Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment year 2004-05 - During relevant assessment year, assessee claimed certain expenses as business expenditure - Assessing Officer was of view that a part of expenses claimed related to prior period and as assessee-company was following mercantile system of accounting, said expenses should have been claimed in previous year - On appeal before Tribunal, assessee's case was that those expenses were not booked earlier due to non-receipt of details and information thereof on time which was beyond its control - It was further submitted that as per accounting policy followed by assessee, such expenses were booked in year in which they were settled for payment - Tribunal having gone into details of each and every such expense, recorded a finding of fact that all those expenses were settled during relevant year - Accordingly, Tribunal allowed assessee's claim - Whether on facts, no substantial question of law arose from Tribunal's order and, thus, revenue's appeal was to be dismissed - Held, yes [In favour of assessee] FACTS The assessee filed its return claiming certain expenses allowable as business expenditure. The Assessing Officer was of the view that a part of the expenses claimed related to the prior period and as the assessee company was following the mercantile system of accounting, the said expenses should have been claimed in the previous year. The Commissioner (Appeals) confirmed this view of the Assessing Officer. However, in further appeal, the Tribunal reversed the order of the Assessing Officer as well as the Commissioner (Appeals) and allowed those expenses. On revenue's appeal: HELD When the assessee was following the mercantile system of accounting, the explanation furnished by the assessee before the Assessing Officer and the Commissioner (Appeals), which was reiterated before the Tribunal was that the expenses were not booked due to non-receipt of details and information thereof on time, which was beyond the control of the assessee. It was also explained that the aforesaid expenses to the tune of Rs. 41.95 lakhs were marginal as compared to enormous…

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