Brief of the case:
ITAT Chandigarh held in Lakshmi Energy & Foods Products Ltd Vs The ACIT that if the assessee was following mercantile method of accounting and it had booked loss in the assessment year in which the same had been determined then the same should be allowed because the assessee had taken all the required necessary steps to recover the amount, it had appealed to the ministry of commerce and also export departments etc but failed. So, it was determined in the year under appeal that the difference amount would not be recoverable so it had claimed the loss in its books of account. The revenue view that the same had been determined in the subsequent year of the year under appeal because the same was not confirmed by the opposite party was not tenable.
Deduction u/s 80IB(11A) cannot be allowed if return is filed late.
Moreover if the assessee had filed it return of income late then it would not be allowed deduction of sec 80IB(11A). Additional grounds of appeal could not be entertained if the return of income had been filled late.
Facts of the case:
The assesse’s assessment under sect ion 143(3)/153A of the Act was completed at Rs. 42,82,36,985/- on 30.12.2008. Addition of Rs. 18,21,20,035/- was made on account of loss claimed by the assessee in respect of lifting of wheat by M/s PEC Ltd. The assessee filed appeal before ld. CIT(Appeals) – I Ludhiana against the quantum of addition of Rs. 18.21 Cr made by Assessing Officer . The ld. CIT(Appeals) vide order dated 27.10.2009 dismissed the appeal of the assessee. The assessee preferred appeal before the Appellate Tribunal, who vide order dated 26.03.2010 restored the matter back to the file of Assessing Officer for fresh adjudication.
Contention of the assessee:
Assessee was of the view that as it was following the mercantile system of accounting so it should be allowed the loss suffered by assessee on loss on export of wheat. Further assessee was given only Rs 8.5 Cr out of total amount of Rs 18.42 Cr booked by the assessee in its books of account. The Assessee company had filed complaint with Hon’ble Prime Minister of India and matter was pending. It was contended that assessee’s accounts were maintained on mercantile basis and when liabilities denied by M/s PEC Ltd., assessee was justified in claiming the loss.
Moreover assessee was of the view that assessee should be allowed deduction u/s 80IB(11A) because it fulfills all the relevant conditions for the said deduction.
Contention of the revenue:
Revenue was of the view that the liability had not been crystallized in the assessment under appeal so loss could not be claimed by the assessee in the assessment year under appeal.
Moreover revenue was of the appeal that as the assessee had filed return of income late so additional grounds could not be entertained by the ITAT. So deduction u/s 80IB(11A) could not be allowed to the assessee.
Held by ITAT:
ITAT held that as the assesse had filed complaint to the Hon’ble Prime Minister of India for the loss suffered by the assessee. As the opposite party had denied the balance amount standing in the books of account of assessee in the assessment year under appeal so the loss should be allowed to the assessee as it was following mercantile system of accounting. ITAT had also considered the letter send to the opposite party and the reply received from it from where it was clear that the export receipts were actually less than what was agreed before.
So, assessee was right in considering the loss in the books of account in the assessment year under appeal.
Moreover as the assessee had filed its return of income late so additional grounds could not be entertained by the ITAT. So deduction could not be allowed to the assessee.
Appeal of the assessee was partly allowed.