The Tax Publishers2020 TaxPub(DT) 5529 (Karn-HC)

INCOME TAX ACT, 1961

Section 28

Where revenue sought to disallow amount of bid loss claimed by assessee on allegation that same was incorrect as per provisions of section 145(1) and was not in consonance with the Board's Notification No.69(E) dt. 25-1-2016 and Accounting Standard-22 of ICAI, considering that as assessee did not want spread over of this expenditure over a period of five years, and expenditure was claimed in the year in which it was incurred, merely because a different treatment was given in the books of account, same could not be a factor which would deprive the assessee from claiming the entire expenditure as a deduction.

Business loss - Disallowance of bid loss claimed by assessee on allegation that same was incorrect as per provisions of section 145(1) - Whether it was mandatory on assessee's part to spread over of this expenditure over a period of five years -

Assessee was a company engaged in business of organizing and conducting chit funds for different groups. Revenue challenged order of Tribunal directing the AO to delete the disallowance of bid loss claimed in the computation of total income in addition to bid Loss claimed in profit and loss account. Revenue contended that Tribunal failed to appreciate that amount of bid loss claimed was incorrect as per provisions of section 145(1) and was not in consonance with the Board's Notification No.69(E) dt. 25-1-2016 and Accounting Standard-22 of ICAI. Held: Substantial question of law is no longer res integra and the same was answered by the decision of the Supreme Court in Taparia Tools, wherein it was held that assessee did not want spread over of this expenditure over a period of five years as in the return filed by it, it had claimed the entire interest paid upfront as deductible expenditure in the same year. In such a situation, when this course of action was permissible in law to the assessee as it was in consonance with the provisions of the Act which permit the assessee to claim the expenditure in the year in which it was incurred, merely because a different treatment was given in the books of account cannot be a factor which would deprive the assessee from claiming the entire expenditure as a deduction. It was held repeatedly by Court that entries in the books of account are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act.

Followed:Taparia Tools [(2015) 372 ITR 605 (SC) : 2015 TaxPub(DT) 1438 (SC)].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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