THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM vs. OLAM AGRO INDIA LIMITED, KOLLAM

ITA/52/2015HC KeralaKLHC01025453201506 October 2017Author: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC6 pages
AI SummaryDismissed

What were the facts?

The appeal concerns the assessment year 2008-2009. The assessee, Olam Agro India Limited, a subsidiary of M/s Olam Investments Ltd., Mauritius, had its accounts audited. The Assessing Officer (AO) passed a draft assessment order proposing an addition of ₹63,73,179 by disallowing loss under derivatives contracts. The assessee objected before the Dispute Resolution Panel (DRP), which upheld the AO's proposed additions. The Joint Commissioner of Income Tax completed the assessment, including the disallowance. The Income Tax Appellate Tribunal (ITAT) set aside this disallowance, leading to the present appeal by the revenue challenging the ITAT's order.

What did the High Court hold?

The Tribunal held that the assessee was legally entitled to adopt AS-31 for the assessment year 2008-2009. The court noted that while AS-31 was mandatory from FY 2011-2012, there was no statutory prohibition preventing its adoption earlier. Since the revenue could not demonstrate any such statutory bar, the assessee's adoption of AS-31 was permissible. Consequently, the AO could not fault the assessee for adopting this standard and maintaining accounts on that basis. The revenue did not dispute that if AS-31 was validly adopted, the deduction for loss under derivative contracts of ₹63,73,179 would be allowable. Therefore, the Tribunal's conclusion that the AO was not justified in making the disallowance was upheld. The appeal was dismissed, with the questions of law answered in favour of the assessee.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Was the assessee entitled to change its system of accounting for the assessment year 2008-09? 2. Is the order of the Tribunal erroneous for having deleted the amount of ₹63,73,179/- disallowed under loss on forward contracts by the AO when the changed system of accounting was not in force for the assessment year 2008-09? 3. Did the Tribunal act contrary to law in interfering with the disallowance of ₹63,73,179/-, having regard to the reasoning contained in the assessment order? The revenue contended that the assessee adopted Accounting Standard (AS)-31 for the assessment year 2008-2009, which was mandatory only from the financial year 2011-2012, and this adoption resulted in a loss of revenue. The assessee argued that it was legally entitled to adopt AS-31. The judgment does not record specific arguments from the assessee beyond what is implied in the court's reasoning.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C,Section 144C(9),Section 144C(13)

AI-generated summary — verify with the full judgment below

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 DATED 22-11-2013 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 AOF THE ORDER OF THE DISPUTE RESOLUTION PANEL, BANGALORE DTD.28.8.2012. ANNEXURE BOF THE ORDER U/S 143(3) R.W.S.144C(13) OF THE JOINT COMMISSIONER OF INCOME TAX, KOLLAM DTD.27.12.2012. ANNEXURE COF THE ORDER OF THE APPELLATE TRIBUNAL DTD.22.11.2013.P.S.

The order continues below.

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