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| The Tax Publishers2019 TaxPub(DT) 1025 (Del-Trib) INCOME TAX ACT, 1961
Section 37 read with Accounting Standard -- 4
Provision debited to P & L Account was in respect of the expenses already incurred during the financial year 2011-12 and payments made subsequent to the closure of the books of account but before the approval of the same thus, the amount under the provision was an allowable deduction.
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Business expenditure - Allowability - Provision debited to P & L Account -
Assessee was a company engaged in the business of undertaking promotional, mailing and marketing, publicity activities on behalf of the major insurance companies. During assessment, AO made certain additions by disallowing the provision debited to the Profit and Loss Account. Held: Rule of consistency demands that unless and until something illegal is shown, AO has to follow the course of action taken for earlier years. As per AS-4, the conditions for an event prevail on the balance and crystallized between the close of the financial year and approval of accounts, such events shall be known as adjusting events and have to be recorded in the previous year. Liability said to have been discharged in this matter by way of provision was in respect of the expenses already incurred during the financial year 2011-12 and payments made subsequent to the closure of the books of account but before the approval of the same. Thus, the amount under the provision was an allowable deduction.
Followed:Bharat Earth Movers v. CIT (2000) 245 ITR 428 (SC) : 2000 TaxPub(DT) 1505 (SC); Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 0858 (SC); CIT v. A. Gajapathy Naidu (1964) 53 ITR 114 (SC) : 1964 TaxPub(DT) 0323 (SC)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2012-13
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