Relief to MSEDCL: ITAT deletes disallowance of Net Prior Period Expenditure debited under the head ‘prior Period Expenses’ [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench while granting relief to Maharashtra state electricity board deleted the disallowance of net prior period expenditure debited under the head of “Prior Period Expense”.

The assessee, Maharashtra State Electricity Distribution Company Ltd. engaged in the business of distribution of electricity in the State of Maharashtra.After filing the return of income assessee case was selected for scrutiny .During the proceedings AO made disallowance of net prior period expenditure debited under the head ‘prior period expenses.

Aggrieved by the order, the assessee filed an appeal  before the CIT(A  who dismissed the appeal of the assessee. Thereafter, the assessee filed an appeal against the DRP order before the tribunal.

During the appeal proceedings J. D. Mistry , Counsel for assesee submitted that the issue of prior period expenses has been allowed in assessee’s case by the co-ordinate bench in A.Ys. 2001-02 to 2006-07 and 2010-11.

Manoj Kumar Sinha , Counsel for Revenue,argued that the assessee has failed to furnish any documentary evidence to substantiate the fact that the prior period expenses claimed by the assessee has crystallized during the year under consideration. further stated that the assessee has failed to show how the earlier year’s expenditure was quantified in this year.

It was observed by the tribunal that the issue of allowability of prior period expenses is recurring in nature in assessee’s case where the said expenditure has been allowed in assessee’s case for earlier years by the co-ordinate bench.

Further the tribunal in earlier years has accepted the method adopted by the assessee where the liability of the work/services rendered in earlier years was allowed when the same was crystallized on receipt of the bill in the current assessment year.

After reviewing the facts and records, the two-member bench of B R Baskaran (Accountant member ) and Kavitha Rajagopal (Judicial Member) granted relief to assessee company and deleted the disallowance   disallowance of net prior period expenditure debited under the head of “Prior Period Expense”.

Therefore the bench allowed the Appeal  .

To Read the full text of the Order CLICK HERE

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