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Income Tax Appellate Tribunal, ‘A’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -3, Chennai, dated 01.02.2019 and pertains to assessment year 2015-16.
I heard Shri Uttamchand Jain, the Ld. representative for the assessee and Shri Sanath Kumar Raha, the Ld. Departmental Representative.
The first issue arises for consideration is disallowance of prior period expenses. The Assessing Officer found that the assessee has debited interest payment to the extent of ₹2,18,015/-. Since the assessee was following mercantile system of accounting, liability to pay interest has to be assessed in the year in which the liability accrued. The CIT(Appeals) found that the interest liability accrued in the assessment year 2014-15. Therefore, it can be considered only for the assessment year 2014-15 and not during the year under consideration. It is not in dispute that the liability to pay interest accrued in the assessment year 2014-15 and not in the assessment year 2015-16. Merely because the assessee paid the interest during the year under consideration, the same cannot be claimed as expenditure in view of the mercantile system of accounting followed by the assessee. It is a well settled principle of law that when the assessee was following mercantile system of accounting, the claim has to be made in the year in which the liability accrued irrespective of the actual payment. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
The next ground of appeal is with regard to advances written off to the extent of ₹1,30,552/-.
The assessee has written off ₹1,30,552/- in the Profit & Loss 5. account. The Assessing Officer found that the advances written off are in the nature of deposits. The deposits are not revenue expenditure. The Assessing Officer found that it cannot be allowed as written off. Referring to some of the salary advances and travel advances, the Assessing Officer found that allowing the same during the year under consideration would amount to double relief. On appeal by the assessee, the CIT(Appeals) found that the details of advances were not available before him. Therefore, he confirmed the order of the Assessing Officer. Even before this Tribunal, the details in respect of advances were not available. The Assessing Officer found that part of advances were deposits. Even details of deposits were not available on record. In those circumstances, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the issue of advances written off is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter and bring on record the nature of advances and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the court on 22nd July, 2019 at Chennai.