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TMI Blog2008 (9) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts outside India for which approval of the Reserve Bank of India was required. The fact that the liability had accrued as per the contract cannot be disputed. Once that is the case, then, where the assessee follows the mercantile system of accounting, it cannot be said that the liability had not accrued in terms of the contract. X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed on this issue by the revenue does not call for any further consideration by this Court. 5. Coming to the first issue sought to be raised by the revenue, we find that the same is also covered by the decision of this Court in the case of Bhai Sunder Dass & Sons Co. P. Ltd v. CIT [2003] 259 ITR 33. The factual background in respect of this issue is that the assessee entered into an agreement with EDS Global Services Inc., USA on 21.09.1999. Under the said agreement EDS Global Services Inc., USA provided the assessee with manpower for executing software projects. In consideration for services rendered, the assessee reimbursed the employment cost of the personnel, who were deputed for the purpose, to EDS Global Services Inc., USA, at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the Assessing Officer was reiterated. However, after hearing the parties and after going through the material available on record, the Tribunal noted that the genuineness of the agreement between the assessee and EDS Global Services Inc., USA was not in doubt and that the assessee was following the mercantile system of accounting. The Tribunal also noted that the liability for making the payment had arisen because of the terms of the contract entered into between the parties. It is in this context that the Tribunal concluded that the approval of the Reserve Bank of India for remittance of the payment would not come in the way of accrual of liability under the mercantile system of accounting. The Tribunal examined the Supreme Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals) in deleting the addition made by the Assessing Officer. 9. We are of the view that the decision taken by the Tribunal is absolutely correct in law. In Nonsuch Tea Estate Ltd. [1975] 98 ITR 189 the Supreme Court had noted that there was an absolute bar on the commission being paid to the managing agents unless and until the Central Government had approved such appointments in terms of Section 326 of the Companies Act, 1956. In the present case, there is no such express bar. In fact, the entire argument before the authorities below has proceeded on the basis that the approval for remittances was granted by the Reserve Bank of India in the year subsequent to the year in question. As noted in the Tribunals' orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required. The fact that the liability had accrued as per the contract cannot be disputed. Once that is the case, then, where the assessee follows the mercantile system of accounting, it cannot be said that the liability had not accrued in terms of the contract. 10. We note that in Bhai Sunder Dass and Sons Co. P. Ltd. [2003] 259 ITR 33 this Court had also considered the decision of the Supreme Court in Nonsuch Tea Estate Ltd. [1975] 98 ITR 189. There also this Court noted that in Nonsuch Tea Estate Ltd. [1975] 98 ITR 189 there was an absolute restriction against the appointment and re-appointment of managing agents without the approval of the Government and, therefore, till such approval had been obtained and granted there was no question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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