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2020 (2) TMI 1452 - AAR - Income TaxAdvance ruling - Nature of receipt - claim for liquidated damages (LD) for termination of association agreement for mine development and operations (Association Agreement) - revenue or capital receipt - HELD THAT:- After the arbitration award of ICC London the claim of the applicant of USD 17 mn. towards liquidated damages have been dismissed and the applicant is not entitled to receive any liquidated damages. It was also confirmed in the hearing before AAR on January 22, 2020 that there is no appeal against the award and that it has become final. Thus, question No. 1 as to the character of the liquidated damage qua revenue or capital is inconsequential. Amount of liquidated damages in dispute shall accrue to the applicant during the year ended March 31, 2015 when such claim has been raised or in the year in which the final order/decree is passed by the court directing the payment of liquidated damages creating a right of the applicant - In regard to question No. 2, it is held that in view of the arbitration award nothing accrues to the applicant. MAT Computation u/s 115JB - Applicability of the provisions of sections 115JB and 43B of the Income-tax Act have also become inconsequential as there is no question of crediting any amount to the profit and loss account when there is no receipt of liquidated damages. Trade receivables written off in the accounts of the applicant for the year ended March 31, 2015 - whether allowable as deduction under section 36(1)(vii) read with section 36(2) of the Act ? - HELD THAT:- AR has elaborated the reason for the difference in figure. The former figure is the amount invoiced to SPL along with service tax and forex fluctuation difference whereas the latter figure is exclusive of foreign rate fluctuation difference amount. As explained from the financial statement that the invoiced amount and the foreign rate fluctuation difference was declared as income in the financial year 2014-15 and the service tax though not recovered from SPL was paid to the credit of Government to avoid demand and penalty and is therefore claimed as business expenditure under section 37. It is also alternately urged that the same is also allowable as trading loss or bad debt. The authorities cited in this regard have been perused by us and we are in agreement with the contention of the learned authorised representative on this issue. The Revenue may, however, verify these figures from the financial statements and the return of income filed by the applicant. The amount comprising of invoice amount and foreign rate fluctuation difference is allowable as bad debt under section 36(1)(vii) and the service tax paid but not realised is allowable as business expenditure under section 37.
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