee.
Held :
The Tribunal noted that the assessee had transferred its
entire premises to Fiat India, who in turn had allowed the assessee to use
certain portion of the premises as well as certain other services like supply of
power, water, etc. Under the agreement no consideration was fixed for the use of
these facilities. Thus, according to the Tribunal, it cannot be said that any
liability arose under the agreement and consequently, the assessee could not
make any provision in the earlier years. The liability arose only when Fiat
India decided to charge the assessee in respect of the said premises and the
facilities used by the assessee. Therefore, it was held that liability accrued
only in the year under consideration and accordingly, the order of the CIT(A)
was upheld.
