Corporate Professional Today – October 20, 2018

October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u (^11369)
Chemicals Ltd. v. ITO [2008] 23 SOT 143 (Kol.)]
Thus, the tax authorities are not justified in
disallowing entire amount of the prior period
expenses, while assessing the entire amount
of the prior period income. [refer- Mazagaon
Dock Ltd. v. ITO [2017] 85 taxmann.com 213
(Mum. - Trib.)].
Conclusion

8. Even though on matching principle and
   under mercantile system of accounting, income
   and expenditure pertaining to a year should
   be accounted for in that year, but where the

Department taxes income of prior period, it

has to allow expenditure relating to such

income. Expenditure is a liability. It can be

allowed as deduction also in the year in

which it is ascertained and quantified, or

say, when it is crystallized. A liability for

expenses is crystallized when either Court

of law decides and/or assessee accepts or

pays. It can also be claimed in a subsequent

year if statute so directs.

lll

PriOr PeriOd exPenses-inCOme-Tax PersPeCTiVe