ORDER

Per Chandra Poojari, Accountant Member

This appeal by the revenue was disposed of by the Tribunal vide order dated 05.09.2014 for the assessment year 2008-09 and on appeal by the assessee, the Hon’ble High Court of Karnataka in ITA No.61 of 2005 dated 08.02.2021 framed the following substantial questions of law:-

“1. Whether the Tribunal was correct in holding that telescoping of expenses of Rs.30,00,000/- cannot be allowed against income declared of Rs.50,00,000/- when the Assessing Officer had granted such a relief and the revenue was not in appeal?

2. Whether the Tribunal was correct in holding that similar telescoping of expenses of Rs.32,50,000/- cannot be allowed against the income declared of Rs.50,00,000/- as held by the CIT(A) as there was no availability of funds without examining the material on record and the order of CIT u/s.263 of the Act disallowing the expenses and consequently recorded a perverse finding?”

2. The Hon’ble High Court vide above judgment remitted the matter to the Tribunal by observing as under:-

“6. Learned senior counsel for the assessee while inviting attention of this Court to the judgment of the Supreme Court in ‘J.K.Industries Limited and Another Vs. Union of India and Others’, (2007) 13 SCC 673 submitted that the assessee is entitled to the benefit of matching principle. However, the aforesaid contention has not been considered neither by the Tribunal nor the assessee has been afforded an opportunity. In this connection, counsel invited attention of this Court to Paragraph 17 of the order passed by the Tribunal. Learned counsel for the revenue could not dispute the aforesaid submission.

7. In view of the law laid down by the Supreme Court in J.K.Industries Limited (supra) and in view of the aforesaid decision, the assessee is entitled to take a plea with regard to the matching principle and since the assessee has not been heard on the aforesaid issue, we deem it appropriate to quash the order passed by the Tribunal in so far as it pertains to the appeal preferred by the revenue and remit the matter to the Tribunal to decide the same afresh after affording an opportunity to all the parties on the aforesaid issue.

8. Needless to state that it will be open for the parties to raise all the contentions which are admissible in law to them. Therefore, it is not necessary for us to answer the substantial question of law.”

3. Accordingly the appeal was taken up for hearing. The primary contention of the ld. AR is that the grounds set aside by the Hon’ble High Court is with regard to ground Nos. 5 to 7 raised by the revenue in its appeal and the tax effect on this issue is less than Rs.50 lakhs which is covered by the CBDT Circular No.17 of 2019 dated 8.8.2019. As such, the revenue’s appeal is to be dismissed on the reason that the tax effect is below Rs.50 lakhs on this issue.

4. We have heard both the parties on this issue. On earlier occasion, the revenue came up in appeal before the Tribunal raising ground Nos.2 to 7 where the tax effect is more than Rs.50 lakhs. The tax effect in the whole appeal filed by the revenue is to be considered and not on the issue remitted by the High Court vide its judgment dated 8.2.2021 in ITA No.61 of 2015. As such, there is no merit in the argument of the ld. AR that the tax effect is below Rs.50 lakhs in the revenue’s appeal. Accordingly, the primary objection of the ld. AR for the assessee is rejected.

5. The issue set aside by the High Court and remitted to the Tribunal in this appeal is limited to consideration of the applicability of Hon’ble Supreme Court judgment in the case of J.K. Industries Ltd. & Anr. v. UOI [2007] 13 SCC 673 / 297 ITR 176 (SC) with regard to assessee’s entitlement to the benefit of matching principle. In this judgment, the Hon’ble Supreme Court on the issue of matching principle has held as follows:-

“Matching Principle :

82. Matching Concept is based on the accounting period concept. The paramount object of running a business is to earn prof