AI Drafter 
TaxTMI 
TaxTMI 
2015 (7) TMI 910
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....003) with M/s. Kolmer Petrochemicals, A.G., Switzerland [Kolmer] for the purchase of 6,000 MT of raw material, Paraxylene, used in the manufacture of the finished product, DMT, at $ 882 (Rs. 44,267/08) per MT, i.e., at a cost of Rs. 27.82 cr. The goods were to arrive at Mumbai, the location of delivery, between April 23 and 25, 2003, while its payment, as per the modified agreement, was to be made two days prior to the arrival of the vessel. The other material amendment was that the goods had to be delivered latest by April 30, 2003, failing which the contract was to be treated as cancelled, and the seller continued to be recognized as the owner of the goods. The price of Paraxylene, however, started falling in the months of May and June, 2003, attaining a level of Rs. 22,500 PMT (approx.) at the time of the finalization of the accounts for the year, i.e., June 11, 2003. This led to a corresponding fall in the price of DMT, to Rs. 29,000/- PMT. The assessee, accordingly, provided for the loss inasmuch as the value of the raw-material, realizable on conversion into finished product, had fallen considerably, working out the same at Rs. 14.96 Cr. and, further, resulting likely loss at....
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....isen to the assessee on account of the said firm contract. This of course would be subject to the qualification that it is pretty certain, as on 31.03.2003, the balance-sheet date, that the goods shall arrive in time. In the instant case almost the entire delivery time fail during the following year. There is thus, in our view, no basis in the present case for such certainty. Two, and equally importantly, no loss has in fact arisen during the relevant year. The loss under reference is only on account of fall in the market price of Parxylene and, resultantly, DMT, the finished product. Admittedly, the price of rawmaterial started falling only in May/June 2003, i.e., after the end of the relevant year on 31.03.2003. This fact was confirmed by the Bench from the ld. counsel during hearing, who fairly conceded to it being in fact so. True, all known losses and liabilities have to be provided for following the fundamental accounting principle of conservatism and prudence, which stand since statutorily incorporated per AS1 issued by CBDT u/s.145 of the Act. Market prices being volatile, a loss can be said to arise on the basis of movement therein, firstly, only where they exhibit a....
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.... further, the principle of prudence as not being applicable to losses which arise or have their genesis in events subsequent to the end of the relevant year. As regards reliance on the decision in Nagri Mills Co. Ltd. (supra), we may advert to the decisions in the case of Mysore Spinning & Mfg. Co. Ltd. v. CIT [1966] 61 ITR 572 (Bom) and British Paints India Ltd. (supra), besides to J.K.Woollen Manufactures (P.) Ltd. v. CIT [1967] 65 ITR 237 (All). We decide accordingly, confirming the disallowance of the impugned loss. This decides ground no.1 of the assessee's appeal. 5. Ground no.2 was not pressed by the ld. AR during hearing, and is accordingly dismissed as not pressed. 6. Ground no.3 relates to a disallowance in the sum of Rs. 31,26,703/-, being the provision for various expenses, effected by the AO for the reason that they were not supported by any evidences. In appeal, the ld. CIT(A) called for a remand report from the AO in view of the additional evidences/materials sought to be relied upon by the assessee, granting deletion where found evidenced and/or supported. The balance disallowance, being confirmed, the assessee is in second appeal. 7. We have heard the part....
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....vered by the decision by the Apex Court in the case of CIT vs. Ajanta Pharma Ltd. [2010] 327 ITR 305 (SC). We, accordingly, set-aside the matter back to the file of the AO for working the book profit u/s. 115JB in terms of the said decision. We decide accordingly. I.T.A. No. 3193/Mum/2010 (Revenue's Appeal) 10. The appeal raises two effective grounds, i.e., grounds 2 and 3, which we shall take up in seriatim; ground 1 being general in nature, warranting no adjudication. 11. Ground 2 of the Revenue's appeal is in respect of an addition qua unutilized MODVAT credit in the sum of Rs. 354.40 lacs. While the AO made the addition as in his view the unutilized MODVAT credit was required to be added u/s. 145A, the ld. CIT(A) directed for including the said credit in the value of the opening stock, purchases, sales and closing stock. We find the same to be a proper interpretation of section 145A, which, being a non obstante clause, shall prevail. The decision by the hon'ble jurisdictional High Court in CIT vs. Mahalakshmi Glass Works Pvt. Ltd. [2009] 318 ITR 116 (Bom), followed by him, though we observe to be on a different issue, i.e., whether section 145A shall apply to the openi....