TMI Blog1996 (11) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Tribunal in the present appeal when on 25-6-1996 the learned Departmental Representative appearing on behalf of the Department was directed to give the particulars of the appeals (if any) filed by the Revenue for the assessment years 1990-91 and 1991-92 as it would be proper on the part of the Tribunal to consolidate all the three appeals and hear them together. We note with regret that even on the subsequent date of hearing i.e.,9-9-1996the said information was not forth-coming although the Tribunal had specifically recorded an order on3-9-1996directing the Departmental Representative to positively comply with the earlier directions of25-6-1996. During the course of the hearing of the appeal, the learned Departmental Representative was again asked by the Bench to intimate the particulars of the appeals filed by the Revenue even after the hearing in the present appeal had concluded, but within a reasonable time, but it is once again recorded that no information has come forth even at the time of dictating the order later. The learned counsel for the assessee has not given the particulars of any appeals filed by the Revenue as according to him, his client is not in receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was made. A reference was also made to the relevant accounting standard framed by the Institute of Chartered Accountants of India for the proposition that the loss was allowable on Revenue account and, therefore a valid charge against the profits of the company. 5. The case of the Revenue, on the other hand, before the Commissioner of Income-tax (Appeals) was that the liability was a contingent one and continued to be so till the amount had been actually paid. 6. We may mention at this stage that the learned counsel for the assessee appearing before the Commissioner of Income-tax (Appeals) also placed reliance on a number of other reported decisions and these find a place at page 5 of the appellate order. Reliance was also placed on the orders passed by the CIT (Appeals) for the two immediately preceding assessment years whereby a similar claim had been allowed on Revenue account. 7. The aforesaid submissions advanced on behalf of the assessee did not find favour with the CIT (Appeals), who at the outset, observed that it was not in dispute that the amount was allowable, but the question was when and at what point of time was it to be allowed. The CIT (Appeals) summar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 460/23 Taxman 508 (Cal.) ; (iii) Calcutta Co. Ltd v. CIT [1959] 37 ITR 1 (SC) ; (iv) CIT v. Bank ofIndia[1996] 218 ITR 371/187 Taxman 190 (Bom.) ; and (v) CIT v. Ahmedabad New Cotton Mills Co. Ltd 4 ITC 245 (Privy Council). 9. The learned Departmental Representative, on the other hand, strongly supported the orders passed by the tax authorities and the subsequent arguments advanced by her were a reiteration of the reasons recorded by the said authorities in rejecting the assessee's claim. According to her, the claim was allowable in the year in which the amount was actually remitted and the further submission was to the effect that it was a contingent liability and not an ascertained one, on the last day of the previous year under consideration. In support of the aforesaid arguments and in support of the orders passed by the tax authorities, reliance was placed on the following decisions : (i) CIT v. South India Viscose Ltd. [1979] 120 ITR 451 (Mad.) ; (ii) CIT v. Bharat General Textile Industries Ltd. [1986] 157 ITR 158 (Cal.) ; (iii) Rohit Pulp Paper Mills Ltd. v. CIT [1995] 215 ITR 919/79 Taxman 168 (Bom.) ; (iv) CIT v. Ashoka Mills Ltd. [1996] 218 ITR 526 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise purchases or sells goods for which payment is made in foreign currency. Explanation 9.1 deals with the conversion of current assets and current liabilities other than those related to the acquisition of fixed assets at the closing rate and in the process the net gain is to be ignored whereas net loss is charged to the profit and loss account. 14. We are not proposing to base our judgment solely on the aforesaid Accounting Standard of the Institute, but or a well-accepted proposition of law which envisages revenue claims to be considered on accrual basis or due basis where an assessee follows the "mercantile system" of accounting. In other words, the system of accounting followed by an assessee is a crucial factor for allowability of expenditure and losses as also for the taxation of receipts. In the present case there is no doubt that the assessee's burden has increased in respect of its liability to pay the cost of the goods which it has imported admittedly on revenue account. As it follows the mercantile system of accounting it is entitled to claim the consequential loss in the year in which the devaluation takes place. Both the parties have already agreed that similar clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim the benefit of that section during the assessment year 1973-74." 17. The aforesaid no doubt pertains to the provisions of section 53A, but applies with equal force to the claim made by the assessee under section 28. This judgment also answers the question posed by the Commissioner of Income-tax (Appeals) i.e., "when should the liability be allowed ?" Their Lordships applied the decision of the Hon'ble Supreme Court in the case of Arvind Mills Ltd. to come to the conclusion that they did. 18. Another decision requiring mention is that of the Hon'ble Calcutta High Court in the case of Martin Harris (P.) Ltd. The facts and decision are extracted from the head-notes at pages 460 and 461 of the report as under :-- "During the assessment year 1968-69, the British pound sterling was devalued vis-a-vis the Indian rupee. The assessee at that time had been manufacturing goods under licence from a foreign company inLondon, who were supplying to the assessee on credit major part of the materials needed for the manufacture. The price of such materials was, however, payable by the assessee, who was maintaining accounts on mercantile system, in pound sterling. The Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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