ORIENT OVERSEAS PVT LTD V. DY COMMISSIONER OF INCOME TAX

ITA/882/2011

AI Insights

The case involves an appellant engaged in the import of pulses and PVC resins, who faced contractual breaches leading to the payment of damages. The appellant claimed these payments as deductions under Section 37(1) of the Income Tax Act for the assessment year 2007-08. The Assessing Officer disallowed these deductions, treating the losses as speculative. The CIT(A) reversed this decision, but the Tribunal remanded the case for fresh consideration, suggesting that some necessary evidence was not on record. The appellant contested this remand, arguing that the existing evidence was sufficient and that additional evidence was unnecessary. The court, while dismissing the appeal, allowed the appellant to file an application to clarify these points under Section 254(2).

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 752220 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 19-07-2011
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Biljwan Dass Rameshwar Dayal 149 ITR 387
• Laws Referred To: Section 37(1), Section 254(2)
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year; Breach of contract; Damages; Deduction claim; Interest free advance; Speculative Loss
• Section: 254(2); 37(1)

Judgement Text

"#38 0/0 19.07.2011 Present: Mr. Pritesh Kapur, Mr. Ankur Saiigal and Ms. Bina Gupta, Advocates for the Appellant: Mr. Oeepak Chopra, AdvlOcate for the respondent. +ITA No.SS2/2011 * , The appellant assessee is engag'E:!d iin work of import of pulses and PVC resins and makes sales on whollesale basis. It enters into contracts for sale purchase of commodities in the relevant assessment year i.e. 2007-08. The appellant had entered into certain agreements with the parties for delivery of pulses etc. According to the' appellant due to low payment in the local market the appellant requested the said parties to delay the delivery as this was not accepted, and was treated as breach of contract and on the part of the appellant; the appellant paid stipulated damages to tine said parties for the breach of contract. Likewise, in one case for similar reasons when the foreign party could not supply the material to the appellant, the appellant received the damages in the said account. However, the. damages paid by the appellant in respect of two contracts were more than the damages received in respect of contract. As averred under this contract the appellant suffered business loss and the net damages were paid by the appellant were claimed as deduction under Section 37(1). The Assessing Officer treated the loss as speculative and, therefore, disallowed the amount of Rs. 3,08,75,218 which had Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified ~ been paid by the assessee to certain parties on account of damages for breach of contract. The Assessing Officer also finds that the assessee had given interest free advance to one party wh,ereas it had taken loans and advance from bank to whom the assessee was paying interest. In these circumstances, the Assessing Officer also disallowed the interest paid on estimated basis on the ground that it has given the interest free advance to one party. The assessee preferred appeal aglainst the aforesaid oreer of the Assessing Officer and the CIT(A) deleted both the additions. It was now the turn of the Revenue to feel aggirieved by the order the CIT(A'). The Revenue approached the Tribunal tlhallenging the order of CIT(A) on both the issues. The Income Tax Tribunal remanded the case for fresh consideration stating that in the impugned order that some evidence which was necessary for deciding issues has not appeared on record. Liberty is accordingly given to the assessee to pay the same, record their evidence in order to elilable the Assessing Officer to determine the issues. Challenging this order, the presemt appeal is preferred. It is the contention of the learned counsel for the appellant that no such evidence as suggested by the Income Tax Tribunal in the impugned order was necessary. He has referred to the order of the CIT(A) that there is no dispute about the facts wHich have come on record in the form of evidence. He also submits that the said material/facts were ........ sufficient to determine the issues in qUestion. His further submission is that some of the evidences pOinted OlUt by the Tribunal was not even necessary and had the Tribunal called upon the assessee to clarify the position at the time of arguments the assessee would have replied to the same to the satisfaction of the Tribunal. He has also referred to the judgment of this Court in CIT Vs. BIIiJgwan Dass Rameshwar Dayal 149 ITR 387 and submits that though this judgment is taken note of by Tribunal but not dealt with in the impugned order. In the aforesaid circumstances, we are of the opinion that the assessee may move an appropriate al~plication before the Tribunal under Section 254(2) of the Act bringing to its notice the aforesaid aspects and to create on its basis as no 'fiurther evidence is required to determine the issues involved. We may make it clear that we have not commented upon the merits of tine contentions raised by the assessee and it would be open to tHe Tribunal to deal with the application in accordance with law. Giving liberty to the appellant: assessee as aforesaid, this appeal is dismissed as withdrawn and how-ever in case the appellant feels aggrieved by the orders passed by the ITAT, it will be open to the appellant to chaHenge the order. JULY 19, 2011/vld frt1tl _ A.K. SIKRI, l . . a/ - ~.~ ~ M.L~HTA, J. "