TMI Blog1990 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... was right in holding that the liability in respect of adventitious gain of Rs. 24,28,172 under the COPE scheme was not an ascertained liability but only a contingent liability ? " Shortly stated, the facts are that the assessee, which is a non-resident company, derived income from the business of distribution and marketing of petroleum products in India. As per the Burmah-Shell (Acquisition of Undertaking in India) Act, 1976, the undertaking of Burmah-Shell in India vested in the fully owned Government company, Burmah-Shell Refineries Ltd. with effect from January 24, 1976. The name of the Government company was subsequently changed to Bharat Petroleum Corporation Ltd. On August 1, 1977, with effect from October 16, 1973, the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed at a lower price prior to October 16, 1773, in stock as on November 2, 1973, should also be taken into account. The closing stock on November 2, 1973, included 51,825 m.t. of crude oil purchased before October 16, 1973. The adventitious gain on this stock which was required to be surrendered was Rs. 24,28,172. In the assessment, the assessee claimed that the adventitious gain of Rs. 24,28,172 which was to be surrendered was an ascertained liability and, therefore, allowable. The Inspecting Assistant Commissioner of Income-tax ( IAC of 1. T. ) did not accept the argument of the assessee and he disallowed the liability of the aforesaid amount which was claimed. This was confirmed by the Commissioner of Income-tax (Appeals). The assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included. There was also no provision for surrender of the adventitious gain on stock held. The assessee raised a dispute about this sum and the said dispute was not finalised in this accounting year. So the sum of Rs. 24,28,172 was only a disputed and contingent liability during this year and cannot be allowed as a deduction for the year 1975-76. As the Tribunal rightly held, this sum is only contingent liability and cannot be allowed as a deduction in this year. In 1974, this sum was kept in suspense account. In the assessment year 1978-79, this amount was credited back to the profit and loss account as Government did not raise any demand for it. In this case, the assessee is trying to take inconsistent stands and in fact is following a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated as follows: Crude oil in stock on November 3, 1973, out of purchases prior to October 16, 1973 : X 51,825 M.T. Crude cost taken for determining the selling price by the Government from November 3, 1973 : $ 3.58 per barrel. Approved FOB purchase price of crude oil on October 15, 1973 : $ 2.74 per barrel. Difference : $ 0.84 per barrel. = Rs. 46.8533 per M.T. = Rs. 24,28,172. This stand taken by the company was clearly contrary to and in violation of the directives issued by the Ministry of Petroleum by its letter dated June 24, 1974. In the said letter, it was specifically directed that, in calculating the adventitious gain, the following items shall be taken into account : Crude oil (purchased at a lower pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts and circumstances of the case, we are of the view that there was a liability in respect of adventitious gain under the COPE Scheme. This is an allowable deduction for the assessment year 1975-76. Our attention has been drawn to the order of assessment included in the paper book filed before the Tribunal. In the assessment order reference has been made to the following letter of January 30, 1981, of the assessee: " Further to our letter of even reference dated January 29, 1981, we enclose a copy of the orders passed by the Commissioner of Income-tax ( Appeals ) in respect of our appeal against assessment order passed by the Inspecting Assistant Commissioner of Income-tax, Calcutta, for the assessment year 1975-76, in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In computing the total income, he has excluded the sum of Rs. 24,28,172 as follows: Rs. Total income 22,82,67,774 Less : (vii) Provision written back from COPE Pool Account 24,28,172 In our view, although the amount was a liability for the assessment year 1975-76, in view of the fact that the assessee offered the entire amount of Rs. 68,75,654 for taxation in the assessment year 1978-79, the Incometax Officer was not justified in excluding the said amount from the assessment. The assessee has given an undertaking through Dr. Pal, learned counsel, that they will not object to the inclusion of the said amount of Rs. 24,28,172 in the assessment for the assessment year 1978-79, and the Income-tax Officer may take appropriate steps in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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