Ita/52/2015 Of The Commissioner Of Income Tax, Thiruvananthapuram v. Olam Agro India Limited, Kollam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, THE 6TH DAY OF OCTOBER 2017/14TH ASWINA, 1939 ITA.No. 52 of 2015 () ---------------------- AGAINST THE ORDER IN ITA 3/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED22-11-2013 APPELLANT/RESPONDENT:------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM TRIVANDRUM BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT:-------------------- OLAM AGRO INDIA LIMITED,BISHOP JEROME NAGAR, KOLLAM 691 001 R1 BY ADV. SRI.P.RAVEENDRAN PILLAI R1 BY ADV. SMT.INDIRA RAVEENDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06-10-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.52 of 2015 APPENDIX APPELLANT'S ANNEXURES: ANNEXURE ATRUE COPY OF THE ORDER OF THE DISPUTE RESOLUTION PANEL,BANGALORE DTD.28.8.2012. ANNEXURE BTRUE COPY OF THE ORDER U/S 143(3) R.W.S.144C(13) OF THEJOINT COMMISSIONER OF INCOME TAX, KOLLAM DTD.27.12.2012. ANNEXURE CTRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNALDTD.22.11.2013. TRUE COPY P.S.TO JUDGE Antony Dominic & Dama Seshadri Naidu, JJ. ------------------------------------------- ITA No.52 of 2015 -------------------------------------------- Dated this the 6[th] day of October, 2017 JUDGMENT Antony Dominic, J. This appeal is filed by the revenue impugning the order passedby the Income Tax Appellate Tribunal in ITA No.3 of 2013concerning the assessment year 2008-2009. The assessee is asubsidiary company of M/s Olam Investments Ltd., Mauritius.During the course of the assessment, the Assessing Officer passed adraft order under section 144C making an addition of `63,73,179by disallowing loss under derivatives contract, along with otheradditions. The assessee challenged the additions proposed beforethe Dispute Resolution Panel, Bangalore. The Dispute ResolutionPanel issued its directions under section 144 read with section 144C(9) of the Income Tax Act rejecting the objections of the assesseeand upholding the assessments made by the assessing officer.Annexure-A is the copy of the direction issued by the Dispute I.T.Appeal No.52 of 2015 2 Resolution Panel. The Joint Commissioner of Income Taxcompleted the assessment under Section 143(3) read with section144C(13) of the Act estimating the total income of the assesseewhich included the disallowance of an amount of `63,73,179.Annexure-B is the assessment order. The assessee filed an appealbefore the Income Tax Appellate Tribunal and by Annexure-C orderthe Tribunal held that the Assessing Officer was not justified inmaking the impugned disallowance of `63,73,179 and accordingly,set aside to that extent. It is the order of the Tribunal to the aboveextent which is impugned by the revenue and the questions of lawframed read as under: a)Was the assessee entitled to change the system ofaccounting for the assessment year 2008-09? b)Is the order of the Tribunal erroneous for havingdeleted the amount of Rs.63,73,179/- disallowed under Losson forward contracts by the assessing officer when thechanged system of accounting was not in force for theassessment year 2008-09? c)Did the Tribunal act contrary to law in interfering withthe disallowance of Rs.63,73,179/-, having regard to thereasoning contained in the assessment order? 2. We heard the learned senior counsel and the learned counsel for the assessee. a)Was the assessee entitled to change the system ofaccounting for the assessment year 2008-09? b)Is the order of the Tribunal erroneous for havingdeleted the amount of Rs.63,73,179/- disallowed under Losson forward contracts by the assessing officer when thechanged system of accounting was not in force for theassessment year 2008-09? c)Did the Tribunal act contrary to law in interfering withthe disallowance of Rs.63,73,179/-, having regard to thereasoning contained in the assessment order? 2. We heard the learned senior counsel and the learned counsel for the assessee. 3. The orders show that the assessee was maintaining itsaccounts on the basis of the instructions issued by the Institute ofChartered Accountants of India. While so, the institute revised itsinstructions and issued AS-31, making it mandatory only with effectfrom the financial year 2011-2012. However, the assessee adoptedAS-31 for the assessment year 2008-2009, which, according to theAssessing Officer, resulted in loss of revenue. It is on that basis theAssessing Officer made the impugned disallowance and consequentaddition to the total income of the assessee. Despite our specificquery as to whether there was any statutory prohibition preventingthe assessee from adopting AS-31 for the assessment year 2008-2009,the revenue was unable to show us any such statutory bar. In otherwords, it is evident from the submissions made by the revenue itselfthat the assessee was legally entitled to adopt AS-31 for theassessment year 2008-2009. If that be so, the Assessing Officer couldnot have faulted the assessee for having adopted AS-31 for theassessment year 2008-2009 and maintained its account on that basis. I.T.Appeal No.52 of 2015 4 The revenue has no case that if AS-31 was validly adopted by theassessee, the assessee could not have been allowed deduction towardsloss under derivative contracts of `63,73,179. Therefore, theconclusion is irresistible that the assessee was legally entitled toadopt AS-31 for the assessment year 2008-2009 and on suchadoption, the assessee was entitled to the deduction as well. If thatbe so, the Tribunal was fully justified in its conclusion that theAssessing Officer was not justified in making the impugneddisallowance of `63,73,179. Therefore, we do not find any illegalityin the order of the Tribunal. Answering the questions of law in favour of the assessee andagainst the revenue, the appeal is dismissed. sd/- Antony Dominic, Judge css/ true copy sd/- Dama Seshadri Naidu, Judge P.S.TO JUDGE