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TMI Blog2015 (7) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... our specific finding of no loss having in fact arisen to the assessee during the year and, further, the principle of prudence as not being applicable to losses which arise or have their genesis in events subsequent to the end of the relevant year. Thus confirming the disallowance of the impugned loss. - Decided against assessee. Disallowance of the provision for various expenses - non supported by any evidences - Held that:- During the hearing, the ld. AR, the assessee’s counsel, conceded to the assessee having no further details/material to support its claim, relying on its written submissions before the authorities below, and towards which reference was made to pages 18 and 19 of the assessee’s paper-book. Under the circumstances, we have no hesitation in confirming the impugned disallowance. The question is of the basis on which it could be said or concluded that expenditure to that extent had in fact accrued, and which we find as wanting. The burden to prove its return, as well as claims preferred thereby, is only on the assessee, and which we find as not discharged to that extent. It may also be clarified here that the assessee had been extended sufficient opportunity to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) for short) dated 02.02.2010, partly allowing the assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for assessment year (A.Y.) 2003-04. I.T.A. No. 2250/Mum/2010 (Assessee s Appeal) 2. The principal issue, raised per its ground no.1, is in respect of disallowance of provision made for a loss (at ₹ 1285.64 lacs) on account of a firm purchase contract. The assessee-company, in the business of manufacturer of chemicals, entered into an agreement on 19.03.2003 (which stood revised on 25.03.2003) with M/s. Kolmer Petrochemicals, A.G., Switzerland [Kolmer] for the purchase of 6,000 MT of raw material, Paraxylene, used in the manufacture of the finished product, DMT, at $ 882 (Rs. 44,267/08) per MT, i.e., at a cost of ₹ 27.82 cr. The goods were to arrive at Mumbai, the location of delivery, between April 23 and 25, 2003, while its payment, as per the modified agreement, was to be made two days prior to the arrival of the vessel. The other material amendment was that the goods had to be delivered latest by April 30, 2003, failing which the contract was to be treated as cancelled, and the seller continued to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods are not delivered by April 30, 2003, the contract fails, i.e., is not binding, and there is no question of the assessee incurring any losses, i.e., the loss is contingent on the specific performance of the contract. The loss could not possibly arise on the arrival of goods beyond the cut off date (April 30, 2003). Merely because the agreement is executed in the relevant year would by itself be not sufficient and, in fact, is no ground for claiming a loss, where so, for the year. It is only upon delivery of goods by that date that the loss, if any, could be said to have arisen to the assessee on account of the said firm contract. This of course would be subject to the qualification that it is pretty certain, as on 31.03.2003, the balance-sheet date, that the goods shall arrive in time. In the instant case almost the entire delivery time fail during the following year. There is thus, in our view, no basis in the present case for such certainty. Two, and equally importantly, no loss has in fact arisen during the relevant year. The loss under reference is only on account of fall in the market price of Parxylene and, resultantly, DMT, the finished product. Admittedly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evailing during the relevant year, so as to enable a correct assessment of the operating results for the year and the state of affairs as at its close. There is nothing to show that the market price of the raw-material or the finished products had declined, much less to any substantial extent, up to 31.03.2003, the relevant year end. The assessee s claim, in view of foregoing, is without merit. The decisions relied upon would be of little moment, even as clarified during hearing, in view of our specific finding of no loss having in fact arisen to the assessee during the year and, further, the principle of prudence as not being applicable to losses which arise or have their genesis in events subsequent to the end of the relevant year. As regards reliance on the decision in Nagri Mills Co. Ltd. (supra), we may advert to the decisions in the case of Mysore Spinning Mfg. Co. Ltd. v. CIT [1966] 61 ITR 572 (Bom) and British Paints India Ltd. (supra), besides to J.K.Woollen Manufactures (P.) Ltd. v. CIT [1967] 65 ITR 237 (All). We decide accordingly, confirming the disallowance of the impugned loss. This decides ground no.1 of the assessee s appeal. 5. Ground no.2 was not pressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. AR to be squarely covered against the assessee by the decision of the Apex Court in the case of Ipca Laboratories Ltd. v. Dy. CIT [2004] 266 ITR 521 (SC). We, accordingly, direct for computation of deduction u/s. 80HHC in terms of the said decision by the said hon ble apex court. We decide accordingly. 9. The fifth and last ground of the assessee s appeal concerns the computation of book profit u/s. 115JB of the Act inasmuch as the assessee claims for the deduction u/s. 80HHC to be reduced in computing the book profit there-under. The matter in our view stands squarely covered by the decision by the Apex Court in the case of CIT vs. Ajanta Pharma Ltd. [2010] 327 ITR 305 (SC). We, accordingly, set-aside the matter back to the file of the AO for working the book profit u/s. 115JB in terms of the said decision. We decide accordingly. I.T.A. No. 3193/Mum/2010 (Revenue s Appeal) 10. The appeal raises two effective grounds, i.e., grounds 2 and 3, which we shall take up in seriatim; ground 1 being general in nature, warranting no adjudication. 11. Ground 2 of the Revenue s appeal is in respect of an addition qua unutilized MODVAT credit in the sum of ₹ 354.40 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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