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2013 (10) TMI 978 - AT - Income TaxAccrual of income - Whether enhancement of its income by Rs.4,90,512/- by making an addition in respect of mark to market profit of Rs.7,92,365/- in respect of derivative transactions outstanding as at the year-end, is correct – Held that:- Without doubt, the loss of Rs.3.02 lacs on the unsettled derivative contracts has not crystallized - Prudence is a fundamental accounting assumption, duly recognized by law per Accounting Standard (AS I) issued by the CBDT u/s.145(2) of the Act. The same prescribes booking of all known liabilities and losses, while at the same time not booking, similarly, unrealized profits or income - The closing rate in respect of the security transactions for which loss has been booked/accounted for is substituted for the cost price, so that it is only the price, plus or minus, with reference to the said rate, that would be/is considered while booking the profit and loss on the settlement of the transaction. As such, the matter has to be regarded not with reference to inconsistency, but with regard to the prudence, which, as aforesaid, is a fundamental accounting assumption/principle and, therefore, is to inform all accounting statements. Directed the deletion of the addition of Rs.7.92 lacs made by the ld. CIT(A). Needless to add, the said income would stand to be deleted, and the loss of Rs.3.02 lacs claimed and allowed to the assessee, adjusted against the income, speculative or non-speculative, as the case may be, under which the income from derivatives stands classified for the year of settlement – Decided in favor of Assessee. Rebate u/s 88E to be adjusted in computation of MAT profit u/s 115JB of the Income Tax Act – Held that:- Reliance has been placed on the decision in the case of CIT vs. Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT] - Rebate u/s.88E could not be confined to the tax under regular provisions of the Act, and would, therefore, extend also to that payable on the book profit u/s.115JB. Accordingly, once a comparison between the higher of the two tax payables, i.e., on the income assessed on the regular provisions as well as on the basis of the book-profit, is made to determine the tax exigible, the rebate as exigible under law u/s.88E would have to be allowed irrespective of whether the tax is payable under the regular provisions of the Act or under the book profit – Decided in favor of Assessee.
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