9911796707
TMI Blog2012 (11) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents on record are that the assessee filed return of income for the assessment year 2004-05 on 30.10.2004 admitting income of Rs.92,91,066/-. The case of the assessee was taken up for scrutiny and notice under section 143(2) was duly served on the assessee on 19.10.2005. Vide assessment order dated 27.12.2006, the Assessing Officer made certain additions/disallowances in the annual income of the assessee. One of the claims of the assessee was expenditure under the head 'Administrative & Other Expenses' on account of exchange loss compensation amounting to Rs. 45,67,071/- and termination fee amounting to Rs.35,00,000/- aggregating to Rs.80,67,071/-. The assessee had entered into an agreement with M/s. Sterling Metchem Trade (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patch of the material for remittance of payment for the material for which separate compensation will be paid on mutual agreement. h. SMTPL shall not be entitled to advance payment from the assessee for making any forex remittance to M/s. Associated Swedish Steels AB. I. Assessee reserves the right at its option to import material directly, in case of urgent need or as circumstances warrant. No compensation shall be paid to SMTPL in such cases. j. Either party shall compensate the other in the event of loss of profits due to premature termination of the agreement. The quantum of compensation shall be mutually agreed upon." The assessee was forced to terminate the agreement with SMTPL for the reason that one of the sister concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d received the compensation /termination fee, had shown the amount of compensation in its books of account relevant to the assessment year 2006-07. 5. On the other hand, Shri R.Meenakshisundaram, Advocate appearing on behalf of the assessee submitted that the assessee quantified the loss on the basis of letter dated 19.03.2004 with respect to premature termination of the agreement. Accordingly, entries were made in the books of account treating the amount as contingent liability. He further submitted that the assessee was forced to terminate the contract prematurely as per the Swedish supplier of the assessee, who is holding 70% stake in the assessee company. The counsel for the assessee strongly supported the order of the CIT(A) and submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 7. As regards termination fee on account of premature termination of the agreement is concerned, it has been accepted by SMTPL that the amount has been received although the books of accounts of SMTPL showed part of the amount has been received in the financial year relevant to the assessment year 2006-07. As per the contentions of the assessee the provisions for payment of contingent liability arising out of the premature termination of the agreement was made in the financial year 2003-04 which is relevant to the assessment year 2004-05. Thus, the assessee is entitled for the amount paid as compensation for the termination of the agreement. However, it is made clear that the assessee is entitled for the expenditure only once. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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