The Income Tax Appellate Tribunal (ITAT) of Ahmedabad bench has held that there is no provision for prior period expenses under section 115 JB(2) of the Income Tax Act,1961 and held addition as not permissible.
The assessee, Gujarat Chemical Port Terminal Co. Ltd engaged in the business of Port and Terminal Operations, where they filed the return of income for the year under consideration i.e. AY 2013-14 on 27.09.2013 declaring a total income at Rs. Nil, after setting off brought forward unabsorbed depreciation to the extent of Rs.35,93,21,210/-. Book profit under Section 115JB of the Income-tax Act, 1961 (the Act) was declared by the assessee in the said return at Nil after setting off an unabsorbed business loss to the extent of Rs.16,50,63,161/-.
The Assessing Officer noted that depreciation on electrical installation @ 15% was claimed by the assessee as against the rate of 10% specifically provided for electrical fittingsand restricted the claim of the assessee for depreciation on electrical installation at 10% instead of 15% claimed by the assessee which resulted in an addition of Rs.12,52,745/-. On appeal, CIT(A) confirmed the addition.
The assessee failed to disclose the contractual receipts,rent and professionalfees aggregating to Rs.15,14,241/- which was reflected in 26AS. CIT(A) in the absence of documentary evidence confirmed the addition of Rs.15,14,241/- made by the Assessing Officer to the total income of the assessee.
The assessee urged the opportunity to submit the evidence by sending the matter back to the Assessing Officer which was restored by the Tribunal to the file of the Assessing Officer for giving the assessee one more opportunity to establish evidence.
The Revenue challenged the deletion by CIT(A) of the addition of Rs.31,26,316/- made by the Assessing Officer on account of prior period expenses while computing book profit under Section 115JB of the Act.
The Tribunal relied on the decision of the Karnataka High Court in the case of CIT v . GMR Industries Ltd., [2020] 425 ITR 504, wherein it was held that “prior period expenses charged to profit and loss account cannot be deducted from the profit of the year to compute book profit under Section 115JB of the Act as the same does not fall within the purview of Section 115JB of the Act.”
In light of the precedents, Shri P M Jagtap, vice-president and Shri Siddhartha Nautiyal, judicial member observed that uphold the impugned order of the learned CIT(A) deleting the addition of Rs.31,26,316/ made by the Assessing Officer on account of prior period expenses while computing the book profit of the assessee-company under Section 115JB of the Act.
The assessee’s appeal was partly allowed while the Revenue’s appeal was dismissed. The assessee was represented by Ms Amrin Pathan and the revenue was represented by Shri Jamesh Kurian & Ms Pooja Parekh.
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