M/s. INDIAN OIL CORPORATION LTD., MUMBAI V. ADDL. CIT Rg - 10(1), MUMBAI

ITA 2201/MUM/2006

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6313 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 21-09-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 07-04-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K BAROJIA
• Assessee Lawyers: SANI R SHAH
• Keywords: Depreciation; Business expenditure; Retrospective amendment; Question of law; Bad and doubtful debts; Revised return; Revenue expenditure
• Section: 43B; 80HHC; 115JB; 80IB; 145; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI A.L. GEHLOT (AM) AND SMT. ASHA VIJAYARAGHA VAN (JM) ITA NO. 2201/MUM/2006 ASSESSMENT YEAR- 2002-03 M/S. INDIAN OIL CORPORATION LTD., G-9, ALI YAVAR JUNG MARG, BANDRA (E), MUMBAI-400 051 PAN-AAACL 1681G THE ACIT, RANGE 10(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI SANI R. SHAH RESPONDENT BY: SHRI N.K. BAROJIA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 13.01.2006 PASSED BY THE LD. CIT(A)-X FOR THE ASSESSMENT YEAR 2002-03. 2. THE GROUND NOS. 1 TO 9 AND GROUND NOS. 23 TO 25 RAISED BY THE ASSESSEE READ AS FOLLOWS: 1. THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECTI NG THE ADDITIONAL COMMISSIONER TO CONSIDER THE REVISED RETURN FILED B Y THE ASSESSEE ON MARCH 31, 2004. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 1,24,28,956 U/S. 43B IN RESPECT OF SALES TAX COLLEC TED DURING THE RELEVANT PREVIOUS YEAR BUT NOT PAID TILL 31 ST OCTOBER, 2002, THE DATE ON WHICH THE RETURN OF INCOME WAS DUE. 3. THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE ADDITI ONAL COMMISSIONER TO ALLOW DEDUCTION OF RS. 14,79,82,217 /- IN RESPECT OF EXPENDITURE INCURRED IN EARLIER YEARS ON CAPITAL WORK-IN-PROGRESS THAT HAD BEEN CAPITALIZED DURING T HE YEAR IN CASE IT IS ULTIMATELY HELD THAT THE APPELLANT IS EN TITLED TO DEDUCTION FOR SCIENTIFIC RESEARCH EXPENDITURE IN TH E YEAR OF CAPITALIZATION. ITA NO. 2201/M/06 2 4. THE LD. CIT(A) ERRED IN NOT DIRECTING THE ADDITI ONAL COMMISSIONER TO ALLOW DEDUCTION FOR THE EXPENDITURE OF RS. 9,16,30,000/- BEING PREMIUM PAID ON LEASEHOLD LAND, AS REVENUE EXPENDITURE 5. THE LD. CIT(A) ERRED IN NOT DIRECTING THE ADDITI ONAL COMMISSIONER TO ALLOW DEDUCTION FOR THE EXPENDITURE OF RS. 2,29,98,000/- BEING EXPENDITURE ON RIGHT OF WAY AS REVENUE EXPENDITURE 6. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) O UGHT TO HAVE DIRECTED TO ALLOW PROPORTIONATE DEDUCTION FOR EXPENDITURE INCURRED DURING THE YEAR AND DURING THE EARLIER YEA RS ON LEASEHOLD LAND AND RIGHT OF WAY. 7. THE LD. CIT(A) OUGHT TO HAVE SPECIFICALLY DIRECT ED TO ALLOW DEDUCTION OF RS. 5,70,91,700/- U/S. 80IB IN R ESPECT OF AU-V GUJARAT REFINERY. 8. THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECTI NG THE ADDITIONAL COMMISSIONER TO ALLOW DEDUCTION U/S. 80I B OF RS. 68,71,26,000/- IN RESPECT OF PROFIT OF MARKETING DI VISION OF GHP UNIT. 9. THE LD. CIT(A) ERRED IN DIRECTING TO VERIFY WHET HER PROFIT OF MARKETING DIVISION OF RS. 68,71,26,000/- SOLELY RELATES TO THE GHP UNIT AND THAT IF IT IS FOUND THAT PROFIT FR OM MARKETING DIVISION IS ATTRIBUTABLE TO OTHER UNITS AS WELL THE N IN THAT CASE DEDUCTION SHOULD BE PROPORTIONATELY DISALLOWED TO T HE EXTENT WHICH DOES NOT RELATE TO GHP UNIT. 23. THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECT ING THE ADDITIONAL COMMISSIONER TO EXCLUDE AN AMOUNT OF RS. 14,85,00,000 BEING THE PROVISION MADE FOR DOUBTFUL DEBTS AND RS. 2,00,00,00,000 BEING PROVISION FOR INVESTMENTS WHILE COMPUTING BOOK PROFIT UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT. 24. THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECT ING THE ADDITIONAL COMMISSIONER TO EXCLUDE AN AMOUNT OF RS. 206,95,13,757 BEING DIVIDEND INCOME EXEMPT FROM TAX UNDER SECTION 10 WHILE COMPUTING BOOK PROFIT UNDER THE PR OVISION OF SEC. 115JB OF THE ACT. ITA NO. 2201/M/06 3 25. THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECT ING THE ADDITIONAL COMMISSIONER TO ALLOW TO CARRY FORWARD T HE FOLLOWING CAPITAL LOSSES FOR SET-OFF IN THE SUBSEQU ENT YEARS: ASSESSMENT YEAR AMOUNT (RS.) 1995-96 4,73,49,591 1996-97 65, 15,00,000 1997-98 3,38,45,479 1998-99 3,85,28,646 2000-01 12,39,05,024 2001-02 11,41,37,314 2002-03 9,64,38,097 3. THE GROUNDS NO. 1 TO 9 AND 23 TO 25 HAVE BEEN EI THER NOT DECIDED BY THE COMMITTEE OF DISPUTES OR NOT PERMITTED BY CO MMITTEE OF DISPUTES HENCE IT IS DISMISSED. 4. THE ASSESSEE IN THIS CASE IS A GOVERNMENT OF IND IA UNDERTAKING AND AS ADMITTED EVEN BY THE LD. D.R. AT THE TIME OF HEARING BEFORE US, AN APPROVAL OF C.O.D. (COMMITTEE ON DISPUTE) IS REQUIR ED TO PROCEED IN THE MATTER OF THIS APPEAL FILED BY THE ASSESSEE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ONGC VS. COLLECTOR OF CENTRAL EXCISE 1992 (SUPPLEMENT 2) SCC 432. THE ASSESSEE HAS SUBMITTED THAT THE COD HAS NOT DECIDED WITH RESPECT OF GROUND NOS. 1,7,8 & 9. WE, THEREFORE, DISMISS THIS GROUNDS FILED BY THE ASSESSEE FOR WANT OF SUCH APPROVAL. HOWEVER, GROUND NOS. 2 TO 6 HAS NOT BEEN PERMITTED BY THE CO D AND THE SAME ARE DISMISSED. THE ASSESSEE HOWEVER WILL BE AT LIBERTY TO MOVE THIS TRIBUNAL FOR RECALLING OF THIS ORDER AND RESTORATION OF ITS APPEAL IF THE REQUISITE APPROVAL OF C.O.D. IS OBTAINED IN FUTURE WITH RESPE CT OF GROUND NOS. 1,7,8 & 9. 5. GROUND NOS. 10 TO 16 RAISED BY THE ASSESSEE READ AS FOLLOWS: 10.THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSTT. COMMISSIONER IN DISALLOWING THE APPELLANTS CLAIM FOR DEDUCTION OF THE AMOUNT OF RS. 3,94,01,26 5/- U/S. 80HHC IN RESPECT OF THE FOLLOWING EXPORTS: ITA NO. 2201/M/06 4 (A) EXPORT OF ATF TO FOREIGN AIRLINES (B) EXPORT OF PETROLEUM PRODUCTS PRODUCED IN THE REFINERY LIKE NAPTHA, FURNACE OIL, BENZENE, ETC. 11. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE APPELLANT WAS ENTITLED TO THE ENTIRE AMOUNT OF DEDUCTION U/S. 80HHC AS CLAIMED BY THE APPELLANT, SUBJECT ONLY TO VARIATION BASED ON THE AMOUNT OF PROFITS ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 12. THE LD. CIT(A) ERRED IN HOLDING THAT A SALE OF ATF TO FOREIGN AIRLINES IS NOT OF THE NATURE OF EXPORTS . THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ATF WAS IN FACT EXPORTED OUT OF INDIA AND PAYMENT THEREOF HAD BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. HENCE AS PER THE PROVISIONS OF SEC. 80HHC, THE APPELLANT IS ENTITLED FOR DEDUCTION IN RESPECT OF SUCH EXPORTS. 13. THE LD. CIT(A) ERRED IN HOLDING THAT THE PRODUC TS EXPORTED BY THE APPELLANT FALL UNDER THE PROHIBITORY AMBIT OF SEC. 80HHC(2)(B) AND THAT THE APPELLANT IS NOT ENTITLED FOR ANY DEDUCTION U/S. 80HHC. 14. THE LD. CIT(A) ERRED IN HOLDING THAT THE PRODUC TS EXPORTED BY THE APPELLANT WERE MINERAL OIL WITHIN THE MEANING OF SEC. 80HHC(2)(B)(I). 15. THE LD. CIT(A) ERRED IN HOLDING THAT THE PRODUC TS EXPORTED BY THE APPELLANT WERE PROCESSED MINERALS AND ORES NOT LISTED IN THE TWELFTH SCHEDULE. 16. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE PETROLEUM PRODUCTS EXPORTED BY THE APPELLANT ARE NOT MINERAL OIL AS CONTEMPLATED IN SEC. 80HHC(2)(B)(I) OR MINERALS AND ORES AS CONTEMPLATED IN SEC. 80HHC(2)(B)(II). 6. THE COMMITTEE OF DISPUTES HELD ON 15 TH NOV. 2007, THE PERMISSION HAS BEEN GRANTED. ITA NO. 2201/M/06 5 7. THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE VIDE TRIBUNAL ORDERS DT. 29.8.2007, 27.9.2007 AND 17.3.2008 FOR T HE A.YRS. 1994-95 TO 1998-99, 1999-2000 & 2000-01, WHEREIN IT HAS BEEN D ECIDED AS FOLLOWS: THE CASE OF THE REVENUE AUTHORITIES IS THAT SALES OF ATF AND BUNKER OIL TO FOREIGN AIRLINES AND SHIPS ARE NOT OF THE NATURE OF EXPORTS. THE PRODUCTS EXPORTED FALL UNDER THE PROH IBITORY AMBIT OF SEC. 80HHC(2)(B) AND THAT THE ASSESSEE IS NOT ENTIT LED FOR ANY DEDUCTION U/S. 80HHC. THE PRODUCTS EXPORTED WERE MINERAL OIL WITHIN THE MEANING OF SEC. 80HHC(2)(B)(I) AND THE P RODUCTS EXPORTED WERE PROCESSED MINERALS AND ORES NOT LISTED IN THE TWELFTH SCHEDULE. THE CONTENTION OF THE ASSESSEE BEFORE US IS THAT TH E PRODUCTS EXPORTED ARE NOT MINERAL OIL AS CONTEMPLATED IN SEC . 80HHC(2)(B)(I) OR MINERALS AND ORES AS CONTEMPLATED IN SEC. 80HHC( 2)(B)(II). BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS COVERED AGA INST THE ASSESSEE BY ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEARS 1987-88 TO 1993-94. WE FIND THAT THE ISSUE S TANDS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL FOR THE EARLIE R ASSESSMENT YEARS. RESPECTFULLY FOLLOWING THE EARLIER ORDERS O F THE TRIBUNAL, WE REJECT THIS GROUND ALSO 8. THE 17 TH TO 19 TH GROUNDS RAISED BY THE ASSESSEE READS AS FOLLOWS: '17. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE FOLLOWING EXPENDITURE AS PRIOR PERIOD EXPENSES SR. NO. PARTICULAR AMOUNT 1. MODVAT/CEN VAT REVERSAL ON CHEMICAL (INPUT) 9,64,228/- 2. MODVAT/CEN VAT REVERSAL ON STORES AND SPARES (CAPITAL GOODS) 31,90,680 3. POWER AND FUEL (LDO) ISSUED TO COKE CALCINATION UNIT (CCU) AT BARAUNI REFINERY 81,37,219 4. FIXED WATER CHARGES LEVIED BY GUJARAT GOVERNMENT 7,32,42,513 5. LICENCE FEE DEMAND 9,14,41,637 ITA NO. 2201/M/06 6 RECEIVED FROM DEPARTMENT OF TELECOM, BHUJ 6. HIRE CHARGES 30,99,438 7. EXPENSES PERTAINING TO SECURITY FORCE AT TIKRIKALAN BOTTLE PLANT 30,60,000 8. ERROR IN POSTING PURCHASE OF AFFF TYPE 3% FOAM CONCENTRATE (CHEMICAL & ADDITIVE, ITEM CODE - 6516151014) 6,71,670 9. SURVEY EXPENSES 2,22,60,225 10. ERROR IN RECONCILIATION AND ADJUSTMENT OF CRUDE OIL LOAN 32,24,31,000 11. DEPRECIATION OF AOD 65,77,000 8. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) E RRED IN HOLDING THAT THE LD. ADDITIONAL COMMISSIONER HAS IN THE ASSESSMENT ORDER DISALLOWED THE NET PRIOR PERIOD EX PENDITURE AFTER NETTING OFF THE PRIOR PERIOD INCOME. THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE LD. ADDITIONAL COMMISSIONER TO SET OFF CANALIZING COMMISSION PERTAINING TO EARLIER YEARS O F RS. 1624 LACS AGAINST THE PRIOR PERIOD EXPENSES. 19. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE ADDITIONAL COMMISSIONER TO ALLOW DEDUCTION FOR PRIOR PERIOD EXPENDITURE OF RS. 43,22,71,000 IN THE RESPECTIVE YEARS TO WHICH IT PERTAINS. 9. THE COMMITTEE OF DISPUTES HELD ON 15 TH NOV. 2007, THE PERMISSION HAS BEEN GRANTED. 10. THE LD. COUNSEL FOR THE ASSESSEE IN THE WRITTEN SUBMISSIONS SUBMITTED AS FOLLOWS: I). LIABILITY APPROVED AND EXPENSES CRYSTALISED IN THE CURRENT YEAR. ITA NO. 2201/M/06 7 II) SUBMISSIONS BEFORE THE COMMISSIONER(A) WITH FOLLOWING ENCLOSURES: A) LETTER DT. 11.1.2002 OF OIL AND NATURAL GAS CORPN. REGARDING DEBIT NOTE DT. 18.5.2000 RAISED ON THE ASSESSEE FOR SERVICES RENDERED BY THEIR VESSEL. B) DEBIT NOTE DT. 18.5.2000 RAISED BY ONGC ON THE APPE LLANT ALONGWITH DETAILS OF SERVICES RENDERED BY THEIR VES SEL. C) LETTER DT. 1.4.1992 OF THE DEPARTMENT OF TELECOMMUN ICATIONS, BHUJ REGARDING ISSUANCE OF LICENSE FOR LAYING AND M AINTENANCE OF OFC COMMUNICATION SYSTEM IN KANDLA-BHATINDA PIPE LINE. III) ASSESSMENT ORDER DT. 12.2.2001 FOR THE A.Y. 1998-9 9 IV) APPELLANT RELIED ON THE FOLLOWING DECISIONS: A) DEEPAK FERTILISERS VS DCIT 304 ITR 167 (AT)(MUM ) B) NAVIN BHARAT INDUSTRIES LTD. VS DY. CIT 270 ITR 1 (AT)(MUM) V) WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMITS THAT THE APPELLANT HAS VARIOUS OFFICES SCATTERED AL L OVER INDIA. AT THE FINALIZATION OF ACCOUNTS, THE APPELLANT HAS TO COLLECT INFORMATION FROM VARIOUS REFINERIES, STATE OFFICES AND REGIONS. THEREFORE IT IS QUITE NATURAL THAT THERE WOULD BE OVERFLOW OF INFORMATION AFTER THE CLOSE OF THE ACCOUNTING YEAR. IN VIEW OF THE ABOVE, BUSINESS EXPENDITURE SHOULD NOT BE DISAL LOWED. VI) THE APPELLANT RELIES ON THE FOLLOWING DECISIONS : A) STERLITE INDUSTRIES (I) LTD. VS ADDL CIT 6 SOT 497 (MUM) B) TOYO ENGG. INDIA LTD VS JCIT 5SOT 616 11 TRIBUNAL FOR THE A.YRS 1998-99 AND 1996-97 SET A SIDE THE FILE OF THE AO WHEREIN IT HAS BEEN HELD AS FOLLOWS: THE ASSESSEES CASE IS THAT THIS EXPENDITURE HAD CR YSTALLIZED DURING THE YEAR AND WAS NOT IN THE NATURE OF PRIOR PERIOD EXPENSES. IT WAS SUBMITTED THAT THE ASSESSEES ACTIVITIES ARE DIVIDED INTO 5 DIVISIONS, VIZ., MARKETING, REFINERY, PIPELINE, RES EARCH & DEVELOPMENT AND ASSAM OIL DIVISION. IT IS FURTHER SUBMITTED TH AT THE ASSESSEE HAS 184 TERMINALS AND DEPOTS AND SIX REFINERIES ALL OVER INDIA. IT IS PLEADED THAT IN VIEW OF SUCH VAST OPERATIONS AT THE YEAR END LIABILITIES ARE PROVIDED ON ESTIMATE BASIS AND MAY RESULT INTO, UNDER PROVISIONING OR OVER PROVISIONING IN SOME CASES. I T IS CLAIMED THAT SUCH DIFFERENCE IN ESTIMATES HAVE BEEN CLASSIFIED A S PRIOR PERIOD ITA NO. 2201/M/06 8 EXPENSES IN THE ACCOUNTS. IT IS SUBMITTED THAT TH E ACTUAL LIABILITY IN THE CASES HAVE CRYSTALLIZED DURING THE YEAR AND THO UGH THE PROVISION WAS MADE IN THE EARLIER YEAR, SUCH A PROVISION WAS SUBJECT TO VARIATION AND THAT THESE DIFFERENCES WERE CLAIMED A S EXPENDITURE DURING THE YEAR. IT IS FURTHER ARGUED THAT ACCOUNTING STANDARD -2 NO TIFIED U/S. 145 BY THE CENTRAL BOARD OF DIRECT TAXES PERTAINS T O DISCLOSURE OF PRIOR PERIOD AND EXTRAORDINARY ITEMS AND CHANGES IN ACCOUNTING POLICIES. HE SUBMITTED THAT THIS ACCOUNTING STAND ARD SPECIFICALLY STATES THAT A CHANGE IN ESTIMATE DOES NOT CONSTITUT E CORRECTION OF AN ERROR AND THAT A CHANGE IN ESTIMATE DOES NOT CONSTI TUTE CORRECTION OF AN ERROR AND THAT A CHANGE IN ESTIMATE SHALL NOT BE TREATED AS PRIOR PERIOD ITEMS. THUS HE ARGUES THAT THE EXPENDITURE IN QUESTION HAS TO BE ALLOWED ON THE GROUND THAT IT HAS CRYSTALLIZED D URING THE YEAR. RELIANCE WAS PLACED ON THE FOLLOWING JUDGEMENTS: 1. SAURASHTRA CEMENTS & CHEMICALS INDUSTRIES LTD. VS C IT 213 ITR 523 (GUJ) 2. STERLITE INDUSTRIES (I) LTD., 6 SOT 497 (MUM) 3. ANNAMARIA TRAVELS & TOURS PVT. LTD. VS DCIT 95 TTJ 71 ALTERNATIVELY IT IS SUBMITTED THAT PRIOR PERIOD INC OME SHOULD NOT BE BROUGHT TO TAX DURING THE CURRENT YEAR AND AT BEST THE PRIOR PERIOD INCOME SHOULD BE SET OFF AGAINST PRIOR PERIOD EXPEN SES AND ONLY THE NET AMOUNT SHOULD BE DISALLOWED DURING THE CURRENT YEAR. FOR THIS PROPOSITION THAT ONLY NET OF PRIOR PERIOD ITEMS SHO ULD BE DISALLOWED, HE RELIED ON THE DECISION OF THE MUMBAI TRIBUNAL I N THE CASE OF SURAT COTTON SPINNING & WEAVING MILLS PVT. LTD. VS DCIT I N ITA NO. 4395/MUM/1992. THE LD. DR ON THE OTHER HAND SUBMITTED THAT ADMITTE DLY THE EXPENDITURE IN QUESTION DOES NOT PERTAIN TO THE ASSESSMENT YEAR AND THAT IT COULD NOT BE CLAIMED AS A DEDUCTION DURING THE YEAR. HE RELIED ON THE ORDER OF THE AO AS WELL AS THE ORDER OF THE CIT(A) ON THE ISSUE. AFTER HEARING RIVAL CONTENTIONS ON THIS ISSUE WE H OLD AS UNDER: THE ASSESSEE RELIED UPON THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF CIT, MP, NAGPUR & BHAN DARA VS SWADESHI COTTON & FLOUR MILLS LTD., REPORTED IN 53 ITR 134. IN THIS DECISION THE HONBLE SUPREME COURT HAD HELD TH AT THOUGH THE WORKMEN ARE ENTITLED TO MAKE A CLAIM TO PROFIT BONUS FROM YEAR TO YEAR BASIS, IF NECESSARY CONDITIONS ARE SAT ISFIED AND THAT IT IS ONLY WHEN THE CLAIM OF PROFIT BONUS IS M ADE AND ITA NO. 2201/M/06 9 SETTLED AMICABLY OR BY INDUSTRIAL ADJUDICATION THE LIABILITY IS INCURRED BY THE EMPLOYER, WHO FOLLOWS THE MERCANTIL E SYSTEM OF ACCOUNTING. THUS THEY HELD THAT THE YEAR OF LIA BILITY WOULD BE THE YEAR IN WHICH THE LIABILITY CAN BE PROPERLY ATTRIBUTED. THE CASE OF CIT VS ASHOK IRON & STEEL ROLLING MILL 199 ITR 815 (ALL.) RELIED UPON BY THE LD. COUNSEL FOR THE ASSES SEE THE JUDGMENT IN THE CASE OF SWADESHI COTTON & FLOUR MIL LS LTD. (SUPRA) WAS APPLIED AND IT WAS CONCLUDED THAT THE L IABILITY TO PAY CRYSTALLIZED OR MATERIALIZED ONLY WHEN THE ASST T, LABOUR COMMISSIONER PASSED THE ORDER. BEFORE THIS THE LIA BILITY WAS UNCERTAIN, VAGUE AND INCHOATE. THUS IT WAS DIRECTE D THAT THE AMOUNT IN QUESTION SHOULD BE ALLOWED IN THE YEAR IN WHICH IT IS MATERIALIZED. THE CALCUTTA HIGH COURT IN THE CA SE OF CIT VS PADMAVATI RAJE COTTON MILLS 203 ITR 375 (CAL) WAS CONSIDERING THE ALLOWABILITY OF MARKET FEE LEVIED B Y WAY OF AN ORDINANCE. IN THIS CASE THOUGH THE ORDNANCE WAS IS SUED ON 15.5.1980, THE DEMAND FOR MARKET FEE WAS MADE BY TH E COLLECTOR ON 4.3.1983. IT WAS HELD THAT MARKET FEE IS DEDUCTIBLE IN THE ASSESSMENT YEAR 1983-84 BY OBSERV ING THAT THIS PART OF THE STATUTORY LIABILITY, IN THIS CASE, ADMITTEDLY ACCRUED IN THE YEAR IN QUESTION AND HAS BECAME REAL AND ENFORCEABLE IN THE YEAR IN QUESTION, THOUGH THE SAM E IS REFERABLE TO THE EARLIER ASSESSMENT YEARS. SO THE TEST LAID DOWN BY THE COURT IS THAT THE YEAR OF ALLOWABILITY IS WHEN THE SAID LIABILITY HAS BECOME REAL AND ENFORCEABLE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES VS CIT 213 ITR 523 (GUJ) HELD AS FOLLOWS: MERELY BECAUSE AN EXPENSES RELATES TO A TRANSACTIO N OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYA BLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILI TY WAS DETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS OF MAINTAINING ACCOUNTS ON THE MERCANTILE BA SIS. IT IS TO BE FOUND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIAB ILITY WAS CRYSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEA R SO AS TO BE REQUIRED TO BE ADJUSTED IN THE BOOKS OF THAT PRE VIOUS YEAR. IT FURTHER OBSERVED AS FOLLOWS: IF ANY LIABILITY, THOUGH RELATING TO THE EARLIER Y EAR, DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSE SSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIMED AND PA ID IN THE LATER PREVIOUS YEARS IT CANNOT BE DISALLOWED AS DED UCTION MERELY ON THE BASIS THE ACCOUNTS ARE MAINTAINED ON ITA NO. 2201/M/06 10 MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTI ON OF THE PREVIOUS YEAR. ACCOUNTING STANDARD AS NOTIFIED BY THE BOARD IS APPLICABLE ONLY IN CASES WHERE THERE IS CHANGE IN E STIMATES. ON THE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS T HE ORDER OF THE CIT(A) WE FIND THAT EXPENDITURE HAS NOT BEEN CO NSIDERED ITEM-WISE TO DETERMINE WHETHER THE SAME HAS CRYSTAL LIZED DURING THE YEAR OR NOT. THE TESTS LAID DOWN BY THE VARIOUS COURTS HAVE NOT BEEN PROPERLY APPLIED. IN VIEW OF OUR DISCUSSION ABOVE WE DEEM IT FIT TO SET ASIDE THE IS SUE TO THE FILE OF THE AO WITH THE DIRECTION TO CONSIDER THE I SSUE IN QUESTION ITEM-WISE. IN CASE THE ASSESSEE DEMONSTRA TES THAT THE LIABILITY IN QUESTION HAS CRYSTALLIZED DURING T HE YEAR, THE SAME CANNOT BE DISALLOWED. ACCORDINGLY, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO. RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER (SUPRA) W E SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH IDENTICAL DIRECTIO NS. 12. GROUND NOS. 20 TO 22 RAISED BY THE ASSESSEE REA D AS FOLLOWS: 20 THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF RS. 29,00,000 MADE BY THE ADDITIONAL COMMISSIONER B Y TREATING THE EXCHANGE LOSS ON OUTSTANDING FOREIGN C URRENCY LOAN FROM B.A. ASIA LTD. FOR GENERAL PURPOSE AS CON TINGENT IN NATURE. 21. THE LD. CIT(A) ERRED IN HOLDING THAT PROVISIONS OF EXCHANGE LOSS OF RS. 29,00,000 HAD ACTUALLY DISTORTED THE PI CTURE OF INCOME OF THE APPELLANT. 22. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT L OSS ARISING DUE TO EXCHANGE RATE DIFFERENCE ON 31 ST MARCH IS NOT CONTINGENT IN NATURE AND OUGHT TO HAVE ALLOWED AS R EVENUE DEDUCTION. THE APPELLANT INTER ALIA RELIES ON THE FOLLOWING DECISIONS: CIT VS BROCKHOVER B.V. (BOMBAY HIGH COURT JUDGEMENT DT. 7.6.2000 IN APPEAL NO. 315 OF 2000 ONGC VS DCIT 83 ITD 151 (DEL)SB) 13. THE COMMITTEE OF DISPUTES HELD ON 15 TH NOV. 2007, THE PERMISSION HAS BEEN GRANTED. 14. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED AS FOLLOWS: ITA NO. 2201/M/06 11 THE APPELLANT RELIES ON THE FOLLOWING DECISIONS : CIT VS WOODWARD GOVERNOR INDIA P. LTD (SC) 312 ITR 254 CIT VS BROCKHOVER B.V. (BOMBAY HIGH COURT JUDGEMENT DT. 7.6.2000 IN APPEAL NO. 315 OF 2000) TRIBUNAL ORDER IN THE CASE OF BROCKHOVER 15. WE FIND THAT THE MATTER IS TO BE SENT BACK TO T HE AO WITH RESPECT TO EXCHANGE RATE DIFFERENCE LAW CLAIMED AS REVENUE EXP ENDITURE, TO BE DECIDED IN THE LIGHT OF CIT VS WOODWARD GOVERNOR IN DIA P. LTD (SC) 312 ITR 254 AFTER GIVING AN REASONABLE OPPORTUNITY TO THE ASSESSEE. 16. GROUND NO. 26 & 27 RAISED BY THE ASSESSEE REA DS AS FOLLOWS: 26. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ADDITIONAL COMMISSIONER IN LEVYING INTEREST UNDER S EC. 234D. THE APPELLANT DENIES LIABILITY TOWARDS INTEREST U/S . 234D. 27. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT INTEREST UNDER SEC. 234D CAN BE CHARGED ONLY IN CAS ES WHERE THE REFUND WAS GRANTED AFTER 1 ST JUNE, 2003. 17. THE COMMITTEE OF DISPUTES HELD ON 15 TH NOV. 2007, THE PERMISSION HAS GRANTED. 18. THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF EKTA PROMOTERS PVT. LTD., (DELHI SPECIAL BENCH DT. 11 TH JULY 2008) 305 ITR 01 (DEL)(SB)/113 ITD 719 & CIT VS BAJAJ HINDUSTAN LTD IN ITA NO. 198 OF 2009. 19. WE FIND THAT BEFORE THE BOMBAY HIGH COURT THE F OLLOWING QUESTION OF LAW HAS BEEN RAISED: WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ITAT WAS RIGHT IN HOLDING THAT THE INTEREST U/S. 234D CANNOT BE CHARGED IN RESPECT OF REFUNDS GRANTED PRIOR TO 1 .6.2003? 20. THE BOMBAY HIGH COURT HAS HELD AS FOLLOWS: SO FAR AS THE LAST QUESTION IN CONCERNED, KIT IS S EEN THAT THE SUBJECT PROVISION CAME ON STATUTE BOOK W.E.F. 1.6.2 003. IF THAT BE SO, THE SAID PROVISION DOES NOT HAVE RETROSPECTIVE EFFECT. IN THIS VIEW OF THE MATTER, WE DO NOT SEE APPEAL GIVING RISE TO ANY SUBSTANTIAL ITA NO. 2201/M/06 12 QUESTION OF LAW. APPEAL IS, THEREFORE, DISMISSED I N LIMINI WITH NO ORDER AS TO COSTS. RESPECTFULLY FOLLOWING THE ABOVE, WE ALLOW THIS GRO UND RAISED BY THE ASSESSEE. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF NOVEMBER, 2010 SD/- SD/- (A.L. GEHLOT) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24 TH NOVEMBER, 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2201/M/06 13 DATE INITIALS 1 DRAFT DICTATED ON: 9.11.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 10.11.2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______