The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of the Income Tax Act, 1961 shall prevail when there is a dispute between the provisions of the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the provisions of the Act.
While concluding the assessment against the assessee, the Assessing Officer referred to AS – 2 and AS – 16 issued by The Institute of Chartered Accountants of India (ICAI) and concluded that interest cost is not allowable and it should be added with the cost of inventory.
The assessee, based on judicial precedents, objected to the contention.
Considering the arguments from both the sides, the Tribunal observed that “the provisions of Accounting Standards and Provisions of Act are two different set of regulations and while deciding this issue, it is well settled judicial precedent that is if there is a contradiction between the two, the provisions of Act shall prevail. In the present case, the AO has also referred to AS 2 in addition to AS 16 and in our considered opinion, when the provisions of the Act are in contradiction of Accounting Standard whether AS 16 or AS 2 or any other AS, the provisions of Act will apply and not the provisions of AS.”
“Before us, the learned DR of the revenue has argued that the judgments followed by CIT (A) are not applicable but in reply to the argument of the learned AR of the assessee as per which, he placed reliance on this tribunal order rendered in the case of DLF Limited vs. ACIT (Supra), she could not point out any judgment of any Hon’ble High Court or Hon’ble apex court where a contrary view is taken. Hence, we respectfully follow this tribunal order and decline to interfere in the order of CIT (A) on this issue in both years because facts are admittedly similar in both years,” the Tribunal concluded.
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