IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT: HONOURABLE MR.JUSTICE ANTONY DOMINIC & HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, 6TH DAY OF OCTOBER 2017/14TH ASWINA, 1939 ITA.No. 52 of 2015 AGAINST ORDER IN ITA 3/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 22-11-2013 APPELLANT/RESPONDENT: 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, COURT ON SAME DAY DELIVERED FOLLOWING: ITA No.52 of 2015 APPENDIX APPELLANT'S ANNEXURES: ANNEXURE TRUE COPY OF ORDER OF DISPUTE RESOLUTION PANEL, BANGALORE DTD.28.8.2012. ANNEXURE B TRUE COPY OF ORDER U/S 143(3) R.W.S.144C(13) OF JOINT COMMISSIONER OF INCOME TAX, KOLLAM DTD.27.12.2012. ANNEXURE C TRUE COPY OF ORDER OF APPELLATE TRIBUNAL DTD.22.11.2013. TRUE COPY P.S.TO JUDGE css/ Antony Dominic & Dama Seshadri Naidu, JJ. ITA No.52 of 2015 Dated this 6th day of October, 2017 JUDGMENT Antony Dominic, J. This appeal is filed by revenue impugning order passed by Income Tax Appellate Tribunal in ITA No.3 of 2013 concerning assessment year 2008-2009. assessee is subsidiary company of M/s Olam Investments Ltd., Mauritius. During course of assessment, Assessing Officer passed draft order under section 144C making addition of `63,73,179 by disallowing loss under derivatives contract, along with other additions. assessee challenged additions proposed before Dispute Resolution Panel, Bangalore. Dispute Resolution Panel issued its directions under section 144 read with section 144C (9) of Income Tax Act rejecting objections of assessee and upholding assessments made by assessing officer. Annexure-A is copy of direction issued by Dispute I.T.Appeal No.52 of 2015 2 Resolution Panel. Joint Commissioner of Income Tax completed assessment under Section 143(3) read with section 144C(13) of Act estimating total income of assessee which included disallowance of amount of `63,73,179. Annexure-B is assessment order. assessee filed appeal before Income Tax Appellate Tribunal and by Annexure-C order Tribunal held that Assessing Officer was not justified in making impugned disallowance of `63,73,179 and accordingly, set aside to that extent. It is order of Tribunal to above extent which is impugned by revenue and questions of law framed read as under: a) Was assessee entitled to change system of accounting for assessment year 2008-09? b) Is order of Tribunal erroneous for having deleted amount of Rs.63,73,179/- disallowed under Loss on forward contracts by assessing officer when changed system of accounting was not in force for assessment year 2008-09? c) Did Tribunal act contrary to law in interfering with disallowance of Rs.63,73,179/-, having regard to reasoning contained in assessment order? 2. We heard learned senior counsel and learned I.T.Appeal No.52 of 2015 3 counsel for assessee. 3. orders show that assessee was maintaining its accounts on basis of instructions issued by Institute of Chartered Accountants of India. While so, institute revised its instructions and issued AS-31, making it mandatory only with effect from financial year 2011-2012. However, assessee adopted AS-31 for assessment year 2008-2009, which, according to Assessing Officer, resulted in loss of revenue. It is on that basis Assessing Officer made impugned disallowance and consequent addition to total income of assessee. Despite our specific query as to whether there was any statutory prohibition preventing assessee from adopting AS-31 for assessment year 2008-2009, revenue was unable to show us any such statutory bar. In other words, it is evident from submissions made by revenue itself that assessee was legally entitled to adopt AS-31 for assessment year 2008-2009. If that be so, Assessing Officer could not have faulted assessee for having adopted AS-31 for assessment year 2008-2009 and maintained its account on that basis. I.T.Appeal No.52 of 2015 4 revenue has no case that if AS-31 was validly adopted by assessee, assessee could not have been allowed deduction towards loss under derivative contracts of `63,73,179. Therefore, conclusion is irresistible that assessee was legally entitled to adopt AS-31 for assessment year 2008-2009 and on such adoption, assessee was entitled to deduction as well. If that be so, Tribunal was fully justified in its conclusion that Assessing Officer was not justified in making impugned disallowance of `63,73,179. Therefore, we do not find any illegality in order of Tribunal. Answering questions of law in favour of assessee and against revenue, appeal is dismissed. sd/- Antony Dominic, Judge sd/- Dama Seshadri Naidu, Judge css/ true copy P.S.TO JUDGE Commissioner of Income-tax, Thiruvananthapuram v. Olam Agro India Limited