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The Bombay Dyeing & Mfg. Co. Ltd. and others Versus Jt. CIT (OSD) Range (2) (1) MUMBAI and others

Disallowance of provision made for a loss on account of a firm purchase contract - Held that:- Prudence only implies that even though the amount cannot be determined with certainty, and represents only a best estimate in light of the available information, the same must be provided for. It nowhere advocates or prescribes providing for loss/liability that has not arisen during the relevant year or, in any case, by the end of the relevant year. Events after the balance-sheet date can only be taken .....

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tle moment, even as clarified during hearing, in view of our specific finding of no loss having in fact arisen to the assessee during the year and, further, the principle of prudence as not being applicable to losses which arise or have their genesis in events subsequent to the end of the relevant year. Thus confirming the disallowance of the impugned loss. - Decided against assessee.

Disallowance of the provision for various expenses - non supported by any evidences - Held that:- Dur .....

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hich we find as wanting. The burden to prove its return, as well as claims preferred thereby, is only on the assessee, and which we find as not discharged to that extent. It may also be clarified here that the assessee had been extended sufficient opportunity to present its case. Needless to add, the assessee is a liberty to make a fresh claim for the subsequent year/s, even as it shall have to be shown by it that expenditure as claimed had arisen for those years, i.e., of payment, each year bei .....

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tter in our view stands squarely covered by the decision by the Apex Court in the case of CIT vs. Ajanta Pharma Ltd. [2010 (9)8 - SUPREME COURT]. We, accordingly, set-aside the matter back to the file of the AO for working the book profit u/s. 115JB in terms of the said decision. We decide accordingly.

Addition qua unutilized MODVAT credit - Held that:- no infirmity in his direction for including the unutilized MODVAT credit and, thus, apply the condition of section 145A on all factor .....

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f premium payable on premium notes (SPN) - Held that:- The matter was during hearing fairly conceded by the ld. DR to be covered against the Revenue by the order by the tribunal in the assessee’s own case for AY 1996-97 - Decided in favour of assessee. - I.T.A. No. 2250/Mum/2010,I.T.A. No. 3193/Mum/2010, - Dated:- 11-6-2015 - Shri Joginder Singh and Shri Sanjay Arora, JJ. For the Petitioner : Shri Madhur Agarwal. For the Respondent : Ms. Neema Singh Pandey. ORDER Per Sanjay Arora, A. M.: These a .....

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#8377; 1285.64 lacs) on account of a firm purchase contract. The assessee-company, in the business of manufacturer of chemicals, entered into an agreement on 19.03.2003 (which stood revised on 25.03.2003) with M/s. Kolmer Petrochemicals, A.G., Switzerland [Kolmer] for the purchase of 6,000 MT of raw material, Paraxylene, used in the manufacture of the finished product, DMT, at $ 882 (Rs. 44,267/08) per MT, i.e., at a cost of ₹ 27.82 cr. The goods were to arrive at Mumbai, the location of d .....

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approx.) at the time of the finalization of the accounts for the year, i.e., June 11, 2003. This led to a corresponding fall in the price of DMT, to ₹ 29,000/- PMT. The assessee, accordingly, provided for the loss inasmuch as the value of the raw-material, realizable on conversion into finished product, had fallen considerably, working out the same at ₹ 14.96 Cr. and, further, resulting likely loss at ₹ 12.86 cr. (Rs. 27.82 and ₹ 14.96) cr. 3. Discussion: The assessee s c .....

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ration Ltd. V JCIT (98 ITD 278)(ITAT Hyderabad) iv) Western Coalfields Ltd. V ACIT (27 DTR 226)(ITAT Nagpur) v) ITO v SBI DHFL Ltd. (35 taxmann.com 184)(ITAT Mumbai) vi) Securities Trading Corporation of India Ltd. V Addl. CIT (ITA No.449 - 973/M/2009)(ITAT Mumbai) The Revenue s case: The Revenue dismisses the assessee s claim as contingent. The goods are likely to arrive only in the next year, whereat only, the property in the goods shall pass to the assessee, for it to take cognizance of or re .....

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the parties, and perused the material on record. The assessee s claim is not maintainable, both in law and in accountancy. The contract is firm, but only subject to the conditions specified therein. If the goods are not delivered by April 30, 2003, the contract fails, i.e., is not binding, and there is no question of the assessee incurring any losses, i.e., the loss is contingent on the specific performance of the contract. The loss could not possibly arise on the arrival of goods beyond the cu .....

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in time. In the instant case almost the entire delivery time fail during the following year. There is thus, in our view, no basis in the present case for such certainty. Two, and equally importantly, no loss has in fact arisen during the relevant year. The loss under reference is only on account of fall in the market price of Parxylene and, resultantly, DMT, the finished product. Admittedly, the price of rawmaterial started falling only in May/June 2003, i.e., after the end of the relevant year .....

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ersible downward trend. Clearly, where likely to reverse itself, will not lead to a loss having in fact incurred and, consequently, a finding to that effect. This in fact appears to be the case inasmuch as the fall in the market price of raw-material led to a corresponding fall in the price of the finished product, i.e., as per the ruling international prices, and subsisted. Secondly, the loss/liabilities must have in fact arisen or accrued, and which is not so; the prices starting to fall only .....

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Paints India Ltd. [1991] 188 ITR 44 (SC) comes readily to mind. Per that decision, the apex court clarified the fundamental principles of jurisprudence on tax law, i.e., it is the correct income for each year that is to be brought to tax for that year and, two, each year is an independent and self-contained unit of assessment. Prudence only implies that even though the amount cannot be determined with certainty, and represents only a best estimate in light of the available information, the same .....

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e raw-material or the finished products had declined, much less to any substantial extent, up to 31.03.2003, the relevant year end. The assessee s claim, in view of foregoing, is without merit. The decisions relied upon would be of little moment, even as clarified during hearing, in view of our specific finding of no loss having in fact arisen to the assessee during the year and, further, the principle of prudence as not being applicable to losses which arise or have their genesis in events subs .....

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ld. AR during hearing, and is accordingly dismissed as not pressed. 6. Ground no.3 relates to a disallowance in the sum of ₹ 31,26,703/-, being the provision for various expenses, effected by the AO for the reason that they were not supported by any evidences. In appeal, the ld. CIT(A) called for a remand report from the AO in view of the additional evidences/materials sought to be relied upon by the assessee, granting deletion where found evidenced and/or supported. The balance disallowa .....

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e may, however, elaborate further. That an expenditure is allowable, where mercantile system of accounting, as in the present case, is adopted, even though no payment has been made, which is claimed to have been during the subsequent year, is undisputed and not in issue. Reference, therefore, to the decision by the apex court in CIT vs. U.P.State Industrial Development Corporation [1997] 225 ITR 703 (SC) would be of no moment. The question is of the basis on which it could be said or concluded t .....

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d arisen for those years, i.e., of payment, each year being independent. We may though clarify that we are not making any observation with regard to the deduction of the said expenditure for those years/s. We decide accordingly, dismissing the assessee s third ground. 8. Ground 4 concerns the computation of the deduction u/s. 80HHC, and which was, at the very outset, again, admitted by the ld. AR to be squarely covered against the assessee by the decision of the Apex Court in the case of Ipca La .....

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the Apex Court in the case of CIT vs. Ajanta Pharma Ltd. [2010] 327 ITR 305 (SC). We, accordingly, set-aside the matter back to the file of the AO for working the book profit u/s. 115JB in terms of the said decision. We decide accordingly. I.T.A. No. 3193/Mum/2010 (Revenue s Appeal) 10. The appeal raises two effective grounds, i.e., grounds 2 and 3, which we shall take up in seriatim; ground 1 being general in nature, warranting no adjudication. 11. Ground 2 of the Revenue s appeal is in respect .....

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