2003 (1) TMI 269 - AT - Income Tax

Summary

Issues Involved:
1. Double taxation of Rs. 1,15,27,120.
2. Disallowance of the claim of loss of profit of Rs. 3,11,18,213.

Issue-wise Detailed Analysis:

1. Double Taxation of Rs. 1,15,27,120:
The assessee argued that Rs. 1,15,27,120, part of the Rs. 4 crores awarded by the Supreme Court, was already taxed in the assessment year 1996-97. The Departmental Representative admitted this fact, and it was conceded that the amount should not be taxed again in the assessment year 1998-99. The CIT(A) did not address this issue, but the Tribunal allowed the assessee's ground, deleting the said amount to prevent double taxation.

2. Disallowance of the Claim of Loss of Profit of Rs. 3,11,18,213:
The assessee claimed a deduction for Rs. 3,11,18,213 as liability for damages towards stockists due to breach of supply contract by M/s. Mysore Lamp Works. The Assessing Officer and CIT(A) disallowed this claim, considering it a contingent liability and not a crystallized one. The agreements with stockists were deemed unilateral and lacked formal contractual obligations or arbitration clauses.

The Tribunal examined letters from stockists indicating dissatisfaction and claimed losses due to short supply. However, these letters did not quantify losses or hold the assessee liable. The Tribunal noted the significant time gap between the stockists' claims and the issuance of credit notes, which were not substantiated with postal acknowledgements.

The Tribunal concluded that the liability towards stockists was not definite in the accounting year 1998-99, and only actual payments made in that year could be considered. Hence, it allowed a deduction of Rs. 31,48,048, the amount paid in the relevant year, and suggested that other payments be considered in subsequent years.

Conclusion:
The Tribunal partly allowed the assessee's appeal, preventing double taxation of Rs. 1,15,27,120 and permitting a deduction of Rs. 31,48,048 for payments made towards stockists' claims. The remaining claims were to be addressed in the respective years of payment.