The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) recently remanded an Income Tax Appeal filed by Housing and Urban Development Corporation ( HUDCO ), while maintaining that prior period expenses may be integrated into the income tax assessment for the current Assessment Year if they had not been claimed as deductions during the prior year under consideration.
HUDCO is a public sector undertaking under the Ministry of Housing and Urban Affairs, and is involved in financing housing and infrastructure for urban development projects in India. It was submitted by the Assessee that they had filed their returns of income for the Assessment Year (A.Y.) 2010-11 on 28.09.2010, declaring a total income of Rs.7,89,09,90,414/-.
The Income Tax Appeal was one of multiple Appeals filed by HUDCO against the Revenue and vice versa; the ITAT rendered the judgment while disposing of the Appeals in unison. The Assessee, through the present Appeal had challenged the confirmation of disallowance of Rs. 3 Lakhs on account of prior period expenses by the Commissioner of Income Taxes ( CIT(A) ), passed under Section 143(3) of the Income-tax Act, 1961.
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HUDCO claimed deduction of Rs.3 Lakh as prior period expenses, including office rent, electricity charges, interest on investments and other expenditure. Upon apprehension by the Revenue, the Appellant claimed that they are a massive organization operating through multiple locations and that full collation of data from all their units does not occur before the finalization of their annual accounts.
Owing to such delay, the expense of Rs.3 Lakhs were booked by the Assessee under prior period items separately, in the profit and loss account as per the accounting principles and disclosure requirements under Schedule VI of the Companies Act, 1956.
The Assessing Officer (AO) disallowed the claim of the Assessee, arguing that the expenses did not pertain to the year under consideration. The CIT(A) upheld the decision of the AO, following which the present Appeal had been instituted.
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The two-member Bench of the Income Tax Appellate Tribunal, Delhi comprising Yogesh Kumar U.S., Judicial Member and M. Balaganesh, Accountant Member attested to the submissions of HUDCO, affirming that “once it is proved that the said expenditure is not claimed as deduction in earlier years, then the same would be squarely allowable as deduction during the year under consideration”, allowing the claim of the Assessee.
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