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TMI Blog2021 (12) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: "a) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal ("Tribunal") was right in treating the income of Rs. 10,01,281/- as income from house property and not business income as claimed by the appellant? b) Whether on the facts and in the circumstances of the case and in the light of the fact that the expenses pertaining to said property had been allowed as business expenditure the Appellate Tribunal erred in treating the above income as income from house property? 4. The learned Counsel appearing for the assessee and the Revenue would state that the questions covered by (a) and (b) are similar to the questions raised by the assessee for the Assessment Year 2003-04 in ITA No.26/2013. This Court vide order dated 29.07.2021 has answered the said questions against the assessee and in favour of the Revenue. By following the reasons stated therein, question nos. (a) and (b) are answered in favour of the Revenue and against the assessee. 5. Substantial question no.(c) reads thus: "c) Whether on the facts and in the circumstances of the case the Tribunal was right in confirming the disallowance of the amount of Rs. 1,03,92,000/- bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very facet of the explanation given by the assessee and whether it merits acceptance as an expenditure for the subject Assessment Year. Briefly stated, the conclusion recorded by the Tribunal is apt to be reproduced, and reads as follows: "27. It is evident from the orders of the lower authorities that the provisions for the expenditure claimed on account of payable has been disallowed as it is in the nature of provision only and is not an ascertained liability. Whereas it is the contention of the assessee that the provision has been made under the matching concept principle of accountancy and the same has been accrued during the relevant financial year though the exact quantification could not be made in the absence of details furnished by the assessee. Such claim of the assesee is not acceptable. It is not disputed that the expenditure debited to P&L account is only a provision made on estimate basis. Payments of commission are also fixed in terms of the agreement entered into with the selling agents. In such circumstances, it would have been a difficult task to ascertain the amount of expenses payable and to whom payable. Therefore, there was necessity to create the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allowing expenditure neither actually incurred nor ascertained with certainty as payable by the assessee. Such deduction is impermissible in law. The argument not accepted by the Revenue and the Tribunal, even if entertained by us, establishes the perversity or illegality in the findings of fact recorded by the orders under appeal. Such is not the case. Next, the Tribunal recorded a finding of fact upon reexamination of all circumstances, hence, we do not see a question of law, much less a substantial question of law, warranting our interference on any of the conclusions recorded either by the Assessing Officer, Commissioner of Income-Tax (Appeals) or the Tribunal. We are in full agreement with the reasons recorded both by the Assessing Officer and the Tribunal, and the question is answered against the assessee and in favour of the Revenue. 6.1 It is argued, for the assessee, that though the provision made towards commission payable to commission agents could not be established by the assessee for the previous year ending on 31.03.2009 (Assessment Year 2009-10), according to learned Senior Advocate Mr Joseph Markos, the assessee, in fact, has paid commission to its agents throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents gain on cancellation of forward contracts relating to capital assets lying in CWIP. The Assessing Officer rejected the claim by recording that, firstly the reply of the assessee was not acceptable, secondly the case law mentioned by the assessee, though in its favour, since the Department has not accepted the decision in favour of the assessee and an appeal was pending in the Kerala High Court, the deduction claimed by the assessee was rejected. 9.2 The conclusions recorded by the Assessing Officer prima facie suffer from the following infirmities, namely, there is no consideration of any of the details furnished by the assessee. The decision between the parties, on which the assessee relied on was refused to be followed by observing that an appeal was pending in this Court. The said observation, it has been argued, is factually incorrect, for the Revenue did not file an appeal against an order where a finding in favour of the assessee was recorded. On the other hand, the assessee has filed ITA No.535/2009 in this Court. In the said Income Tax Appeal the assessee has raised the following substantial question of law and the findings recorded and considered by this Court have s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to the claim of assessee amounting to Rs. 1,63,79,541/-. The said amount is stated as unrealised foreign exchange gain on capital asset on foreign exchange forward contracts entered into for capital asset purposes. It means the capital asset is acquired through foreign exchange. The assessee claims to have derived foreign exchange gain in the Financial Year 2008-09. The nature of the gain is stated as unrealised capital gain on account of settlement of foreign exchange forward contract. In other words, a notional gain is derived by the assessee. The Assessing Officer, in the draft assessment order under Section 144C of the Act, disallowed the said claim and the disallowance was considered by the Dispute Resolution Panel (DRP) as objection no.11. The DRP and the Assessing Officer considered that the assessee rests its claim by referring to the decision of the Supreme Court in Commissioner of Income-Tax v. Woodward Governor India P. Ltd. (2009) 312 ITR 254 (SC) It is understood that the assessee is not entitled to deduction in the computation of income as the amount was unrealised. It was further recorded by the DRP that the assessee incorrectly, to its own advantage, interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in Woodward's case [2009] 312 ITR 254, the court observed thus (page 272): "... what triggers the adjustment in the actual cost of the assets, in terms of the unamended section 43A of the 1961 Act is the change in the rate of exchange subsequent to the acquisition of asset in foreign currency. The section mandates that at any time there is change in the rate of exchange, the same may be given effect to by way of adjust ment of the carrying cost of the fixed assets acquired in foreign currency. But for section 43A which corresponds to paragraph 10 of AS-II such adjustment in the carrying amount of the fixed assets was not possible, particularly in the light of section 43(1). The unamended section 43A nowhere required as condition precedent for making necessary adjustment in the carrying amount of the fixed asset that there should be actual payment of the increased/decreased liability as a consequence of the exchange variation. The words used in the unamended section 43A were 'for making payment' and not 'on pay ment which is now brought in by amendment to section 43A, vide the Finance Act, 2002." 15. Opining that the amendment of section 43A of the Act by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,63,97,541/- has been made. Therefore, he contends that the assessee is entitled for deduction of unrealised foreign exchange capital gain while taking the benefit under Section 43A of the Act in computation of net income of the assessee. 13. Per contra, learned Standing Counsel submits that it is one aspect of the matter, if deduction is made while computing the net income of the assessee and it is definitely a different circumstance if due credit is shown in the form of reduced expenditure booked by the assessee. The situation is a matter of record on a case-to-case basis. He further states that the documents now filed by the assessee are to be appreciated and decided by this Court. 14. We have carefully perused the explanation offered by the assessee to the draft assessment order and the case argued before the DRP. In our considered view, the first error committed in this behalf is that the authorities have gone backwards by appreciating the case of assessee on the legal principle laid down in Woodward Governor India P. Ltd. and ONGC cases. Even in this behalf the appreciation of the reported decisions is not in line with the facts or the dictum laid down by Woodward Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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