IN INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI, BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER . I.T.A.No.724 Mds 2016 ( Assessm ent Year: 2007-08) M s. Madura Micro Finance Ltd., Vs Assistant Commissioner of 36, 2nd Main Road, Kasturba Nagar, Income Tax, Adyar, Chennai-20. Corporate Circle-4(1), Chennai-34. PAN: AAEC M48 49 ( Appellant) ( Respondent) Appellant by : Mr. V.S.Jayakumar, Advocate Respondent by : Mr. Sahadevan,JCIT Date of hearing : 6th June, 2016 D at e of Pr on oun c em ent : 15th September, 2016 O R D E R Per A. Mohan Alankamony, AM: This appeal is filed by assessee aggrieved by order of learned Commissioner of Income Tax (Appeals)- V, Chennai dated 31.01.2012 in ITA No.CIT (A)-V 231 2009- 10 passed under section 143(3) r.w.s. 250(6) of Act. 2. This appeal is filed by assessee with delay of 1431 days. whole-time Director of assessee company has filed affidavit before us dated 06.06.2016. relevant portion of affidavit is reproduced herein below for reference: 2 ITA No.724 Mds 2016 1. Appellant, Madura Micro Finance Limited, is public limited company. Company carries on micro finance business. I am Director of Appellant Company and I am well acquainted with facts of case relating to belated filing of Income Tax Appeal filed before this Hon'ble Tribunal for Assessment Year 2007-08. 2. Appellant Company filed Appeal before ITAT on 24th March 2016 against order of CIT (A) in ITA No.231 2009-10 dated 31.01.2012 and appeal was belatedly filed by 1431 days. impugned order of CIT (A) in ITA No.231 2009-10 was collected by Chartered Accountant, Mr. S.Nagarajan from office of CIT (A) on 23-02-2012 and it was handed over to Mr. M. Chockalingam, Accountant of Appellant Company, who is only authorised person to collect tapals, communications, orders, etc., from various statutory and non-statutory bodies including that of Income Tax Department, apart from Provident Fund, ESI, Service Tax Authorities, amongst others. 3. For assessment year 2007-08, Appellant Company filed its return of income on 29-10-2007. Appellant Company filed revised return of income on 17-10-2008. AO issued notice under section 143(2) on 05-08-2008. Appellant Company made claim that sum of Rs.2,10,99,000 -(wrongly mentioned as Rs. 2,05,99,000 - before AO) representing amount held in cash collateral by ICICI Bank, in respect of loans sold by Appellant Company to said ICICI Bank, during previous year relevant to assessment year 2007-08, was not its income. 4. Assessment was completed under section 143(3) on 30-11-2009 by AO rejecting said claim and adding Rs.2,10,99,000 - as income in hands of Appellant Company. 5. Appellant Company filed appeal against AO's order before CIT (A). CIT(A) did not accept plea of appellant company. appellant company is now in appeal against CIT (A)'s order before his Hon'ble Tribunal against quantum order passed under See 143(3) of Act which was confirmed by CIT(A). 3 ITA No.724 Mds 2016 6. Appellant Company's Chartered Accountant, Mr. S. Nagarajan, received impugned order of CIT (A) in ITA No.231 2009-10 dated 31.01.2012 on 23.02.2012 as stated in para 2 above. same was handed over to Mr. M. Chockalingam, accountant of Appellant Company. Mr. M. Chockalingam, who after receiving impugned order had misplaced it among other records of Company by oversight and same was irretrievably lost. receipt of order was not brought to knowledge of Appellant Company. Appellant Company was under bona fide impression that suitable action had been taken on this appellate order. Apparently, when all records were sorted out on 22nd March, 2016, due to re-arranging cupboards and shelves, as Company was asked to vacate office from existing premises at 36, " Main Road, Kasturba Nagar, Adyar, Chennai 600020 to new rented premises at 6th Floor, Karumuttu Centre, Nandanam, Chennai 600035, impugned order was found located amongst other records relating to Appellant Company. Immediately, Appellant Company sought advice of its counsel as to what action should be taken. 7. Accordingly, Appellant was advised to file belated appeal before this Hon'ble Tribunal against impugned order of CIT (A) who had confirmed addition made by AO in his order passed under See 143(3). appeal papers were handed over to our counsel on 22.03.2016 for preparing grounds and same was prepared and sent for signature of Director. ITAT appeal fees was also paid by way of challan on 22.03.2016. papers were duly signed and appeal was presented before Registry, ITAT on 24.03.2016. 8. I submit that Mr.Chockalingam of Appellant Company was appointed as accountant during September 2007. He was in-charge of collecting records and correspondences from all, including statutory authorities like, income tax, service tax and others and to maintain records. As stated earlier, he had misplaced impugned order of CIT (A) in which CIT (A) has sustained addition made by AO u s 143(3) and same was irretrievably lost. said order was mixed up amongst other records maintained by him belonging to Appellant Company. His lapse in his regular responsibilities were noticed when some of papers, 4 ITA No.724 Mds 2016 tapals, and other original papers from various statutory authorities were found missing as stated at Para 6 above. 9. I submit that domestic enquiry was conducted on Mr. M.Chockalingam on 22 03 2016 and suitable action was taken. Thereafter, Mr. M. Chockalingam himself resigned from Appellant Company on 31st March 2016. One such original order that was missing was that of impugned order of CIT (A). For best reasons known to Mr. M Chockalingam, he was found to have kept those original papers out of reach and attention of higher up in Appellant Company was not drawn by him. This impugned order of CIT (A) was located on 22nd March 2016 as stated above. In view of these circumstances delay in filing of present appeal has arisen. 10. Appellant Company was also advised that issue on hand has relevancy to subsequent assessment proceedings for AY 2012-13. In AY 2012-13, Appellant Company had written off in its books of accounts as "bad debts" in respect of very same amount taxed in year 2007-08. Appellant Company is filing this belated appeal before this Hon'ble Tribunal, in order to reiterate crucial fact which is already brought on record. There is no loss of revenue in respect of addition made in year of account, since entry relating to adjustment of cash collateral treated as bad debt in assessment year 2012-13 as same has already been assessed in assessment year 2007-08. plea of Appellant Company had always been that amount in question is contingent or hypothetical one, realisation of which was doubtful and hence cannot be taxed as income. Appellant Company submits that accounts of subsequent assessment years, which was highlighted earlier, and now brought on record, as matter of abundant caution, would conclusively prove that said amount in question if treated as income in year of account is considered as doubtful recovery in later year and hence taken under head "bad debt" in assessment year 2012-13. said claim of bad debts was allowed in assessment order for Assessment Year 2012-13 itself in scrutiny proceedings vide order of AO u s 143(3) dated 29.03.2015. 11. Appellant submits that AO initiated penalty 5 ITA No.724 Mds 2016 proceedings for very same assessment year 2007-08 on 30-11-2009. He thereafter levied penalty under section 271(1) (c) on 12-10-2012. said AO's penalty order was served on Appellant Company on 20-10- 2012. Against levy of penalty, Appellant Company filed appeal before CIT (A) on 16-11-2012. 12. CIT (A), deleted penalty vide his order in ITA No.414 13-14 dated 21-8-2014. original order of CIT (A) in above appeal was received by Chartered Accountant on 24.09.2014, who as per usual practice handed it over to Mr. M. Chockalingam for further action. This order was also misplaced by him. 13. I submit that against cancellation of penalty by CIT (A), Department filed appeal before ITAT, Chennai. date of filing of appeal by Department as per Form 36 was 20-11-2014. This Form 36 along with ITAT hearing notice was served on Company and was also received by accountant Mr.M.Chockalingam. This paper was also misplaced by said accountant, Mr. M. Chockalingam. 14. I submit that Hon'ble ITAT, Chennai vide its order dated 28.01.2016 in appeal filed by Department against cancellation of penalty by CIT (A) had reversed order of CIT (A) and restored levy of penalty by AO in order dated 12- 10-2012. This order of ITAT confirming levy of penalty was served on advocate of Appellant Company on 23-02-2016 and same was handed over to its Company Secretary, Mr. Sanin Panicker, by said advocate on record. 15. I humbly submit that from 23 02 2012 to 24 09 2014, Appellant Company was unaware of loss of order misplacing order. On 24 09 2014, when Chartered Accountant of Appellant Company received CIT (A) Order in penalty proceedings, Appellant Company was under bona fide impression that there is no need to file any appeal before ITAT in quantum proceedings, in which addition was confirmed by CIT (A). 16. It is most respectfully submitted that date of passing entry as "bad debt" in AY 2012-13, later to assessment year in question, would justify intention of Appellant Company to await final 6 ITA No.724 Mds 2016 outcome or decision of tax department in respect of those two assessment years, in order to take further steps if aggrieved. 17. I humbly submit that it is well known principle of law that there cannot be any double taxation in respect of same income. It is submitted that amount offered by Appellant Company in its Income Tax Return for AY 2007-08 shows gross amount of income and Appellant has also taken 2% of gross amount as not realisable, and taken net real income. This working had been clearly furnished and has also been reproduced in assessment order for assessment year 2007-08. recovery of gross amount was contingent one and based on market condition of micro finance companies. Hence, same cannot be taxed in AY 07-08, based on real income theory. 18. Appellant Company as matter of abundant caution, filed, based on professional advice, belated appeal in quantum proceedings before ITAT on 24th March 2016. In matter of penalty proceedings against order of ITAT confirming levy of penalty, Appellant Company had presented incomplete set of papers in Hon'ble High Court of Judicature at Madras bearing SR.No.SJ29189(TCA) on 13th April 2016 to comply with limitation period. Later on, said SR.No.SJ29189(TCA)was converted into TC(A) 305 of 2016. case was admitted on 22.04.2016. In process, being pre-occupied with further processing of appeals before High Court and ITAT, Appellant Company could not specifically mention in pleadings before High Court that Appellant Company was contemplating has filed appeal before ITAT against impugned order of CIT (A) in current proceedings. 19. Appellant Company was advised to file this Appeal before this Hon'ble ITAT, immediately without any further delay. Accordingly, appeal was filed on 24th March 2016. I submit that delay in filing this appeal is neither wanton nor deliberate and is unintentional which is beyond its control and due to circumstances mentioned above. 19. filing this appeal before this Hon'ble Tribunal against order of CIT (A) in ITA It is prayed that this Hon'ble ITAT may be pleased to condone delay of 1431 days in 7 ITA No.724 Mds 2016 No.231 2009-10 dated 31-01-2012 and render justice. 3. From above affidavit, it is apparent that assessee could not pursue its case before Tribunal because of fault of employee of assessee company. Further on perusing merits of case, it prima-facie appears that additions made by Revenue cannot be sustained. Therefore, we are of view that when technicalities with respect to delay in filing appeal is pitted against merit of case, then merits of case should supersede and has to be given utmost importance in larger interest of justice, more so when assessee is endangered by penal provisions of penalty and prosecution. We place strong reliance in decision of Hon ble Supreme Court in case Collector, Land Acquisition vs. Mst. Katiji & Ors., reported in 167 ITR 471 while arriving at this conclusion. In that case Honab le Appex Court had held that When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred, for other side cannot claim to have vested right in injustice being done because of non-deliberate 8 ITA No.724 Mds 2016 delay. Further Hon'ble Supreme Court in case of Vedabhai v s Santaram, 253 ITR 798 had observed that inordinate delay calls for cautions approach. This means there should be no malafide or dilatory tactics. "Sufficient cause" should receive liberal construction to advance substantial justice. In case of assessee deley had occurred due to negligence of accountant of assessee and delay is not willful. Accordingly, in interest of justice, we hereby condone delay of 1431 days and proceed to dispose of appeal on merits. 4. assessee has raised several grounds in its appeal, however crux of issue is as follows:- learned Commissioner of Income Tax (Appeals) has erred in sustaining addition of Rs.2,10,99,000 - made by learned Assessing Officer being income from buy-out loans of previous year relating to assessment year 2007- 08. 5. Brief facts of case are that that assessee is non-banking financial company engaged in business of money lending to self-help groups (micro finance) filed its return of income for assessment year 2007-08 on 9 ITA No.724 Mds 2016 29.10.2007 admitting income of `5,19,73,900 -, which was revised subsequently on 17.10.2008 declaring income of `5,75,22,740 -. case was selected for scrutiny and thereafter assessment was completed by learned Assessing Officer under section 143(3) of Act on 30.11.2009 wherein learned Assessing Officer made addition towards liability towards credit default of Rs.2,10,99,000 - and disallowance under section 14A of Act for `1,18,765 - . 6.1 On appeal, learned Commissioner of Income Tax (Appeals) confirmed order of learned Assessing Officer with respect to addition made for Rs.2,10,99,000 - aggrieved by which assessee is now in appeal before us. 6.2. During course of assessment proceedings, it was observed by learned Assessing Officer that assessee had credited amount of Rs.7,70,99,863 - towards income from buy out of loans. details of which are as follows:- Tranche I Gross consideration 40,77,83,271 10 ITA No.724 Mds 2016 Less:Book value of loans 35,55,31,021 5,22,52,250 Less: Liability towards credit default 82,00,000 4,40,52,250 Less: Payable to ICICI Bank 18,05,794 4,22,46,456 Tranche II Gross consideration 33,81,65,584 Less:Book value of loans 29,81,46,413 4,00,19,171 Less: Liability towards credit default 67,64,000 3,32,55,171 Less: Payable to ICICI Bank 20,22,975 3,12,32,196 Tranche III Gross consideration 30,67,34,611 Less:Book value of loans 27,35,22,174 3,32,21,437 Less: Liability towards credit default 61,35,000 2,70,77,437 Less: Payable to ICICI Bank 2,70,77,437 10,05,56,089 Less: Expenses relating to Buy out Repayment loss : 2,34,56,226 Income offered from buy-out of loans: 7,70,99,863 11 ITA No.724 Mds 2016 6.3. In computation as stated hereinabove, liability towards credit default is reduced from each tranche as per agreement as follows:- Details Amount Rs. Cash collateral for Tranche I 82,00,000 Cash collateral for Tranche II 67,64,000 Cash collateral for Tranche III 61,35,000 Total cash collateral provided 2,05,99,000 Sic 2,10,99,000 6.4. assessee had explained that as per terms of sanction of said sell out of loans granted to self help groups, ICICI Bank Ltd. has stipulated that assessee shall provide cash collateral for amount equivalent to minimum of 2% of purchase consideration in form of bank deposit in account with bank. As per terms of sanction, amount in cash collateral account shall not be released to assessee in following circumstances:- i) Any amount due to ICICI bank remaining outstanding; & ii) Event of default under any of transaction conditions. Based on above terms of sanction, assessee company has provided cash collateral on three tranches 12 ITA No.724 Mds 2016 as mentioned hereinabove. It was further explained by assessee as follows:- above amount of cash collateral is withheld by bank towards possible default in loans and assessee does not have any immediate right over said amount held in separate deposit with ICICI bank. As per accounting policy followed by assessee, which is furnished in Notes forming part of audited accounts along with return of income, profit loss on sale of loans is accounted for net of amount of cash collateral provided. Since assessee does not have any right over cash collateral unless and until all amounts due to ICICI bank are settled in respect of loans sold to them, same does not partake character of income at point of sale of loans and it can be treated as income of assessee only when it fulfils all conditions of terms of buyout of loans by ICICI bank. Hence, it is submitted that said amount of cash collateral which is held in sundry creditors cannot be treated as income for assessment year 2007-08. 6.5 However, learned Assessing Officer rejected submission of learned Authorized Representative and made addition of `2,10,99,000 - by holding as under:- amount claimed is not actual expenditure incurred by assessee for earning income. amount is kept with ICICI Bank as cash collateral for amount equivalent to minimum of 2% of purchase consideration in form of bank deposit in account with bank. Thus it is very clear that it is mere 13 ITA No.724 Mds 2016 diversion of income by overriding title. Where assessee applied income to discharge obligation after income reaches hands of assessee, it would be application of income and this will result in taxation of such income in hands of assessee. obligation to apply income in particular way before it is received by asessee or before it has accrued or arisen to assessee results in diversion of income. On other hand, obligation to apply income which has accrued or arisen or has been arrived, amounts merely to apportionment of income, not to its diversion, as decided in Raja Bejoy Dudhuria Vs CIT (1933) 1 ITR 135 (PC). In this connection reliance is placed on following decisions of Supreme Court. CIT Vs. Dalmia Cements Limited (237 ITR 617 (SC) and CIT vs. Sitaldas Tirathdas (41 ITR 367). In both cases, meaning of "diversion of income by overriding title" has been explained by Hen' ble Supreme Court which is stated as below" "In our opinion, true test is whether amount sought to be deduction in truth, never reached assessee as his income. Obligations, no doubt, there are in every case, but it is nature of obligation which is decisive fact. There is difference between amount which person is obliged to apply out of his income and amount which by nature of obligation cannot be said to be part of income of assessee. Whereby obligation, income is diverted before it reaches assessee, it is deductible but where income is required to be applied to discharge obligation after such income reaches assessee, same consequence, in law, does not follow. It is first kind of payment which can truly be excused and not second. second payment is merely obligation to pay another portion of one's own income, which has been received and is since applied" Reliance is also placed on Supreme Court's decision in case of CIT Vs. Travancore Sugars & Chemicals Pvt. Ltd. (88 ITR 1), wherein Apex Court has observed 14 ITA No.724 Mds 2016 that: "It is thus clear that whereby obligation income is diverted before it reaches assessee it is deductible. But, where income is required to be applied to discharge obligation after such income reaches assessee, it is merely case of application" of income to satisfy obligation of payments and is therefore not deductible" For above stated reasons and also cited case laws which have clearly defined what is income to be assessed in hands of assessee, amount of Rs. 2,10,99,000 - claimed by Assessee Company towards 'Liability towards credit default' is assessable in hands of Assessee Company. Accordingly amount of Rs. 2,10,99,000 - is added to total income of Assessee Company. 6.6. On appeal, learned Commissioner of Income Tax (Appeals) held issue against assessee by observing as under:- 6.1.2.1 It is clear from Facts that entire sale consideration has not only accrued to the: appellant but has also been received by it. Therefore part of sale consideration, that has already been received, kept. in F.D with buyer i.e.) ICICI as security for liability towards credit default cannot be said to have not accrued as income to appellant. Apart from above said reason given by AO for not allowing said amount and bringing that to tax, it is stated expenditure that is allowable is one which actually exists during previous year. But making provision for expenditure which depends upon happening of event is not allowable expenditure. Since liability is not capable of being construed .in definite terms and since 15 ITA No.724 Mds 2016 liability has not arisen during accounting year it is contingent liability. Contingent liability does not constitute expenditure and cannot be subject matter of deduction even under mercantile system of accounting. Expenditure which is deductible for income-tax purposes is towards liability actually existing at time. Setting apart money which might become expenditure on happening of event is not allowable expenditure. Reliance for this view is Placed on following decisions: (i) Shree Sajjen Mills Ltd. Vs. CIT 156 ITR 585 (SC) (:ii) Mahadeo Gangaprasad v. 2nd lTO, 61 ITR 384 [Bom] and (iii) Indian Molasses Company Ltd. Vs. CIT 37 lTR 66 (SC). It may further be stated that where liability arising out of contractual obligation is disputed, assessee is entitled to claim deduction in that behalf in assessment year relevant to previous year in which dispute is finally settled. Hon ble Supreme Court in case of CIT v. Gemini Cashew Sales Corporation, 65 ITR 643 held that where obligation itself is purely contingent question of estimating its present value will not arise. estimated income or Iiability which is yet to crystallize, can only be adjusted as contingent item but not as accrued income or liability of that year (Saurastra Cement and Chemical Industries Ltd v. CIT, 213 ITR 523 (Guj). Since there is no obligation capable of commercial valuation, claim of assessee @ 2 percent of income from buy out of loans is no permissible. Further decision of ITAT Madras Bench in case of Income-tax Officer Vs Serval Engg. Works (P.) Ltd [35 ITD 482 is also relevant on issue. Relevant extract of said decision is reproduced as under: "The cardinal fact of instant case was that assessee had received in full contracted price for machineries supplied by it to 16 ITA No.724 Mds 2016 parties. Now under scheme of Act, ambit of taxation varies 'with factor of residence in previous year. In respect of residents - and assessee was resident) charge is on i) Income received or deemed to be received in India. in year of account, date or place of its accrual being immaterial Section 5(1)(a) (II} Income which. accrues or arises or is deemed to accrue or arise in India during accounting year, date or place of its receipt being immaterial Section 5{ 1)( b) , and (iii ) Income which accrues. or arises outside India (during accounting year, even if it. is not received in or brought into India Section 5(1)(c)] Secondly, it is well settled that whenever right to receive money in course of trading transactions accrues or crises or money is realized , profit or income embedded in receipt also arises or accrues or is received. For a. fact, even when sale consideration is received not in money but in money s worth, that is to say even in cases of exchange above principle applies: In instant case, assessee had received sale consideration in full. Hence, profit embedded in sale consideration was simultaneously realised or received by assessee. With result, section. 5(1)(a) would get activated to bring on receipt basis, the, entire profit arising out of said transaction. order of Commissioner in allowing assessee's claim. was to be set aside. Further in cases where claim for revenue deduction is made on basis. of 17 ITA No.724 Mds 2016 provision made as respects legally enforceable [arid not mere contingent) liability, matter is always examined in. context of section 37(1) and even section 28. As it was found earlier that. provision in respect of said sum related to contingent liability it was not deductible." In view of above discussion, I am of considered view that since in facts of case, there is no obligation capable of commercial valuation, claim of appellant @ about 2% of income from buy out of loans is not permissible. Also claim of appellant that said amount, kept in fixed deposits will accrue on satisfactory discharge of loans by borrowers is not tenable. Therefore, action of Assessing Officer in bringing to tax amount which has not only accrued but also has been received is upheld and grounds of appeal relating to this issue are dismissed. 7. Before us, learned Authorized Representative reiterated submissions made before Revenue authorities on earlier occasions and prayed that additions made by learned Assessing Officer which was further confirmed by learned Commissioner of Income Tax (Appeals) may be deleted. 8. learned Departmental Representative on other hand, vehemently argued in support of orders of Revenue. 18 ITA No.724 Mds 2016 9. We have heard rival submissions and carefully perused materials available on record. From order of learned Assessing Officer it is evident that he has made addition because of following reasons:- i) amount of deduction of ` 2,10,99,000 - claimed by assessee is not actual expenditure incurred for earning income. ii) claim of assessee is nothing but mere diversion of income by overriding title application of income to discharge obligation after income reaches hands of assessee which is taxable income. Further on perusing order of learned Commissioner of Income Tax (Appeals) it is apparent that he has sustained order of learned Assessing Officer because of following reasons:- i) entire sale consideration has not only accrued to appellant but it has also been received by appellant and kept in FD with buyer viz. ICICI Bank as security for liability towards credit default. 19 ITA No.724 Mds 2016 ii) deduction claimed by assessee is nothing in nature of provision for expenditure which is contingent in nature. iii) Liability arising on contractual obligation can be claimed as deduction only when dispute is finally settled. iv) obligation of assessee cannot be commercially valued. learned Commissioner of Income Tax (Appeals) placed reliance on various decisions cited in his order while confirming order of learned Assessing Officer for above stated reasons. 10. Perusing facts of case, we do not subscribe to views of Revenue authorities. At initial stage, learned Assessing Officer has misconstrued issue by relying on principles of diversion of income by overriding title. Further, learned Commissioner of Income Tax (Appeals) has also misconstrued issue because he was of view that assessee has received income and 20 ITA No.724 Mds 2016 deduction claimed by assessee is only in nature of contingent liability. It is worthwhile to mention that though technically assessee has not received money it was withheld by M s. ICICI bank, and it is beyond scope of assessee to have control over it. However, this is case where assessee has received certain income from M s. ICICI Bank towards sell out of its loan, out of which `2,10,99,000 - is withheld by M s. ICICI bank by placing it in name of assessee as fixed deposits which is to be released to assessee only on recovery of entire debts. In event there is default in recovery to extent of such default, amount will be appropriated by M s. ICICI bank from fixed deposit account of assessee. Thus, there is predominant element of uncertainty hovering over fixed deposit maintained by assessee with M s. ICICI bank. Accounting Standard AS-9 with respect to revenue recognition clearly provides as under:- Timing of Revenue recognition: Revenue from sale of rendering services should be recognized at time of sale or rendering of services. However, if at time of rendering of 21 ITA No.724 Mds 2016 services or sale there is significant uncertainty in ultimate collection of revenue, then revenue recognition is postponed and in such cases revenue should be recognized only when it becomes reasonably certain that ultimate collection will be made. It also applies to revenue arising out of escalation of price; export incentive, interest, etc. 11. From above, it is apparent that assessee has been rightly advised by its Chartered Accountant not to treat amount of `2,10,99,000 - withheld by M s. ICICI bank in form of fixed deposits in name of assessee as income of assessee for relevant assessment year because there is significant uncertainty in ultimate realization of fixed deposits. It is pertinent to mention here that adherence of accounting standard is mandatory with respect to limited companies. Further, policy of assessee company is also in parity with accounting standards (AS-9). Therefore, in these circumstances, assessee is left out with no other option other than to disregard amount retained by M s. ICICI bank as its income for relevant assessment year and to declare 22 ITA No.724 Mds 2016 same only in assessment year when such uncertainty perishes. Hence, we do not find it proper on part of learned Assessing Officer to make addition of `2,10,99,000 - by holding it to be application of income to discharge obligation after income reaches in hands of assessee. We also find it do not proper on part of learned Commissioner of Income Tax (Appeals) to hold it as contingent liability and therefore not allowable as deduction . For above stated reasons, we hereby direct learned Assessing Officer to delete addition of `2,10,99,000 - being fixed deposit retained by M s. ICICI bank towards security for default of loans sold out. 12. In result, appeal of assessee is allowed. Order pronounced in open court on 15th September, 2016 Sd - Sd -(N.R.S.Ganesan) ( A.Mohan Alankamony ) Judicial Member Accountant Member Chennai, Dated 15th September, 2016 somu Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. GF. M/s. Madura Micro Finance Ltd. v. Assistant Commissioner of Income-tax, Corporate Circle-4(1), Chennai