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2019 (5) TMI 541 - AT - Income TaxDisallowance of provision for retirement benefits - such provision is not permissible for not complying with Section 43B - although the provision made on scientific basis but it could be allowed in view of Section 43B - HELD THAT:- Only the provision for employee’s benefits being in the nature of gratuity, superannuation, provident fund& leave encashment are subject to Section 43B(b) & (f) and therefore allowable only on actual payment basis. Unable to agree with the contention of the DR that all the provisions for employee’s post retirement benefits payable to employees are subject to application of Section 43B - since the employee’s benefits in form of medical reimbursements, foreign pension and staff pension do not find mention in any of the specific clauses of Section 43B, the same is held to be allowable u/s 37 on mercantile basis. We find merit in the Ld. AR’s submissions that when the provision for leave encashment had been separately added back u/s 43B(f) while assessing the taxable income, the AO could not have again disallowed the said provision in light of AS-15 (Revised) and that the impugned addition amounted to double disallowance. For the reasons set out in the foregoing therefore we find no infirmity in the order of the Ld. CIT(A) deleting the disallowance of provision for leave encashment made by the AO in light of AS-15 since it had already been added back separately u/s 43B(f). No infirmity in the reasoning and conclusions of the CIT(A) deleting the disallowance of provision for employees’ retirement benefits. This ground of the Revenue is therefore dismissed. Allowability of marked-to-market loss arisen on realignment of open foreign exchange derivative contracts as on the year-end - notional and contingent - HELD THAT:- Loss debited in the P & L account by an assessee on account of restatement of foreign currency denominated trade payables or receivables pursuant to exchange rate variation at the yearend is defined or ascertained loss and not contingent loss and hence allowable as deduction from the business profits. Applying the ratio laid down in OIL & NATURAL GAS CORPORATION LTD. [2010 (3) TMI 81 - SUPREME COURT] and M/S WOODWARD GOVERNOR INDIA P. LTD. & M/S HONDA SIEL POWER PRODUCTS LTD. [2009 (4) TMI 4 - SUPREME COURT] to the facts of the present case, in our considered view since the underlyings of the derivative contracts entered into by the assessee were export bills& loan commitments, the gain/loss arising its restatement as on 31st March was real in nature and in the revenue field. In respect of the interest rate derivative, we additionally note that when such contract was finally settled in AY 2010-11 the assessee had accounted for a profit of ₹ 97.39 lacs after taking into re-aligned position of the derivative contract i.e. after accounting for the MTM losses of earlier years. In the income tax assessment order passed u/s 143(3) for AY 2010-11 which was much later than passing of the impugned order for AY 2008-09, the AO assessed such profit of ₹ 97.39 lacs without allowing the deduction for the MTM losses disallowed in the earlier AYs 2008-09 & 2009-10. We therefore note that the Revenue authorities did not faithfully follow the proposition incorporated in the CBDT Instruction of 2010 in the subsequent year but adopted a selective criteria by assessing the profit arising in AY 2010-11 (computed based on the re-aligned position) without allowing for the deduction of MTM losses which was disallowed in the prior years. - Decided against revenue. Interest income under the head ‘Business’ - whether interest income earned by the assessee from FDs and financial institutions had no nexus with the assessee’s business of growing & manufacturing tea? - HELD THAT:- As relying on assessee's own case [2019 (2) TMI 1617 - ITAT KOLKATA] interest from FDs and financial institutions was assessable under the head ‘Business’ and the benefit of Rule 8 was granted to the assessee. - Decided against revenue
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