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TMI Blog2017 (12) TMI 1815X X X X Extracts X X X X X X X X Extracts X X X X ..... the closing stock. While anticipated loss is taken into account and the anticipated profit in the shape of appreciation of value of the closing stock is to be brought into accounts. In view of the principle laid down by the Hon ble Supreme Court, we are of the view that the assessee is entitled to this loss and he has rightly claim so. Accordingly, we reverse the orders of the lower authorities and allow this claim of the assessee. TDS u/s 192/194H - disallowance of commission payment for non-deduction of TDS invoking the provisions of section 40(a)(ia) - HELD THAT:- Respectfully following the assessee s own case for AY 2005-06 [ 2016 (6) TMI 1431 - ITAT MUMBAI] it is that to held the commission paid to the directors in the nature of salary and hence, no disallowance can be made by invoking the provisions of section 40a(ia) of the Act because there is no provision for disallowance of salary under the provisions of section 40a(ia) of the Act.. Accordingly, we dismiss the appeals of Revenue. - ITA No. 482/Mum/2016, ITA No. 3501/Mum/2016, ITA No. 1107/Mum/2016, ITA No. 4451/Mum/2016 - - - Dated:- 18-12-2017 - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM For the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gins on equity shares at ₹ 44,53,452/- and according to him, this is contingent liability in nature and disallowed by observing in Para 5 as under: - 5. The assessee has debited for MTM Margin Equity Stock Futures at ₹ 44,53,452/-. This expense is contingent in nature and not known in real as on 31/03/2010. Contingent in nature provision cannot be allowed in P L account and the same amount is disallowed and added to the income of the assessee Aggrieved, now assessee preferred the appeal before CIT(A), who also confirmed the action of the AO by observing in Para 6 as under: - 6. I have carefully considered the facts of the case and the submissions of the ld.AR. The learned AR has argued that it is a derivative loss arrived at by year end by valuing the closing stock at cost or market value whichever is lower. The AO on the other hand has contended that it is a provision and all the provisions which are not actually arisen during the year cannot be debited in the P L. I fully agree with the argument of the AO that the provisions are unascertained liabilities and cannot be claimed in P L. The learned AR has not demonstrated before me satisfactorily that it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, neither the AO nor CIT(A) has discussed the facts but we find from the details that the assessee has valued outstanding equity derivative transactions at lower of cost or market value in the balance sheet as on 31-03-2010. Admittedly, the assessee has debited mark to market losses on account of diminution in the value of outstanding equity derivatives. We find that this issue has been settled by Hon ble Supreme Court in the case of Woodward Governor India P. Ltd: (supra), wherein, it is clearly held that losses suffered by the assessee on account of fluctuation in the rate of foreign exchange has on the date of balance sheet is item of expense under section 37(1) of the Act. For valuing closing stock at the end of the year, the value prevailing on the last date is relevant because profit and loss is embedded in the closing stock. While anticipated loss is taken into account and the anticipated profit in the shape of appreciation of value of the closing stock is to be brought into accounts. In view of the principle laid down by the Hon ble Supreme Court, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. At the outset, the learned Counsel for the assessee file a copy of Tribunals order in assessee s own case for AY 2005-06 in ITA No. 707/Mum/2014 order dated 15-06-2016, wherein, it is held that the commission paid was part of the salary to the directors and the payment made on account of salary is not covered under section 40a(ia) of the Act, Tribunal in Para 4.4. observed as under: - 4.4 We have also examined other crucial aspect, as to whether there was any escapement of income in this case. A perusal of the reasons reveals that as per the Assessing Officer the commission income was not offered in the return of income by the payee directors in their individual returns and, therefore, it would be presumed that no commission would have been paid by the assessee company to its directors. This is a case where Assessing Officer is trying to put the Cart before the Horse . The approach of the AO has been highly irresponsible and casual in reopening this case. The constitution of our country has attached great sanctity to the concept of finality of litigation. No reopening of an already concluded assessment can be done except as provided by the legislature. Any casual and irre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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