1 ITXA622.1.sxw IN THE HIGH COURT OF JDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION. INCOME TAX APPEAL NO. 622 OF 2010 The Commissioner of Income Tax V., Pratyksha Kar Bhawan, Dr. Ambedkar Road, Near Akurdi Rly. Station, Pradhikaran, Pune- 411 004 ...Appellant Vs. Kirloskar Ferrous Industries Ltd. Laxmanrao Kirloskar Road, Khadki, Pune, 411 033 ..Respondent. Mr.Vimal Gupta for the Appellant, Mr. S.N. Inamdar with Mihir Naniwadekar for the Respondent. CORAM : J.P. DEVADHAR AND A.A. SAYED, JJ. DATE : 4TH JULY, 2011. P.C. 1. Three questions of law are raised by the Revenue in this appeal, which read thus: "(i). Whether on the facts and in the circumstances of the case in law that ITAT was justified in deleting the disallowance of Rs. 7,40,078/- out of various expenses when the same were held to be not incurred wholly and exclusively for business purposes by the AO as well as by the CIT(A)?. 2 ITXA622.1.sxw (ii) Whether on the facts and in the circumstances of the case and in law that ITAT was justified in deleting the disallowance of Rs. 40,47,074/- on account of prior period expenses which did not pertain to the year under consideration when the assessee is following mercantile system of accounting? (iii) Whether on the facts and in the circumstances of the case and in law that ITAT was justified in directing the AO to allow prior period expenses in the year under consideration which has the effect of enhancing the losses and carrying forward of the same for being set off against the future income when the same has not been claimed by the assessee in its return of income as mandated by the provisions of the I.T. Act 1961?" 2. As regards the first question is concerned the disallowance made by the Assessing Officer and confirmed by CIT(A) on adhoc basis in respect of vehicle expenses, telephone expenses, gift expenses and staff welfare and canteen expenses have been deleted by ITAT by following its decision in the case of Kirloskar Engines Ltd. in ITA No. 1039 and 1040/PN/2000 for A.Y. 1995-96 and 1996-97, wherein it was held that in case of a limited company expenditure incurred on telephone, vehicle etc. which are certified by the auditors of the Company as also the auditors under the Income Tax Act cannot be disallowed. There is nothing on record to suggest that the revenue has challenged the decision of the Tribunal in the case of Kirloskar Engines Ltd. (Supra). In these circumstances, we see no merit in the question raised by the revenue, especially when the genuineness of the expenditure is not doubted by the assessing officer. 3 ITXA622.1.sxw 3. As regards the question Nos. ii and iii are concerned, the Tribunal relying upon its decision in the case of Kirloskar Pneumatic Co. in ITA No.6/PN/2007 for the A.Y. 2003-04 held that even if the expenditure is incurred in the earlier year but the demand is raised and accepted in the subsequent year, then the expenditure would be allowable in the subsequent year. We see no infirmity in the above order passed by ITAT. Accordingly appeal is dismissed. ( A.A. SAYED, J. ) ( J.P. DEVADHAR , J.)