Ita/249/2015 Of M/S. Appollo Tyres Ltd v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 26 DAY OF AUGUST 2021 / 4TH BHADRA, 1943 ITA NO. 249 OF 2015 AGAINST THE ORDER IN IT(TP)A No.02/COCH/2014 OFI.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: M/S. APOLLO TYRES LTD6TH FLOOR, CHERUPUSHPAM BUILDINGS, SHANMUGHAM ROAD, ERNAKULAM, KOCHI-682031. (PAN: AAACA699Q). BY ADVS.SRI.JOSEPH MARKOSE (SR.)SRI.V.ABRAHAM MARKOSSRI.ABRAHAM JOSEPH MARKOSSRI.BINU MATHEWSRI.ISAAC THOMASSRI.NOBY THOMAS CYRIACSRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/S: THE ASSISTANT COMMISSIONER OF INCOME TAXCIRCLE-1(1), ERNAKULAM, KOCHI-682018. BY ADV CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 26.08.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. No. 249/2015 J U D G M E N T S.V. Bhatti, J. Heard learned Senior Counsel Mr Joseph Markos and learned Standing Counsel Mr Christopher Abraham for parties. 2.M/s. Apollo Tyres Ltd Kochi/Assessee is theappellant. The Assistant Commissioner of Income Tax, Circle-1,Ernakulam/Revenue is the respondent. 3. The assessee assails the order dated 21.11.2014 of the Income Tax Appellate Tribunal (for short ‘Tribunal) CochinBench in IT(TP)A No.02/Coch/2014. The issues canvassed in theappeal relate to the return filed by the assessee for theAssessment Year 2009-10. Substantial question nos. (a) and (b)read as follows: I.T.A. No. 249/2015 “a) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal("Tribunal") was right in treating the income ofRs.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 expensespertaining to said property had been allowed asbusiness expenditure the Appellate Tribunal erred intreating the above income as income from houseproperty? 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 theAssessment Year 2003-04 in ITA No.26/2013. This Court videorder dated 29.07.2021 has answered the said questions againstthe assessee and in favour of the Revenue. By following the I.T.A. No. 249/2015 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 ofthe case the Tribunal was right in confirming thedisallowance of the amount of Rs. 1,03,92,000/- beingyear-end provision for payment of commission as anunascertained liability? 5.1The assessee for the Assessment Year 2009-10 booked an expenditure of Rs.5,00,36,912/- towards commission paid tothe selling agents of the assessee. The said expenditureincluded an amount of Rs.1,03,92,000/- representing provisionmade as on 31.03.2009 towards commission payable by theassessee to commission agents, through whom the assesseeclaims to have made sales in favour of State Transport I.T.A. No. 249/2015 favour of the Revenue and against the assessee. 5.Substantial question no.(c) reads thus: “c) Whether on the facts and in the circumstances ofthe case the Tribunal was right in confirming thedisallowance of the amount of Rs. 1,03,92,000/- beingyear-end provision for payment of commission as anunascertained liability? 5.1The assessee for the Assessment Year 2009-10 booked an expenditure of Rs.5,00,36,912/- towards commission paid tothe selling agents of the assessee. The said expenditureincluded an amount of Rs.1,03,92,000/- representing provisionmade as on 31.03.2009 towards commission payable by theassessee to commission agents, through whom the assesseeclaims to have made sales in favour of State Transport I.T.A. No. 249/2015 Undertakings (STUs). The Assessing Officer sought clarificationon the claim of Rs.1,03,92,000/- towards expenditure which hasbeen a provision created for payment of commission to theagents through whom the assessee claims to have effected salesin favour of STUs. The assessee replied that the subjectdeduction is an ad hocprovision made by the assessee, since thequantum of commission payable to each one of the commissionagents for the sales made to STUs through them could not bequantified and that the commission payable to them is alsonegotiable. Since no payment as commission was made to thecommission agents, tax at-source was not deducted. However,while making the payment, TDS could be effected. Theprovision made was also reversed in the subsequent year, actualcommission payable to each party in respect of sales madethrough them to STUs was quantified, the tax was dulydeducted at-source and deposited with the Department. I.T.A. No. 249/2015 5.2The Assessing Officer disallowed the provision madeby the assessee towards commission payable to STU commissionagents, amounting to Rs.1,03,92,000/-. The reason assigned bythe Assessing Officer is that the assessee did not deduct TDSfrom the amount payable to the commission agents. The ex postfactoreversing of the entry and payment of commission in thesubsequent year together with deduction of TDS is notacceptable while treating the provision made for theAssessment Year 2009-10. The subject expenditure does notsatisfy the provision of Section 40(a)(ia) of the Act. A mereprovision of expenditure is not allowable as expenditureinasmuch as the assessee has not suffered actual expenditure onaccount of the said commission payable to the agents. Theconclusion and reasoning of the Assessing Officer was affirmedby the Commissioner of Income Tax (Appeals). The Tribunalindependently examined the tenability of the deduction, I.T.A. No. 249/2015 considered every facet of the explanation given by the assesseeand whether it merits acceptance as an expenditure for thesubject Assessment Year. Briefly stated, the conclusionrecorded by the Tribunal is apt to be reproduced, and reads asfollows: “27. It is evident from the orders of the lower authorities thatthe provisions for the expenditure claimed on account ofpayable has been disallowed as it is in the nature of provisiononly and is not an ascertained liability. Whereas it is thecontention of the assessee that the provision has been madeunder the matching concept principle of accountancy and thesame has been accrued during the relevant financial yearthough the exact quantification could not be made in theabsence of details furnished by the assessee. Such claim of theassesee is not acceptable. It is not disputed that theexpenditure debited to P&L account is only a provision madeon estimate basis. Payments of commission are also fixed interms of the agreement entered into with the selling agents. Insuch circumstances, it would have been a difficult task to ascertain the amount of expenses payable and to whompayable. Therefore, there was necessity to create the provisionfor expenditure on adhoc basis. It is also a fact on record thatwhen the AO asked the assessee to furnish details ofexpenditure, the same was not furnished and it was stated thatit was made only on adhoc basis. From this it is clear that whenclaiming the provision to be allowed as expenditure, theassessee treats it as a known and ascertained liability accruedduring the financial year, however, when confronted with theobligation under the TDS provision, the assessee takes acontradictory stand that the deductees are not identifiable andin absence of details relating to correct amount to be paid andcorrect amount of TDS, adhoc deduction of tax on estimatedprovision was not possible.The assessee cannot be allowed totake such contradictory stand. It is also a fact that the assesseehas not been able to substantiate as to how the said provisionwas only in respect of the service providers for which revenuewas recognized for relevant year. So far as the decisions reliedupon by the assessee are concerned, they are found to bedistinguishable on facts and do not apply to the case of the I.T.A. No. 249/2015 assessee. Thus, the liabillity on account of expenses as well asthe identity of the persons to whom it is payable is ascertainedthought it was payable in future. However, in case of theassessee neither the exact amount payable nor to whompayable are ascertained. The ratio laid down in other citedcases are also on similar lines. In aforesaid view of matter, wefully agree with the findings of the DRP and hold thatexpenditure claimed is not allowable.” (emphasis supplied) 6. Mr Joseph Markos appearing for the assessee tried to convince this Court to take a different view by the very sameargument put forward by the assessee before the Tribunal andthe Assessing Officer. We have two difficulties in appreciatingthe argument of the assessee to accept the provision madetowards commission payable to the agents through whom saleshave been affected in favour of STUs. Firstly, the liabilityarising on account of the expenditure for which a provision is I.T.A. No. 249/2015 made could not be crystallized by the assessee as anexpenditure. The provision for which deduction is claimedincludes an unascertained amount of expenditure and thepersons to whom the said commission was payable by theassessee. The deduction, if results in favourable considerationat our hands, then it would amount to allowing expenditureneither actually incurred nor ascertained with certainty aspayable by the assessee. Such deduction is impermissible inlaw. The argument not accepted by the Revenue and theTribunal, even if entertained by us, establishes the perversity orillegality in the findings of fact recorded by the orders underappeal. Such is not the case. Next, the Tribunal recorded afinding of fact upon reexamination of all circumstances, hence,we do not see a question of law, much less a substantialquestion of law, warranting our interference on any of theconclusions recorded either by the Assessing Officer, I.T.A. No. 249/2015 Commissioner of Income-Tax (Appeals) or the Tribunal. We arein full agreement with the reasons recorded both by theAssessing Officer and the Tribunal, and the question isanswered against the assessee and in favour of the Revenue. I.T.A. No. 249/2015 Commissioner of Income-Tax (Appeals) or the Tribunal. We arein full agreement with the reasons recorded both by theAssessing Officer and the Tribunal, and the question isanswered against the assessee and in favour of the Revenue. 6.1It is argued, for the assessee, that though theprovision made towards commission payable to commissionagents could not be established by the assessee for the previousyear ending on 31.03.2009 (Assessment Year 2009-10), accordingto learned Senior Advocate Mr Joseph Markos, the assessee, infact, has paid commission to its agents through whom saleshave been affected in favour of STUs. The claim made in thesubsequent year if not considered, then the assessee would bedenied of claiming legitimate expenditure which the assesseehas incurred for effecting the sales, and the expenditure isallowed in the subsequent Financial Year. I.T.A. No. 249/2015 7.We appreciate the contention of the assessee and we are of the view that the finding now recorded, either by theTribunal or by us while answering this question ought to belimited for the purpose of deduction claimed by the assessee forthe Assessment Year 2009-10. Therefore, the assessee could begiven liberty to prove actual payment made in favour ofcommission agents in any subsequent year before the AssessingOfficer, place such proof of the expenditure incurred onaccount of commission paid to the agents and upon such detailsbeing furnished by the assessee, the Assessing Officer isrequired to pass revised assessment order in respect of suchclaims. With the above observation, question no.(c) is answered infavour of the Revenue and against the assessee. 8.Substantial question no.(d) reads as follows: I.T.A. No. 249/2015 “d) Whether on the facts and in the circumstances of the case and in the light of the decision of SpecialBench in appellant's own case the Appellate Tribunalwas right in holding that the interest component in theforeign exchange gain was a revenue receipt?” 9. Senior Advocate Mr Joseph Markos, to enable the Court to appreciate the intricacy involved in the substantialquestion raised by the assessee, has prefaced his submission byinviting our attention to paragraph 31 of the Tribunal’s order,which reads thus: “31. We have heard both the parties and perused the record. In ouropinion, gain earned from cancellation of foreign exchangeforward contracts which are connected with foreign loans raisedfor purchase of capital asset should be reduced from cost of plantand machinery to the extent of amount relating to the principalportion as held by the ITAT, Special Bench, Delhi in the assessee'sown case (89 ITD 235). However, foreign exchange fluctuation I.T.A. No. 249/2015 related to the interest portion is to be treated as revenue receiptwhich shall be brought to tax. Being so, this ground of the assessee.is partly allowed(emphasis supplied) 9.1The assessee claimed an amount of Rs.3,74,58,280/-as deduction from the total income. The said claim representsgain on cancellation of forward contracts relating to capitalassets lying in CWIP. The Assessing Officer rejected the claimby recording that, firstly the reply of the assessee was notacceptable, secondly the case law mentioned by the assessee,though in its favour, since the Department has not accepted thedecision in favour of the assessee and an appeal was pending inthe Kerala High Court, the deduction claimed by the assesseewas rejected. 9.2The conclusions recorded by the Assessing Officerprima faciesuffer from the following infirmities, namely, there is The conclusions recorded by the Assessing Officer no consideration of any of the details furnished by the assessee. 9.1The assessee claimed an amount of Rs.3,74,58,280/-as deduction from the total income. The said claim representsgain on cancellation of forward contracts relating to capitalassets lying in CWIP. The Assessing Officer rejected the claimby recording that, firstly the reply of the assessee was notacceptable, secondly the case law mentioned by the assessee,though in its favour, since the Department has not accepted thedecision in favour of the assessee and an appeal was pending inthe Kerala High Court, the deduction claimed by the assesseewas rejected. 9.2The conclusions recorded by the Assessing Officerprima faciesuffer from the following infirmities, namely, there is The conclusions recorded by the Assessing Officer no consideration of any of the details furnished by the assessee. The decision between the parties, on which the assessee reliedon was refused to be followed by observing that an appeal waspending in this Court. The said observation, it has been argued,is factually incorrect, for the Revenue did not file an appealagainst an order where a finding in favour of the assessee wasrecorded. On the other hand, the assessee has filed ITANo.535/2009 in this Court. In the said Income Tax Appeal theassessee has raised the following substantial question of lawand the findings recorded and considered by this Court havesome relevance for the outcome of the present question. “Whether on the facts and circumstances of the case, the gains on the cancellation of forward contracts, heldto be a capital receipt, were liable to be set-off againstthe cost of acquisition of imported plant andmachinery.” I.T.A. No. 249/2015 9.3This Court observed that the finding of the Tribunalthat it, namely gains on the cancellation of forward contracts, isa capital receipt and not a revenue receipt, has become final asthere is no challenge at the instance of the Revenue. Byreferring to the said conclusion, the case of the assessee is thatthe Tribunal, though has accepted the claim of the assessee,however has observed erroneously that foreign exchangefluctuation related to the interest portion is to be treated asrevenue receipt, it shall be brought to tax. Being so, thisground of the assessee is partly allowed. 10.The conclusion/finding in our view is erroneous:firstly that this Court in the decision reported in Apollo Tyres Ltdv. Assistant Commissioner of Income Tax[1], has recorded a findingthat the gains on the cancellation of forward contracts are acapital receipt and not a revenue receipt. Such a finding has I.T.A. No. 249/2015 become final between the assessee and the Revenue. The underlined portion excerpted above is liable to be set aside forit treats the capital gain as revenue receipt. From the viewstaken by this Court, the receipt is treated as capital gain andthis is accepted by the Tribunal. However, an unintendedobservation is resulting in contradictory findings. We affirmthe substantial findings recorded in favour of the assessee inparagraph 31 of the order under appeal, and while affirming thesaid finding we set aside the following observation in the orderof the Tribunal: “However, foreign exchange fluctuation related to the interest portion is to be treated as revenue receiptwhich shall be brought to tax. Being so, this ground of”.the assessee is partly allowed As indicated above, the question is answered in favour of theassessee and against the Revenue. I.T.A. No. 249/2015 -18- 11.Substantial question no.(e) reads as follows: “e) Whether on the facts and in the circumstances of the casethe Appellate Tribunal was right in holding that the amount ofRs.1,63,97,541/- on account of foreign exchange fluctuation hasto be treated as revenue income?” 11.1The substantial question of law relates to the claim of “However, foreign exchange fluctuation related to the interest portion is to be treated as revenue receiptwhich shall be brought to tax. Being so, this ground of”.the assessee is partly allowed As indicated above, the question is answered in favour of theassessee and against the Revenue. I.T.A. No. 249/2015 -18- 11.Substantial question no.(e) reads as follows: “e) Whether on the facts and in the circumstances of the casethe Appellate Tribunal was right in holding that the amount ofRs.1,63,97,541/- on account of foreign exchange fluctuation hasto be treated as revenue income?” 11.1The substantial question of law relates to the claim of assessee amounting to Rs.1,63,79,541/-. The said amount isstated as unrealised foreign exchange gain on capital asset onforeign exchange forward contracts entered into for capitalasset purposes. It means the capital asset is acquired throughforeign exchange. The assessee claims to have derived foreignexchange gain in the Financial Year 2008-09. The nature of thegain is stated as unrealised capital gain on account ofsettlement of foreign exchange forward contract. In otherwords, a notional gain is derived by the assessee. The AssessingOfficer, in the draft assessment order under Section 144C of the I.T.A. No. 249/2015 Act, disallowed the said claim and the disallowance wasconsidered by the Dispute Resolution Panel (DRP) as objectionno.11. The DRP and the Assessing Officer considered that theassessee rests its claim by referring to the decision of theSupreme Court in Commissioner of Income-Tax v. WoodwardGovernor India P. Ltd.[2] It is understood that the assessee is notentitled to deduction in the computation of income as theamount was unrealised. It was further recorded by the DRP thatthe assessee incorrectly, to its own advantage, interpreted theprinciple laid down in Woodward Governor India P. Ltd. case. It isaccepted by DRP that the unrealised capital gain on foreignexchange issued is on capital account and for the said reason,the principle in Woodward Governor India P. Ltdcase is not on allfours acceptable. The decision allows notional loss/gain onrevenue account but not on capital account. This entailedrejection of the claim of the assessee. The Assessing Officer2(2009) 312 ITR 254 (SC) recorded that the Woodward Governor India P. Ltdcase deals withrevenue loss and the situation in the case on hand deals withcapital assets. The result of the brief discussion of the AssessingOfficer is that: “unrealised foreign exchange gain ofRs.1,63,97,541/- is disallowed and added to the total income.” 11.2The Tribunal has taken note of the fact that theassessee has reduced an amount of Rs.1,63,97,541/- at thecomputation stage and distinguished that there is differencebetween notional loss on capital account and the case relied onby the assessee deals with revenue loss. 12.Senior Advocate argues that the authorities underthe Act and the Tribunal fell in patent error of fact and law infirstly understanding the difference of expression employed inSection 43A prior to amendment and after the amendment witheffect from 01.04.2003. The judgments relied on by the assessee Senior Advocate argues that the authorities under I.T.A. No. 249/2015 in Woodward Governor India P. Ltd. case and Oil and Natural GasCorporation Ltd (ONGC) v. Commissioner of Income-Tax[3]shall not beunderstood as dealing only with revenue loss; the decision inWoodward Governor India P. Ltd. case the Supreme Court made itclear that after amendment the adjustment in actual cost is tobe made only on actual payment, with reference to gain withForeign Exchange implication on capital account. He refers tothe following paragraphs in ONGCcase to argue that thereported decisions of the Supreme Court deal with both, capitalloss and revenue loss, on account of foreign exchangefluctuation and that adjustment in actual cost is made on actualpayment. The paragraphs relied on are: Senior Advocate argues that the authorities under I.T.A. No. 249/2015 in Woodward Governor India P. Ltd. case and Oil and Natural GasCorporation Ltd (ONGC) v. Commissioner of Income-Tax[3]shall not beunderstood as dealing only with revenue loss; the decision inWoodward Governor India P. Ltd. case the Supreme Court made itclear that after amendment the adjustment in actual cost is tobe made only on actual payment, with reference to gain withForeign Exchange implication on capital account. He refers tothe following paragraphs in ONGCcase to argue that thereported decisions of the Supreme Court deal with both, capitalloss and revenue loss, on account of foreign exchangefluctuation and that adjustment in actual cost is made on actualpayment. The paragraphs relied on are: “14.On the question whether an assessee is entitled to adjustthe actual cost 14 of imported assets acquired in foreigncurrency on account of fluctuation in the rate of exchange ateach balance-sheet date, pending actual payment of the variedliability with reference to unamended section 43A of the Act, 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, interms of the unamended section 43A of the 1961 Act is the changein the rate of exchange subsequent to the acquisition of asset inforeign currency. The section mandates that at any time there ischange in the rate of exchange, the same may be given effect to byway of adjust ment of the carrying cost of the fixed assets acquiredin foreign currency. But for section 43A which corresponds toparagraph 10 of AS-II such adjustment in the carrying amount ofthe fixed assets was not possible, particularly in the light ofsection 43(1). The unamended section 43A nowhere required ascondition precedent for making necessary adjustment in thecarrying amount of the fixed asset that there should be actualpayment of the increased/decreased liability as a consequence ofthe exchange variation. The words used in the unamended section43A were 'for making payment' and not 'on pay ment which is nowbrought in by amendment to section 43A, vide the Finance Act,2002." 15.Opining that the amendment of section 43A of the Act bythe Finance Act, 2002 with effect from April 1, 2003 isamendatory and not clarificatory and would thus, applyprospectively, the court explained that under the unamendedsection 43A, adjustment to the actual cost takes place on thehappening of change in the rate of exchange, whereas under the amended section 43A, the adjustment in the actual cost ismade on cash basis. In other words, under the unamendedsection 43A, "actual payment" was not a condition precedentfor making necessary adjustment in the carrying cost of thefixed asset acquired in foreign currency but under theamended section 43A, with effect from April 1,2003, suchpayment of the decreased/enhanced liability on account offluctuation in foreign exchange rate has been made a conditionprecedent for making adjustment in the carrying amount ofthe fixed asset. 16.We are of the opinion that the decision of this court inWoodward'scase [2009] 312 ITR 254 settles the second issue aswell. We respectfully concur with the same and hold that allthe assessment years in question being prior to the amendmentin section 43A of the Act with effect from April 1, 2003 theassessee would be entitled to adjust the actual cost of theimported capital assets, acquired in foreign currency, onaccount of fluctuation in the rate of exchange at each of therelevant balance-sheet dates pending actual payment of the”.varied liability (emphasis supplied) 16.We are of the opinion that the decision of this court inWoodward'scase [2009] 312 ITR 254 settles the second issue aswell. We respectfully concur with the same and hold that allthe assessment years in question being prior to the amendmentin section 43A of the Act with effect from April 1, 2003 theassessee would be entitled to adjust the actual cost of theimported capital assets, acquired in foreign currency, onaccount of fluctuation in the rate of exchange at each of therelevant balance-sheet dates pending actual payment of the”.varied liability (emphasis supplied) 12.1He contends that the assessee at the first instancereduced the notional foreign exchange fluctuation gain againstthe miscellaneous expenses shown in Schedule IX:Manufacturing and other expenses. The result thereby is thatthe expenses that could be claimed by the assessee have comedown and corresponding deduction is claimed in thecomputation of net income of the assessee. The said procedureconforms to the accounting standard-11 by referring to whichthe accounts of the assessee are finalised. The conclusionsrecorded by the Tribunal and the authorities ignored that theassessee has reduced the actual expenses in Schedule IX of theaudit report. In other words, it amounts to giving due credit tothe foreign exchange fluctuation gain. The subject entry is anotional gain, no prudent trader cares to show the unrealisedgain in the computation and pay income-tax on suchunrealised/notional gain, deduction, hence, from computation I.T.A. No. 249/2015 of total income of Rs.1,63,97,541/- has been made. Therefore,he contends that the assessee is entitled for deduction ofunrealised foreign exchange capital gain while taking thebenefit under Section 43A of the Act in computation of netincome of the assessee. 13.Per contra, learned Standing Counsel submits that it isone aspect of the matter, if deduction is made while computingthe net income of the assessee and it is definitely a differentcircumstance if due credit is shown in the form of reducedexpenditure booked by the assessee. The situation is a matterof record on a case-to-case basis. He further states that thedocuments now filed by the assessee are to be appreciated anddecided by this Court. 14.We have carefully perused the explanation offered by the assessee to the draft assessment order and the case argued I.T.A. No. 249/2015 before the DRP. In our considered view, the first errorcommitted in this behalf is that the authorities have gonebackwards by appreciating the case of assessee on the legalprinciple laid down in Woodward Governor India P. Ltd. and ONGCcases. Even in this behalf the appreciation of the reporteddecisions is not in line with the facts or the dictum laid down byWoodward Governor India P. Ltd. & ONGC. It was not examined bythe authorities on the actual details furnished in Schedule IX,the effect thereof, and Section 43A, as is applicable, enables theassessee to revise the value before actual payment of suchamount. The assessee, it is brought to our notice that, in thesubsequent Financial Year, has duly accounted for this item inthe Financial Year 2008-09 and added it to the income in theFinancial Year 2009-10. The authorities and the Tribunal havedenied the claim more by inappropriately appreciating theaccounting standard followed by the assessee and the effect to I.T.A. No. 249/2015 be given at the stage of preparation of P&L account and balance sheet for the year ending 31.03.2009 and the claim to which theassessee is entitled while filing the return. I.T.A. No. 249/2015 be given at the stage of preparation of P&L account and balance sheet for the year ending 31.03.2009 and the claim to which theassessee is entitled while filing the return. 14.1 As we understand from the record, the gist of themethod followed by the assessee is that, the assessee inSchedule IX claimed less deduction than claimable by adjustingthe notional capital gain on Forex and correspondingdeductions of the same amount while computing the netincome of assessee for purpose of tax. In effect, both credit anddebit are given and the tax liability is not materially impacted.Anyway, when the actual event has taken place, tax is stated tohave been paid. The converse is that if the deduction isdisallowed, the assessee would be called upon to pay tax onunrealised/notional capital gain; the treatment is as per theaccounting standard, and the claim for deduction conformswith Section 43A of the Act. For the above reasons, we answer question no.(e) in favour of the assessee and against theRevenue. ITA No.249/2015 is allowed in part as indicated above. Thesubstantial question nos.(a) to (c) are answered in favour of theRevenue, against the assessee, and question nos.(d) and (e) areanswered in favour of the assessee, against the Revenue. Sd/-S.V.BHATTIJUDGESd/-VIJU ABRAHAMJUDGE I.T.A. No. 249/2015 APPENDIX OF ITA 249/2015 PETITIONER ANNEXURE ANNEXURE A TRUE COPY OF THE ORDER DATED 24/01/2013 ISSUED BYTHE TRANSFER PRICING OFFICER. ANNEXURE B TRUE COPY OF THE DRAFT ASSESSMENT ORDER DATED 28/03/2013 PASSED BY THE RESPONDENT. ANNEXURE CTRUE COPY OF THE ORDER DATED 10/12/2013 PASSED BY THE DISPUTE RESOLUTION PANEL, BANGALORE. ANNEXURE D TRUE COPY OF THE FINAL ASSESSMENT ORDER DATED 31/12/2013 PASSED BY THE RESPONDENT. ANNEXURE ETRUE COPY OF THE APPEAL DATED 12/02/2014 FILED BY THE APPELLANT BEFORE THE ITAT, KOCHI. ANNEXURE F CERTIFIED COPY OF THE IMPUGNED ORDER DATED 21/11/2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH.