TMI Blog2014 (11) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... In the books of account of the assessee, necessary entries were made though loss was not claimed - The assessee banker approached the RBI for permission to make payment by way of foreign exchange which was refused by RBI - The assesee approached the Insurance company to settle the claim, to which they declined - The assessee was constrained to file the Civil Suit in Mangalore Court against the ship owners, charterers, Insurance company claiming the amount - the assessee did not make entry in the book of accounts for the year 1994-95 showing the loss - However, for the subsequent year, necessary entries were made showing loss and in the return filed and also claimed deduction - When it was not allowed in the subsequent year after writing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M V Hazar through the charterer viz., M/s Ummall Quwain (UAE) and booked the consignment. The teak logs were inspected by the representatives of assessee company at Tanga Port and a certificate was issued on behalf of the assessee on 28.06.1994 stating the quality, quantity and measurement of teak logs. The teak logs shipped on M V Hazar were insured by the assessee company with M/s National Insurance Company, Mysore for invoice value vide Marine policy dated 30.06.1994. The cargo was loaded on shipping vessel, which was to arrive at Mangalore port on or around 19.07.1994. A bill of lading dated 01.07.1994 was issued by the Charterer which was signed by the Master of vessel M/s M V Hazar. The freight has been prepaid at Dubai. As per bill o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit in the Court of Civil Judge, Mangalore, impleading the ship owners, Charterers, their agents and also the National Insurance Company seeking a decree in favour of assessee company against the defendants jointly and severally to make good the loss incurred by the assessee. 6. The assessee recognized the said transaction in the financial year relevant to the assessment year 1995-96 i.e., as on 31.03.1995, purchases were debited to the extent of invoice value, goods were taken into closing stock under the head 'goods in transit'. M/s Ply International was shown as a creditor for supply of goods. The same position continued in the books of accounts as on 31.06.1996 with notes to the effect that provision will be made in the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contingent liability is not allowable. It was observed that the foreign supplier M/s Ply International, USA is the proprietary concern owned by brother of one of the Directors of the assessing company. Therefore, it raises a doubt that this is not a normal business transaction. It also held that the seller has not made any serious claim towards payment of the purchase price and it has not taken any legal action for the recovery of dues. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax Appeals. 9. The Appellate Authority held the assessee and its sister concerns have been regularly doing business with M/s Ply International during subsequent years and therefore, it cannot be said that it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n computation of income for the assessment year 1995-96. Neither did he write off the loss in its books of account for the assessment year 1996-97, but it was claimed as an deduction in the assessment for the assessment year 1997-98, it was written off in the books of account. Therefore, the order passed by the assessing authority was set aside and set off claimed by the assessee was allowed. Aggrieved by the said order, the revenue preferred an appeal before the Tribunal. 11. The Tribunal upholding the findings of Appellate Authority held that the loss of goods in transit accrued in the commercial sense during the relevant assessment year 1996-97 and therefore, the assessee was eligible for deduction of loss of ₹ 1,43,51,506/-. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer was expected to take the insurance policy whereas the seller has to pay the freight charges. When the seller negotiated the document of title, the assessee received the same and acknowledged the liability. Admittedly, the ship which carried the logs did not enter the Indian water and the goods was not delivered because of the dispute between the owner of ship and the charterer. Once the title of goods has passed to the assessee and the goods was transported at his risk and when he accepted the document negotiated through the bank and acknowledged the liability and when the goods did not reach him, he did sustain loss of the value of goods which he has purchased. In the books of account of the assessee, necessary entries were made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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