TaxTMI 
TaxTMI 
2016 (11) TMI 1302
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....alid, bad in law and be quashed; and (ii) the order passed by the Transfer Pricing Officer ("TPO') be treated as illegal, invalid, bad in law and be quashed. Without prejudice to above ground : Ground No. 2 : Reference to Transfer Pricing Officer ("TPO"): 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of making a reference to the TPO without satisfying the conditions as to what are "necessary or expedient" circumstances existed in the Appellant's case for such a reference. 2. The Appellant prays that the action of the lower authorities be deleted by holding that the reference to TPO as also the order pursuant to such reference be treated as invalid, illegal and bad in law and be quashed. Without prejudice to above grounds: Ground No. 3 : Non compliance with the instruction issued by the Central Board of Direct Taxes ("CBDT"): 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of referring the Appellant's case to TPO for determination of Arms-Length price ("ALP') contrary to the Instruction No. 3 of 2003 dated May, 20,....
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....2 of the Act. Ground No. 7: Disallowance of loss on forward exchanje contract- Rs. 2,62,65,930/-. 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the A. 0 of disallowing Rs. 2,62,65,9301- being the difference in value of the forward contracts as on the date on which the contract was entered into and the rate prevailing as at the end of the financial year, on the ground that the same represents notional loss. 2. The Appellant prays that the action of the lower authorities be deleted. Without prejudice to above 3. If at all the action of the lower authorities is upheld then, in that case, the Appellant be allowed the loss in the year in which the contract is settled. Ground No. 8 : Disallowance of provision for leave encashment - Rs. 95,184/-: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the A.O of disallowing Rs. 95,184/- being provision for leave encashment, u/s 43B(f) of the Act. 2. The Appellant prays that the action of the lower authorities be deleted. Ground No. 9: Disallowance u/s 14A- Rs. 14,495/- 1. On the facts and in the ....
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....he A.O after perusing the 'Audit report' filed by the assessee company in 'Form 3CEB', referred the computation of the 'Arms length price' ('ALP') as regards the International transactions of the assessee company relating to advance of share application money to its 'Associated Enterprise' (AE), and incurring of expenses in relation to pre and post incorporation of the 'AE', to the Transfer Pricing Officer 11(2), Mumbai ('TPO') u/s 92CA(1) of the 'Act', who vide his order passed u/s 92CA(3) of the 'Act', dt. 15.03.2011, proposed adjustments of Rs. 16,56,556/- as regards the aforesaid International transactions of the assessee company. The A.O following the order of the 'TPO' and carrying out adjustments as regards the International transactions of the assessee company with its 'AE', alongwith certain other additions to the 'returned income' of the assessee company, therein as required u/s 144C(1) of the 'Act', forwarded a 'draft assessment order' dt. 28.11.20 11 to the assessee company (Page 122 of 'APB'). The assessee company vide its letter dt. 20.12.2011 (Page ....
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....9;Act', did not find favour with the claim of the assessee company and had concluded that the assessment framed by the A.0 was well within the period of limitation, therein submitted that the Ld. CIT(A) while observing that on perusal of Sec. 153 r.w 144C of the 'Act', the assessment framed by the A.0 was found to be well within the period of limitation, had gravely erred in loosing sight of the fact that as Sec. 144C was in itself made available on the statute vide the 'Finance Act, 2012, w.r.e.f 01.04.2009, therefore the same was to be made applicable for A.Y. 2009-10 and the succeeding years, and as such was not applicable to the year under consideration in the case of the assessee company, pursuant whereto the limitation for framing of assessment in the case of the assessee company was to be gathered only on the basis of the period contemplated in the Second proviso of Sec. 153(1) of the 'Act'. The Ld. A.R further supporting his contention that Sec. 144C was applicable only w.e.f A.Y 2009-10, and thus could not be made applicable to the preceding years, therein culling out the changes brought in by Sec. 144C of the 'Act', submitted that as the sa....
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.... proceedings, however as new rights and obligations, not only in favour of assessee but also in favour of DRP and concerned assessing officer emerges while giving effect to the provisions of Sec. 144C, therefore the same inescapably, in light of the parameters laid down by the Hon'ble Apex Court in the case of H.V Thakur (supra), have to be construed as 'Substantive provisions', as a result whereof the same could only be given prospective operation, and resultantly would not be applicable to the year under consideration in the case of the assessee company. 5. The Ld. A.R further to drive home his contention that while for procedural provisions are applicable both to future as well as pending proceedings, while for amendments to substantive provisions can only be given a prospective effect, therein in support of the aforesaid proposition, relied on a host of Judgments, as under: (i). Jai Parkash Singh Vs. (219 ITR 737)(SC) (ii). KM Sharma Vs. ITO (254 ITR 772, 779)(SC) (iii). Aditya Cement Staff Club Vs. UOI (266 ITR 70)(Raj) (iv). Associated Cement Co. Vs. CTO (48 STC 466) (v). K. Co. Gopal Rao Vs. CWT (181 CTR 94)(AP) (vi). CWT Vs. R.K Indrajeet Si....
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....lable on the statute w.e.f A.Y. 2010-11, and thus could not be made applicable to the year under consideration in the case of the assessee company. The Ld. A.R further submitted that in light of the settled position of law that CBDT Circulars are binding on the Revenue/department, the A.0 in the case of the assessee company had thus grossly erred in adopting a view contrary to the CBDT Circular, and as such erred in extending the scope of applicability of the provisions of Sec. 144C to the years preceding the A.Y. 2010-11. The Ld. A.R further in support of his contention that the Circulars issued by CBDT in exercise of its powers u/s 119 of the 'Act', though are not binding on the assesses or the appellate authorities, but are binding on the Revenue/department, therein relied on the following judgments: (i). CIT Vs. K. Srinivasan and K. Gopalan (23 ITR 87)(SC) (ii). CWT, Central Vs. Balbhadradas Bangur(148 ITR 149)(Cal). (iii). CIT Vs. 0.M.S.S. Sankaralinga Nadar & Co. (147 ITR 332)(Mad). (iv). Charitable Gadodia Swadeshi Stores Vs. CIT (12 ITR 385)(Lahore) (v). CIT Vs. Raja Bahadur Kamakhaya Narayan Singh (16 ITR 325) (Privy council). (vi). Beohar Singh R....
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..... 9. The Ld. A.R further buttressing his contention that the provisions of Sec. 144C would have to be accorded a prospective application, and as such would be applicable only w.e.f A.Y. 2010-11, therein submitted that going by the 'Rule of Strict literal interpretation', it can safely and rather inescapably be gathered that the provisions of Sec. 144C are to be made effective from A.Y. 2010-11, and no interpretation howsoever meaningful it may so appear, can therein be permitted to substitute the plain and literal interpretation of the said statutory provision. 10. The Ld. D.R on the hand rebutting the aforesaid averments of the assessee company, relied on the order of the Ld. CIT(A) and submitted that the provisions of Sec. 144C which were made available on the statute vide the 'Finance (No. 2) Act, 2009, w.r.e.f 01.04.2009, were applicable as regards any order which the A.O proposes to make as a consequence of the order of the TPO uls 92C(3) of the 'Act', therein effecting variation in income or loss returned by an eligible assessee on or after October 1, 2009, irrespective of the assessment year to which it pertains. It was further submitted by the Ld. ....
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....ade in the 'draft order' were not acceptable to it and were to be challenged by way of filing of an appeal u/s 246A of the 'Act' before the CIT(A), therefore the final assessment order may be passed. We are of the considered view that though it is the settled position of law as had been so laid down by the Hon'ble Supreme Court in the case of : H.V Thakur Vs. State Bank of Maharashtra (1994 AIR 263), as well as appreciated in the host of other judgments relied upon by the Ld. AR, that a statute which effects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, however are convinced that the said proposition would not help the assessee company to support its contention that Sec. 144C being substantive in nature, therefore the same would be applicable prospectively w.e.f A.Y. 2010-11, because to our understanding Sec. 144C has only brought about a procedural amendment therein providing the tax payer an alternate dispute resolution me....
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....y provision going by the 'Rule of Strict Literal interpretation', has to be construed in light of its simple and plain meaning, and no violence can be done to its literal interpretation in the garb of giving it a better meaning and arriving at the underlying object behind the enactment, but are unable to persuade our self to interpret the scope and gamut of the period of applicability of Sec. 144C(1) of the 'Act' by divorcing the 'Cut off' date of 01.10.2009 from the text in which it has been used, and therein reading the same in isolation. We are of the considered opinion that as Sec. 144C which had been inserted vide the Finance (No. 2) Act, 2009, w.r.e.f 01.04.2009, nowhere makes any mention that the said statutory provision would only be applicable to A.Y. 2010-11 and onwards, therefore the same would be applicable in the cases where the A.0 on or after the 1st day of October, 2009, as a consequence of the order of the TPO u/s 92CA(3) of the 'Act', proposes to make any variation in the income or loss returned, which is prejudicial to the interest of the assessee, independent of the assessment year involved therein. That as regards the reliance pl....
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....ficer is required to forward a draft assessment order to the eligible assessee, if he proposes to make, on or after the r day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. In other words section 144C is applicable to any order which proposes to make variation in income or loss returned by an eligible assessee, on or after ft October, 2009, irrespective of the assessment year to which it pertains. Amendments to other sections of the Income-tax act referred to in para 45.3 of the Circular No. 5 of 2010, dated 3'd June, 2010, shall also apply from 1st October, 2009." 13. Thus in light of the fact that an inadvertent drafting error as had crept in Para 45.5 of Circular No. 5 ; Dt. 03.06.2010, therein wrongly stating that the provisions of section 144C inserted vide Finance (No. 2) Act, 2009 were in relation to the assessment year 2010-11 and subsequent assessment years, had in itself been taken cognizance of as being an 'Inadvertent mistake', and rectified by the CBDT by substituting Para 45.5 (supra), vide its Circular No. 9; 19.11.2013, pursuant thereto the support taken by the assessee company on ....
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....assessee company had during the course of hearing of the appeal averred at length that as per the time limit contemplated in the Second proviso of Sec. 153(1) of the 'Act', the A.0 remained under a statutory obligation to frame assessment in the hands of the assessee company within a period of 33 months from the end of the relevant assessment year, i.e latest by 31.12.2011, however as the same was framed only as on 19.01.2012, therefore the same was barred by limitation and was thus liable to be struck down on the said count itself That the Ld. D.R on the other hand rebutting the aforesaid contention and relying on the order of the Ld. CIT(A), therein submitted that in the case of the assessee company, the A.0 by resorting to the provisions of Sec. 144C of the 'Act' therein remained under a statutory obligation to frame assessment within the time period contemplated U/s 144C(4) of the 'Act', and as the assessment framed by the A.O in the hands of the assessee company was found to be within the parameters contemplated u/s 144C(4) of the 'Act', therefore no infirmity as regards the limitation for framing of the assessment was liable to be drawn. 15.....
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....mplated in Sec. 153 of the 'Act', can be gathered beyond any scope of doubt on a bare perusal of sub sections of Sec. 144C. That for the sake of clarity, the relevant sub-sections which therein regulate the time limit' for framing of assessment in a case where the provisions of Sec. 144C had been invoked, are reproduced as under:- "Sec. 144C(4). The Assessing Officer shall, notwithstanding anything contained in Sec. 153 [or Section 153B], pass the assessment order under sub-section (3) within one month from the end of the month in which- (a). the acceptance is received; or (b). the period of filing of objections under sub-section (2) expires. 16. Thus a bare perusal of Sec. 144C(4), which starts with the non obstante clause "The Assessing Officer shall, notwithstanding anything contained in Sec. 153 " and provides for an independent 'time limit' of 'One month' which is to be reckoned from the end of the month, in which either the acceptance to the variations is received by the A.0 from the assessee, or the stipulated period of filing of objections had expired, therein puts the matter to rest, beyond any scope of doubt, that the time limitatio....
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....o the assessee company, as required u/s.144C(1) of the Act. 28.12.2011 The assessee company was required to file its 'Objections' to the 'draft assessment' order of the A.O, as required u/s 144C(2) of the 'Act'. 31.01.2012 The A.O remained under a statutory obligation to frame assessment u/s 143(3) in the hands of the assessee company, as required u/s 144C(4)(b) of the 'Act'. 18. Thus now in the case of the assessee company, the A.0 who remained under a statutory obligation to frame the assessment, not later then 31.01.2012, is found to have framed the same as on 19.01.2012, therefore the same is within the period of limitation. Thus the claim of the assessee company that the assessment framed by the A.0 is barred by limitation, is rejected, and consequent thereto the 'Ground of appeal No. 1' of the assessee company is dismissed. GROUND OF APPEAL 2 & 3: 19. The Ld. A.R of the assessee company during the course of the hearing of the appeal had therein submitted that 'Ground of appeal No. 2' and 'Ground of appeal No. 3' are not being pressed, as a result whereof the same are dismissed as being not pre....
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....id amounts had been remitted to the 'WOS' by way of share application money for allotment of shares, wherein as against part of the amount 31,120 shares were allotted to the assessee company, while for the balance amount of the share application money was refunded, thus the said remittance not being in the nature as that of a loan advanced to the WOS, therefore in view the color and character of the transaction, no adverse inference as regards the same were liable to be drawn in the hands of the assessee company. The Ld. A.R further submitted that the amount of 'Share application' money so remitted to the 'WOS' was to be used by the latter for the purpose of obtaining mining contracts in Africa, and therefore till the mining contracts were finalized, the money was kept in the bank by the 'WOS' and it was only after the finalization of the contracts, the amount which was not required by the WOS for the aforesaid purpose were refunded to the assessee company 22. The TPO not finding favour with. the submissions of the assessee company, therein held the remittances of US $ 8,60,000/- (Rupee equivalent of Rs. 1,51,18,263/-) by the assessee company to i....
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....e hands of the assessee company. 23. That on appeal by the assessee company, the Ld. CIT(A) referring to the provisions of Sec. 73(2) and Sec. 73(2A) of the Companies Act, 1956, which provides for refund of money in the absence of any permission of Stock exchange to deal in with shares within 8 days, failing which the company stands liable to pay money with interest at the rate of not less than 4% but not exceeding 15%, and further taking support from certain other regulations of the SEBI (Issue of Capital and Disclosure Requirement) Regulations of 2009, though upheld the order of the A.O, but however directed the latter to workout interest at the rate of 6 month LIBOR plus 150 basis points. 24. That during the course of hearing of the appeal before us, the Ld. A.R of the assessee company, in order to drive home his contention that the remittance made by the assessee company to its WOS/AE was towards share application money, after satisfying all the requisite, parameters under law, which was duly recognised and approved as such, therein referred to the Resolution dated. 21/03/2006 of the 'Board of Directors' of the assessee company wherein consent was given to incorpo....
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....B of the 'Act; AND (c).That it is not permissible for revenue authorities to re-characterize the transaction unless the same is shown to be sham or bogus transaction. , therein relied on a host of orders of different benches of the Tribunal, as under:- (i). Bharti Airtel India Vs. ACIT (63 SOT 113)(Del) (ii). Aditya Birla Vs. DCIT (69 SOT 18)(Mum) (iii) Allcargo Global Logistics Ltd.Vs. ACIT (150 ITD 651 )(Mum) (iv) Parle Biscuits (P) Ltd. Vs. DCIT (46 taxmann.coml 1)(Mum) (v). Vijay Electricals Ltd. Addl. CIT (60 SOT 77)(Hyd) (vi). Micro Inks Ltd. Vs. ACIT (144 ITD 610)(Ahd) (vii).Prithvi Information Solutions Ltd. Vs. ACIT (49 Taxmann.com 176)(Hyd). (viii).Hill Country Properties Ltd. Vs. Addl. CIT (48 Taxmann.com.94)(Hyd). (ix). ITO Vs. Sterling Oil Resources (P) Ltd. (67 Taxmann.com 2)(Mum). 26. The Ld. A.R to further support his aforesaid contention that the lower authorities had seriously erred in re-characterizing the transactions of remittance of share application money as a loan, in light of the fact that the genuineness of the aforesaid transactions, i.e as that of being in the nature of remittance towards share application money ha....
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....i).Where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner, therein relied on the following judicial pronouncements:- (i). CIT Vs. EKL Appliances Ltd. (24 Taxmann.com 199)(Delhi) (ii). ITO Vs. Sterling Oil Resources (P) Ltd. (67 taxmann.com 2) 29. Alternatively, it was further submitted by the Ld. A.R that even if the aforesaid remittance of share application money was to be treated as a loan transaction, then only the funds against which no shares have been allotted be treated as a loan transaction and interest thereon be considered based on LIBOR plus 150 points as determined by the Ld. CIT(A). 30. The Ld. D.R on the other hand had strongly relied on the order of the Ld. CIT(A) and had averred that the color and character of the remittances made by the assessee company to its WOS/AE was not to be gathered merely as per its hollow claim, but rather the same was to be arrived at on the basis of conjoint perusal of the facts involved right from the remittance of the amoun....
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....nce of the WOS/AE, in the garb of remittance towards share application money. The Ld. D.R in order to buttress his contention that the TPO had rightly concluded that the remittance made by the assessee company to its WOS/AE was clearly in the sum and substance as that of an interest free loan transaction, and no infirmity as regards such observation of the TPO did surface, therein submitted that in light of the settled position of law that re- characterization of a transaction is permissible on the part of the Revenue, where either the economic substance of a transaction differs from its form, or where the form and substance of the transaction though are the same, but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner, thus submitted that in the case of the assessee company not only the economic substance of the transaction pertaining to remittance of funds, which as claimed by the assessee company was towards share application money, clearly differed from its form, but rather even otherwise, the peculiar arrangement and the circumstances at....
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.... not permissible on the part of the Revenue/Department to carry out re- characterization of a share application money as a loan due to delay in allotment of shares, however in light of the facts involved in the case of the present assessee company, though we find ourselves to be in agreement with the contention of the Ld. A.R that to the extent 31,120 shares worth US $ 6,60,000 had been allotted to the assessee company, the re-characterization by the AO/TPO of the remittance made by the assessee company by way of share application money to its `WOS' to the said extent, as a loan due to delay in allotment of shares is not permissible in the eyes of law, but are unable to persuade ourselves to accept the contention of the Ld. A.R that a similar treatment is also to be accorded to the balance amount of US $ 2,00,000 (supra) which had been refunded by the WOS to the assessee company. In other words, to be brief and explicit, to the extent the remittance of US $ 6,60,000 made by the assessee company to its `WOS' by way of share application money is concerned, against which 31,120 shares had been allotted to the assessee company, though involving some delay, to the said extent th....
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....a remittance towards share application money, pursuant whereto the issue of any re-characterization would never arise. In this regard it would further be relevant and pertinent to point out that now when the economic substance of the remittance of US $ 2,00,000 (supra) by the assessee company to its 'WOS' towards share application money, can safely and inescapably be held to be in the nature of a transaction different from its form, and rather as a matter of fact the arrangements made in relation to the aforesaid transaction, viewed in their totality, differ from those which would have been adopted by the assessee company behaving in a commercially rational manner, no embargo under such factual circumstances can be placed as regards re-characterization of such remittance towards share application money as a loan transaction. 32. That still further we are not impressed by the contention of the Ld. A.R of the assessee company that as the business of a `WOS' is to be treated as the business of the 'Holding company', therefore going by the said position of law, as the fruits of the investment by the assessee company in its `WOS' were solely to belong to the a....
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....e transaction' executed by the assessee company was a Finance lease' and not an 'Operating lease'. 35. The facts pertaining to the issue under consideration are that the assessee company which is engaged in the business of mining and wind power had in the period relevant to A.Y. 2006-07 and 2007-08 taken railway wagons (2 rakes) on lease, and treating the said lease transaction as an 'Operating lease', had thus claimed the lease rental charges as an expenses as per the provisions of the 'Act', while filing its 'Return of income' for both of the aforesaid assessment years. However, the assessee company following the 'Accounting Standard 19' (AS 19) on lease (both for 'Operating lease' and 'finance lease') as issued by the ICAI, had therein in its 'Books of accounts' treated the same as a 'Finance lease' and accordingly the value of assets taken on lease were capitalized as 'Fixed assets' and 'Interest' and 'depreciation' on the said assets., i.e wagons were debited in the 'P &. loss a/c' as an expense. The assessee company while filing its 'Return of income' for....
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....find favour with the claim of the assessee company as regards the 'lease rentals', and thus disallowed the same by holding that the lease transaction was a 'Finance lease' transaction, aggrieved with which an appeal was filed with the Ld. CIT(A), who though vide his order dated. 08/12/2009 upheld the order of the A.0 and concluded that the lease transaction was a 'Finance lease', but directed the A.0 to allow the claim of the assessee company towards 'depreciation' and 'Interest'. 36. That the A.O while framing the assessment in the hands of the assessee company for the year under consideration, not finding favour with the contentions of the assessee company that the 'lease transaction' was in sum and substance an 'Operating lease' and not a 'Finance lease', therein referring to various articles of the 'Lease agreement', Schedules to the 'Balance sheet' of the assessee company [Schedule 3, Schedule 19 - Note 5 & Note 1(h), Schedule II of the 'Balance sheet', i.e Note to the annexures of 'Fixed assets'], which did go to prove beyond any scope of doubt that the assessee company was the ....
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.....0 as regards the issue under consideration, coupled with the fact that the assessee company though had raised a specific 'Ground of appeal No. 8' as regards the disallowance of the 'Lease rentals' of Rs. 9,70,34,749/-, alongwith an alternative plea that in case the addition was to be upheld, then the assessee company be allowed the 'finance charges' and 'depreciation', as per the provisions of the 'Act', however during the course of proceedings before him, no submission in support of the aforesaid contentions was raised by the Ld. A.R of the assessee company, except for stating that the issue was covered against it as per the order of the Ld. CIT(A) in A.Y. 2007-08, therefore relying on the order of his predecessor for A.Y. 2007-08, proceeded with and dismissed the ground of appeal pertaining to the issue under consideration. 38. That before us the Ld. AR had submitted that the lease transaction was in the nature as that of a 'Operating lease' and the authorities below erred in taking the same as a 'Finance lease' and had wrongly disallowed the Rs. 9,70,34,749/- so claimed by the assessee company as a revenue expenditure. ....
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....49/- by the A.0 had been sustained by the Ld.CIT(A), we uphold the order of the Ld. CIT(A) to the said extent. However, we are not persuaded to accept the finding of the authorities below that despite the fact that the assessee company following the 'Accounting Standard 19' (AS 19) on lease as issued by the ICAI, in its 'Books of accounts' had reflected the value of wagons as 'Fixed assets' in its 'Balance sheet' and categorically raised its claim towards 'Interest' and 'depreciation' on the said assets., and debited the same in its `13 & loss a/c' as an expense, but being of the view that the lease transaction was a 'Operating lease', had thus while filing the 'Return of income' for the year under consideration, disallowed the 'depreciation' and the 'Interest' in the 'Computation of income' and claimed the 'lease rental' of Rs. 9,70,34,749/- as an expenses by treating the lease as on 'Operating lease', however now when the said claim of the assessee company had not found favour with the lower authorities who therein held that the lease transaction was in the nature as that o....
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....arted approach to the issue under consideration by the Ld. CIT(A) is deprecated and we are constrained to hold that the Revenue authorities while following and adopting the orders of their predecessors should be careful and in case if such findings are to be adopted, then those have to be adopted in sum and substance, and not on the basis of a self suiting whimsical piece meal manner. That as regards the reliance placed by the A.0 on the judgment of the Hon'ble Supreme Court in the case of : Goetz India Ltd. Vs. CIT (2006) 157 Taxmann 1 (SC), which debars the A.0 to allow a new claim of an assessee, which the latter had not raised in its 'Return of income', except by way of filing a revised 'Return of income', without going into the issue as to whether the claim raised by the assessee company in the present case towards 'depreciation' and 'Interest', and duly reflected by the latter in the `13 & Loss a/c', but had been added back by the assessee company in its 'Computation of Income', being of the view that the lease transaction was in the nature as that of an 'Operating lease' and not a 'Finance lease', could in the b....
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....ts as on the date on which contract was entered into and the rate prevailing as at the end of the financial year, on the ground that the same represents notional loss. The assessee company had further alternatively submitted that if the order of the lower authorities is upheld, then in that case the appellant be allowed the loss in the year in which the contract is settled. 43. The facts relating to the issue under consideration are that the assessee company which is engaged in the business of processing and trading of iron ore, carrying out mining activity of extracting iron ore on contract basis, generation of wind power and trading in iron ore in domestic as well as international market, was recognized as a Star export house during the year under consideration. The assessee company in order to safeguard against the loss on account of foreign exchange fluctuation with respect to export receivables, had therein entered into hedging contracts. The said contract was settled in the immediately succeeding year, i.e period relevant to AN 2009-10. However, the assessee company on the basis of the guidelines issued by the ICAT, claimed the same as an allowable deduction in the 'Re....
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.... deduction should be allowed, although the liability may have to be quantified and discharged at a future date. Thus it was submitted by the Ld. A.R that in background of the facts involved in the present case r.w the aforesaid settled position of law, now when the business liability of the assessee company w.r.t leave encashment had definitely arisen during the year under consideration, therein the said provision for leave encashment, irrespective of the fact that the said liability is to be quantified and discharged at a future date, as claimed by the assessee company, may therein be allowed. The Ld. D.R on the other hand relied on the order of the CIT(A) and submitted that as the matter was pending adjudication before the Hon'ble Supreme Court and the operation of the judgment of the Hon'ble Calcutta High Court in the case of : Exide Industries Ltd. (supra) had been stayed by the Hon'ble Supreme Court, therefore the appeal of the assessee company on the said issue was liable to be dismissed. 47. We have considered the rival submissions of either side and perused the relevant materials on record, including the orders of the authorities below and are of the consider....