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TMI Blog2010 (7) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... ak up is stated below: Assessment Year Appeal No. Amount (Rs.) 2001-02 ITA No.135/V/05 34,74,038/- 2002-03 ITA No.182/v/07 51,09,876/- 2003-04 ITA No. 503/V/06 55,257/- 2004-05 ITA No. 340/V/08 11,67,172/- 2005-06 ITA No. 572/V/08 23,12,653/- 2006-07 ITA No. 638/v/08 31,85,561/- It was brought to our notice by the learned Authorised Representative that an identical issue was adjudicated in the hands of the assessee by this Bench for the assessment year 2000-01 in ITA No.763/v/2004. Learned Authorised Representative also placed a copy of the order dated 19.03.2010 in which this above said issue was adjudicated. We have gone through the order and for the sake of convenience, we extract below the relevant paragraphs: "7. The next issue in the appeal relating to the assessment year 2000-01 relates to the disallowance of liquidated damages. The assessee made a provision of ₹ 2,96,006/- towards liquidated damages. The Assessing Officer was of the view that the liability to pay liquidity damages would arise only on completion of the contract. Accordingly, the Assessing Officer verified the details of contract and identified that the liability towards the liquidit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer for the reason that the assessee could not produced any evidence in support of its claim that the above said debts have become irrecoverable. However, there is no dispute with regard to the fact that the assessee has written off these debts as bad in its books of account. This issue has been settled at rest by Hon'ble Supreme Court in the case of TRF Ltd Vs. CIT (2010) 323 ITR 397 (Supreme Court), wherein the Hon'ble Supreme Court has held as under: "After the amendment of section36(1)(vii) of the Income Tax Act, 1961, with effect from April 1, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable : it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee." Since the decision of the learned CIT(A) is in accordance with the decision rendered by Hon'ble Supreme Court, we find no reason to interfere with the same. 4. The next issue in the appeals of the revenue, which is common in assessment year 2001-02 & 2002-03, relates to disallowance of legal expenses. The Assessing Officer disallowed the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appeal of the assessee as well as that of revenue relates to disallowance of claim under the head 'foreign exchange fluctuations'. The assessee has claimed the loss under the head 'Foreign Exchange Fluctuation' in the following years : Assessment Year Appeal No. Amount (Rs.) 2001-02 ITA No.135/V/05 18,88,199/- 2004-05 ITA No. 340/V/08 2,05,41,616/- 2005-06 ITA No. 506/V/08 21,22,296/- 2006-07 ITA No. 636/V/08 12,72,416/- The claim of the assessee for the assessment years 2001-02 & 2004-05 was allowed by the learned CIT(A) and hence the revenue is in appeal before us. However, the learned CIT(A) confirmed the additions of similar claims in assessment years 2005-06 & 2006-07 and hence the assessee is in appeal before us. 5.1 The facts relating to this issue are that the assessee company has given loan in foreign currency to its sister concern M/s KCP Vietnam Industries Ltd. As at the end of every year, the assessee company ascertains the rupee equivalent value of the outstanding foreign currency loan amount and provides for loss, if any, arising on account of foreign exchange fluctuations. Similarly, if there is depreciation in the value of foreign currency, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee has accounted for foreign exchange gain as well as foreign exchange loss in assessment years 2004-05, 2005-06 and 2006-07. If the loss/gain relating to foreign exchange fluctuations pertains to one single item of advance, there can either be foreign exchange loss or foreign exchange gain. Thus there cannot be both foreign exchange loss and gain in respect of one single item of advance. When questioned about this contradiction, the learned Authorised Representative could not furnish a reply, as he was not having the required material in this regard. Hence, we feel that the nature of foreign exchange loss/gain in all the years requires examination with reference to the assets on which the said loss/ gain was accounted for. Accordingly, we set aside this issue relating to the assessment years 2001-02, 2004-05, 2005-06 and 2006-07 to the file of the Assessing Officer with a direction to correlate the foreign exchange loss/gain to the specific assets and decide the issue afresh in accordance with the principle stated above and also in accordance with the law. Accordingly, the orders of the learned CIT(A) in all the four years on this issue stand set aside. 6. The on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the head office are also to be allocated to the respective industrial undertakings for the purpose of computing eligible profits u/s 80HH and 80I. While observing so, the ITAT has placed reliance on the decision of the Hon'ble Supreme Court reported in 155 ITR 120. The Hon'ble Allahabad High Court in case of Mentha and Allied Products Pvt Ltd. Vs CIT (302 ITR 144) was held that the relief u/s 80HHA is to be computed after adjusting the loss of the head office against the profit of the branches. In view of the discussion, the Assessing Officer has correctly determined and allowed the deduction u/s 80IA at ₹ 3,27,03,530/-. Thus, this ground stands dismissed. We are unable to agree with the contention of Learned Authorised Representative that the Commission paid to the directors is an appropriation of profit. The said claim, in our opinion, is against the accounting principles. We have gone through the decision of Learned CIT(A) and we are convinced with the reasoning given by Learned CIT(A). Accordingly we uphold the order of Learned CIT(A) on this issue. 8. The next issue in the appeal of the assessee for the assessment year 2006- 07 relates to the disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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