DCIT, CIR-4(1), KOLKATA, Kolkata V. M/s Mcleod Russel India Ltd., Kolkata

ITA 114/KOL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6853 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D S DAMLE
• Keywords: Business income; Depreciation; Business expenditure; Rule of consistency; Transactions in derivatives; Question of law; Valuation report; Set aside
• Section: 43B; 143(3); 260A; 43(5); 263

Judgement Text

1 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NOS. 114-115/KOL/2016 ASSESSMENT YEARS: 2008-09 & 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(1), KOLKATA VS. M/S. MCLEOD RUSSEL INDIA LTD. (PAN: AAACE6918J) APPELLANT RESPONDENT DATE OF HEARING 06.03.2019 DATE OF PRONOUNCEMENT 03.05.2019 FOR THE APPELLANT SHRI A. K. SINGH, CIT, DR FOR THE RESPONDENT SHRI D. S. DAMLE, AR ORDER PER SHRI A.T.VARKEY, JM THESE APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDERS OF THE LD. CIT(A) DATED 11 TH SEPTEMBER 2015 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS COMMON ORDER. 2. WE FIRST TAKE UP THE APPEAL FILED BY THE REVENUE IN ITA NO. 114/KOL/2016 FOR AY 2008-09. GROUND NO. 1 RAISED BY THE REVENUE RELATES TO DISALLOWANCE OF PROVISION FOR RETIREMENT BENEFITS ON THE GROUND THAT SUCH PROVISI ON IS NOT PERMISSIBLE FOR NOT COMPLYING WITH SECTION 43B OF THE ACT. BRIEFLY STATED THE FAC TS OF THE CASE ARE THAT THE APPELLANT COMPANY SETS ASIDE PROVISION IN ITS ANNUAL ACCOUNT S FOR PAYMENT OF POST RETIREMENT BENEFITS TO EMPLOYEES EMPLOYED AT ITS VARIOUS TEA ESTATES, B EING MEDICAL REIMBURSEMENTS, LEAVE ENCASHMENT, STAFF PENSION & FOREIGN PENSION, IN CON FORMITY WITH THE ACCOUNTING STANDARD 15 (AS-15) PRESCRIBED BY THE INSTITUTE OF CHARTER ED ACCOUNTANTS OF INDIA (ICAI). IN THE RELEVANT YEAR THE SAID AS-15 WAS REVISED BY THE ICA I AND THE METHODOLOGY TO MEASURE THE 2 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 EMPLOYERS OBLIGATION TOWARDS LONG TERM RETIREMENT BENEFITS WAS AMENDED WITH A VIEW TO ENSURE A MORE REALISTIC AND CORRECT ASCERTAINMENT O F THE LIABILITY. IN TERMS OF THE REVISED AS-15, EVERY REPORTING CORPORATE ENTITY WAS REQUIRE D TO RE-MEASURE ITS PAST AS WELL AS PRESENT OBLIGATIONS AND RESTATE SUCH LIABILITY IN I TS BOOKS, BASED ON THE REVISED METHODOLOGY. THE ADDITIONAL LIABILITY OF RS.11,04,1 4,367/- ARISING AS A CONSEQUENCE OF RE- STATEMENT OF THE PAST OBLIGATIONS WAS PROVIDED BY W AY OF TRANSITIONAL PROVISION IN THE ASSESEES BOOKS OF ACCOUNT WHICH WAS CHARGED TO RES ERVE ACCOUNT. THE LIABILITY OF RS.1,65,51,581/- BASED ON REVISED AS-15 PERTAINING TO THE RELEVANT FINANCIAL YEAR WAS CHARGED OFF TO THE PROFIT & LOSS ACCOUNT. PROVISIO N FOR RETIREMENT BENEFITS BASED ON APPLICATION OF REVISED AS-15 WAS CLAIMED BY WAY OF DEDUCTION IN THE COMPUTATION OF INCOME. IN THE ASSESSMENT ORDER PASSED U/S 143(3), THE AO DISALLOWED THE DEDUCTION IN RESPECT OF PROVISION FOR RETIREMENT BENEFITS HOLDIN G THAT THERE WAS NO PROVISION IN THE INCOME-TAX ACT, 1961 WHICH SPECIFICALLY PERMITTED I TS DEDUCTION. HE FURTHER HELD THAT SUCH PROVISION WAS MADE BASED ON ACTUARIAL VALUATION REP ORTS, WHICH IN TURN ARE BASED ON ASSUMPTIONS AND THEREFORE THE PROVISION SO CREATED WAS CONTINGENT IN NATURE. AGGRIEVED BY THE ORDER OF THE AO; AN APPEAL WAS PREFERRED BY THE LD. CIT(A) WHO DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: 4.2. I HAVE CONSIDERED THE A/R'S SUBMISSIONS AND PE RUSED THE OBSERVATIONS & FINDINGS OF THE AO IN THE IMPUGNED ORDER. I HAVE ALSO GONE THROUGH THE RELEVA NT ACCOUNTING STANDARD AND GUIDANCE NOTES ISSUED BY THE ICAI IN RESPECT OF PROVISION FOR EMPL OYEES' RETIREMENT BENEFITS. FROM THE MATERIAL PLACE D BEFORE ME I FIND THAT THE ASSESSEE HAD CONSISTENTLY BEEN MAKING PROVISION FOR RETIREMENT BENEFITS FOR EMPLOYEES IN ITS ANNUAL ACCOUNTS IN CONFORMITY WITH AS-15. IN ALL THE PAST ASSESSMENTS OF THE APPELLANT, THE AOS CONSISTENTLY ALLOWED THE DEDUCTI ON FOR PROVISION FOR POST RETIREMENT BENEFITS DEBIT ED IN ACCOUNTS IN CONSONANCE WITH AS-15. I FURTHER NOT E THAT PRIOR TO AY 2005-06 TEA BUSINESS OF THE APPELLANT BELONGED TO EVEREADY INDUSTRIES INDIA LIM ITED. THE APPELLANT COMPANY SUCCEEDED TO THE TEA BUSINESS OF EVEREADY INDUSTRIES INDIA LIMITED ON AC COUNT OF THE SCHEME OF DEMERGER APPROVED BY CALCUTTA HIGH COURT. EVEREADY INDUSTRIES INDIA LIMI TED IN ITS BOOKS MADE PROVISION FOR POST RETIREMENT BENEFITS TO EMPLOYEES IN CONFORMITY WITH AS-15. IN INCOME-TAX ASSESSMENTS OF THE SAID COMPANY ALSO THE DEDUCTION WAS ALLOWED BY THE AOS I N ALL REGULAR ASSESSMENTS EXCEPT FOR AY 1997-98. THE ITAT, KOLKATA IN ITS APPELLATE ORDER FOR AY 199 7-98 IN ITA NO. 959/KOL/2002 HOWEVER ALLOWED THE ASSESSEE'S CLAIM FOR PROVISION FOR POST RETIREMENT BENEFITS TO EMPLOYEES TAKING THE VIEW THAT THE SAID PROVISION WAS MADE IN RESPECT OF A LIABILITY WHICH ACCRUED DURING THE RELEVANT YEAR IN RELATION TO SERVICES PERFORMED BY THE EMPLOYEES ALTHOUGH PAYABL E IN FUTURE AT UNSPECIFIED DATE. THE TRIBUNAL FURTHER FOUND THAT THE PROVISION FOR POST RETIREMEN T BENEFITS WAS ASCERTAINED ON THE BASIS OF ACTUARIA L VALUATION CERTIFICATE OBTAINED BY THE ASSESSEE. SUC H PROVISION WAS MADE IN CONFORMITY WITH AS-15 PRESCRIBED BY THE ICAI. THE ITAT ACCORDINGLY HELD T HAT THE DEDUCTION WAS ALLOWABLE IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. FOLLOWING THE ITAT DECISION FOR AY 1997-98, NO DISALLOWANCES WERE MADE IN THE CASE OF EVEREADY INDUSTRIES INDIA LIMIT ED OR THE APPELLANT TILL AY 2007-08 EVEN THOUGH IN THE ACCOUNTS OF THE RELEVANT YEARS THE PROVISION FO R EMPLOYEE RETIREMENT BENEFITS WAS DEBITED AND DEDUCTION THEREFOR WAS CLAIMED. 3 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 4.3 FROM THESE FACTS IT THEREFORE APPEARED THAT IN THE PAST ASSESSMENTS THE AOS IN PRINCIPLE ACCEPTED THAT THE DEDUCTION FOR PROVISION FOR POST RETIREMEN T BENEFITS WAS PERMISSIBLE IN ARRIVING AT THE TAXAB LE INCOME OF THE ASSESSEE SINCE THE RELEVANT LIABILITY WAS INCURRED DURING THE RELEVANT YEARS IN WHICH TH E EMPLOYEES PERFORMED THEIR SERVICES. WHILE ASSESSING TOTAL INCOME IN THE PAST YEARS THE AOS ALSO ACCEPTED THAT THE PROVISION WAS TO BE ALLOWED IN AC CORDANCE WITH THE METHOD PRESCRIBED IN AS-15 ISSUED BY I CAI EVEN THOUGH NO SPECIFIC PROVISION O F THE I. T. ACT DEALT WITH SUCH CLAIM. YET IN THE P AST ASSESSMENTS DEDUCTION FOR SUCH PROVISION WAS ALLOWA BLE BECAUSE RETIREMENT BENEFITS WERE PAYABLE TO EMPLOYEES IN TERMS OF CONTRACT OF EMPLOYMENT WITH T HE EMPLOYEES. 4.4 IN THE IMPUGNED ORDER THE AO DISALLOWED THE ASS ESSEE'S CLAIM ON ONE OF THE FACT THAT THE ASSESSEE DID NOT DEBIT RS.11,00,14,367/- TO ITS PROFIT & LOS S ACCOUNT. THE ASSESSEE DID NOT SPELL OUT THE ENABL ING PROVISION OF THE ACT UNDER WHICH THE ACTION WAS PER MISSIBLE IN RESPECT OF A LIABILITY WHICH WAS ADMITTEDLY NOT CHARGED DURING THE RELEVANT BUT WHIC H WAS TO BE PAID AT A FUTURE UNSPECIFIED DATE. IN OTHER WORDS IN AO'S OPINION SUCH LIABILITY WAS A CO NTINGENT. THE REASONS ADDUCED BY THE AO JUSTIFYING THE DISALLOWANCE ARE APPARENTLY INCONSISTENT WITH T HE DEPARTMENTAL STAND IN THE EARLIER YEARS AND ALSO CONTRARY TO THE PROVISIONS OF THE ACT. THE AO'S DEC ISION IS ALSO CONTRARY TO THE JUDICIAL PRECEDENTS AVAILABLE ON THE SUBJECT. AS NOTED IN THE FOREGOING THE APPELLANT AND ITS PREDECESSOR IN BUSINESS IN T HE PAST YEARS HAD MADE PROVISION IN ITS BOOKS FOR THE POST RETIREMENT EMPLOYEES' BENEFITS IN ACCORDANCE WITH AS-15. IN ALL THE PAST ASSESSMENTS EXCEPT FOR AY 1997-98 THE DEDUCTION THEREFOR WAS ALLOWED. THE DISALLOWANCE MADE IN AY 1997-98 WAS DISAPPROVED BY THE CIT(A) & ITAT. IN THE ASSESSMENT ORDERS OF THE PAST YEARS, DEDUCTION FOR RETIREMENT BENEFITS A S DEBITED IN THE ACCOUNTS IN ACCORDANCE WITH AS- 15 WAS ALWAYS ALLOWED. ON THE BASIS OF THE PRINCIPLE O F JUDICIAL CONSISTENCY THEREFORE THE AO COULD NOT DEPART FROM THE ADMITTED POSITION WHEN THERE WAS NO CHANGE IN THE FACTUAL MATRIX EXCEPT FOR THE FACT THAT THE ICAI HAD RECOMMENDED REVISION IN THE METHO D FOR ASCERTAINING THE LIABILITY. 4.5 THE SUPREME COURT IN THE CASE OF RADHASOAMI SAT SANG VS. CIT (193 ITR 321) HAS HELD AS FOLLOWS: 'WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPRO PRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR.' THE PRINCIPLE OF CONSISTENCY HAS ALSO BEEN APPLIED BY THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF RUSSELL PROPERTIES P LTD VS. ADDL CIT (109 ITR 229). I THEREFORE FIND THAT IF THE PROVISION FO R RETIREMENT BENEFITS OF EMPLOYEES MADE IN ACCORDANCE WITH AS-15 WAS CONSIDERED AS AN ALLOWABLE DEDUCTION IN THE PAST ASSESSMENTS, THEN APPARENTLY THERE WAS NO REASON FOR THE AO TO DEPART FROM THE SAID POSITION AND TAKE ENTIRELY A CONTRARY VIEW IN AY 2008-09 SO AS TO DISALLOW THE CURRENT YEAR'S LIABILITY OF RS.1,65,51,581/- 4.6. IN THE IMPUGNED ORDER THE AO JUSTIFIED THE DIS ALLOWANCE ALSO ON THE GROUND THAT THE APPELLANT DID NOT SPECIFY ANY SPECIFIC PROVISION OF THE I.T. ACT UNDER WHICH DEDUCTION WAS PERMISSIBLE. IN MY CONSIDERED OPINION THIS REASON IS INAPPROPRIATE. IT IS NOT DISPUTED BY THE AO THAT IN TERMS OF THE CONTRACT OF EMPLOYMENT, THE ASSESSEE HAD ASSURED CE RTAIN BENEFITS TO EMPLOYEES WHICH WERE PAYABLE EITHER DURING THE PERIOD OF EMPLOYMENT OR AT THE TI ME OF RETIREMENT OR DURING THE POST RETIREMENT PERIOD. THE RETIREMENT BENEFITS WERE PAYABLE BY THE ASSESSEE TO ITS EMPLOYEES ONLY AT THE TIME OF OR AFTER THE EMPLOYEES RETIRED FROM THE ACTIVE SERVICE . BUT IN EITHER CASE THESE BENEFITS COULD NOT HAVE BEEN CLAIMED BY THE EMPLOYEES WHILE THEY WERE. IN A CTIVE SERVICE. HOWEVER THE FACT REMAINED THAT THE RETIREMENT BENEFITS WERE PROMISED TO BE PAID BY THE ASSESSEE EMPLOYER IN CONSIDERATION FOR THE SERVICE S RENDERED OR PERFORMED DURING THEIR TIME WHEN EMPLOY EES WERE IN ACTIVE SERVICE. IT WAS APPARENT THAT THE CONTRACT OF EMPLOYMENT ENVISAGED PAYMENT OF REM UNERATION TO EMPLOYEES WHICH WAS PARTLY PAYABLE DURING THE PERIOD WHEN THEY WERE IN ACTIVE OF SERVICE AND PARTLY DURING THE PERIOD WHEN THE EMPLOYMENT CAME TO AN END. HOWEVER BOTH THE COMPONE NTS OF THE REMUNERATION WERE PAYABLE IN CONSIDERATION OF THE SERVICES TO BE PERFORMED BY TH E EMPLOYEES FROM YEAR TO YEAR DURING THE PERIOD WHEN SERVICES WERE ACTUALLY RENDERED. IN THE CIRCUM STANCES BY APPLYING THE PRINCIPLE OF MATCHING OF COST AND BENEFIT IT WAS NECESSARY FOR THE APPELLANT TO MAKE FAIR ESTIMATE OF ITS LIABILITY TO PAY FOR THE EMPLOYEES' RETIREMENT BENEFITS THOUGH PAYABLE IN FU TURE BUT FOR THE PERIOD DURING WHICH THE SERVICES 4 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 WERE ACTUALLY PERFORMED BY THE EMPLOYEES. THE LIABI LITY ON ACCOUNT OF POST RETIREMENT BENEFITS REPRESENTED CONTRACTUAL LIABILITIES PAYABLE TO EMPL OYEES ACCORDING TO THEIR TERMS OF EMPLOYMENT. IN TH E IMPUGNED ORDER THE ASSESSING OFFICER HAS ALLOWED TH E DEDUCTION FOR EMOLUMENTS PAID TO EMPLOYEES DURING THE RELEVANT YEAR ON BEING SATISFIED THAT TH E EXPENDITURE WAS INCURRED OR LAID OUT WHOLLY FOR BUSINESS PURPOSES. IN TERMS OF THE SAME CONTRACT OF EMPLOYMENT, THE EMPLOYEES OF THE APPELLANT WERE ALSO ENTITLED FOR THE RETIREMENT BENEFITS ASSURED U NDER THE SAME CONTRACT OF EMPLOYMENT. THE ONLY DIFFERENCE WAS THAT SUCH BENEFITS WERE RECEIVABLE B Y THE EMPLOYEES IN FUTURE UPON RETIREMENT. HOWEVER THERE BEING NO MATERIAL DIFFERENCE IN THE CHARACTER OF PAYMENT IN THE BENEFIT RECEIVABLE BY THE EMPLOYEES THE AO COULD NOT DISALLOW THE PROVISION F OR RETIREMENT BENEFITS WHEN THE DEDUCTION WAS FULLY ALLOWED IN RESPECT OF REMUNERATION PAID TO EMPLOYEE S UNDER THE SAME CONTRACT OF EMPLOYMENT. 4.7. IN ORDER TO DISCLOSE TRUE & FAIR AMOUNT OF INC OME EARNED, IT WAS THEREFORE MANDATORY FOR THE ASSESSEE TO DETERMINE ITS LIABILITY; WHICH ACCRUED DURING THE IMPUGNED YEAR. IN RESPECT OF SERVICES PERFORMED BY THE EMPLOYEES DURING THAT PERIOD BUT W HICH WOULD BE PAYABLE AT FUTURE UNSPECIFIED DATE THE AS-15 METHODOLOGY BY WHICH THE ASSESSEE WAS REQ UIRED TO MAKE FAIR ESTIMATE OF SUCH FUTURE LIABILITY WHICH ACCRUED WITH REFERENCE TO SERVICES PERFORMED EMPLOYEES DURING THE RELEVANT REPORTING PERIOD. AS-15 CONTAINED THE RULES AS THE METHODOLOG Y TO BE FOLLOWED BY THE ENTERPRISES IN ASCERTAINING THE QUANTUM OF THE LIABILITY FOR EMPLOYEE RETIREMEN T BENEFITS TO BE DISCHARGED IN FUTURE. FOR ASCERTAINING SUCH LIABILITY, AS-15 MANDATED THAT TH E ENTERPRISE SHOULD OBTAIN A REPORT FROM THE ACTUAR Y ESTIMATING THE LIABILITY. THE ACTUARIAL VALUATION O F A LIABILITY OR EXPENDITURE IS ALWAYS BASED ON ASSUMPTIONS WHICH ARE STATISTICALLY PROVEN. THE SUP REME COURT IN THE CASE OF BHARAT EARTH MOVERS LIMITED VS CIT (245 ITR 248) ACCEPTED THAT THE LIAB ILITY FOR LEAVE ENCASHMENT THOUGH PAYABLE AT FUTURE UNSPECIFIED DATE YET THE PROVISION THEREFOR MADE ON SCIENTIFIC BASIS WAS ALLOWABLE AS DEDUCTION IN COMPUTING THE PROFITS. THE RELEVANT OBSERVATIONS OF THE SUPREME COURT WERE AS FOLLOWS: 'THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DE FINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTI ON SHOULD BE ALLOWED ALTHOUGH THE-LIABILITY-MAY-HAVE T O BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIAB ILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIF ICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED, THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUG H IT WILL BE DISCHARGED AT I FUTURE DATE. IT DOES NOT MA KE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAI N. APPLYING THE PRINCIPLES LAID DOWN IN METAL BOX CO. OF INDIA LTD. V. THEIR WORKMEN [1969] 73 ITR 53 (SC) AND CALCUTTA CO. LTD. V. CIT [1959J 37 ITR 1 (SE), IT MUST BE HELD THAT THE PROVISION MADE BY THE ASSESSEE-COMPANY FOR MEETING THE LIABILITY I NCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED BY EMPLOY EES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATI ON AS APPLICABLE ON THE RELEVANT DATE, WOULD BE ALLOWABLE AS DEDUCTION OUT OF THE GROSS RECEIPTS FO R THE ACCOUNTING YEAR DURING WHICH THE PROVISION WAS MADE FOR THE LIABILITY. THE LIABILITY WAS NOT A CONTINGENT LIABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING A VIEW TO THE CONTRARY. ' 4.8 IN THIS JUDGMENT THE SUPREME COURT HAD RELIED O N ITS EARLIER JUDGMENT IN THE CASE OF METAL BOX COMPANY OF INDIA L.TD VS THEIR WORKMEN (73 ITR 53). FROM THESE JUDGMENTS IT IS EVIDENT THAT THE SUPREME COURT IN PRINCIPLE ACCEPTED THAT LIABILITY OF A COMPANY PAYABLE AT FUTURE UNSPECIFIED DATE IN RELATION TO EMPLOYEE BENEFITS CAN BE ALLOWED IN THE YEARS IN WHICH THE EMPLOYEES RENDER THE RELEVANT SERVICES. THE SUPREME COURT HOWEVER OBSERVED THAT T HE LIABILITY CAN BE ALLOWED AS A DEDUCTION IF IT CA N BE ESTIMATED BY FOLLOWING A METHOD WHICH HAS SCIENT IFIC BASIS. IN THE APPELLANT'S CASE SUCH LIABILITY WAS ASCERTAINED BY OBTAINING REPORT FROM AN ACTUARY. IN VARIOUS JUDGMENTS THE COURTS HAVE ACCEPTED IN PRINCIPLE THAT OBTAINING ACTUARIAL VALUATION REPORT IS THE SCIENTIFIC WAY OF ASCERTAINING THE QUANTUM OF AN EXPENDITURE OR LIABILITY. MOREOVER AS-15 ISSUED BY ICAI AND WHICH WAS MANDATORY U/S 209 OF THE COMPANIES ACT 1956 MAKES IT COMPULSORY THAT THE REP ORTING ENTERPRISE SHOULD OBTAIN ACTUARIAL VALUATION OF THE POST RETIREMENT EMPLOYEE BENEFIT L IABILITY AND BASED THEREON PROVISION SHOULD BE MADE IN THE ACCOUNTS. ON THESE FACTS I AGREE WITH THE AR 'S SUBMISSIONS THAT IN ARRIVING AT THE AMOUNT OF BUSINESS INCOME WHICH WAS TO BE ASSESSED ON THE BAS IS OF GENERALLY ACCEPTED PRINCIPLE AND METHOD OF ACCOUNTING, THE ASSESSEE WAS ENTITLED TO CLAIM DEDU CTION FOR RETIREMENT BENEFITS PAYABLE TO EMPLOYEES. 5 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 4.9 THE SUPREME COURT IN THE CASE OF UP STATE INDUS TRIAL DEVELOPMENT CORPORATION (225 ITR 703) HAS OBSERVED AS FOLLOWS: THE ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE I N THE INSTANT CASE WAS IN CONSONANCE WITH GENERAL PRINCIPLES OF ACCOUNTANCY GOVERNING UNDERWRITING AC COUNTS. IT IS A WELL-ACCEPTED PROPOSITION THAT FOR THE PURPOSES OF ASCERTAINING PROFITS AND GAINS THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNTING SHOULD BE APPLIED, SO LONG AS THEY DO NOT CONFLICT WITH ANY EXPRESS PROVISION OF THE RELEVANT STATUTE . THE TRIBUNAL, AFTER REFERRING TO AUTHORITATIVE BOOK S ON ACCOUNTANCY, HAD FOUND THAT THE ASSESSEE WAS MAINTAINING THE ACCOUNTS CORRECTLY IN ACCORDANCE WI TH THE PRINCIPLES OF ACCOUNTANCY APPLICABLE TO UNDERWRITING ACCOUNTS AND KEEPING IN VIEW THE SAID PRINCIPLES THE UNDERWRITING COMMISSION ON THE SHARES WHICH WERE NOT SUBSCRIBED BY THE PUBLIC AND WERE PURCHASED BY THE ASSESSEE COULD NOT BE TREATED AS PROFIT EARNED BY THE ASSESSEE IN THE TRA NSACTION AND THE SAID COMMISSION COULD ONLY BE TREATED AS REDUCING THE PRICE OF THE SHARES PURCHAS ED BY THE ASSESSEE. THE TRIBUNAL HAD ALSO STATED THAT THERE WAS NO CONTRARY PROVISION IN THE ACT. TH E REVENUE HAD NOT SHOWN THAT THE ACCOUNTANCY PRACTICE FOLLOWED BY THE ASSESSEE WAS REPUGNANT TO ANY PROVISION OF THE ACT. IN THE CIRCUMSTANCES, IT MUST BE HELD THAT THE TRIBUNAL AND THE HIGH COURT H AD NOT COMMITTED ANY ERROR IN TAKING THE VIEW THAT THE UNDERWRITING COMMISSION EARNED BY THE ASSESSEE IN RESPECT OF THE SHARES WHICH WERE RIOT SUBSCRIBED BY THE PUBLIC AND WERE PURCHASED BY THE ASSESSEE, WOULD NOT BE TREATED AS A PART OF ITS TAXABLE INCOME. FROM THE ABOVE OBSERVATIONS IT IS APPARENT THAT ONL Y WHERE THERE IS A CONFLICT BETWEEN THE ACCOUNTING STANDARDS OR STANDARD ACCOUNTING PRINCIPLES WITH TH E PROVISIONS OF IT ACT THEN THE PROVISIONS OF THE I . T. ACT PREVAIL WITH REGARD TO ASSESSMENT OF TOTAL I NCOME. HOWEVER, WHEN THERE IS NO SUCH CONFLICT BETWEEN THE IT AND THE COMMERCIAL PRINCIPLES OF ACC OUNTING THEN THE INCOME OF THE ASSESSEE IS NECESSARILY ASSESSABLE WITH REFERENCE TO ACCEPTED P RINCIPLE OF ACCOUNTING AND THE ACCOUNTING STANDARDS RECOMMENDED BY ICAI WHICH HAVE BEEN MADE MANDATORY UNDER SECTION 209 OF THE COMPANIES ACT, 1956. FROM THE IMPUGNED ORDER IT IS NOTED THAT THE SUM OF RS.2,65,65,948/- DISALLOWED INTER ALIA INCLUDED PROVISION FOR LEAVE ENCASHMENT WHICH IS SUBJECT TO APPLICATION OF SECTION 43B(F) O F THE ACT. I FIND THAT IN ASSESSMENT ORDER THE AO HAS SEPARATELY DEALT WITH PROVISION FOR LEAVE ENCASHMENT INCLUDED IN THE SAID SUM OF RS.12,65,65, 948/- AND MADE SEPARATE DISALLOWANCE BY INVOKING SECTION 43B(F) OF THE ACT. THE SAID DISALLOWANCE IS DEALT WITH IN GROUND NO. 12 OF THE PRESENT APPEAL. SAVE & EXCEPT THE ITEM OF LEAVE ENCASHMENT, THERE W AS NO OTHER EMPLOYEE BENEFIT PAYABLE TO RETIRED EMPLOYEES' WHICH WAS PROHIBITED BY ANY SPECIFIC PRO VISION OF THE ACT. EVEN THE LIABILITY FOR LEAVE ENCASHMENT PROVIDED IN TERMS OF AS-15 WAS DISALLOWE D SEPARATELY BY THE AO AND THEREFORE THE AO COULD NOT HAVE DISALLOWED THE SAME ITEM AGAIN WHILE DEALING WITH THE ISSUE OF PROVISION AS PER AS-15. FROM THE AR'S SUBMISSIONS IT APPEARED THAT THE LIAB ILITY AS PROVIDED IN THE ACCOUNTS PERTAINED TO THE PERIOD WHEN THE EMPLOYEES WERE IN EMPLOYMENT AND BE NEFIT OF THEIR SERVICES HAD BEEN AVAILED BY THE APPELLANT FOR CARRYING ON ITS BUSINESS. APPLYING TH E RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LIMITED VS CIT (SUPRA) THE A SSESSEE'S OWN CASE IN AY 1997-98 IN ITA NO.959/KOI/2002, I AM THEREFORE OF THE OPINION THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION FOR PROVISION FOR POST RETIREMENT EMPLOYEES' BENEFITS C OMPUTED ON THE BASIS OF ACTUARIAL VALUATION IN TERM S OF SEC 37 OF THE ACT SINCE SUCH EXPENDITURE WAS INC URRED OR LAID OUT WHOLLY FOR THE ASSESSEE'S BUSINES S PURPOSES AND THE BENEFITS WERE PAYABLE TO EMPLOYEES ACCORDING TO THEIR CONTRACTS OF EMPLOYMENT WITH THE APPELLANT. 4.10. IN THE IMPUGNED ORDER THE AO JUSTIFIED THE D ISALLOWANCE ALSO ON THE GROUND THAT THE DEDUCTION CLAIMED INTER ALIA INCLUDED THE LIABILITY OF THE EA RLIER YEARS AMOUNTING TO RS.11,00,14,367/- AND WHIC H WAS NOT DEBITED TO THE P&L A/C BUT WAS DEBITED TO T HE GENERAL RESERVE BROUGHT FORWARD FROM THE EARLIER YEARS IN THIS REGARD I FIND THAT THE ICAI R EVISED AS-15 AND PRESCRIBED NEW METHODOLOGY FOR DETERMINING THE LIABILITY WHICH THE ENTERPRISE WAS REQUIRED TO PROVIDE IN ITS BOOKS. THE REVISED METHO D PRESCRIBED WAS MANDATORY. BASED ON THE REVISED METH ODOLOGY THE ENTERPRISES WERE REQUIRED TO RE- COMPUTE THEIR EXISTING LIABILITIES. THE ICAI WAS AW ARE THAT REVISION OF THE EXISTING LIABILITIES WOULD RESULT IN EITHER INCREASE OR DECREASE IN THE QUANTU M OF THE PROVISION MADE IN THE ACCOUNTS TILL THE REVISION WAS MADE EFFECTIVE. THE ICAI THEREFORE REC OMMENDED THAT WHERE AS A RESULT OF THE REVISION ENTERPRISE WAS REQUIRED TO MAKE ADDITIONAL PROVISIO N IN ITS BOOKS THEN THE ADDITIONAL LIABILITY COULD 6 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 EITHER BE SET OFF AGAINST THE GENERAL RESERVES OR A DDITIONAL LIABILITY COULD BE WRITTEN OFF TO THE P&L A/C IN FIVE ANNUAL EQUAL INSTALMENTS. IN THE APPELLANT S CASE IT FOLLOWED THE FIRST OPTION AND DEBITED RS.11,00,14,367/- BEING ADDITIONAL LIABILITY FOR TH E PERIOD UPTO 31.03.2007 TO ITS GENERAL RESERVE. 4.11 IN MY OPINION HOWEVER THE MANNER IN WHICH THE ASSESSEE ACCOUNTED THE ADDITIONAL LIABILITY IN ITS BOOKS WAS NOT MATERIAL IN DECIDING WHETHER THE ASSE SSEE WAS ELIGIBLE TO CLAIM DEDUCTION FOR RS.11,00,14,367/- WHICH REPRESENTED ADDITIONAL LIAB ILITY PROVIDED IN THE ACCOUNTS BASED ON THE REVISIO N IN AS-15 AND WHICH PERTAINED TO PERIOD PRIOR TO 01. 04.2007. THE PROVISION FOR POST RETIREMENT EMPLOYEE' BENEFITS FOR THE PERIOD UPTO 31.03.2007 W ERE ALWAYS ALLOWED AS BUSINESS EXPENDITURE IN THE PAST ASSESSMENTS. AS-15 ONLY PRESCRIBED THE METHODO LOGY ON THE BASIS OF WHICH THE LIABILITY FOR SUCH EXPENDITURE WAS QUANTIFIED IN THE BOOKS. IN THE EAR LIER ASSESSMENTS, THE DEDUCTION WAS ALLOWED BY THE AOS ON BEING SATISFIED THAT THE EXPENSE WAS PERMISS IBLE AS REVENUE DEDUCTION AND FOR WHICH LIABILITY ACCRUED IN THE RESPECTIVE YEARS. IN THE CIRCUMSTANC ES IF THE REVISED AS-15 WAS IN FORCE IN THE EARLIER YEARS THEN THE DEDUCTION FOR THE EXPENSE QUANTIFIED ON THE BASIS OF THE SAID METHODOLOGY WOULD HAVE BEEN ALLOWED IN THE RESPECTIVE YEARS. THE MATERIAL CHANGE, IF ANY, WHICH OCCURRED DURING THE PREVIOUS YEAR RELEVANT TO AY 2008-09 WAS REVISION IN THE MET HODOLOGY PRESCRIBED BY ICAI FOR ESTIMATING THE LIABILITY IN ACCORDANCE WITH REVISED AS-15. AS A RE SULT OF THE REVISION IN AS-15, THE ASSESSEE WAS MANDATORILY REQUIRED TO RECOMPUTED OR REWORK THE QU ANTUM OF ITS EXISTING PROVISION BECAUSE THE REVISION PRESCRIBED IN AS-15 WAS RETROACTIVE IN OPE RATION. BECAUSE OF THE RETROACTIVE REVISION NOT ONL Y THE CURRENT YEARS LIABILITY BUT ENTIRE LIABILITY OF THE COMPANY ACCRUING UPTO THE DATE OF REVISION BECOMING EFFECTIVE WAS REQUIRED TO BE QUANTIFIED AN D PROVIDED IN THE ACCOUNTS. AS A CONSEQUENCE THE ASSESSEE'S LIABILITY TO PAY SUCH EXPENDITURE WENT U P BY RS.11,00,14,367/-. 4.12 ADDITIONAL LIABILITY OF RS.11,00,14,367/- HOWE VER GOT CRYSTALLISED AS A CONSEQUENCE OF THE REVISI ON OF AS-15 MADE BY ICAI AND WHICH CAME IN FORCE W.E.F. 0 1.04.2007. THE CRYSTALLIZATION OF THE LIABILITY PER TAINED TO AN ITEM OF EXPENDITURE WHICH WAS IN NATURE. I TH EREFORE FIND THAT THE LIABILITY OF RS.11,00,14,367/ - CRYSTALLISED DURING FY 2007-08. THE REVISION IN THE QUANTUM OF LIABILITY DID NOT BRING ABOUT ANY CHANG E IN THE BASIS CHARACTER OR NATURE OF THE EXPENDITURE WH ICH WAS ALWAYS CONSIDERED IN THE PAST ASSESSMENTS T O BE REVENUE IN THE EARLIER YEAR' ASSESSMENTS THE DEDUCT ION FOR THE SAME EXPENSE WAS ALLOWED BY THE AOS FOLLOWING PRE-AMENDED AS-15 AND THEREFORE THERE WAS NO REASON FOR AO TO ADOPT CONTRARY VIEW WITH REGAR D TO ALLOWABILITY OF THE ADDITIONAL EXPENDITURE WHICH ACCRUED AS A RESULT OF REVISION IN AS-15. THE REVI SION IN AS-15 HAVING BECOME EFFECTIVE DURING THE RELEVANT P REVIOUS YEAR, THE DEDUCTION WAS PERMISSIBLE IN THE RELEVANT YEAR OF THE REVISION. , THEREFORE HOLD THA T THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION BOTH FOR RS.11,00,14,367/- AND RS.1,65,51,581/- WHICH REPRES ENTED THE ASSESSEE'S LIABILITY TO PAY POST RETIREME NT EMPLOYEES BENEFITS BASED ON REVISED AS-15. THE AO I S ACCORDINGLY DIRECTED TO RE-COMPUTE THE INCOME AFT ER ALLOWING THE DEDUCTION FOR RS.12,65,65,948/-. GROUN D NOS.1 TO 6 ARE THEREFORE ALLOWED. BEING AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE FOREGOING FINDING OF THE LD. CIT(A). 3. WE HAVE CAREFULLY PERUSED THE MATERIAL ON RECORD . THE LD. DR APPEARING ON BEHALF OF THE REVENUE CONTENDED THAT ALTHOUGH THE PROVISIO N FOR EMPLOYEE RETIREMENT BENEFITS WAS PROVIDED ON SCIENTIFIC BASIS BUT IT COULD BE ALLOWE D IN COMPUTATION OF BUSINESS INCOME ONLY ON ACTUAL PAYMENT BASIS AS STATUTORILY PROVIDED IN SECTION 43B OF THE ACT. PER CONTRA, THE LD. AR OF THE APPELLANT SUPPORTED THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE PROVISION FOR RETIREMENT BENEFITS WHICH THE AO DISA LLOWED INTER ALIA INCLUDED THE FOLLOWING : 7 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 PARTICULARS AMOUNT (IN RS.) STAFF PENSION RS.7,34,67,165/- MEDICAL REIMBURSEMENT RS.2,95,13,970/- LEAVE ENCASHMENT RS.74,20,744/- FOREIGN PENSION RS.2,73,41,641/- 4. IT WAS CONTENDED THAT OUT OF THE ABOVE FOUR PROV ISIONS, ONLY PROVISION FOR LEAVE ENCASHMENT WAS SUBJECTED TO THE RIGORS OF SECTION 4 3B(F) OF THE ACT.THE REMAINING THREE PROVISIONS FOR POST RETIREMENT BENEFITS I.E. MEDICA L REIMBURSEMENT, STAFF PENSION & FOREIGN PENSION WERE ALLOWABLE ON ACCRUAL BASIS. AS REGARDS PROVISION FOR LEAVE ENCASHMENT, THE LD. AR INVITED OUR ATTENTION TO THE AOS ORDER WHEREIN HE HAD SEPARATELY DISALLOWED THE PROVISION FOR LEAVE ENCASHMENT WHICH WAS SEPARATELY CONFIRMED BY THE LD. CIT(A) IN PARA 4.9 OF HIS APPELLATE ORDER. HE THEREFORE SUBMITTED THAT THE AO COULD NOT HAVE AGAIN DISALLOWED THE PROVISION FOR LEAVE ENCASHMENT WHILE DEALING WITH IT FROM THE ANGLE OF AS- 15 (REVISED). WITH REGARD TO THE DEDUCTIBILITY OF R EMAINING THREE PROVISIONS ON MERCANTILE BASIS, HE FULLY SUPPORTED THE ORDER OF THE LD. CIT( A).HE RELIED ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH M OVERS LTD VS CIT (245 ITR 428) &ROTORK CONTROL (I) LTD (189 TAXMAN 422); VISHAKAP ATNAM BENCH OF THIS TRIBUNAL IN THE CASE OF RASHTRIYAISPATH NIGAM LTD (ITA NO.13/VIZAG/ 2013) DATED 22.11.2017 AND THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE OF EVEREADY INDUSTRIES INDIA LTD FOR AY 1997-98 IN ITA NO. 959/KOL/2002WHICH HAS SIN CE BEEN UPHELD BY THE HONBLE CALCUTTA HIGH COURT. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES. FROM THE MATERIAL ON RECORD IT IS NOTED THAT THE PROVISION FOR EMPLOY EES POST RETIREMENT BENEFITS WAS REGULARLY PROVIDED INTHE APPELLANTS ANNUAL FINANCIAL ACCOUNT S IN CONFORMITY WITH MANDATORY AS-15. THE SAID AS-15 WAS CONSISTENTLY FOLLOWED IN THE PAS T ASSESSMENTS AND THE AO ALLOWED THE DEDUCTION FROM THE PROFITS OF THE BUSINESS IN RESPE CT OF SUCH PROVISIONS ON ACCRUAL BASIS. IN NONE OF THE PAST INCOME-TAX ASSESSMENTS THE REVENUE DISPUTED THE ALLOWABILITY OF THE 8 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 PROVISION FOR RETIREMENT BENEFITS CLAIMED ON ACCRUA L BASIS AND PROVIDED IN CONFORMITY WITH AS-15. WE NOTE THAT DISPUTE REGARDING THE ALLOWABIL ITY OF PROVISION FOR EMPLOYEE RETIREMENT BENEFITS WAS RAISED BY THE AO ONLY ONCE IN AY 1997- 98. THIS TRIBUNAL VIDE ITS ORDER IN ITA NO. 959/KOL/2002 HOWEVER HELD THAT THE PROVISION FO R EMPLOYEES RETIREMENT BENEFIT ASCERTAINED BY FOLLOWING AS-15 WAS AN ALLOWABLE DED UCTION U/S 37 OF THE ACT. THE ORDER OF THIS TRIBUNALWAS AFFIRMED BY THE HONBLE CALCUTTA H IGH COURT IN ITS JUDGMENT REPORTED IN 258 TAXMAN 313 WHEREIN THE FOLLOWING OBSERVATION WA S MADE : 10. AS FAR AS QUESTION NO. (V) IS CONCERNED, MR. A GARWAL VERY STRENUOUSLY ARGUED THAT THE PROVISIONS FOR RS. 82, 64, 000/- WAS A BENEFIT CONFERRED ON THE EMPLOYEES ON SUPERANNUATION OR WAS A RETIREMENT BENEFIT. 11. ANALYSING THE QUESTION, WE FIND THAT THIS ISSUE DOES NOT APPEAR FROM THE QUESTION RAISED. THE ISSUE WHICH IS RAISED IS WHETHER THE PR OVISION REGARDING RS. 82, 64, 000/- WAS IN THE NATURE OF A CONTINGENT LIABILITY AND THU S NOT ALLOWABLE. NEITHER WAS THE ISSUE RAISED IN THE WAY MR. AGARWAL HAS SOUGHT TO R AISE IT NOW, BEFORE THE TRIBUNAL. LEARNED COUNSEL TRIED TO SUBMIT THAT ON APPLICATION OF SECTION 40A (7) AND SECTION 36 (1) (IV) OF THE SAID ACT, THESE PROVISIONS BEING ON E FOR BENEFIT OF EMPLOYEES ON SUPERANNUATION OUGHT TO BE APPROVED BY THE APPROPRI ATE AUTHORITY AND IN THE ABSENCE OF THAT THE DEDUCTION WAS NOT ADMISSIBLE. WE FIND O N EXAMINATION OF THE ORDER OF THE TRIBUNAL THAT ITS DECISION WAS BASED ON BHARAT EART H MOVERS V. CIT [2000] 112 TAXMAN 61/245 ITR 428 WHERE THE SUPREME COURT HELD THAT THE LIABILITY WAS NOT A CONTINGENT LIABILITY. IN THAT CASE, THE SUPREME COU RT WAS CONCERNED WITH BENEFICIARY SCHEMES FOR ENCASHMENT OF LEAVE OF THE ASSESSEE COM PANY BHARAT EARTH MOVERS. IN THIS CASE A SCHEME FOR MEDICAL BENEFIT POST RETIREM ENT WAS INVOLVED. THE TRIBUNAL TREATED THE LIABILITY AS ACCRUED AND TO BE DISCHARG ED IN THE FUTURE, BASED ON THE ABOVE SUPREME COURT DECISION. IN OUR OPINION, THIS FINDIN G OF THE TRIBUNAL IS BASED ON STANDARD ACCOUNTING PRINCIPLES AND CONSEQUENTIAL AP PLICATION OF THE LAW LAID DOWN BY THE SUPREME COURT IN BHARAT EARTH MOVERS (SUPRA). W E FIND NO INFIRMITY IN THE REASONING OR CONCLUSION REACHED BY THE TRIBUNAL. 6. WE THEREFORE FIND THAT THE ISSUEOF ALLOWABILITY OF PROVISION FOR EMPLOYEE RETIREMENT BENEFITS STANDS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE BY THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT (SUPRA). 7. IT IS ALSO NOTED THAT IN ALL INCOME-TAX ASSESSME NTSCOMPLETED UPTO AY 2007-08 THE AO HIMSELFALLOWED DEDUCTION IN RESPECT OF PROVISION FOR RETIREMENT BENEFITS ON ACCRUAL 9 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 BASIS AND CLAIMED ON THE BASIS FORMULATED IN AS-15. THE LD. AR ALSO DREW OUR ATTENTION TO THE FACT THAT IN THE INCOME-TAX ASSESSMENT ORDERS P ASSED U/S 143(3) FOR AYS 2010-11 AND ONWARDS THE AO ONCE AGAIN ALLOWEDTHE ASSESSEES CLA IM OF DEDUCTION FOR PROVISION FOR POST RETIREMENT EMPLOYEE BENEFITS U/S 37 OF THE ACT ON A CCRUAL BASIS. WE THEREFORE FIND FORCE IN THE SUBMISSIONS OF THE LD. AR THAT ON THE PRINCIPLE OF JUDICIAL CONSISTENCY THE AO WAS NOT PERMITTED TO DEPART FROM THE ACCEPTED POSITION,WHIC H PERMEATED IN EARLIER YEARS AS WELL AS SUBSEQUENT YEARS, WITHOUT POINTING OUT ANY CHANGE I N THE FACTUAL MATRIX OR PROVISIONS OF LAW IN THE RELEVANT AY 2008-09. IN THIS REGARD WE MAY G AINFULLY REFER TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMISATS ANG (193 ITR 321)WHEREIN IT WAS HELD AS UNDER: WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE P ARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 8. NOW WE PROCEED TO DEAL WITH THE LD. DRS CONTENT ION REGARDING THE APPLICABILITY OF PROVISION OF SECTION 43B TO SUCH PROVISION FOR EMPL OYEES RETIREMENT BENEFITS. FOR THIS WE FIRST NEED TO EXAMINE THE PROVISIONS OF SECTION 43B OF THE ACT WHICH IS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FO RCE, OR (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY F UND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, OR (C) ANY SUM REFERRED TO IN CLAUSE (II) OF SUB-SECT ION (1) OF SECTION 36, OR (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL C ORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, IN ACCORDANCE WITH THE TERM S AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING, OR 10 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR ADVANCES FROM A SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DE VELOPMENT BANK IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVE RNING SUCH LOAN OR ADVANCES, OR (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE. 9. FROM THE ABOVE, IT IS NOTED THAT ONLY THE PROVIS ION FOR EMPLOYEES BENEFITS BEING IN THE NATURE OF GRATUITY, SUPERANNUATION, PROVIDENT F UND& LEAVE ENCASHMENT ARE SUBJECT TO SECTION 43B(B) & (F) OF THE ACT AND THEREFORE ALLOW ABLE ONLY ON ACTUAL PAYMENT BASIS. WE ARE THEREFORE UNABLE TO AGREE WITH THE CONTENTION O F THE LD. DR THAT ALL THE PROVISIONS FOR EMPLOYEES POST RETIREMENT BENEFITS PAYABLE TO EMPL OYEES ARE SUBJECT TO APPLICATION OF SECTION 43B OF THE ACT. IN OUR CONSIDERED OPINION S INCE THE EMPLOYEES BENEFITS IN FORM OF MEDICAL REIMBURSEMENTS, FOREIGN PENSION AND STAFF P ENSION DO NOT FIND MENTION IN ANY OF THE SPECIFIC CLAUSES OF SECTION 43B OF THE ACT, THE SAME IS HELD TO BE ALLOWABLE U/S 37 ON MERCANTILE BASIS. 10. WITH REGARD TO PROVISION FOR LEAVE ENCASHMENT,W E AGREE WITH THE CONTENTION OF THE LD. DR TO THE EFFECT THAT SUCH PROVISION IS ALLOWAB LE ONLY ON ACTUAL PAYMENT BASIS. HOWEVER FROM THE FACTS ON RECORD IT IS NOTED THAT THE APPEL LANT HAD ALREADY ADDED BACK THE PROVISION FOR LEAVE ENCASHMENT IN THE COMPUTATION OF INCOME F OR AY 2008-09 UNDER SECTION 43B(F) OF THE ACT. THE LD. AR ALSO DREW OUR ATTENTION TO THE FACT THAT EVEN THE AO HAD TAKEN SPECIFIC NOTE OF THESEPARATE DISALLOWANCE MADE IN THE COMPUT ATION OF INCOME IN HIS ASSESSMENT ORDER AND THAT THE AO HAD SEPARATELY MADE ADDITION IN RES PECT OF PROVISION FOR LEAVE ENCASHMENT ON THE GROUND OF BEING NOT ADMISSIBLE IN TERMS OF S ECTION 43B(F) OF THE ACT. WE FURTHER NOTE THAT THIS SEPARATE DISALLOWANCE MADE U/S 43B(F) WAS CONFIRMED BY THE LD. CIT(A) AGAINST WHICH NO APPEAL HAS BEEN PREFERRED BY THE ASSESSEE. WE THEREFORE FIND MERIT IN THE LD. ARS SUBMISSIONS THAT WHEN THE PROVISION FOR LEAVE ENCAS HMENT HAD BEEN SEPARATELY ADDED BACK U/S 43B(F) WHILE ASSESSING THE TAXABLE INCOME, THE AO COULD NOT HAVE AGAIN DISALLOWED THE SAID PROVISION IN LIGHT OF AS-15 (REVISED) AND THAT THE IMPUGNED ADDITION AMOUNTED TO DOUBLE DISALLOWANCE. FOR THE REASONS SET OUT IN THE FOREGOING THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE DISALLO WANCE OF PROVISION FOR LEAVE ENCASHMENT 11 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 MADE BY THE AO IN LIGHT OF AS-15 SINCE IT HAD ALREA DY BEEN ADDED BACK SEPARATELY U/S 43B(F) OF THE ACT. 11. FOR THE REASONS SET OUT ABOVE WE DO NOT FIND AN Y INFIRMITY IN THE REASONING AND CONCLUSIONS OF THE LD. CIT(A) DELETING THE DISALLOW ANCE OF PROVISION FOR EMPLOYEES RETIREMENT BENEFITS. THIS GROUND OF THE REVENUE IS THEREFORE DISMISSED. 12. GROUND NO. 2 OF THE APPEAL IS AGAINST THE LD. C IT(A)S ACTION DIRECTING THE AO TO ALLOW MARKED-TO-MARKET LOSS OF RS.65.56 LACS ARISEN ON REALIGNMENT OF OPEN FOREIGN EXCHANGE DERIVATIVE CONTRACTS AS ON THE YEAR-END. T HE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAD BOOKED MARK TO MA RKET (MTM) LOSS ON UNSETTLED FORWARD CONTRACTS AMOUNTING TO RS.65.56 LACS WHICH WAS CREATED BY CORRESPONDING DEBIT TO PROFIT AND LOSS ACCOUNT AND THE SAME WAS CLAIMED AS DEDUCTION IN THE RETURN OF INCOME BY THE ASSESSEE. ACCORDING TO AO THE LOSS ACCOUNTED BY THE ASSESSEE WAS ONLY NOTIONAL AND CONTINGENT. PLACING RELIANCE ON THE INSTRUCTION NO. 3/2010 DATED 23.3.2010, THE AO DISALLOWED THE CLAIM OF MTM LOSS ON UNSETTLED DERIV ATIVE CONTRACTS. ON APPEAL THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY O BSERVING AS UNDER: 10.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR. I HAVE ALSO PERUSED THE INSTRUCTION NO. 3 OF 2010 ISSUED BY CBDT WITH REFERENCE TO WHICH THE AO DISALLOWED THE LOSS OF RS. 65.56 LACS. I HAVE ALSO EXAMINED THE DOCUMENTS WITH REFERENCE TO WHICH THE ASSESSEE ACCO UNTED MTM LOSS IN ITS BOOKS. FROM THE IMPUGNED ORDE R I FIND THAT THE AOS ORDER IS CRYPTIC. THE AO DID N OT DISCUSS THE BACKGROUND FACTS LEADING TO MTM LOSS WHICH THE APPELLANT ACCOUNTED IN ITS BOOKS. THE MTM LOSS OF RS. 65.56 LACS HAD TWO COMPONENTS COMPRISING OF RS.26.01 LACS AND RS.39.55 LACS. LOSS OF RS.26.01 L ACS PERTAINED TO FOREX DERIVATIVE TRANSACTIONS WHIC H THE APPELLANT ENTERED INTO UNDER INTEREST SWAP ARRANGEM ENT WITH ICICI BANK REMAINING LOSS OF RS.39.55 LACS WAS INCURRED ON ACCOUNT OF UNSETTLED OUTSTANDING FO RWARD CONTRACTS WHICH THE APPELLANT EXECUTED INTO I N RELATION TO ITS EXPORT SALES. THE MAIN COMPONENT OF THE LOSS THUS PERTAINED TO OPEN OUTSTANDING FORWAR D CONTRACTS PERTAINING TO APPELLANTS EXPORT RECEIVAB LES. 10.3 FROM THE AUDITED ACCOUNTS OF THE APPELLANT, I FIND THAT DURING THE RELEVANT YEAR THE ASSESSEES E XPORTS WERE RS.145.15 CRORES WHICH PROVED THAT ASSESSEE CA RRIED ON INTERNATIONAL TRADE ON SUBSTANTIAL SCALE. IN THE CIRCUMSTANCES THE ASSESSEE WAS EXPOSED TO THE RISK OF EXCHANGE RATE FLUCTUATIONS AND THEREFORE IT WAS IN THE APPELLANTS BUSINESS INTEREST THAT ASSESSEE HEDGED ITS EXCHANGE RATE FLUTCTUATION RISKS BY ENTERING IN TO FORWARD CONTRACTS. IN TERMS OF AS-11 ISSUED BY THE ICAI, VALUES OF OUTSTANDING OPEN CONTRACTS AS ON 31.03.2008 WERE RESTED AT THE PREVAILING EXCHANGE R ATES. ANY GAIN OR LOSS INCURRED ON RESTATEMENT OF T HE OUTSTANDING POSITION WAS ACCOUNTED IN ITS BOOKS. TH E UNDERLYING TRANSACTIONS IN RELATION TO WHICH THE ASSESSEE EXECUTED FORWARD WERE ITS EXPORT SALES I.E . TO SAY, REVENUE ITEM. IN THE CIRCUMSTANCES ANY GA IN OR LOSS INCURRED ON RESTATEMENT OF OPEN FORWARD CONTRA CTS AND WHERE UNDERLYING SECURITY WAS THE EXPORT RECEIVABLES, REPRESENTED REVENUE GAIN OR REVENUE LO SS. THE ASSESSEE FOLLOWED ACCOUNTING METHOD OF REST ATING THE UNSETTLED OPEN CONTRACTS ON THE LAST DATE OF TH E PREVIOUS YEAR CONSISTENTLY AND THE GAIN OR LOSS I NCURRED WAS ACCOUNTED IN THE BOOKS IN CONFORMITY WITH AS-11 . I THEREFORE FIND THAT THE LOSS WHICH THE ASSESSEE INCURRED WAS A DEFINITIVE LOSS AND IT ACCRUED ON TH E LAST DATE OF THE PREVIOUS YEAR I.E. 31.03.2008. T HE LOSS 12 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 WAS QUANTIFIED WITH REFERENCE TO EXCHANGE RATE PREV AILING ON 31.03.2008 AND THEREFORE SUCH LOSS ACCRUE D IN AY 2008-09. 10.4 THE ISSUE AS TO WHETHER EXCHANGE FLUCTUATION L OSS ACCOUNTED BY AN ASSESSEE WITH REFERENCE TO EXCH ANGE RATE PREVAILING ON THE DATE OF BALANCE SHEET IS A N OTIONAL OR CONTINGENT LOSS OR ASCERTAINED LOSS WAS CONSIDERED AND DECIDED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PVT. LTD. (312 ITR 254). IN THIS JUDGMENT THE SUPREME CO URT ESSENTIALLY CONSIDERED THE QUESTION WHETHER THE LOSS ARISING FROM RESTATEMENT OF AN EXPENDITURE OR LIABI LITY PURSUANT TO EXCHANGE FLUCTUATION IN RESPECT OF UNPAID TRADE RECEIVABLE OR TRADE PAYABLE WAS ALLOWABLE IN COMPUTING BUSINESS INCOME OF AN ASSESSEE. IN THE CA SE BEFORE THE SUPREME COURT IT WAS THE REVENUES ARGUM ENT THAT SUCH LOSS WAS NOTIONAL OR HYPOTHETICAL LOS S WHICH COULD NOT BE ALLOWED TO BE DEDUCTED IN COMPUT ING THE BUSINESS INCOME OF THE ASSESSEE. IT WAS THE DEPARTMENTS ARGUMENT THAT SUCH LOSS CAN BE ALLOWED AS A DEDUCTION ONLY WHEN THE LOSS WAS ACTUALLY INCURRED ON EXCESS PAYMENT AND NOT OTHERWISE. THE S UPREME COURT HOWEVER NEGATED THE REVENUES CONTENTION AND HELD THAT THE LOSS ACCOUNTED BY AN A SSESSEE WITH REFERENCE TO EXCHANGE RATE PREVAILING AT THE END OF THE PERVIOUS WAS A REAL AND DEFINITIVE LOSS AND THE SAME WAS ADMISSIBLE AS A DEDUCTION IN ARRIV ING AT TAXABLE INCOME IF THE ASSESSEE HAD RECOGNIZE SUCH L OSS BY DEBITING IT TO ITS P&L A/C IN TERMS OF MERCA NTILE SYSTEM OF ACCOUNTING WHICH THE ASSESSEE CONSTANTLY FOLLOWED. IN ITS JUDGMENT THE SUPREME COURT DISCUSS ED IN DETAIL THE ACCOUNTING METHOD PRESCRIBED IN AS-11 IS SUED BY THE ICAI AND HELD THAT SUCH METHOD OF ACCOUNTING IF FOLLOWED CONSISTENTLY BY AN ASSESSEE WAS SUPREME EVEN FOR COMPUTATION PURPOSES AND THE DEPARTMENT WAS PRECLUDED FROM MAKING THE DISALLOWAN CE UNLESS THE REVENUE PROVED THAT THE ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE WAS INCORRECT. THE APEX COURT PARTICULARLY HELD THAT LOSS RECOGNIZED A ND ACCOUNTED BY AN ASSESSEE ON ACCOUNT OF RESTATEMENT OF FOREIGN EXCHANGE DENOMINATED LIABILITIES WAS ALL OWED AS REVENUE DEDUCTION IF THE UNDERLYING FOR SUCH TRA NSACTIONS WERE REVENUE ITEMS SUCH AS TRADE RECEIVAB LES, TRADE PAYABLES OR WORKING CAPITAL. THIS VIEW WAS RE ITERATED BY THE SAME COURT IN ITS LATER DECISION IN THE CASE OF CIT VS. OIL & NATURAL GAS CORPN. LIMITED VS CIT (322 ITR 180). 10.5 THE A/RS RELIANCE ON THE DECISIONS OF THE ITA T, DELHI IN THE CASE OF BECHTEL INDIA PVT. LTD. VS. ADDL. CIT (32 TAXMANN.COM 123) AND ITAT, MUMBAI SPECIAL B ENCH IN THE CASE OF DCIT V. BANK OF BAHRAIN AND KUWAIT (41 SOT 290) ALSO FOUND TO BE RELEVANT. IN A RRIVING AT THE FINDING THAT MTM LOSSES WERE DEFINIT IVE AND NOT NOTIONAL OR CONTINGENT, THE ITAT BENCHES HA D TAKEN INTO ACCOUNT NOT ONLY THE DECISIONS OF THE APEX COURT REFERRED ABOVE BUT ALSO THE CBDT INSTRUCTION NO. 3 OF 2010 ON WHICH THE AO PLACED RELIANCE IN TH E IMPUGNED ORDER. EVEN AFTER CONSIDERING INSTRUCTION NO. 3 OF 2010, THE ITAT BENCHES DID NOT AGREE WITH THE DEPARTMENTS VIEW THAT MTM LOSS ACCOUNTED BY THE AS SESSEE IN THEIR BOOKS AS PER AS-11 WAS NOTIONAL. ON THE CONTRARY THE ITAT BENCHES HELD THAT THE APEX CO URT IN ITS JUDGMENTS IN THE CASES OF CIT VS. WOODWA RD GOVERNOR INDIA PVT. LTD. (SUPRA) CIT VS. & OIL AND NATURAL GAS CORPN. LIMITED (SUPRA) HAD ACCORDED JUDICIAL RECOGNITION TO AS-11 AND HELD THAT THE LOS S ON RESTATEMENT OF OUTSTANDING FOREIGN EXCHANGE TRANSACTIONS WERE ASCERTAINED LOSSES AND COULD NOT CONSIDERED TO BE NOTIONAL OR CONTINGENT ONE. IN VIE W OF THE BINDING JUDICIAL PRECEDENTS THEREFORE I HAVE NO HESITATION IN HOLDING THAT LOSS OF RS.39.55 LACS A CCOUNTED BY THE APPELLANT IN ITS BOOKS OF ACCOUNT ON RESTATE MENT OF OUTSTANDING FORWARD CONTRACTS WHERE UNDERLY ING WAS EXPORTS RECEIVABLE, WAS ALLOWABLE IN COMPUTING ASSESSEES BUSINESS INCOME. 10.6 THE SECOND COMPONENT OF MTM LOSS OF RS.26.01 L ACS PERTAINED TO RE0STATEMENT OF UNSETTLED DERIVATI VE CONTRACTS BOOKED UNDER INTEREST RATE SWAP ARRANGEME NT WHICH THE APPELLANT ENTERED WITH ICICI BANK. THE ASSESSEE HAD OBTAINED LOAN OF RS.40 CRORES FROM BAN KS & INSTITUTIONS FOR ITS BUSINESS PURPOSES. INTERE ST PAYABLE THEREON WAS BEING CLAIMED AS BUSINESS EXPEN DITURE. THE LOANS WERE OBTAINED IN INDIAN CURRENCY CARRYING INTEREST @ 11.25%. SINCE INTEREST RATES GL OBALLY WERE MUCH LOWER, TO REDUCE ITS SERVICING COS T THE ASSESSEE ENTERED INTO INTEREST RATE SWAP ARRANGEMEN T WITH ICICI BANK WITH REGARD TO LOAN OF RS.40 CROR ES. UNDER THIS ARRANGEMENT ICICI AGREED TO PAY NET INTE REST @ 2% ON RS.40 CRORES BY TREATING THE LOAN AMOU NT BEING NOTIONALLY SWAPPED WITH DEPOSIT IN SWISS FRAN CS DENOMINATION. HOWEVER UNDER THIS ARRANGEMENT THE APPELLANT INCURRED THE RISK OF DEPRECIATION OF INDI AN CURRENCY AGAINST SWISS FRANCS. FROM THE ARS EXPLANATION IT WAS APPARENT THAT THE PURPOSE OF ENT ERING INTO INTEREST SWAP ARRANGEMENT WAS TO REDUCE EFFECTIVE COST OF BORROWING THE DOMINANT PURPOSE FO R WHICH THE INTEREST SWAP ARRANGEMENT WAS ENTERED I NTO WAS NOT TO OBTAIN ADDITIONAL LOAN BUT TO REDUCE EFF ECTIVE COST OF EXISTING BORROWING. IN VIEW OF THESE FACTS THEREFORE ANY LOSS OR GAIN WHICH AROSE FROM THE INT EREST RATE SWAP ARRANGEMENT WAS IN THE REVENUE FIEL D 13 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 SINCE THE UNDERLYING TRANSACTION FOR SUCH AN ARRANG EMENT WAS INTEREST PAYABLE WHICH WAS A REVENUE ITEM . APPLYING THE PRINCIPLE LAID DOWN BY SUPREME COURT I N THE CASES OF CIT VS WOODWARD GOVERNOR INDIA PVT. LTD. (SUPRA) & OIL & NATURAL GAS CORPN. LIMITED VS CIT (SUPRA), SUCH MTM LOSS OF RS.26.01 LACS INCURRE D AND ACCOUNTED IN THE APPELLANTS BOOKS THEREFORE CO NSTITUTED REVENUE LOSS. 10.7 FROM THE A/RS SUBMISSIONS IT FURTHER APPEARED THAT THE ASSESSEES METHOD OF RESTATEMENT OF OUTSTANDING OPEN FOREIGN CURRENCY CONTRACTS WAS CON SISTENTLY FOLLOWED IN THE SUBSEQUENT YEARS AS WELL. THE INTEREST RATE SWAP TRANSACTIONS WERE ULTIMATELY SET TLED IN THE ASSESSMENT YEAR 2010-11. IN THE BOOKS F OR AY 2010-11 WHEN THE OUTSTANDING INTEREST SWAP DERIVATI VES WERE ULTIMATELY SETTLED THE ASSESSEE ACCOUNTED PROFIT OF RS.97.39 LACS. SUCH PROFIT WAS ACCOUNTED AFTER T AKING INTO ACCOUNT THE OPENING PROVISION FOR MTM LO SS FROM CURRENCY INTEREST RATE SWAPS AMOUNTING TO RS.7 88.77 LACS. THE PROVISION FOR MTM LOSS WAS MADE IN THE ACCOUNTS FOR THE AY 2008-09 & 2009-10 RESPECTIVELY. AFTER TAKING INTO ACCOUNT LOSS OF RS.788.77 LACS ACCOUNTED IN THE EARLIER YEARS THE ASSESSEE REPORTE D NET GAIN OF RS. 97039 LACS IN AY-2010-11 FORM INT EREST RATE SWAP TRANSACTION. FROM THE ASSESSMENT ORDER FO R AY 2010-11, I FIND THAT EVEN THOUGH LOSS OF RS. 7 88.77 LACS ARISING FROM RESTATEMENT OF INTEREST RATE SWAP DERIVATIVES WAS DISALLOWED IN AY 2008-09 AND 2009- 10, NO DEDUCTION THEREFORE WAS ALLOWED IN AY 2010-11 BE ING THE YEAR IN WHICH THE DERIVATIVE TRANSACTION WA S ULTIMATELY SETTLED. THE GAIN OF RS. 97.39 LACS ACCO UNTED AS INCOME IN THE BOOKS OF THAT WAS HOWEVER AS SESSED AS INCOME OF AY 2010-11. I THEREFORE FIND THAT THE YEAR IN WHICH THE DERIVATIVES TRANSACTIONS WAS ULTI MATELY SETTLED, THE AO DID ALLOW THE DEDUCTION FOR THE LOS S ACCOUNTED IN THE BOOKS OF PRIOR YEARS BUT THE INC OME REPORTED IN THE RELEVANT YEAR WAS ASSESSED WITHOUT DEMURE. I, THEREFORE, FIND THAT WHILE MAKING ASSESS MENT THE AO DID NOT EVEN FOLLOW THE CBDT INSTRUCTIONS NO . 3 OF 2010 IN ITS TRUE LETTER AND SPIRIT. 10.8 FROM THE INSTRUCTION NO. 3 OF 2010, IT IS APPA RENT THAT THE BOARD DID NOT LAY DOWN A PROPOSITION THAT LOSSES INCURRED FROM FOREIGN EXCHANGE DERIVATIVES S HOULD BE DISALLOWED IN ALL CIRCUMSTANCES. THE ONLY PROPOSITION PUT FORTH IN THIS INSTRUCTION IS THAT M TM LOSS WHICH IS CONSIDERED BY THE BOARD TO BE NOTI ONAL OR CONTINGENT SHOULD NOT BE ALLOWED FROM YEAR TO YEAR BUT BE ALLOWED ONLY IN THE YEAR IN WHICH DERIVATIVE CONTRACT IS ULTIMATELY SETTLED. APPLYING THE LETTER AND SPIRIT OF INSTRUCTION NO. 3 OF 2010, THE AO SH OULD HAVE THEREFORE, ALLOWED THE DEDUCTION FOR LOSS OF RS. 69 1.38 LACS IN AY 2010-11. HOWEVER FROM THE ASSESSMEN T ORDER OF AY 2010-11, I FIND THAT THE AO DID NOT ALL OW DEDUCTION FOR SUCH LOSS EVEN THOUGH IN THE YEAR UNDER CONSIDERATION MTM LOSS WAS DISALLOWED. I THEREFORE FIND FROM THE ARS SUBMISSIONS THAT THE AO DID NOT FOLLOW CBDTS INSTRUCTION NO. 3 OF 2010 AND THEREFO RE, THE AOS RELIANCE ON THE SAID INSTRUCTION WAS INAPPROPRIATE BECAUSE THE AO HIMSELF NEVER FAITHFUL LY ACTED IN ACCORD WITH THE SAID INSTRUCTION. 10.9 FOR THE REASONS SET OUT IN THE FOREGOING THERE FORE I HAVE NO HESITATION IN HOLDING THAT THE DISAL LOWANCE OF RS. 65.56 LACS MADE BY THE AO IN THE IMPUGNED OR DER SOLELY RELYING ON INSTRUCTION NO. 3 OF 2010 WAS LEGALLY & FACTUALLY INAPPROPRIATE. FURTHER SINCE TH E LOSS WAS INCURRED BY THE APPELLANT IN RELATION TO UNDERLYING TRANSACTIONS WHICH WERE IN THE REVENUE F IELD, THE LOSS INCURRED ON RESTATEMENT OF OUTSTANDI NG FOREIGN EXCHANGE CONTRACTS OR OPEN DERIVATIVE CONTR ACT POSITIONS WAS IN THE REVENUE FIELD AND HENCE ALLOWABLE. AS PER THE RATIO LAID DOWN BY SUPREME CO URT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PVT. LTD. (SUPRA) & OIL & NATURAL GAS CORPN. LIMITE D VS CIT (SUPRA), MTM LOSS WAS NOT A CONTINGENT OR NOTIONAL LOSS BUT THE SAME WAS REAL LOSS WHICH WAS ALLOWABLE IN THE YEAR IN WHICH THE LOSS WAS ACCOUNT ED IN THE APPELLANTS BOOKS. THE AO IS THEREFORE DIRECTED TO DELETE THE DISALLOWANCE OF RS. 65.56 LACS. GROU ND NOS. 15 & 16 ARE THEREFORE ALLOWED. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRO DUCTION AND MARKETING OF TEA AND SUBSTANTIAL REVENUE IS DERIVED FROM EXPORTS. THE TO TAL EXPORT TURNOVER DURING THE YEAR WAS 14 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 RS. 145.15CRORES. IN ORDER TO HEDGE ITS EXCHANGE RI SK, THE ASSESSEE ENTERED INTO FOREIGN EXCHANGE FORWARD CONTRACTS WITH BANKS FOR ITS EXPOR T BILLS. APART FROM FOREIGN EXCHANGE FORWARD CONTRACTS;THE ASSESSEE HAD ALSO ENTERED INT O AN INTEREST SWAP DERIVATIVE WITH ICICI BANK WITH A VIEW TO REDUCE EFFECTIVE INTEREST COST ON THE BORROWINGS. THE ASSESSEE HAD ORIGINALLY BORROWED LOAN OF RS.40 CRORES IN INDIAN RUPEES CARRYING INTEREST RATE OF 11.25%. SINCE THE INTEREST RATES GLOBALLY WERE LOWER, THE A SSESSEE UNDER A DERIVATIVE CONTRACT ENTERED INTO WITH ICICI BANK SWAPPED THE LOAN AMOUNT NOTION ALLY IN SWISS FRANCS AND THEREBY THE ASSESSEE WAS ENTITLED TO RECEIVED INTEREST OF 2% ON SUCH CONVERTED AMOUNT OF LOAN IN FOREIGN CURRENCY I.E. SWISS FRANCS. EFFECTIVELY THEREFORE T HE ASSESSEE WAS ABLE TO REDUCE THE INTEREST RATE TO 9.25% PAYABLE ON THEIR BORROWINGS. HOWEVER AS A CONSEQUENCE OF THIS INTEREST SWAP DERIVATIVE THE ASSESSEE INCURRED THE RISK OF DEPREC IATION OF INDIAN CURRENCY AGAINST SWISS FRANCS. DUE TO ADVERSE FLUCTUATION IN EXCHANGE RATE , UPON RE-ALIGNMENT OF THE FOREIGN EXCHANGE FORWARD CONTRACTS & INTEREST RATE DERIVATI VE, THE ASSESSEE INCURRED MTM LOSSES AT THE CLOSE OF THE FINANCIAL YEAR. IN TERMS OF THE MA NDATORY ACCOUNTING STANDARDS PRESCRIBED BY ICAI FOR ACCOUNTING FOR SUCH DERIVATIVE CONTRACT S AND FOLLOWING THE DOCTRINE OFPRUDENCE, THE ASSESSEE WAS MANDATORILY REQUIRED TO PROVIDE FO R SUCH LOSSES IN RESPECT OF ALL OUTSTANDING DERIVATIVE CONTRACTS AT THE BALANCE SHE ET DATE BY MARKING THEM TO MARKET. ACCORDINGLY WITH REFERENCE TO THE OPEN DERIVATIVE C ONTRACTS OUTSTANDING AS ON 31.3.2008, THE ASSESSEE DETERMINED THE LOSS OF RS. 65.56 LACS WITH REFERENCE TO THE EXCHANGE RATE PREVAILING AT THE END OF THE YEAR I.E. 31.3.2008. THE SAID LOS S WAS PROVIDED IN THE ASSESSEES ACCOUNTS FOR 31.3.2008 AND SUCH PROVISION WAS REVERSED IN TH E NEXT YEAR AND THE ASSESSEE ACCOUNTED FOR THE ACTUAL PROFIT / LOSS UPON SETTLEMENT OF THE FORWARD CONTRACT. THE LD. DR SUPPORTED THE ORDER OF THE AO. HE HEAVILY RELIED ON THE INSTR UCTION NO. 3/2010 DATED 23.3.2010 WHEREIN IT HAS BEEN MENTIONED THAT MARK TO MARKET L OSS WHERE SALE OR SETTLEMENT HAS ACTUALLY NOT TAKEN PLACE, THE SAID LOSS WOULD BE NOTIONAL AN D CONTINGENT IN NATURE AND CANNOT BE ALLOWED AS DEDUCTION. ACCORDINGLY HE PRAYED THAT TH E ORDER OF THE AO ON THIS ISSUE BE RESTORED. 14. PER CONTRA THE LD AR ARGUED THAT THE ASSESSEE H AD DERIVED EXPORT TURNOVER OF RS. 145.15CRORES. AS SUCH THE ASSESSEE WAS HIGHLY EXPOS ED TO THE RISKS ARISING FROM EXCHANGE RATE FLUCTUATIONS. WITH A VIEW TO HEDGE AGAINST EXC HANGE FLUCTUATION RISKS IN RELATION TO ITS 15 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 INTERNATIONAL TRADING OPERATIONS, THE ASSESSEE HAD ENTERED INTO FOREIGN EXCHANGE DENOMINATED FORWARD CONTRACTS WITH BANK. HE THEREFO RE SUBMITTED THAT UNDERLYINGS OF THE FOREIGN EXCHANGE FORWARD CONTRACTS ENTERED INTO BY THE ASSESSEE WERE EXPORT ORDERS/BILLS AND THEREFORE ANY GAIN/LOSS WHICH ACCRUED OR AROSE ON A CCOUNT OF RE-ALIGNMENT OF FOREIGN EXCHANGE FORWARD CONTRACTS AT THE YEAR WAS IN THE N ATURE OF REVENUE GAIN/LOSS INCURRED IN THE ORDINARY COURSE OF ASSESSEES BUSINESS. THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ARGUMENTS :- - CIT VS D CHETAN& CO (75 TAXMANN.COM 300) (BOM HC) - BECHTEL INDIA (P) LTD VSADDL CIT (33 TAXMANN.COM 21 3) (ITAT DELHI) - RELIANCE INDUSTRIES LTD VS CIT (40 TAXMANN.COM 431) (ITAT MUMBAI) 15. IN RESPECT OF THE INTEREST RATE DERIVATIVES, TH E LD. AR SUBMITTED THAT THE UNDERLYING OF THIS DERIVATIVE CONTRACT WAS THE LOAN COMMITMENTS. THE INTEREST PAID ON THE BORROWINGS WAS ALLOWED BY THE AO AS DEDUCTION FROM THE BUSINESS PR OFITS. HE THEREFORE CONTENDED THAT THE INTEREST RATE DERIVATIVE WHICH WAS ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS WITH A VIEW TO REDUCE THE EFFECTIVE COST OF BORROWINGS, THE MTM LOSS INCURRED ON SUCH DERIVATIVE AS ON 31.03.2008 WAS REAL, CRYSTALLIZED AND ON REVENUE AC COUNT. THE LD. AR ALSO INVITED OUR ATTENTION TO THE FACT THAT WHEN THE INTEREST RATE D ERIVATIVE WAS ULTIMATELY SETTLED IN FY 2009- 10 RELEVANT TO AY 2010-11ANDNET GAIN OF RS.97.39 LA CS DETERMINED AT THE TIME OF ACTUAL SETTLEMENT WAS OFFERED TO TAX IN THAT YEAR; SUCH GA IN WAS COMPUTED AFTER TAKING INTO CONSIDERATION THE RE-ALIGNED POSITION OF THE INTERE ST RATE SWAP FOR AYS 2008-09 & 2009-10. IT WAS SUBMITTED THAT HAD THE MTM LOSSES OF RS.26.0 3 LACS AND RS.762.75 LACS NOT BEEN RECOGNIZED IN AYS 2008-09 & 2009-10, THEN INSTEAD O F GAIN OF RS.97.39 LACS THERE WOULD HAVE BEEN A LOSS OF RS.691.36 LACS AND CONSEQUENTLY THE TAXABLE PROFIT OF AY 2010-11 WOULD HAVE BEEN A LOWER BY THAT AMOUNT. THE LD. AR SUBMITTED THAT THE FACT THAT AO WHO FRAMED THE INCOME-TAX ASSESSMENT FOR AY 2010-11 DID NOT DISPUTE THE EXCHANGE GAIN OF RS.97.39 LACS AND THE SAME AMOUNT WAS ASSESSED AS T HE APPELLANTS INCOME WITH REFERENCE TO THE RE-ALIGNED POSITION OF THE INTEREST RATE DERIVA TIVE, SHOWED THAT THE REVENUE ADOPTED SELECTIVE APPROACH TO TREAT THE GAIN DERIVED FROM D ERIVATIVE CONTRACT TO BE TRUE & REAL BUT 16 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 LOSSES TO BE NOTIONAL & CONTINGENT. THE LD. AR THER EFORE SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE MTM LOSS INCURRED ON DERI VATIVE CONTRACTS TO BE REAL & THEREFORE ALLOWABLE AS DEDUCTION FROM BUSINESS PROFITS. HE AL SO ARGUED THAT THE RELIANCE PLACED BY THE LD. DR ON THE CBDT INSTRUCTION NO. 3/2010 DATED 23. 3.2010 WAS MISPLACED IN AS MUCH AS IT TALKS ABOUT LOSSES ARISING TO AN ASSESSEE ON ACC OUNT OF TRADING IN FOREX DERIVATIVES. ADMITTEDLY IN THE FACTS OF THE PRESENT CASE THE ASS ESSEE HAD NOT CARRIED OUT TRADING IN FOREXDERIVATIVES AND THEREFOREHE CONTENDED THAT THE SAID INSTRUCTION NO. 3/2010 HAD NO APPLICATION. THE LD. AR THUS PLEADED THAT THE ORDER OF LD. CIT(A) BE UPHELD. 16. AFTER GIVING THOUGHTFUL CONSIDERATION TO THE FA CTS OF THE CASE AND THE MATERIAL PLACED BEFORE US, WE FIND DO NOT FIND ANY FORCE IN THE CAS E WHICH THE LD. DR TRIED TO MAKE OUT BY REFERRING TO THE BOARD INSTRUCTION NO. 3/2010 DATED 23.3.2010. FROM PERUSAL OF THE SAID INSTRUCTION, WE FIND THAT THIS INSTRUCTION WAS ISSU ED IN RESPECT OF LOSS ON ACCOUNT OF TRADING IN FOREIGN EXCHANGE DERIVATIVES. IN THE PRESENT CAS E HOWEVER THE ASSESSEE HAD ENTERED INTO DERIVATIVE CONTRACTS IN ORDER TO HEDGE ITS EXCHANGE RISK IN RESPECT OF EXPORT PROCEEDS RECEIVABLE BY IT IN FOREIGN EXCHANGE OR WITH A VIEW TO REDUCE ITS EFFECTIVE COST OF SERVICING THE BORROWINGS RAISED IN THE ORDINARY COURSE OF IT S TEA BUSINESS. THE FORWARD CONTRACTS ENTERED INTO BY THE ASSESSEE WERE NOT BY WAY OF TRA DING PER SE IN FOREIGN EXCHANGE DERIVATIVES. IN OUR CONSIDERED VIEW THEREFORE INSTR UCTION NO. 3/2010 HAD NO RELEVANCEIN THE FACTS OF THE INSTANT CASE. 17. IT IS NOTED THAT THE ICAI RELYING ON THE PRINCI PLE OF PRUDENCE HAS RECOMMENDED THAT THE ENTITIES AND ENTERPRISES WHO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING SHOULD EVALUATE DERIVATIVES CONTRACT ON THE BASIS OF EXCHANGE RATE PREVAILING ON THE BALANCE SHEET DATE AND ON RESTATEMENT OF OUTSTANDING DERIVATIVE OR FORWARD CONTRACTS THE ENTERPRISE SHOULD ACCOUNT FOR INCOME OR LOSS ARISING FROM RESTATEMENT OF OUTS TANDING FOREIGN CURRENCY DERIVATIVE CONTRACTS. THE ASSESSEE HAS CONSISTENTLY FOLLOWED T HE SAID METHOD RECOMMENDED BY ICAI IN THE PAST AS WELL AS IN THE SUBSEQUENT YEARS AND ACC ORDINGLY THE INCOME OR LOSS ARISING FROM RESTATEMENT OF OUTSTANDING FOREIGN EXCHANGE DERIVAT IVE CONTRACTS WERE OFFERED AS INCOME OR CLAIMED AS LOSS IN THE EARLIER YEARS AS THE CASE MA Y BE. 17 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 18. THE FACTS ON RECORD DEMONSTRATE THAT THE FOREIG N EXCHANGE FORWARD CONTRACTS WERE ENTERED INTO BY THE ASSESSEE WITH REFERENCE TO UNDE RLYING WHICH WERE EXPORT BILLS IN THE ORDINARY COURSE OF ITS BUSINESS. IN OUR CONSIDERED VIEW THEREFORE ANY GAIN OR LOSS ARISING ON RESTATEMENT OFSUCH FOREIGN EXCHANGE FORWARD CONTRAC TS ALSOAROSE IN THE ORDINARY COURSE OF ASSESSEES BUSINESS. SIMILARLY WE NOTE THAT THE INT ENT & PURPOSE OF THE INTEREST RATE DERIVATIVE WAS TO REDUCE EFFECTIVE INTEREST COST IN RESPECT OF LOAN OF RS.40 CRORES BORROWED IN THE ORDINARY COURSE OF BUSINESS. INTEREST PAID O N SUCH LOAN HAS BEEN ALLOWED AS REVENUE DEDUCTION BY THE AO. ACCORDINGLY ANY GAIN OR LOSS A RISING FROM SUCH INTEREST RATE DERIVATIVE WAS ALSO IN THE REVENUE FIELD SINCE THE UNDERLYING WAS THE INTEREST PAYABLE ON THE LOAN. NOW THEISSUE AS TO WHETHER THE LOSS ARISING ON ACCOUNT OF RESTATEMENT OF FOREIGN CURRENCY DENOMINATED TRADE PAYABLES OR RECEIVABLES ARISING F ROM EXCHANGE RATE VARIATION IS REAL OR CONTINGENT HAS BEEN DEALT WITH BY THE HONBLE APEX COURT IN IN THE CASE OF WOODWARD GOVERNOR OF INDIA LTD VS, CIT( 312 ITR 254) AND CIT VS. ONGC LTD (322 ITR 180). IN BOTH THESE JUDGMENTS THE HONBLETHE SUPREME COURT C ATEGORICALLY HELD THAT THE LOSS DEBITED IN THE P & L ACCOUNT BY AN ASSESSEE ON ACCOUNT OF R ESTATEMENT OF FOREIGN CURRENCY DENOMINATED TRADE PAYABLES OR RECEIVABLES PURSUANT TO EXCHANGE RATE VARIATION AT THE YEAR- END IS DEFINED OR ASCERTAINED LOSS AND NOT CONTINGE NT LOSS AND HENCE ALLOWABLE AS DEDUCTION FROM THE BUSINESS PROFITS.APPLYING THE RATIO LAID D OWN IN THESE JUDGMENTS TO THE FACTS OF THE PRESENT CASE, IN OUR CONSIDERED VIEW SINCE THE UNDE RLYINGS OF THEDERIVATIVE CONTRACTS ENTERED INTO BY THE ASSESSEE WERE EXPORT BILLS& LOAN COMMIT MENTS, THE GAIN/LOSS ARISING ITS RESTATEMENT AS ON 31 ST MARCH WAS REAL IN NATURE AND IN THE REVENUE FIELD. 19. WE ALSO FIND THAT THE DECISION RELIED UPON BY THE LD AR IN THE CASE OF CIT VS D CHETAN& CO (SUPRA) IS SQUARELY APPLICABLE TO THE FA CTS INVOLVED IN THE PRESENT CASE. IN THE DECIDED CASE THE QUESTION RAISED BEFORE THE HONBLE BOMBAY HIGH COURT AND THE DECISION RENDERED THEREON IS AS UNDER:- THE REVENUE HAS URGED THE FOLLOWING QUESTION OF LA W FOR OUR CONSIDERATION:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T H CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF MARK TO MARK ET LOSS OF RS.78,10,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF LOSS ON FOREIGN EXCHANGE FORWARD 18 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 CONTRACT LOSS AND NOT APPRECIATING THE FACT THAT TH E SAID LOSS WAS A NOTIONAL LOSS AND HENCE CANNOT BE ALLOWED? 7. THE IMPUGNED ORDER OF THE TRIBUNAL HAS, WHILE UP HOLDING THE FINDING OF THE CIT (APPEALS), INDEPENDENTLY. COME TO THE CONCLUSION TH AT THE TRANSACTION ENTERED INTO BY THE RESPONDENT ASSESSEE IS NOT IN THE NATURE-OF SPE CULATIVE ACTIVITIES. FURTHER THE HEDGING TRANSACTIONS WERE ENTERED INTO SO AS TO COV ER VARIATION IN FOREIGN EXCHANGE RATE WHICH WOULD IMPACT ITS BUSINESS OF IMPORT AND EXPORT OF DIAMONDS. THESE CONCURRENT FINDING OF FACTS ARE NOT SHOWN TO BE PER VERSE IN ANY MANNER. IN FACT, THE ASSESSING OFFICER ALSO IN THE ASSESSMENT ORDER DOES NOT FIND THAT THE TRANSACTION ENTERED INTO BY THE RESPONDENT ASSESSEE WAS SPECULA TIVE IN NATURE. IT FURTHER HOLDS THAT AT NO POINT OF TIME DID REVENUE CHALLENGE THE ASSER TION OF THE RESPONDENT ASSESSEE THAT THE ACTIVITY OF ENTERING INTO FORWARD CONTRACT WAS IN THE REGULAR COURSE OF ITS BUSINESS ONLY TO SAFE GUARD AGAINST THE LOSS ON ACCOUNT OF F OREIGN EXCHANGE VARIATION. EVEN BEFORE THE TRIBUNAL, WE FIND THAT THERE WAS NO SUBM ISSION RECORDED ON BEHALF OF THE REVENUE THAT THE RESPONDENT ASSESSEE SHOULD BE CALL ED UPON TO EXPLAIN THE NATURE OF ITS TRANSACTIONS. THUS, THE SUBMISSION NOW BEING MA DE IS WITHOUT ANY FOUNDATION AS THE STAND OF THE ASSESSEE ON FACTS WAS NEVER DISPUTED. SO FAR AS THE RELIANCE ON ACCOUNTING STANDARD-L L IS CONCERNED, IT WOULD NOT BY ITSELF D ETERMINE WHETHER THE ACTIVITY WAS A PART OF THE RESPONDENT-ASSESSEE'S REGULAR BUSINESS TRANSACTION OR IT WAS A SPECULATIVE TRANSACTION. ON PRESENT FACTS, IT WAS NEVER THE REV ENUE'S CONTENTION THAT THE TRANSACTION WAS SPECULATIVE BUTONLY DISALLOWED ON T HE GROUND THAT IT WAS NOTIONAL. LASTLY, THE RELIANCE PLACED ON THE DECISION IN S. V INODKUMAR DIAMONDS (P) LTD. (SUPRA) IN THE REVENUE'S FAVOUR WOULD NOT BY ITSELF GOVERN THE ISSUES ARISING HEREIN. THIS IS SO AS EVERY DECISION IS RENDERED IN THE CONTEXT OF THE FACTS WHICH ARISE BEFORE THE AUTHORITY FOR ADJUDICATION. MERE CONCLUSION IN FAVO UR OF THE REVENUE IN ANOTHER CASE BY ITSELF WOULD NOT ENTITLE A PARTY TO HAVE AN IDEN TICAL RELIEF IN THIS CASE. IN FACT, IF THE REVENUE WAS OF THE VIEW THAT THE FACTS IN S. VINODK UMAR (SUPRA) ARE IDENTICAL/SIMILAR TO THE PRESENT FACTS, THEN RELIANCE WOULD HAVE BEEN PLACED BY THE REVENUE UPON IT AT THE HEARING BEFORE THE TRIBUNAL. THE IMPUGNED ORDER DOES NOT INDICATE ANY SUCH RELIANCE. IT APPEARS THAT IN S. VINODKUMAR DIAMONDS (P.) LTD. (SUPRA), THE TRIBUNAL HELD THE FORWARD CONTRACT ON FACTS BEFORE IT TO BE SPECULATIVE IN NATURE IN VIEW OF SECTION 43(5) OF THE ACT. HOWEVER, IT APPEARS THAT THE DECISION OF THIS COURT IN CITV. BADRIDASGAURIDU (P.) LTD. [2003] 261 ITR 256/[2004] 134 TAXMAN 376 (MUM.) WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL WHEN IT R ENDERED ITS DECISION IN S. VINODKUMAR DIAMONDS (P.) LTD. (SUPRA). IN THE ABOVE CASE, THIS COURT HAS HELD THAT FORWARD CONTRACT IN FOREIGN EXCHANGE WHEN INCIDENTA L TO CARRYING ON BUSINESS OF COTTON EXPORTER AND DONE TO COVER UP LOSSES ON ACCO UNT OF DIFFERENCES IN FOREIGN EXCHANGE VALUATIONS, WOULD NOT BE SPECULATIVE ACTIV ITY BUT A BUSINESS ACTIVITY. 19 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 8. IN THE ABOVE VIEW, THE QUESTION OF LAW, AS FORMU LATED BY THE REVENUE, DOES NOT GIVE RISE TO ANY SUBSTANTIAL OF LAW. THUS, NOT ENTERTAIN ED. 20. WE FURTHER FIND THAT THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF BECHTEL INDIA PVT LTD VS ADDL. CIT (SUPRA) HAD DECIDED AN I DENTICAL ISSUE IN FAVOUR OF THE ASSESSEE AFTER CONSIDERING THE INSTRUCTION NO. 3/2010 WHEREI N IT WAS HELD AS FOLLOWS :- 8. COMING TO THE CORPORATE ADDITIONS I.E. DISALLOW ANCE OF LOSS, IT CLEARLY EMERGES FROM THE RECORD THAT THE ASSESSEE IN RESPECT OF FOR EIGN EXCHANGE REALIZATION FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM OF ACCOUNTING. THE LOSS HAS BEEN INCURRED FOR HEDGING OF FOREIGN CURRENCY FLUCTUATIO N INVOLVED IN SALES INVOICES ON THE BASIS OF FORWARD CONTRACTS, WHICH IS A BUSINESS DEC ISION TO SAFEGUARD ITS INTEREST. THE LOSS HAS BEEN INCURRED ON THE BASIS OF SCIENTIFIC M ETHOD IN THE ORDINARY COURSE OF BUSINESS. THE LOSS BEING BASED ON A SCIENTIFIC METH OD, ON THE BASIS OF CONTRACTUAL LIABILITY WITH BANKS AND ON MERCANTILE SYSTEM HAS T O BE ALLOWED TO THE ASSESSEE FOLLOWING HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF WOODWARD GOVERNOR INDIA (P) LTD. (SUPRA). OUR VIEW IS FURTHER FORTIFIED BY THE FACT THAT DRP IN ITS OWN ORDER IN SUBSEQUENT YEAR HAS ITSELF HELD THAT THE ISSUE ABOU T THE LOSS ON MERCANTILE SYSTEM IS PENDING DISPUTE IN AY 2008-09. THEREFORE, THE ALLOW ABILITY OF THE LOSS ON ACTUAL PAYMENT IN AY 2009-10 HAS BEEN MADE SUBJECT TO THE ALLOWABILITY OF THE LOSS FOR AY 2008-09. THIS STAND OF THE DRP ITSELF NEGATES THE O BSERVATIONS OF ASSESSING OFFICER THAT IT IS A NOTIONAL LOSS AND ESTABLISHES THAT IT IS A BUSINESS LOSS INCURRED BY THE ASSESSEE ON MERCANTILE SYSTEM WHICH METHOD IS CONSISTENTLY F OLLOWED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE INCLINED TO ALLOW THE F OREIGN EXCHANGE FLUCTUATION LOSS TO ASSESSEE IN THIS YEAR. THIS GROUND OF THE ASSESSEE IS ALLOWED. 21. IN RESPECT OF THE INTEREST RATE DERIVATIVE, WE ADDITIONALLYNOTE THAT WHEN SUCH CONTRACT WAS FINALLY SETTLED IN AY 2010-11 THE ASSESSEE HAD ACCOUNTED FOR A PROFIT OF RS.97.39 LACS AFTER TAKING INTO RE-ALIGNED POSITION OF THE DERIVA TIVE CONTRACT I.E. AFTER ACCOUNTING FOR THE MTM LOSSES OF EARLIER YEARS. IN THE INCOME TAX ASSE SSMENT ORDER PASSED U/S 143(3) FOR AY 2010-11 WHICH WAS MUCH LATER THAN PASSING OF THE IM PUGNED ORDER FOR AY 2008-09, THE AO ASSESSED SUCH PROFIT OF RS.97.39 LACS WITHOUT ALLOW ING THE DEDUCTION FOR THE MTM LOSSES DISALLOWED IN THE EARLIER AYS 2008-09 & 2009-10. WE THEREFORE NOTE THAT THE REVENUE AUTHORITIES DID NOT FAITHFULLY FOLLOW THE PROPOSITI ON INCORPORATED IN THE CBDT INSTRUCTION OF 2010 IN THE SUBSEQUENT YEAR BUT ADOPTED A SELECTIVE CRITERIA BY ASSESSING THE PROFIT ARISING IN 20 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 AY 2010-11 (COMPUTED BASED ON THE RE-ALIGNED POSITI ON) WITHOUT ALLOWING FOR THE DEDUCTION OF MTM LOSSES WHICH WAS DISALLOWED IN THE PRIOR YEA RS. 22. IN VIEW OF THE FACTS AS DISCUSSED ABOVE AND RE SPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD G OVERNOR OF INDIA LTD (SUPRA) AND BOMBAY HIGH COURT IN THE CASE OF D CHETAN& CO. (SUP RA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN THIS REGARD. HENCE TH IS GROUND RAISED BY THE REVENUE IS DISMISSED. 23. GROUND NO. 3 RAISED BY THE REVENUE IS AGAINST T HE LD. CIT(A)S ORDER DIRECTING THE AO TO CONSIDER INTEREST INCOME UNDER THE HEAD BUSI NESS WITHOUT APPRECIATING THE FACT THAT INTEREST INCOME EARNED BY THE ASSESSEE FROM FDS AND FINANCIAL INSTITUTIONS HAD NO NEXUS WITH THE ASSESSEES BUSINESS OF GROWING & MANUFACTU RING TEA. AT THE OUTSET THE LD. AR OF THE ASSESSEE POINTED OUT THAT THIS VERY ISSUE HAS B EEN ADJUDICATEDIN ITS FAVOUR BY THE B BENCH OF THIS TRIBUNAL IN THEIR ORDER IN ITA NO. 11 6 & 117/KOL/2016 FOR AYS 2010-11 & 2011-12 DATED 01.02.2019. THE LD. AR SUBMITTED THAT IN THE AFORESAID DECISION THE TRIBUNAL HAD FOLLOWED THE JUDGMENT RENDERED BY THE JURISDICT IONAL HONBLE CALCUTTA HIGH COURT IN ASSESSEES OWN CASE IN ITAT NO. 92 OF 2013 DATED 19 .06.2018 FOR THE AY 2007-08 WHEREIN THE HONBLE HIGH COURT HAD HELD THAT THE INTEREST F ROM FDS AND FINANCIAL INSTITUTIONS WAS ASSESSABLE UNDER THE HEAD BUSINESS AND THE BENEFI T OF RULE 8 WAS GRANTED TO THE ASSESSEE. THE RELEVANT FINDINGS OF THE SAID DECISION IS AS FO LLOWS: ..AT THE OUTSET THE LD. AR OF THE ASSESSEE POINTED OUT THAT THIS VERY ISSUE WAS ADJUDICATED IN ASSESSEESFAVOUR BY THE JURISDICTION AL HONBLE CALCUTTA HIGH COURT IN ASSESSEES OWN CASE IN ITS JUDGMENT RENDERED IN ITA T NO. 92 OF 2013 DATED 19.06.2018 FOR THE AY 2007-08. THE LD. AR SUBMITTED THAT IN AY 2007-08 ALSO THE ASSESSEE HAD EARNED INTEREST FROM FDS AND FINANCIAL INSTITUTIONS WHICH WAS ASSESSED BY THE AO UNDER THE HEAD OTHER SOURCES AND BENEFIT OF RULE 8 WAS DENIED TO THE ASSESSEE. ON APPEAL THE LD. CIT(A) UPHELD THE ASSESSEES CONTENT ION BY OBSERVING AS FOLLOWS: 14. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE A/R AND HAVE PERUSED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF EVEREADY INDUSTRIES (I) LTD FOR THE A.Y. 1991-92 & 1992-93. IN THE AUDITED ACCO UNTS FOR THE YEAR ENDED 31ST MARCH 2007 APPELLANT HAD DEBITED GROSS INTEREST OF RS.43,44,53,000LACS AND SEPARATELY CREDITED RS.1,64,65,000, OUT OF WHICH RS .4,74,687 BEING EXEMPT INTEREST, 21 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 I.E. RS.1,59,90,313/- BEING GROSS INTEREST RECEIVED ON LOANS AND DEPOSITS. THE NET INTEREST EXPENDITURE WAS THEREFORE RS.41,79,88,000/ -. ACCORDING TO A.O. RULE-8 WAS NOT APPLICABLE TO THE INTEREST RECEIVED AS IT DID N OT HAVE ANY ELEMENT OF AGRICULTURAL INCOME. BY THE SAME LOGIC, THE ENTIRE INTEREST DEBI TED IN THE PROFIT & LOSS A/C ALSO DID NOT HAVE ELEMENT OF EXPENDITURE INCURRED WHOLLY & EXCLUSIVELY IN RELATION TO BUSINESS OF GROWING AND MANUFACTURE OF TEA. IN ANY BUSINESS; FUND POSITION UNDERGOES CHANGE ON DAY- TO-DAY& FROM MOMENT TO MOM ENT. INTEREST IS A CHARGE FOR USE OF FUNDS. INTEREST INCOME IS A CHARGE RECEI VED FOR USE OF ASSESSEE'S BUSINESS FUNDS BY OTHER PERSONS. SIMILARLY INTEREST EXPENDIT URE IS A CHARGE PAID BY THE ASSESSEE FOR USE OF FUNDS BELONGING TO OTHERS. TO D ETERMINE THE EFFECTIVE COST OF BORROWINGS; IT IS THEREFORE NECESSARY TO SET OFF TH E INTEREST RECEIVED AGAINST INTEREST PAID AND ONLY THE NET INTEREST CAN BE CONSIDERED TO BE BUSINESS EXPENDITURE FOR TAX PURPOSES. IN THE PRESENT CASE AFTER SETTING OFF INT EREST RECEIVED AGAINST INTEREST PAID THERE WAS NET INTEREST EXPENDITURE OF RS.41,79,88,0 00/-. WHICH WAS INCURRED IN CONNECTION WITH BUSINESS OF GROWING AND MANUFACTURE OF TEA TO WHICH RULE - 8 WAS APPLICABLE. I DO NOT FIND SUBSTANCE IN THE AO'S HYP OTHESIS THAT GROSS INTEREST PAID REPRESENTED EXPENDITURE OF TEA BUSINESS TO WHICH RU LE - 8 WAS APPLICABLE WHEREAS GROSS INTEREST RECEIVED REPRESENTED NON AGRICULTURA L INCOME TO WHICH RULE - 8 WAS NOT APPLICABLE. HAVING REGARD TO THE NATURE OF BUSI NESS AND COMPOSITE NATURE OF FUNDS DEPLOYED, THE ONLY CORRECT METHOD WAS TO SET OFF INTEREST RECEIVED AGAINST INTEREST PAID. THIS PROPOSITION IS ACCEPTED BY THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF EVEREADY INDUSTRIES (I) LTD IN 1TA NOS 123 OF 2000 DATED 22.12.2009. IN THAT CASE ALSO THE ASSESSEE ENGAGED IN BUSINESS OF GROWING AND MANUFACTURE OF TEA HAD DERIVED INTEREST INCOME WHIC H WAS ASSESSED SUBJECT TO APPLICATION OF RULE-8. IN THE REGULAR INCOME TAX AS SESSMENTS, THE AO DID NOT ASSESS INTEREST INCOME SEPARATELY BUT CONSIDERED THE INTER EST TO BE PART OF THE COMPOSITE BUSINESS OF GROWING AND MANUFACTURE OF TEA & THEREB Y ASSESSED ONLY 40% OF SUCH INCOME UNDER CENTRAL INCOME TAX ASSESSMENT. THE C I T IN HIS ORDER U/S 263 DIRECTED TO AO TO ASSESS GROSS INTEREST RECEIVED AS FULLY CH ARGEABLE TO TAX UNDER CENTRAL INCOME TAX. THE ORDER OF THE CIT U/S 263 WAS UPHELD BY THE TRIBUNAL. ON FURTHER APPEAL, THE CALCUTTA HIGH COURT HOWEVER HELD THAT T HE INTEREST INCOME WAS RIGHTLY TREATED BY THE AO TO BE PART OF ASSESSEE'S BUSINESS OF GROWING AND MANUFACTURE OF TEA SUBJECT TO RULE - 8 AND THEREFORE ONLY 40% OF I NTEREST INCOME COULD BE BROUGHT TO CENTRAL INCOME TAX. 15. THE DECISION OF THE CALCUTTA HIGH COURT SQUAREL Y ANSWERS THE QUESTION RAISED IN GROUND NO. 6 OF THE PRESENT APPEAL. IN APPELLANT'S CASE ALSO AFTER NETTING OF INTEREST RECEIVED AGAINST INTEREST PAID THERE IS NET EXPENDI TURE OF RS.41,79,88,000/- WHICH COULD ONLY BE CONSIDERED TO BE EXPENDITURE INCURRED IN CONNECTION WITH ASSESSEE'S BUSINESS OF GROWING AND MANUFACTURE OF TEA. THE AO COULD NOT TREAT INTEREST PAID 22 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 AND INTEREST RECEIVED OF DIFFERENT FOOTINGS. I THER EFORE DIRECT AO TO CONSIDER INTEREST RECEIPT OF RS.1,59,90,313/- AS PART OF ASSESSEE'S I NCOME OF GROWING AND MANUFACTURE OF TEA AND THEREFORE IN COMPUTING BOOK PROFITS ONLY 40% OF SUCH INTEREST COULD BE BROUGHT TO TAX FOR THE PURPOSES OF SEC. 115 JB OF T HE ACT. THE AO SHALL ACCORDINGLY RE-COMPUTE THE BOOK PROFITS.' 7. ON FURTHER APPEAL THE COORDINATE BENCH OF THIS T RIBUNAL REVERSED THE LD. CIT(A)S ORDER AND RESTORED THE AOS ORDER ASSESSING INTERES T INCOME WHOLLY TO CENTRAL INCOME-TAX WITHOUT GIVING BENEFIT OF RULE 8 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE THE HONBLE CALCUTTA HIGH COURT WHEREIN THE FOLLOWING THE QUESTION WAS RAISED: 'WHETHER THE INTEREST INCOME DERIVED FROM TEMPORARY INVESTMENT OF SURPLUS BORROWED FUNDS FOR THE BUSINESS OF GROWING AND MANU FACTURING OF TEA, WOULD FALL WITHIN THE SCOPE OF RULE 8 OF THE INCOME TAX RULES, 1962? 8. IN ITS JUDGMENT THE HONBLE CALCUTTA HIGH COURT FOUND MERIT IN THE ASSESSEES CASE AND SET ASIDE THE DECISION OF THIS TRIBUNAL AND RES TORED THE ORDER OF THE LD. CIT(A) HOLDING THAT THE INTEREST INCOME WAS LIABLE TO BE S ET OFF AGAINST THE INTEREST EXPENSE AND ONLY THE NET INTEREST EXPENDITURE WAS LIABLE TO BE CONSIDERED FOR ASSESSING INCOME FROM COMPOSITE BUSINESS TO WHICH RULE 8 WAS APPLICA BLE. THE LD. AR ALSO BROUGHT TO OUR ATTENTION THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EVEREADY INDUSTRIES INDIA LTD FOR THE AY 1997-98 IN ITA NO. 959/KOL/2002 WHEREIN ALSO THE IDENTICAL VIEW WAS EXPRESSED BY THE TRIBUN AL. THE TRIBUNAL HELD THAT SINCE ASSESSEE PAID INTEREST ON LOANS AND ALSO DERIVED IN TEREST ON DEPOSITS, THE INTEREST RECEIVED HAD TO BE NETTED OFF AGAINST INTEREST PAYM ENT AND ONLY THE NET INTEREST EXPENDITURE COULD BE CONSIDERED IN COMPUTING THE CO MPOSITE INCOME OF GROWING & MANUFACTURE OF TEA. AGAINST THIS ORDER OF THE TRIBU NAL, AN APPEAL U/S 260A WAS FILED BY THE REVENUE BEFORE THE HONBLE CALCUTTA HIGH COURT RAISING THE FOLLOWING QUESTION OF LAW : (IV) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS CORRECT IN HOLDING INTEREST O F RS. 22, 07, 47, 000/- RECEIVED AS 'PROFITS AND GAINS OF BUSINESS' INSTEAD OF 'INCOME FROM OTHER SOURCES', CONTRARY TO LAW, ON THE BASIS OF ITS ORDER FOR EARLIER YEARS AGAINST WHICH APPEALS UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 HAVE BEEN ADMITTED BY THE HON'BLECOURT ? 9. IN ITS JUDGMENT DATED 09.08.2018 IN ITA NO. 789 OF 2004, THE HONBLE CALCUTTA HIGH COURT DISMISSED THE APPEAL OF THE REV ENUE INTER ALIA INCLUDING THE QUESTION RAISED ABOVE. THE LD. DR WAS UNABLE TO CON TROVERT THE SUBMISSIONS OF THE LD. 23 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 AR AS ALSO THE FINDINGS OF THE LD. CIT(A) WHICH ARE IN CONSONANCE WITH THE VIEW TAKEN BY THE HONBLE CALCUTTA HIGH COURT IN ASSESSEES OW N CASE FOR AY 2007-08. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT RENDERED IN ASSESSEES OWN CASE, WE THEREFORE SEE NO REASON TO TAKE ANY CONTRARY VIEW. ACCORDINGLY GROUND NO. 2 RAISED BY THE REVENUE IS R EJECTED. 24. THE LD. DR FAIRLY STATED THAT THE ISSUE NOW STA NDS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE SAID JUDGMENT OF THE HONBLE HIGH C OURT. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT AND THI S TRIBUNAL RENDERED IN ASSESSEES OWN CASE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY GROUND NO. 3 RAISED BY THE REVENUE IS REJECTED. 25. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO . 114/KOL/2016 IS DISMISSED. 26. NOW WE PROCEED TO DEAL WITH THE REVENUE'S APPE AL IN ITA NO. 115/KOL/2016 FOR AY2009-10. GROUND NO. 1OF THE APPEAL RELATE TO THE DISALLOWANCE OF PROVISION FOR RETIREMENT BENEFITS OF RS.55,58,000/-.AFTER CONSIDE RING THE RIVAL SUBMISSIONS, IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS GROUND IS IDENTICAL TO GROUND NO.1 OF DEPARTMENTAL APPEAL IN A.Y. 2008-09. THE REASONS FOR MAKING THE DISALLOWAN CE IN THE YEAR UNDER CONSIDERATION ARE SAME AS DISCUSSED IN THE ASSESSMENT ORDER FOR AY 20 08-09. THE ORDER OF THE LD. CIT(A) WAS ALSO PASSED ON IDENTICAL LINES ON WHICH THE REL IEF WAS ALLOWED IN THE APPELLATE ORDER FOR AY 2008-09. FOLLOWING OUR CONCLUSIONS DRAWN IN A.Y. 2008-09, WE THEREFORE DISMISS GROUND NO. 1 RAISED BY THE REVENUE AND UPHOLD THE O RDER OF LD. CIT(A). 27. GROUND NO. 2 IS AGAINST THE ORDER OF LD. CIT(A) DIRECTING THE AO TO ASSESS INTEREST INCOME UNDER THE HEAD BUSINESS AND GRANT THE BENE FIT OF RULE 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE ORDERS OF THE AUTHORITIES BELOW, IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS GROUND IS SIMILAR TO THE GROUND NO . 3 OF DEPARTMENT APPEAL IN A.Y. 2008- 09. FOLLOWING OUR CONCLUSION IN A.Y. 2008-09, WE UP HOLD THE ORDER OF LD. CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 28. GROUND NO. 3 IS AGAINST THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS.941.52 LACS MADE BY THE AO ON ACCOUNT OF MTM LOS SES INCURRED ON OPEN DERIVATIVE CONTRACTS. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE ORDERS OF THE AUTHORITIES BELOW, IT 24 ITA NOS. 114-115/KOL/2016 MCLEOD RUSSEL INDIA LTD., AY 2008-09 IS OBSERVED THAT THE ISSUE INVOLVED IN THIS GROUND IS SIMILAR TO THE GROUND NO. 2 OF DEPARTMENT APPEAL IN A.Y. 2008-09. FOLLOWING OUR CO NCLUSION IN A.Y. 2008-09, WE UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 29. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD MAY, 20 19. SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD MAY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CIRCLE-4(1), KOLKATA 2 RESPONDENT M/S. MCLEOD RUSSEL INDIA LTD., 4, MANG OE LANE, KOLKATA-700 001. 3 4 5 CIT(A)-2, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR