INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Revenue expenditure corresponding to distributors' commission, distributors' incentives and outward freight cartage in the year under consideration - Allowability -

The issue that arose for consideration as to whether Tribunal erred in affirming the order of CIT(A) by allowing the assessee to book all of the revenue expenditure corresponding to the distributors' commission, distributors' incentives and outward freight cartage, whereas according to Revenue it was required to be spread over on the basis of the 'matching principle'. Held: Revenue had placed reliance on the observations of the Supreme Court in J. K. Industries Limited v. UOI [(2008) 297 ITR 176 (SC)], where it was stated that 'matching principle' forms an important component of accrual basis of accounting. While as a general proposition this may be acceptable, assessee claimed the entire expense as revenue expenditure in his accounts and if sought to be altered on the basis of the above principle, it would indisputably affect the accounts of the subsequent year. AO had not rejected the accounts on the basis that it did not present the true and correct picture of business of assessee. Thus, view taken by Tribunal was a plausible one and did not give rise to any substantial question of law.

REFERRED : J.K. Industries Ltd. v. Union of India (2008) 297 ITR 176 (SC) and ITO v. Essel Agro Pvt. Ltd [ITA No. 2158/Del/2011] : 2019 TaxPub(DT) 0818 (Del-Trib)

FAVOUR : In assessee's favour

A.Y. :

SUBSCRIBE FOR FULL CONTENT