DCIT,Circle-15(2), Kolkata, Kolkata V. Modern Malleables Ltd, Kolkata

ITA 1889/KOL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6026 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI ALOKE NAG
• Assessee Lawyers: A K; J P KHAITAN SENIOR
• Keywords: Revenue expenditure
• Section: 143(3); 251

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1889/KOL/2016 ASSESSMENT YEARS: 2010-11 DCIT, CIRCLE-15(2), AAYAKAR BHAWAN, POORVA 110, SHANTIPALLY, KOLKATA-107 / V/S . MODERN MALLEABLES LTD. 53B, MIRZA GHALIB STREET, KOLKATA-700 016 [ PAN NO.AABCM 5669 D ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SHRI ALOKE NAG, ADDL. CIT-DR /BY RESPONDENT SHRI J.P. KHAITAN, SENIOR ADVOCATE & SHRI A.K. GUPTA, FCA /DATE OF HEARING 07-08-2019 /DATE OF PRONOUNCEMENT 25-09-2019 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-12, KOLKATAS ORDER DATED 24.06.2016 PASSED IN CASE NO.591/CIT(A)-12/A-(3)/CIR-8(1)KOL/2014-15, INVOLVING PROCEEDINGS 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE PLEADED IN THE INSTANT APPEAL IS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE IMPUGNED DISALLOWANCE OF 4,74,56,267/- UNDER THE HEAD DISPUTED LIABILITY FOR PAYMENT TO NEPAL ELECTRICITY BOARD AND NEPAL BANK CLAIMED AT THE ASSESSEES BEHE ST AND DECLINED BY THE ASSESSING ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 2 OFFICER DURING THE RELEVANT SCRUTINY ASSESSMENT FRA MED ON 22.03.2013. THE CIT(A)S DETAILED DISCUSSION ANALYZING THE RELEVANT FACTS AS WELL AS ASSESSEES SUBMISSIONS READ AS UNDER:- 4.2 THE FACTS OF THE CASE ARE IN BRIEF:- 1. MODERN MALLEABLES LIMITED A PUBLIC LIMITED COMPANY REGISTERED UNDER THE INDIAN COMPANIES ACT, 1956 ENTERED INTO A CONTRACT OF SUPPLY WITH NEPAL STATE ELECTRICITY BOARD A GOVERNMENT UNDERTAKING OF NEPAL . 2. MODERN MALLEABLE LIMITED ASKED FOR A BANK GUARANTEE FROM UNITED BANK OF INDIA WHICH IS A PUBLIC SECTOR UNDERTAKING. 3. UNITED BANK OF INDIA IN TURN ASKED NEPAL BANK (A JO INT VENTURE COMPANY BETWEEN THE NEPAL GOVERNMENT AND GENERAL PUBLIC AND THE FIR ST BANK OF NEPAL) TO PROVIDE A COUNTER GUARANTEE. 4. ON MODERN MALLEABLE LIMITED FAILING TO MAKE THE DEL IVERY OF GOODS, NEPAL ELECTRICITY BOARD PROPOSED TO INVOKE THE BANK GUARA NTEE. 5. ON 9 MARCH, 1999 THE SUPREME COURT OF NEPAL ORDERED FOR A SETTLEMENT BETWEEN MODERN MALLEABLES LIMITED AND NEPAL ELECTRICITY BOA RD WHICH WAS SUBSEQUENTLY STAYED BY THE CALCUTTA HIGH COURT. 6. SUBSEQUENTLY ON 10 SEPTEMBER 2009, THE DISTRICT COU RT OF NEPAL PASSED A COMPROMISE DECREE ON ACCOUNT OF A JOINT APPLICATIO N MADE BY NEPAL BANK AND THE NEPAL STATE ELECTRICITY BOARD AT RS.4,74,56,267 /-. ON 5 FEBRUARY 2010 NEPAL BANK ACTING UPON THE COUNTER GUARANTEE AND IN VIEW OF THE ORDER OF THE DISTRICT COURT, NEPAL BANK MADE THE PAYMENT TO NEPAL ELECTRI CITY BOARD. NEPAL BANK BEING A FOREIGN BANK AND THE TRANSACTION BEING BETW EEN RESIDENTS OF TWO DIFFERENT COUNTRIES, MODERN MALLEABLE WAS UNABLE TO RESTRAIN NEPAL BANK FROM MAKING THE PAYMENT TO NEPAL ELECTRICITY BOARD. 7. SINCE THE COUNTER GUARANTEE WAS ACTED UPON ON 5 FEB RUARY 2010 THE LIABILITY CRYSTALLIZED IN THE YEAR OF SUCH PAYMENT MADE BY NE PAL BANK IT IS THUS NOT DISPUTED THAT, ON 5.2.2010 THE NEPAL BANK MADE THE PAYMENT TO NEPAL ELECTRICITY BOARD AS THEY HAD GIVEN A COUNTER GUARA NTEE AND THE DISTRICT COURT HAD BEEN ABLE TO WORK SOME SORT OF COMPROMISE BETWEEN N EPAL BANK AND NEPAL ELECTRICITY BOARD FOR AN AMOUNT OF RS.4,74,56,267/- . THUS THE CONTENTION OF APPELLANT IS THAT SINCE THE COMPROMISE HAS BEEN REACHED BETWE EN THE NEPAL ELECTRICITY BOARD AND NEPAL BANK WHEREIN THE ONLY AMOUNT DUE AND CLAI MABLE WAS RS.4,74,56,267/-., THE SAID AMOUNT WAS NOW TAKEN TO BE CRYSTALLIZED AN D A DEDUCTIBLE LIABILITY. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM STAT ING THAT NEPAL BANK HAS MADE A PRAYER FOR WINDING UP OF UNITED BANK OF INDIA AND T HE HON'BLE HIGH COURT HAS OT PASSED A JUDGEMENT IN THIS REGARD. THE CONTENTION O F THE APPELLANT IS THAT THE WINDING UP PETITION DOES NOT DETERMINE THE CRYSTALLIZATION OF THE LIABILITY BUT IT IS THE DECREE FOR COMPROMISE FILED BEFORE THE KATHMANDU DISTRICT COUR T WHICH HAS CRYSTALLIZED THE LIABILITY. SINCE THAT PAYMENT HAS ALREADY BEEN MADE BY THE BANK WHICH HAD MADE THE GUARANTEE ON BEHALF OF THE APPELLANT THE ORDER OF T HE ASSESSING OFFICER WHEREIN IT STATES THAT NEPAL BANK HAD FILED WINDING UP PETITIO N AGAINST UNITED BANK OF INDIA IS OF LITTLE OR OF NO CONSEQUENCES TO THE LIABILITY BE ING CRYSTALIZED. THE APE HAS SUPPORTED ITS ARGUMENTS WITH THE FOLLOWING SUBMISSION:- THE COMMITTEE IS OF THE VIEW THAT A CONTINGENT LIA BILITY IN RESPECT OF GUARANTEES ARISES WHEN A COMPANY ISSUES GUARANTEES TO ANOTHER PERSON ON ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 3 BEHALF OF A THIRD PARTY E.G. WHEN IT UNDERTAKES TO GUARANTEE THE LOAN GIVEN TO A SUBSIDIARY OR TO ANOTHER COMPANY OR GIVES A GUARANT EE THAT ANOTHER COMPANY WILL PERFORM ITS CONTRACTUAL OBLIGATIONS. HOWEVER, WHERE A COMPANY UNDERTAKES TO PERFORM ITS OWN OBLIGATIONS, AND FOR THIS PURPOSE ISSUES, WHAT IS CALLED A GUARANTEE , THE COMMITTEE IS OF THE VIEW THAT THIS DOES NOT REPRESENT A CONTINGENT LIABILITY AND IT IS MISLEADING TO SHOW SUCH ITEMS AS CONTINGENT LIABILITIES IN THE BALANCE SHEET. SECTION 126 OF THE INDIAN CONTRACTS ACT, 1872 DEFIN ES A CONTRACT OF GUARANTEE AS A CONTRACT TO PERFORM THE PROMISE OR DISCHARGE THE LIABILITY, OF A THIRD PERSON IN CASE OF HIS DEFAULT. IT IS CLEAR FROM TH IS THAT THE TRANSACTIONS OF THE KIND REFERRED TO IN THE QUERY ARE NOT GUARANTEES. FOR VARIOUS REASONS, IT IS CUSTOMARY FOR GUARANTEES TO BE ISSUED BY BAKERS E.G. FOR PAYMENT OF INSURANCE PREMIA, DEFERRED PAYMENTS TO FOREIGN SUPPLIERS, LETTERS OF CREDIT ETC. FOR THIS PURPOSE, THE COMPAN Y ISSUES A COUNTER- GUARANTEE TO ITS BAKERS. SUCH COUNTER-GUARANTEE IS NOT REALLY A GUARANTEE AT ALL, BUT IS AN UNDERTAKING TO PERFORM WHAT IS IN ANY EVENT THE OBLIGATION OF THE COMPANY, NAMELY, TO PAY THE INSUR ANCE PREMIA WHEN DEMANDED OR TO MAKE DEFERRED PAYMENTS WHEN DUE . IF, AS A RESULT OF ANY SUCH GUARANTEES OR UNDERTAKINGS GIVEN, AN OBLIGATION HAS ACTUALLY ARISEN, A PROVISION SHOULD BE MADE THE RE AGAINST IN THE ACCOUNTS E.G. IT A COMPANY HAS GUARANTEED THAT A PRODUCT MANUFACTURED AND SOLD BY IT WILL GIVE A CERTAIN PERFORMANCE, AND THE CUSTOMER HAS CLAIMED COMPENSATION BECAUSE THAT LEVEL OF PERFORMANCE HAS NOT BEEN ACHIEVED, A PROVISION FOR SUCH LIABILITY SHOULD BE MADE IN THE ACCOUNTS . AGAIN, IF A COMPANY HAS GUARANTEED A LOAN GIVEN BY BANKERS TO A SUBSIDIARY COMPANY AND THE SUBSIDIARY HAS BECOME INSOLVENT, THE COMPAN Y SHOULD MAKE A PROVISION IN THE ACCOUNTS FOR THE AMOUNT IT MAY BE CALLED UPON TO PAY. TO TAKE ANOTHER EXAMPLE, IT IS CUSTOMARY FOR AUTOMOBILE MAN UFACTURERS TO GUARANTEE THE PERFORMANCE OF THE CAR FOR A PERIOD OF TIME AND TO REPLACE DEFECTIVE PARTS DURING THAT PERIOD. SUCH COMPANIES USUALLY MAKE A P ROVISION FOR CONTRACTUAL GUARANTEE OBLIGATIONS IN THEIR ACCOUNTS. THUS, IN VIEW OF THE ABOVE, A COUNTER-GUARANTEE I S NOT REALLY RECOGNIZED AS A GUARANTEE, AND THE LIABILITY HAS BEEN ACCEPTED IN A CCOUNTING NORMS TO BE CRYSTALLIZED. FURTHER, GUIDANCE NOTE AS PER PARA 8.8.7.2 IN THE R EVISED SCHEDULE TO THE COMPANIES ACT 1956, ISSUED BY ICAI ( AS PER DECEMBER 2011 EDITION ) WHICH READS AS FOLLOWS:- 8.8.7.2 A CONTINGENT LIABILITY IN RESPECT OF GUARAN TEES ARISES WHEN A COMPANY ISSUES GUARANTEES TO ANOTHER PERSON ON BEHA LF OF A THIRD PARTY E.G. WHEN IT UNDERTAKES TO GUARANTEE THE LOAN GIVEN TO A SUBSIDIARY OR TO ANOTHER COMPANY OR GIVES A GUARANT EE THAT ANOTHER COMPANY WILL PERFORM ITS CONTRACTUAL OBLIGATIONS. H OWEVER, WHERE A COMPANY UNDERTAKES TO PERFORM ITS OWN OBLIGATIONS, AND FOR THIS PURPOSE ISSUES, WHAT IT CALLED A GUARANTEE , IT DOES NOT REPRESENT A CONTINGENT LIABILITY AND IT IS MISLEADING TO SHOW S UCH ITEMS AS CONTINGENT LIABILITIES IN THE BALANCE SHEET. FOR VARIOUS REASONS, IT IS CUSTOMARY FOR GUARANTEES TO BE ISSUED BY BAKERS .E. G. FOR PAYMENT OF INSURANCE PREMIA, DEFERRED PAYMENTS TO FOREIGN SUPP LIERS LETTERS OF CREDIT ETC. FOR THIS PURPOSE, THE COMPANY ISSUES A COUNTER- ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 4 GUARANTEE TO ITS BANKERS. SUCH COUNTER-GUARANTEE IS NOT REALLY A GUARANTEE AT ALL, BUT IS AN UNDERTAKING TO PERFORM WHAT IS IN ANY EVENT THE OBLIGATION OF THE COMPANY, NAMELY, TO PAY THE INSURANCE PREMIA WHEN DEMANDED OR TO MAKE DEFERRED PAYMENTS W HEN DUE. HENCE, SUCH PERFORMANCE GUARANTEES AND COUNTER-GUAR ANTEES SHOULD NOT BE DISCLOSED AS CONTINGENT LIABILITIES. IT IS FURTHER SUBMITTED THAT THE LIABILITY WHEN NEP AL STATE ELECTRICITY BOARD HAS BECOME CRYSTALLIZED AS THE PAYMENT HAS ALREADY BEEN MADE BY THE GUARANTOR OF THE APPELLANT. THAT BEING THE CASE, THE LIABILITY ON TH E APPELLANT HAS CRYSTALLIZED IN RELATION TO PAYMENT WHICH WAS TO BE MADE TO NEPAL S TATE ELECTRICITY BOARD AND IS A CLAIMABLE EXPENDITURE. THE APPELLANT HAS CITED AND PLACED RELIANCE ON THE FOLLOWING DECISIONS:- A) KANPUR TANNERY LTD. V. CIT (1958) 34 ITR 863 (ALL), B) CIT V. SWADESHI COTTON AND FLOW MILLS (P) LTD. (196 4) 53 ITR 134 (SC). C) CIT V. BANWARILAL MADAN MOHAN (1977) 110 ITR 868 (A LL) IN SWADESHI COTTON AND FLOUR MILLS (P-) LTD. (SUPRA ) THE ASSESSEE WAS REQUIRED TO PAY PROFIT BONUS TO ITS EMPLOYEES AND FOR THE CALEN DAR YEAR 1947, IT MADE THE PAYMENT IN TERMS OF AN AWARD MADE ON 135H JAN, 1949, UNDER THE INDUSTRIAL DISPUTES ACT, IT DEBITED THE AMOUNT IN ITS P&L A/C FOR THE YEAR 1948 BUT IN FACT PAID IT TO THE EMPLOYEES IN THE CALENDAR YEAR 1949. THAT LIABILITY WAS TREATED AS AN ALLOWABLE DEDUCTION ONLY IN 1949 WHEN THE CLAIM TO PROFIT BON US WAS SETTLED BY THE AWARD OF THE INDUSTRIAL TRIBUNAL. THE VIEW TAKEN WAS THAT AN EMPLOYER WHO FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING INCURS A LIABILITY TOWARDS PROFIT BONUS ONLY WHEN THE CLAIM, IF MADE, IS SETTLED AMICABLY OR BY INDUS TRIAL ADJUDICATION . THE CONTENTION OF THE APPELLANT THUS IS THAT SINCE THE GUARANTOR OF THE APPELLANT HAD SETTLED THE AMOUNT WITH NEPAL STATE ELECTRICITY BOA RD, AND ALSO MADE THE PAYMENT, THE LIABILITY HAD CRYSTALLIZED ON THE DATE THE COMPROMI SE DECREE WAS PASSED. BY FOLLOWING THE ICAI GUIDE NOTES IT IS CLEAR THAT THE COUNTER GUARANTEE COULD NOT AT ALL OR EVER BE TREATED AS A CONTINGENT LIABILITY. I N THE WRITTEN NOTES AS SUBMITTED BY THE APPELLANT, IT IS CLEAR THAT A COUNTER GUARANTEE COU LD NOT BE TREATED AS A CONTINGENT LIABILITY UNDER THE ICAI GUIDANCE NOTES AND SPECIAL LY IN THIS CASE WHEN THE COUNTER GUARANTEE HAS BEEN ACTED UPON. BY FOLLOWING THE DECISIONS OF THE SUPREME COURT IN CIT VS. SWADESHI COTTON FLOUR MILLS, 53 ITR 134, SINCE THERE HAS BEEN AN ACTUAL P AYMENT BY THE COUNTER GUARANTOR I HOLD THAT THE LIABILITY HAS CRYSTALISED AND CAN BE CLAIMED AS A REVENUE EXPENDITURE BY THE APPELLANT. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY DISA LLOWED THE ASSESSEES CLAIM OF DEDUCTION REGARDING THE IMPUGNED DISPUTED LIABILIT Y NOT TO HAVE CRYSTALLIZED DURING THE RELEVANT PREVIOUS YEAR. HE REFERS TO ASSESSEES DETAILED PAPER BOOK RUNNING INTO 142 PAGES COMPRISING OF ITS LETTER DATED 20.03.2013 ALONGWITH ANNEXURE SUBMITTED BEFORE THE DCIT HON'BLE JURISDICTIONAL HIGH COURTS ORDER DATED 27.03.1995 STAYING ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 5 RECOVERY OF BANK GUARANTEE, COPY OF SUPREME COURT O F NEPALS ORDER DATED. 09.03.1999 ON SETTLEMENT OF DUES, COPY OF JOINT APPLICATION FI LED BEFORE THE KATHMANDU DISTRICT COURT BY THE NEPAL STATE ELECTRICITY BOARD AND NEPA L BANK, APPLICATION DATED 05.02.2010 FILED BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT FOR RECOVERY OF BANK GUARANTEE AMOUNT AND THE TAXPAYERS QUARTERLY RETUR N FILED ALONGWITH RELEVANT CHALLENS; RESPECTIVELY. THE REVENUES CASE ACCORDIN GLY IS THAT ASSESSING OFFICER HAD MADE IT CLEAR THAT ALTHOUGH THE NEPAL SIDE HAD PAID UP THE LIABILITY IN QUESTION IN NEPAL, BUT THE BENCH OF NEPAL HAD FIELD A CASE IN HON'BLE JURISDICTIONAL HIGH COURT ( PAGES 67 TO 82 ) AGAINST THE UNITED BANK OF INDIA FOR ACTUAL RECOV ERY OF THE BANK GUARANTEE AMOUNT. HE THEN QUOTES VARIOUS DECISIONS (1997) 91 TAXMAN 251 (RAJ) COMMISSIONER OF INCOME-TAX VS. ASSAM ROLLER FLOUR M ILLS, (2014) 52 TAXMANN.COM 56 (AP) COROMANDAL CEMENTS LTD. VS. COMMISSIONER OF INCOME-TAX, (1996) 84 TAXMAN 435 (SC) COMMISSIONER OF INCOME-TAX VS. KALINGA TUBES LTD., (2011) 15 TAXMANN.COM 301 (MAD) COMMISSIONER OF INCOME-TAX, MADURAI VS. K.A.S MATHIVANAN , (2018) 173 TAXMAN 155 (KER) COMMISSIONER OF INCOME-TAX TRICHUR VS. KERALA SOLVENT EXTRACTIONS LTD. (2008) 322 ITR 144 (ALL) MENTHA & ALLIED PRODUCTS (P) LTD. VS. COMMISSIONER OF INCOME-TAX, (1975) 98 ITR 189 (SC) NONSUCH TEA ESTATE LTD. VS. COMMISSIONER OF INCOME-TAX, (1999) 103 TAXMAN 460 (KER) COMMISSIONER OF INCOME-TAX VS. PURUSHOTHAM GOKULDAS, AND (2010) 127 ITD 40 (DEL) INCOME-TAX OFFICER, WARD-15(2), NEW DELHI VS. RAMPUR ENGG. CO. LTD. THE REVENUES CASE IN VIEW OF THE ABOVE STATED CASE LAW IS THAT THERE SOM E MATERIALS MUST EXIST ON RECORD TO INDICATE ACCRUAL OF A LIABILITY BEFORE IT IS TAKEN AS AN ALLOWABLE DEDUCTION. AND ALSO THAT THE LIABILITY IN QUESTION SHOULD BE AN ASCERTA INED NOT A CONTINGENT CONSEQUENT UPON SOME EVENTS IN FUTURE. 4. LEARNED SENIOR COUNSEL VEHEMENTLY SUPPORT THE CI T(A)S FOREGOING FINDINGS ACCEPTING THE ASSESSEES DEDUCTION CLAIM PERTAINS T O ITS DISPUTED LIABILITY IN NEPAL. HE INVITED OUR ATTENTION TO VARIOUS DATES AND EVENTS I NVOLVED IN THE INSTANT CASE THAT THE IMPUGNED LIABILITY HAS BEEN CLAIMED ONLY IN THE REL EVANT FINANCIAL YEAR AND THEREFORE, THE CIT(A) IS VERY WELL JUSTIFIED IN REVERSING THE ASSESSING OFFICERS ACTION DISALLOWING THE SAME. HE QUOTES HON'BLE APEX COURT S LANDMARK DECISION IN ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 6 COMMISSIONER OF INCOME-TAX VS. CHAINRUP SAMPATRAM . (1953) 24 ITR 481 (SC), PCIT VS. GROUND V.B. LTD. (2018) 99 TAXMANN.38 (DEL) AND GREEN DELHI BQS LTD. VS. ACIT (2018 170 ITD (DEL) (TRIB.). LEARNED SENIOR COUNSEL S CASE IS THAT THE ASSESSEES DETAILED EVIDENCE FILED DURING THE COURSE OF ASSESS MENT AS WELL AS THE PAPER BOOK BEFORE US SUFFICIENTLY INDICATES THE IMPUGNED LIABI LITY TO HAVE CRYSTALLIZED ONLY IN THE RELEVANT FINANCIAL YEAR. HE THEREFORE PRAYS FOR CON FIRMING THE CIT(A)S FINDINGS UNDER CHALLENGE. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. WE MAKE IT CLEAR THAT THERE IS NO DISPUTE BETWEEN THE PARTIES REGARDING THE ASSESSEE TO HAVE GIVEN A BANK GUARANTEE IN NEPAL IN THE COURSE OF ITS REGULA R BUSINESS OPERATIONS. THE SOLE ISSUE BETWEEN THE PARTIES IS ABOUT CRYSTALLIZATION OF THE CORRESPONDING LIABILITY AMOUNT OF 474,56,267/-IN THE RELEVANT PREVIOUS YEAR. BOTH PAR TIES HAVE ARGUED IN FAVOUR OF THEIR RESPECTIVE STANDS. WE FIND IN THIS BACKDROP OF FACT S THAT ON 10.09.2009, THE DISTRICT COURT OF NEPAL HAD PASSED A COMPROMISE DECREE BASED ON A JOINT APPLICATION MADE BY THE BANK OF NEPAL AND NEPAL STATE ELECTRICITY BOARD . THERE IS FURTHER NO QUARREL THAT THE BANK OF NEPAL; HAD ACTED UPON THE COUNTER GUARA NTEE AS PER ITS ARRANGEMENT MADE WITH THE UNITED BANK OF INDIA. IT MADE THE ACTUAL P AYMENT TO THE OTHER ENTITY ON 05.02.2010. THIS CLINCHING FACT HAS GONE UNREBUTTED FROM THE DEPARTMENT SIDE RIGHT THROUGHOUT. THE ASSESSING OFFICER HELD THAT SINCE S OME ISSUES HAD ARISEN BETWEEN THE TWO BANKS, THE ASSESSEE HAD NOT MADE THE ACTUAL PAY MENT. WE FIND NO REASON TO CONCUR WITH THE REVENUES STAND IN VIEW OF FOREGOING FACTS ON RECORD. T FACT REMAINS THAT THE ACTUAL LIABILITY AMOUNT OF 474,56,267/- STOOD PAID TO THE OTHER PARTY BY THE B ANK OF NEPAL. THE SAME FORMED SUFFICIENT MATERIAL FOR THE ASSESSEE TO RAISE ITS CORRESPONDING DEDUCTION CLAIM IN THE IMPUGNED ASSESSMENT YEAR. HO N'BLE APEX COURTS LANDMARK DECISION IN CHAINRUP SAMPATRAM (SUPRA) SETTLED THE LAW LONG BACK THAT THE PRINCIP LE OF CONSERVATIVE AND PRUDENCE IN THE ACCOUNT TREATMENT REQUIRE THAT NO ANTICIPATED PROFITS CAN BE TREATED AS INCOME UNTIL THEY ARE RELIZED, AN D, AT THE SOMETIME, AN ANTICIPATED LOSS CAN BE ALLOWED TO BE DEDUCTED AT THE FIRST SIG N OF ITS REASONABLE PROBABILITY. SUFFICE TO SAY, WE HOLD THAT SINCE THE OTHER ENTITY M/S NEPAL STATE ELECTRICITY BOARD HAD BEEN PAID THE IMPUGNED LIABILITY SUM IN THE REL EVANT PREVIOUS YEAR THE ASSESSEE; ITA NO.1889/KOL/2016 ASSESSMENT YEAR 2010-11 DCIT, CIR-15(2), KOL. VS MODERN MALLEABLES L TD. PAGE 7 HAVING ACTED AS THE ENTITY RESPONSIBLE FOR CARRYING OUT THE NECESSARY WORKS, ACTED AS PER CONSERVATISM AND PRUDENCE TO CLAIM THE SAID SUM TO HAVE CRYSTALLIZED AS ON 05.02.2010 IN THE FINANCIAL YEAR 2009-10. THE REVEN UES CASE LAW THAT THE SUCH DEDUCTION CLAIM HAS TO BE MADE IN CASE OF AN ASCERT AIN LIABILITY ONLY THAN A CONTINGENT FUND (SUPRA) SUPPORTS THE ASSESSEES CASE ONLY. HON 'BLE DELHI HIGH COURT AS WELL AS THIS TRIBUNALS CO-ORDINATE BENCHS DECISIONS (SUPRA) Q UOTED AT THE ASSESSEES BEHEST (SUPRA) ALSO PROCEED ON THE SAME LINE OF REASONING. WE THEREFORE UPHOLD THE CIT(A)S FINDINGS DELEING THE IMPUGNED DISPUTED LIABILITY DI SALLOWANCE OF 474,56,267/- IN ISSUE. 6. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25/09/2019 SD/- SD/- ( &) (( &) (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS ) - 25/09/2019 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-15(2), AAYAKAR BHAWAN POORVA 1 10, SHANTIPALLY KOLKAT-107 2. /RESPONDENT-MODERN MALLEABLES LTD., 53B, MIRZA GHAL IB ST. KOLKATA-16 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . ((, , , /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ ,,