High Court allows Revenue's appeal, remands for price variation examination. Loss claim timing clarified.

The High Court allowed the appeal filed by the Revenue, vacated the orders of the Tribunal and the first appellate authority, and remanded the matter to the Assessing Officer for further examination of the accounting of price variation between the assessee and purchasers. The Court emphasized that the assessee can claim loss only in the year when purchasers credited their accounts, directing that subsequent assessments should be revised accordingly if the claim is found allowable in the next year or later years.

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Issues involved: The judgment deals with the issue of whether the Tribunal was justified in confirming the order of the CIT(A) upholding the respondent-assessee's claim of loss on account of de-escalation of price of LPG cylinders supplied to oil companies.

Summary:
The High Court considered the appeal filed by the Revenue challenging the Tribunal's decision regarding the respondent-assessee's claim of loss due to price de-escalation of LPG cylinders supplied to oil companies. The assessee claimed a loss of Rs. 55,61,146, which was set off against the declared profit. The Revenue contended that the loss should be accounted for in the subsequent year. The CIT(A) allowed the appeal based on the principle that only real income is assessable, as per the Supreme Court decision in Godhra Electricity Co. Ltd. vs. CIT. The High Court found that the assessee is entitled to claim loss only in the year when purchasers credited their accounts. The Court emphasized that income must be computed in accordance with the system of accounting followed by the assessee. The matter was remanded to the AO for fresh decision after verifying the accounts of the assessee and purchasers regarding the price variation. The Court directed that subsequent assessments should be revised if the claim is found allowable in the next year or later years.

In conclusion, the High Court allowed the appeal, vacated the orders of the Tribunal and the first appellate authority, and remanded the matter to the AO for further examination of the accounting of price variation between the assessee and purchasers.

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