The Income Tax Appellate Tribunal (ITAT) Chennai Bench ruled that no disallowance on claim of prior period expenses on customs duty paid due to unable to perform Export
The assessee TANFAC Industries Ltd. filed the appeal against the order passed by Commissioner of Income Tax (Appeals) by disallowing customs duty for Rs.9.53 Lacs.
Assessee are eligible to import raw material without payment of customs duty if the said material is used in the manufacturing process and the goods are ultimately exported. Such savings in customs duty is accounted for as income in the year when the raw material is imported.
Accordingly, the year assessee could not export the finished goods and consequently, asked to pay impugned customs duty for Rs.9.53 Lacs. The assessee could not perform the obligation of export and accordingly, claimed the sum so paid as prior period items.
During the proceedings, the AO noted this and disallowed the claim on the ground that the expenditure was not related to previous year.
Aggrieved, by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax Appeals (CIT(A)), who upheld the action of AO. Thus, the assessee filed the appeal before the tribunal.
During the appeal proceedings, the tribunal observed that expenditure had crystallized only during the assessment year. Also, the incentive received in earlier years has been considered as income in earlier years.
Thus, in this year, the assessee could not perform export obligation and accordingly, held liable to pay the said amount
Therefore, the two member bench of the tribunal comprising Manoj Kumar Aggarwal (Accountant Member) and Mahavir Singh (Vice President) allowed deduction to assessee.
R. Vijayaraghavan appeared for the assessee and D. Hema Bhupal appeared for revenue.
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