Deduction towards Prior period expenses crystallised during the year

Kamla Retail Ltd (ITA 2010-11 1023/CHANDI 2019)

Short Overview of the case:

Facts:

1. The assessee had debuted Rs 30,45,000 under the head prior period expenses but were added back to profit.

2. The assessee maintained that this expense pertains to rent payment for the stores at JW Marriot Hotel, Mumbai and pending negotiation with the landlord and the brand owners for a possible remission in rent due to poor performance of the store, the lease rent was not paid earlier and the final settlement was reached in August, 2009 and lease rent was thereafter paid as per the modified terms.

3. The AO disallowed these expenses.

The Chandigarh ITAT held as below:

1. The settlement was made during the financial year relevant to the impugned assessment year and, therefore, the liability has crystallized during the year and, therefore, the same should be allowed in the hands of the assessee.

2. Even TDS has been deducted and paid in the financial year relevant to the impugned assessment year.

3. The assessee deserves an allowance towards these expenses in the year under consideration.