TaxTMI 
TaxTMI 
2022 (3) TMI 1014
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....ment year 2012-13 and Rs. 1,84,89,537/- in assessment year 2014-15. For this, assessee has raised various grounds in both the appeals but for the sake of brevity the same are not reproduced. 3. The facts and circumstances are identical in both the assessment years 2012-13 & 2014-15, hence we will take the facts for assessment year 2012-13 in ITA No.2945/Chny/2018 and will decide the issue which will apply mutatis mutandis to the other appeal for A.Y. 2014-15 also. 4. Brief facts are that the assessee is engaged in the business of manufacturing and sale of Metal Halide Lamps and exporting the same. The AO during the course of scrutiny assessment proceedings noticed that the assessee has claimed deduction / loss on account of difference between actual exchange amount and exchange amount accounted for in the financial year relevant to assessment year 2012-13 amounting to Rs. 3,15,16,252/-. The AO required the assessee to furnish the details of exchange gain as well as exchange loss. In response to the same, assessee filed a letter dated 18.02.2016 and contended that as and when exports are made, invoices are made and issued in foreign currency and accounted in Indian rupees by conve....
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.... This amounts to claiming expenditure or showing income of the future year. This practice is incorrect and cannot be seconded. CBDT Instruction No.03/2010 dated 23.03.2010 is also indicative in this regard. Considering the same, the disallowance of forex loss claimed of Rs. 3,15,16,252/-, being reversal of forex gain admitted in the books of accounts, is sustained. The grounds of appeal are rejected." Aggrieved, assessee is in appeal before the Tribunal. 6. At the outset, the ld. Counsel for the assessee filed a chart of foreign exchange / loss incurred on year-on-year basis and claimed that the assessee is following this method of accounting consistently. The relevant chart submitted before us reads as under:- Particulars AY 2010-11 Actual Exchange Loss/Gain Addition made to Business Income in Computation Memo-Exchange Loss/Gain Rs. 14,42,00,371/- (Loss) Exchange Loss/Gain accounted: Deduction claimed in Business Income in Computation Memo-Exchange Loss/Gain Rs. 7,33,03,205/- (Loss) Particulars AY 2011-12 Actual Exchange Loss/Gain Addition made to Business Income in Computation Memo-Exchange Loss/Gain Rs. 1,79,96,287/- (Gain) Exchange Loss/Gain account....
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.... us. On query from the Bench in respect of treatment of gains in certain years by the Revenue, he could not contradict that it was accepted by the Revenue as part of total income of the assessee. Thus, this factual matrix remained uncontroverted and unchallenged. In the course of hearing, a query was also raised before ld. Counsel of the assessee to demonstrate the accounting procedure adopted for the reversal of reinstatement of assets and liabilities as on 31st March of every year on account of exchange fluctuations, for which the ld. Counsel referred to the paper-book compilation submitted before us and demonstrated the accounting methodology adopted by the assessee for the same. We have also gone through the judgment of Hon'ble Supreme Court in the case of Woodward Governor India P. Ltd., supra, wherein it was held that the loss suffered by assessee on account of foreign exchange difference as on the date of balance sheet is an item of expenditure allowable u/s.37(1) of the Act. Further, it was held that the accounting method followed by an assessee continuously for a given period of time needs to be presumed to be correct till AO comes to conclusion for reasons to be given tha....
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...., one has to take into account stock-in-trade for determination of profits. The 1961 Act makes no provision with regard to valuation of stock. But the ordinary principle of commercial accounting requires that in the P&L account the value of the stock-in-trade at the beginning and at the end of the year should be entered at cost or market price, whichever is the lower. This is how business profits arising during the year needs to be computed. This is one more reason for reading Section 37(1) with Section 145. For valuing the closing stock at the end of a particular year, the value prevailing on the last date is relevant. This is because profits/loss is embedded in the closing stock. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into account, as no prudent trader would care to show increase profits before actual realization. This is the theory underlying the Rule that closing stock is to be valued at cost or market price, whichever is the lower. As profits for income-tax purposes are to be computed in accordance with ordinary principles of commercial accounting, unless, such principles stand supe....
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....s arising out of order of learned Commissioner of Income Tax (Appeals)-7 in ITA No.94(T)/CIT(A)- 7/2015-16, order dated 13.03.2019. The assessment was framed by DCIT, Corporate Circle 3(2), Chennai for the assessment year 2010-11 u/s.143(3) r.w.s. 147 of the Act vide order dated 20.03.2015. 10. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of provision made towards stock amounting to Rs. 25,00,000/-. For this assessee has raised various grounds, which we need not to reproduce for the sake of brevity. 11. Brief facts are that the AO during the course of assessment proceedings noticed that the assessee has made provision towards stock for an amount of Rs. 75,00,000/- out of which provision made for the impugned year was for Rs. 25,00,000/-. The AO required the assessee to explain as to why the claim of provision for stock should not be disallowed. The assessee explained that during the year under consideration, the provision for stock was made for a sum of Rs. 25,00,000/- in view of the fact that the assessee is situated in the Madras Export Processing Zone and for removal of some materials which has only negligible value from ....
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.... that the Hon'ble Supreme Court in the case of Rotork Controls India P. Ltd., vs. CIT, reported in [2009] 314 ITR 62 (SC) has noted the issue regarding contingent liability like warranty provision and held that the value of contingent liability, like the warranty expenses, if properly ascertained and discounted on accrual basis can be claimed as item of deduction u/s.37(1) of the Act. But, Hon'ble Supreme Court stated that the principle of estimation of contingent liability is not the normal rule. It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. All the parameters indicated by the Hon'ble Supreme Court while dealing with accounting for similar aspects like warranty provisions are not at all satisfied in the present case. 14. Further, the Hon'ble Supreme Court explained that a provision is a liability which can be measured only by using a substantial degree of estimation. But a provision is recognized when - a) an enterprise has a present obligation as a result o....