INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Computer software acquired by assessee - Allowability -

Assessee had claimed prior period expense which was got crystallized during the year under consideration and hence the same were allowable expenses. However, AO rejected such contention made by assessee, and added the said amount in the hand of assessee which was further confirmed by First Appellate Authority. Held: When assessee followed the mercantile system of accounting, expenditure incurred during the previous year though pertaining to an earlier period was deductible. Where assessee followed mercantile system of accounting and distributing the liability to pay to sales tax and not making provision in its books of account particularly when the demand raised on the basis of the sales made during the accounting year the assessee was entitled to deduct the amount of sales tax on the basis of the liability incurred and even in the absence of entries in the books of accounts, the same was admissible. Therefore, expenditure was not to be disallowed merely because it related to earlier previous year.

REFERRED : Kedarnath Jute Manufacturing Co. Ltd. v. CIT (1971) 82 ITR 363 (SC) : 1971 TaxPub(DT) 0366 (SC) Indermani Jatia v. CIT (1959) 35 ITR 298 (SC) : 1959 TaxPub(DT) 0077 (SC) Saurashtra Cement & Chemical Industries Ltd. v. CIT (1995) 213 ITR 523 (Guj.) : 1995 TaxPub(DT) 0614 (Guj-HC) Cadila Pharmaceuticals Ltd. v. Asstt. CIT (2012) 25 Taxmann.com 519 (Ahd-Trib) : 2012 TaxPub(DT) 2502 (Ahd-Trib)

FAVOUR : In assessee's favour

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section 28

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