2013 (2) TMI 178 - HC - Income Tax

Doctrine of Res judicata Legal & Professional charges Due to shifting of HO, supporting were not traceable Tribunal had taken note from the past years payment as well as subsequent years and allowed the claim Held that - There is no question of its being a res judicata so as to bind the A.O. appellate authority or the Tribunal in tax matters so as to decide the matter according to the past transaction only. What is important is that all facts and circumstances in which the fact of previous year payments has been considered and that can be said to be relevant, i.e., relevant and it cannot be said that the said consideration is absolutely impermissible. Merely mentioning that since such amount was paid by the assessee against the head of the legal and professional charges in other years, does not mean that this was treated to be res judicata, it was used for quantification in want of exact and accurate particulars of the legal and professional charges, therefore, for the purpose of determination and quantification only this amount of previous year has been taken into account by the Tribunal which cannot be said to be impermissible at all. In favour of assessee

Summary

Issues:
1. Disallowance of loss on foreign exchange difference
2. Entitlement for deduction in respect of legal and professional charges
3. Provision for bad and doubtful debt in book profit computation under section 115JA

Issue 1: Disallowance of loss on foreign exchange difference
The appeal raised concerns about the Income-tax Appellate Tribunal's decision to delete the disallowance of loss on foreign exchange difference. The Tribunal's ruling was based on the observation in the annual audited account. The Assessing Officer disallowed the loss due to lack of supporting documents, including vouchers, demanded but not supplied by the assessee. However, the Tribunal found that the loss was correctly accounted for in the profit and loss account, following the assessee's policy. The High Court agreed with the Tribunal's assessment, emphasizing that the audited accounts were reliable evidence, and the Tribunal's inference was based on material facts, not posing any legal question.

Issue 2: Entitlement for deduction in respect of legal and professional charges
The second issue pertained to the Tribunal's decision on the deduction claimed for legal and professional charges. The Revenue argued that the Tribunal wrongly considered past payments as res judicata, binding them to allow the deduction. The assessee failed to produce supporting documents for the charges, citing the relocation of headquarters as the reason. The Tribunal, however, allowed a partial deduction based on past and subsequent payments, considering the company's size. The High Court upheld the Tribunal's decision, stating that past payments can be a relevant factor in determining deductions, emphasizing that it was not treated as res judicata but used for quantification purposes in the absence of exact particulars.

Issue 3: Provision for bad and doubtful debt in book profit computation under section 115JA
The final issue revolved around the provision for bad and doubtful debt in the computation of book profit under section 115JA. The Assessing Officer and the Commissioner of Income-tax (Appeals) added the provision to the book profit, considering it as an unascertained liability. The High Court noted that the provision was rightly added, as it was not an ascertained liability. The Tribunal's decision was upheld, emphasizing that the provision could not be added back in the computation of book profit. Consequently, the High Court found no legal question involved in the appeal and dismissed it accordingly.