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TMI Blog2019 (10) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... ,12,327/- after making disallowance of Rs. 259,31,00,000 being expenditure incurred under the head provision for copper concentrate purchase. 3 That on facts and circumstances of the case and in law, the CIT(A) erred in holding that the ratio of the order passed by the CIT(A) and Hon'ble Income Tax Appellate Tribunal in the Appellant's own case for AY 2004-05 was not applicable, without appreciating that the findings rendered therein were directly applicable to the facts and circumstances of this case. 4. That on facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO by disallowing the provision for purchase of copper by erroneously holding that the Appellant had simply relied upon the guidelines of accounting standards without appreciating that the Appellant had also established that the provision was in-fact in the nature of an ascertained liability. 5. That on facts and circumstances of the case and in law, the CIT(A) erred in upholding the interpretation of the AO that provision for purchase of copper was in the nature of an unascertained liability despite having recorded that the said action of the Appellant was in conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lphuric acid, power slime, dore etc. It filed its return of income on 08.10.2010 declaring total income of Rs. 3158744760/- which was subsequently revised on 18.10.2010 of Rs. 3246648940/-. Subsequently, assessment u/s 143(3) of the Act was completed on 02.052014 determining total income of Rs. 7293012330/-. Thereafter , action u/s 263 of the Act was taken and the order passed by the ld AO was found to be erroneous and prejudicial to the interest of revenue. Subsequently, the order u/s 263 was passed setting aside the issue to the file of the ld AO. One of the issues in proceedings u/s 263 of the act was that the assessee has made a provision of Rs. 259.31 crores pending final price payable for the purchase of copper concentrate received during the year , for which actual purchase price could not be finalized before the close of the financial year but soon thereafter. Therefore, this issue was raised by ld AO in the assessment proceedings pursuant to order u/s 263 of the act. 4. Therefore, the ld AO raised the above query to the assessee. The assessee submitted its reply stating that in the order u/s 263 of the Act dated 27.03.2017 passed by the Pr. CIT, Pr CIT nowhere has said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otation period price was not finalized as on 31st March 2009, a provision of Rs. 140.68 Cr based on forward LME rate of copper and LBMA rate of precious metals was made. /Is against it, during the year Rs. 153.31 Cr has been incurred towards final price settlement The additional amount of Rs. 12.63 Cr has been charged to Profit and Loss Account under raw-materials consumption. Liability recognized under this class for the year is Rs. 259.31 Cr which is outstanding as on 31st March 2010. Actual outflow is expected on finalization of quotation period price in the next financial year." In this context the note which appears in the Books of Accounts of the Assessee Company for the FY 2010-11 also is reproduced below:- The Company has recognized liability based on substantial degree of estimation for:- Final price payable on purchase of copper concentrate for which the quotational period price was not finalised as on 31st March 2010, a provision of Rs. 259.31 Cr based on forward LME rate of copper and LBMA rate of precious metals was made. /4s against it, during the year Rs. 248.26 Cr has been incurred towards fnal price settlement. The balance amount of Rs. 11.05 Cr has been cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said arguments judgments . the relevant portions are reproduced here: Hon'ble High Court of Madras staying the assessment proceedings would also bar the proceedings currently initiated u/s.263 of the I.T. Act, 1961 is not acceptable. 9. In view of the facts narrated above, also taking into account that the issue on hand gets time barred by limitation on 31.03.2017, coupled with the fact that the assessee has failed to furnish any details w.r.t. the present proceedings, 1 am constrained to pass this order u/s.263 of the 1.1. Act. 1961 based on facts of the case. The issues involved have been narrated, in detail, in the notice issued on 01.02.2017.10. In respect of the issue on hand, it is pertinent to mention that a provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: i. an enterprise has a present obligation as a result of a past event. ii. it is probable that an outflow of resources will be required to settle the obligation: and iii. a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. Liability is defined as a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability actually existing al the time hut setting apart money which might become expenditure on the happening of events is nol expenditure AM these verdicts clearly reinforce the stand of the Department in so Tar as the issue in the assessee's case is concerned In the assessee company's case, certain deductions towards provisions made by it. were lo be allowed only on actual payment basis and since some of these amounts have not been paid by it within the specified time, a disallowance u/s.43 B of the I.T Act, 1961 was called for. 11. It is accordingly evident that the AO was required to conduct a proper verification and/or enquiry in respect of above mentioned issue. His failure to do so has resulted in an assessment order which is not only erroneous but is also prejudicial to the interest of revenue. It is placed on record that there is no right of appeal which is available to the Revenue against such erroneous assessment orders passed by the AOs, to compensate which the revisionary powers u/s 263 of the I.T. Act, 1961 have been conferred on the CIT/PC1T in the Statute. Furthermore, such powers were held to he of wide amplitude by the Hon'ble Supreme Court in the case of CIT v/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned AY 2010-11 as on March 31, 2010, the provision under the head was Rs. 259,31,35,883. Hence, the net amount of Rs.l 18,63,80,577 only can be disallowed if at all your honor proceed to disallow the same. The relevant page of the financials for the FY 2009-10 (Assessment Year 2010-11) showing the amounts of the provision for both the FY 2009-10 and FY 2008- 09 is attached herewith in Annexure I. " However, it is to be noted that the assessee in its reply itself has stated that the said provision are made for copper purchases in transit. Therefore, the said provision in its entirety has been made for copper purchases in transit during the year and therefore, is liable to be disallowed during the year. (Disallowance: Rs. 259,31,00,000/-) 6. Based on the above findings, disallowance of Rs. 259.31 Crores was made and total income was assessed at Rs. 9886112327/- as per order dated 29.12.2017 u/s 143 (3) rws 263 of the Act. 7. Assessee aggrieved with the order of the ld AO, preferred appeal before the ld CIT(A) who dealt with the above issue on the ground that whether same was considered u/s 263 or not as well as on the merits of the issue as under:- "5.2 During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order dated 02.05.2014, passed in this case u/s. 143(3) and section 92 CA r.w.s 144C of the IT Act, 1961 for AY 2010-11 it set aside within the meaning of Sec.263 of the IT Act, 1961. The Assessing Officer is directed to complete the reassessment proceedings afresh, after making necessary enquiry/ Verification in respect of the above mentioned issue and after affording the assessee an opportunity of being heard before passing a fresh assessment order in accordance with law. In so far as the issues considered by the assessing authority in the order dated 02.05.2014, which is presently stayed by the Hon'ble High Court of Madras vide its order dated 20.06.2014 are concerned suitable action will be taken in accordance with the directions of the Hon'ble High Court, as and when the Writ petitions are disposed." 3.2.4 Thus, your honour will note that CIT in his final order never directed the AO to complete the assessment proceedings on the provision for purchase of copper concentrate. Thus, AO order disallowing provision for purchase of copper concentrate is without jurisdiction and needs to be quashed. The following judicial precedents are relied upon In CIT vs D.N. Dosani (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that some of the sale proceeds was yet to be received by the assessee. The revision u/s 263 is not like the reopening of the assessment where once the assessment is reopened entire assessment is open before the Assessing Officer to be reconsidered in accordance with law " 5.3 I have considered the facts of the case, the grounds of appeal, the order of the AO and the submissions of the appellant. The appellant vide these grounds of appeal, has challenged the legal validity of the assessment order, by claiming that the assessment order seeks to make an addition which is in contrast with the directions issued by the Pr CIT vide order u/s 263. The appellant has submitted that the addition, so made, has not been directed by the Pr CIT in the revisionary order u/s 263. The appellant has strongly contended that the Pr CIT vide the order u/s 263 had considered the order of the AO to be prejudicial to the interest of the revenue only to the extent of Rs. 4,00,25,257/-, u/s 43B of the Act. The appellant contended that during the entirety of the proceedings u/s 263, ie, from the show cause notice to the final assessment order, there was no discussion of the now made addition of Rs . 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961. Accordingly the order passed by the AO is found to be erroneous in so far as it is prejudicial to the interest of Revenue." The Pr. CIT categorically stated that: "The Assessing Officer is directed to complete the reassessment proceedings afresh, after making necessary enquiry/verification in respect of the above mentioned issue...." The above extract more than clearly states that the Pr CIT had directed the AO, to proceed ith the assessment order afresh, but with also considering the infirmities pointed therein in the order u/s 263 of the Act. The order no where directs the AO to simply stick on to one issue, ie, the issue mentioned u/s 263 of the Act, while not considering any other issue that comes in the sight of the AO. 5.6 As has been stated above, since the Pr CIT has directed the AO to consider the assessment order afresh the AO, as apparent from the assessment records, has very well considered all the matters and records of the appellant. It is only after verification of the records of the appellant, in consonance with the direction of the Pr CIT that the AO has found the so directed addition under Sec 43B, to be justified and not fit for addition, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions are not met, no provision can be recognised. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. A past event that leads to present obligation is called as an obligation event. The obligation event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognised as a provision. In accordance with the provisions of the IT Act,1961. Though an assessee company has to incur the expenditure for its business the creation of a mere provision in lieu of this expenditure is not entitled for deduction under IT Act, 1961. It is pertinent to note that a special Bench of the Hon'ble ITAT, Mumbai in the case of DCIT vs. Bank of Bahrain and Kuwait has held that anticipated liability which are contingent in nature are not allowable and anticipated liability coupled with a present obligation can be said to be crystallised liability. If an event has already taken place, such as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon'ble Supreme Court in the case of CIT vs. Shree Manjunathesware packing products & Camphor works (1998) 231 ITR 53/96 Taxman 1. Therefore, normally when an AO has not conducted a proper enquiry on particular issue leading to a loss of revenue. Moreover, in terms of the specific language of explanation 2 to section 263(1) of the IT Act,1961 an order passed by the AO is deemed to be erroneous and prejudicial to the interest of revenue if the order is passed without making enquiries or verification which should have been made. In view of the above, the impugned assessment order passed by the AO is erroneous and prejudicial to interest of revenue since the AO failed to conduct the requisite enquiry/ verification in respect of the issue in hand." 16 The assessee has further stated in its reply : Further it is submitted that the reopening of the assessment proceedings for the AY 2009-10 was also initiated by the Deptt. On the basis of the same reason as in year under consideration Against the same the assesseee had filed a WP 1129 of 2016 before the Goa Bench of the Hon'ble Bombay High Court. The HC finding merit in the issue was pleased to issue an interim stay order ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rolyte process at Tuticorin and Silvassa works into a product called cathode which may further be drawn into Cast Copper Rods depending on the market requirement. 3.3.2 The Appellant Company purchases copper concentrate for production of copper anode/ copper cathode. 3.3.3 The copper concentrates are initially invoiced at a Provisional price and provisional metal content. Subsequently, based on the determination of applicable payable price and final metal content, the supplier raises the final invoice and the Appellant has to settle the bills on the basis of final pricing. In between the date of provisional invoice and the final invoicing, the copper purchase is subjected to two types of risk i.e., 1) on account of fluctuation in the rate of Copper on London Metal Stock Exchange and 2) on account of fluctuation in the Exchange rate of Rupee vis- a-vis USD. 3.3.4 In view of the increase in the price of copper on LME, the Appellant's liability to pay for the copper concentrate for which final invoicing was not yet done on 31st March,2010 went up substantially and accordingly company provided for the increased liability. 3.3.5 As per, the Clause No 2 of Schedule 12 referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards company consistently following this practice. In this regard, your honour may please note the provisions of Section 145 and Section 145A of the Income-tax Act, 1961 which stood as follows:- [Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub¬section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in [Method of accounting in certain cases. 145A. Notwithstanding anything to the contrary contained in, the valuation of purchase and sale of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11 As per the Income-tax Act, 1961 there are certain Accounting Standards which are mandatorily required to be followed by the Assessee while computing the Income under the heading business and profession. As per Notification No. SO 69(E) dated 25th January, 1996 the following Accounting Standards have been prescribed to be mandatorily followed by the Assessee:- Notified accounting standards - The following accounting standards are notified, to be followed by all assessees following mercantile system of accounting, namely:- A. Accounting Standard I relating to disclosure of accounting policies: i. All significant accounting policies adopted in the preparation and presentation of financial statements shall be disclosed. ii. The disclosure of the significant accounting policies shall form part of the financial statements and the significant accounting policies shall normally be disclosed in one place. iii. Any change in an accounting policy which has a material effect in the previous year or in the years subsequent to the previous years shall be disclosed. The impact of, and the adjustments resulting, from, such change, if material, shall be shown in the financial statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to another; (d) "Financial Statements" means any statement to provide information about the financial position, performance and changes in the financial position of an assessee and includes balance sheet, profit and loss account and other statements and explanatory notes forming part thereof; (e) "Going concern" refers to the assumption that the assessee has neither the intention nor the necessary of liquidation or of curtailing materially the scale of the business, profession or vocation and intends to continue his business, profession or vocation for the foreseeable future. B. Accounting Standard II relating to disclosure of prior period and Extraordinary items and changes in accounting policies: i. Prior period items shall be separately disclosed in the profit and loss account in the previous year together with their nature and amount in a manner so that their impact on profit or loss in the previous year can be perceived. ii. Extraordinary items of the enterprise during the previous year shall be disclosed in the profit and loss account as part of taxable income. The nature and amount of each such item shall be separately disclosed in a manner so that their relative s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year: Provided that income or expenses arising from the ordinary activities of the business or profession or vocation of an assessee, though abnormal in amount or infrequent in occurrence, shall not qualify as extraordinary item; (d) "Financial Statements" means any statement to provide information about the financial position, performance and changes in the financial position of an assessee and includes balance sheet, profit and loss account and other statements and explanatory notes forming part thereof; (e) "Prior period items" means material charges or credits which arise in the previous year as a result of errors or omissions in the preparation of the financial statements of one or more previous years: Provided that the charge or credit arising on the outcome of a contingency, which at the time of occurrence could not be estimated accurately shall not constitute the correction of an error but a change in estimate and such an item shall not be treated as a prior period item. viii. This notification shall come into force with effect from 1st day of April, 1996 and shall, accordingly, apply to the assessment year 1997-98 and subsequent assessment years. ix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation." 3.3.17 However, the Ld. AO without appreciating the facts of the case, disallowed the provision made for copper concentrate purchases treating the same as in transit. 3.3.18 The Ld. AO failed to appreciate the fact that the Appellant was deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed the profits and gains of the business cannot be determined unless and until the expenses or the obligations which have been accrued are set off against the receipts. 3.3.22 It is alternatively claimed that the claim of the appellant may be allowed under section 37 of the Act. Section 37 of the Act provides for the deduction of all expenditure wholly and exclusively laid out or expanded for the purposes of business, where such expenditure is not expressly covered by any other provision of the Act. The copper concentrate provision being a contractual liability, computed considering the prevailing prices as on 31st March and accrued in accordance with the mercantile system of accounting consistently, is allowable deduction under the Act. To substantiate the claim that "accrued liability is an allowable deduction even though it is estimated" the appellant relies on following authorities:- i) Hon'ble Supreme Court in Bharat Earth Movers vs. CIT [2000] 245 ITR 428 (SC) has held that the law is well settled that if a liability had been incurred or has accrued during the year, deduction must be allowed though the liability may be quantified at a later date. ii) Reliance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounting followed by the assessee. In the initial years, there may be fluctuation in the profit of the assessee due to increase in purchase price by changing the method of accounting. However, when the assessee was consistently following the same, there will be revenue neutral, hence there cannot be loss to the Revenue. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee under the provisions of Section 145A of the Act. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed." 3.3.25 From the above decisions it is clear that provision for copper concentrate is an ascertained liability and to be allowed while computing profits and gains of business or profession. Hence, we request your honour to kindly take the said orders (refer Paper Book page No... to ....) on record and consider while disposing off our appeal no for the AY 2010-11. Netting off of Opening copper concentrate provision with closing copper concentrate provision: 3.3.26 Without prejudice, for that on the facts and circumstances of the case, the Ld. AO not reduced Rs. 140 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant with a final invoice. The appellant stated that for the year under consideration, the final invoicing in the case of the appellant was not done, on account of an increase in the price of copper on London metal Exchange (in short LME) and hence, the Appellant's liability to pay for the copper concentrate, for which final invoicing was not yet done on 31st March2010, went up substantially and accordingly appellant provided for the increased liability. The appellant also stated that the said accounting treatment is in line with the accounting practices and principles, that has been adopted by the appellant in earlier years as well. Further, the appellant has relied upon a catena of judgements so as to claim that a provision made on a scientific basis, is allowable and hence, stated that in its case as well, the provision is not unascertained and hence, is allowable to the appellant. Lastly, the appellant also relied on the order of the CIT(A) and the ITAT, in its own case of AY 2004-05, wherein, the appellant claimed, that on similar issue, the ITAT had provided relief to the appellant from the addition so made. 6.4 The appellant's major contention is that the provisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as nowhere commented upon any aspect of its provision being ascertainable, but has simply cramed upon theoretical justifications. Since, in the light of the fact that the appellant itself has not provided any basis or justification of its provision being ascertained, the entire gamut of case laws and the judgements relied upon by the appellant are not applicable in its case. Lastly, even the orders of the CIT(A) and the ITAT is not applicable in its own case, since the said orders were based on different footing, wherein, the question was with respect to the loss being excessive in nature, while in the present case, the moot issue is with respect to the ascertainability of the expenditure. Since, even the said plea of the appellant fails. In view of my detailed deliberation, I am of the considered view that the AO has rightly disallowed the provision claim of Rs. 259,31,00,000/-. Accordingly, the grounds of appeal of the appellant are rejected and the addition is upheld in this regards." 8. Therefore, assessee aggrieved with the order of the learned CIT - A has preferred this appeal. 9. Assailing the findings of the lower authorities, the learned authorised representative ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t . He therefore submitted that above issue was is not the subject matter under section 263 of the income tax act and therefore the learned assessing officer could not have made the above addition in assessment order passed in pursuance of order u/s 263 of The Act. 11. He otherwise submitted that this issue is squarely covered in favour of the assessee by the order of the coordinate bench in earlier years, He referred to the note number 14 at page number 119 of the paper book wherein for financial year 2003 - 04 and identical issue arose wherein it is mentioned that in view of sharp fluctuation in LME/L MBA prices of copper, gold and silver during the year the company has reinstated the cost of purchase of copper concentrate and export of slime at closing LME rate of copper and L MBA rate of precious metal in those cases where potential. Price is not finalized as at year and as against the earlier practice of accounting these on provisional invoice basis only. This has resulted in increased in turnover, consumption of copper concentrate on inventory by INR 8 .27 millions, INR 5 59.55 millions and INR 1 62.99 millions respectively and decrease in profit for the year by INR 2 48.99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with the copies of the bills to show that assessee is following the method of accounting of making provisions for the purchases where the price of the goods though purchase by the assessee are not finalised regularly. He therefore submitted that the provision made by the assessee is an actual provision of the liabilities incurred by the assessee on estimated basis according to the standard London metal exchange rates of the copper. He further stated that above liability is not at all contingent. He further contested that the finding of the learned CIT - A and stated that the above liability has accrued on the assessee and therefore it is perfectly in consonance with the accounting standards issued by the ICAI as well as the concept of accrual as understood under the income tax act. He further stated that the concept of accrual for the accounts and concept of accrual for the purposes of income tax cannot be different. He further submitted that the learned CIT - A has misunderstood the fluctuation in the price of the copper as the unascertainiability of the cost of purchases of copper. He further submitted that the learned CIT - A has further added in rejecting the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer. She further extensively referred to the order u/s 263 of the income tax act. Therefore she submitted that the issue is arising from the order passed u/s 263 of the income tax act and therefore the argument of the assessee that the learned CIT has not given any direction on this issue deserves to be rejected. 14. On the issue on the merits extensively referred to the order of the learned assessing officer and relied upon the order of the lower authorities submitting that the provision made by the assessee is not allowable. She further stated that assessee has relied up on certain bills and method of provisions which were not submitted before the ld lower authorities, so they should not be considered, Therefore, it was submitted that the order passed by the learned assessing officer and confirmed by the learned CIT - A deserves to be confirmed on this ground. 15. We have carefully considered the rival contention and perused the orders of the lower authorities. 16. We come to the 1st argument of the learned authorised representative that the learned Principal Commissioner Of Income Tax has not given any direction on this issue while passing order u/s 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this amount in show cause notice, dealt with the issue of allowability of such provision in a her order, held that AO has not verified this aspect, clearly shows that, this issue was dealt with by the ld PCIT. In view of this, it cannot be said that the learned PCIT as not given any direction to the learned assessing officer to verify the above deduction claimed by the assessee. Hence, we reject the argument of the learned authorised representative that above addition made by the learned assessing officer was not emanating from the order of the learned Principal Commissioner Of Income Tax passed u/s 263 of The Income Tax Act. Accordingly ground number 7 to the extent of claim of the absence of direction in the order of the learned CIT u/s 263 of the income tax act and ground number 8 of the appeal of the assessee are dismissed. 17. Coming to the merits of the addition, the assessee company carries on the business of manufacturing copper rods, copper cathodes, sulphuric acid and phosphoric acid. The raw material copper concentrate is imported, which is processed at the smelter division of the company at Tuticorin into a product, called copper Anode. The above product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set of daily reference price that based on the liquid trading sessions of the day. They are used the word over by industrial and financial participants for purpose of referencing, hedging, physical settlement, contract negotiation and margining and are indicators of where the market is at any point in time. The London metal exchange provides regulated, transparent forum for the trading of future and option contract. As a result the daily prices are published which is used as a reference by the industry. The London metal exchange prices available as on the date of the receipt of the consignment less the treatment charges and refinement charges is considered the transaction price. The treatment charges and refinement charges are negotiated by the parties based on various factors including copper content in the concentrate, payment terms, other terms and conditions of the purchases. The pricing of the copper concentrate is governed by the quotation prices as agreed contractually with the supplier of the copper concentrate. The copper concentrate is usually price that the average of the daily settlement price/quotations for copper of the London metal exchange during the corresponding q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 in ITA number 318 and 319/MDS/2008. The above method of making the provision is regularly followed by the assessee which has never been challenged by the other statutory authority including Ministry of corporate affairs and the auditors has also found the creation of the provision in accordance with the applicable accounting standard. Even the above accounts and the provisions are approved by the shareholders. The assessee has also substantiated the methodology adopted by the assessee stating that another industry in similar business is also following the identical accounting method and same are also disclosed in the annual report of that company. The assessee referred to the account of the Hindalco industries Ltd for financial year 2009 - 10. The assessee also referred to the 11 invoices for financial year 2009 - 10 wherein those consignments are settled on invoice basis primarily and final invoices were received a letter on. The 1st such invoices is from Glencoe or International AG where the invoices based on the contract number 101 - 09 - 18112 - 003 - as dated 24/02/2010 49554.217 metric ton of some non-copper concentrate was the assessee. The shipment was made in February ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it on year to year basis. As the material has been received by the assessee during the financial year ended on 31st of March 2010 the assessee has a present obligation to make payment for the purchases made. On the basis of the probability, the assessee has made a provision for which it has already incurred an obligation at the time of the receipt of the goods. Estimate made by the assessee is also a reliable estimate as same is accepted by the industry as stated in the annual accounts of another's similar company, based on the London metal exchange prices. Therefore the provision created by the assessee is a liability which has been measured by using a substantial degree of estimation. The learned CIT - A has added in holding that such provision made in the books of account is not deductible while computing the taxable income of the assessee. We disagree with the above finding of the learned CIT - A for the reason that assessee has received the goods during the financial year for which the prices would be payable letter on but the reliable estimate is made based on the London metal exchange prices. Such provision has gone into the purchase account of the assessee. Further if, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to INR 4 863657/-. In para number 8.2 of the order of the learned CIT - A the direction has been given to the learned assessing officer to grant the credit of the amount of tax deduction at source of INR 4 863657/- to the assessee. The AO is directed to the follow the direction of the learned CIT - capital and grant the credit of the above tax deduction at source after proper verification. Accordingly ground number 10 of the appeal of the assessee is allowed. 21. Ground number 11 of the appeal is with respect to the charging of interest u/s 234B and 234C of the income tax act. No specific arguments were advanced by either of the parties and therefore the same is dismissed. 22. Ground number 12 of the appeal of the assessee is against the initiation of the penalty proceedings by the learned assessing officer u/s 271 (1) (c) of the act. The above ground is premature as no penalty has been levied by the learned assessing officer. Accordingly same is dismissed. 23. Ground number 1 of the appeal of the assessee is general in nature and therefore same is dismissed. 24. Accordingly appeal of the assessee in ITA number 1454/del/2019 for assessment year 2000 - 11 is partly allo ..... 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