9911796707
TMI Blog2017 (12) TMI 1815X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessments were framed by the Deputy Commissioner of Income Tax, Circle 5(2), Mumbai (in short DCIT) for the assessment years 2010-11, 2011-12 vide orders dated 19-03-2014 & 22-03-2013 under section 143(3) of the Income Tax Act, 1961(hereinafter 'the Act'). 2. The only common issue in these appeals of assessee is as regards to the order of CIT(A) confirming the action of the AO in disallowing the mark to market losses on account of diminution in value of outstanding equity derivatives amounting to Rs. 44,53,452/- in AY 2010-11 and Rs. 6,79,267/- in AY 2011-12. The facts and circumstances are exactly identical and the grounds raised by assessee are identically worded. Hence, we will take up the grounds from AY 2010-11 and will decide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTM Margin Equity Stock Futures at Rs. 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 actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. Departmental Representative relied on the orders of the lower authorities and also filed copy of instruction No. 3/2010 dated 23-03-2010, wherein, tax implication of forward foreign exchange contracts is explained. She particularly referred to the following paragraphs of this circular: - "As the revenue implications of such transaction are large, the Assessing Officers need to examine the statements of accounts and the notes to accounts with a view to find out any reference to any toss on account of forex-derivatives. In some cases, these losses may be camouflaged under the 'financial charges' 'foreign exchange loss' or some similar head which may make it difficult to detect them. In such cases, the Assessing officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6. Coming to Revenue's appeal in ITA No. 4451 & 1107 /Mum/2016. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleing the disallowance of commission payment for non-deduction of TDS under section 192/194H of the Act by invoking the provisions of section 40a(ia) of the Act. The issue is exactly identical in both the years and hence, we will take the facts from AY 2011-12. The relevant grounds raised by Revenue reads as under: - "1. On the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission was disallowed. Aggrieved, assessee preferred the appeal before CIT(A), who relying on the assessee's own case for AY 2010-11 allowed the claim of the assessee. Aggrieved, now Revenue is in appeal. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of the same in the subsequent financial year but before the due date of filing of the return u/s 139. Thus, viewed from this angle also, the same was not disallowable, in view of the clear provisions of law as has emerged after various amendments and legal precedents. Even otherwise, payments made on account of salary is not covered u/s 40(a)(ia) of the Act. Thus, it is a clear case where the payment was duly made by the assessee, expenses were properly booked and claimed in the return of income and due compliance was made with regard to the provisions of TDS also. No case of escapement has been made out by the Assessing Officer, at all. It is not a case where any belief could have been formed about the escapement of income. The reop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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