1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO.3018 OF 2008 The Commissioner of Income Tax – 8, Mumbai ..Appellant. Versus SM Dyechem Limited, Mumbai ..Respondent. Mr.Suresh Kumar for the appellant. None for the respondent. CORAM : V.C. DAGA & J.P. DEVADHAR, JJ. DATE : 6TH AUGUST 2009 P.C. : 1. The revenue has filed this appeal raising following questions of law. i) Whether in the facts and in the circumstances of the case, the ITAT is correct in law in confirming the deletion made by the CIT (A) in respect of the purchase of two generator set for Rs.40 Lakhs treated as bogus by the AO ? ii) Whether in the facts and in the circumstances of the case the ITAT is correct in law in treating Rs.133.02 Lakhs being profits earned by the Assessee on account of cancellation of foreign exchange contract as capital receipt ? iii) Whether in the facts and in the circumstances of the case the ITAT is correct in law in confirming the order of the CIT (A) restricting the addition of Rs. 23,54,497/- made by the AO on account of earlier years expenses to Rs.9,88,273/- ? iv) Whether on the facts and in the circumstances of the case the ITAT is correct in law confirming the deletion made by CIT (A) in respect of premium of Rs. 6,96,500/- on redemption of debenture by holding that the liability for payment of premium had occurred in present though to be discharged in future ? 2 2. Learned counsel for the revenue fairly states that so far as the first question is concerned, the tribunal has recorded a finding of fact that the transactions in question are genuine transactions. Hence, the first question raised by the revenue cannot be said to be a substantial question of law arising out of the order of the tribunal. 3. As regards the second question is concerned, learned counsel for the revenue fairly states that the same is squarely covered by the judgment of the Supreme Court in the case of Commissioner of Income-tax V/s. Woodward Governor India P. Limited reported in [2009] 312 ITR 254 (S.C.) against the revenue. Hence, the question as framed by the revenue cannot be said to be a substantial question of law. 4. As regards the third question is concerned, the Tribunal in principle accepted the plea of the revenue that the prior period expenses could not be allowed in the year in question, because of the mercantile system of accounting followed by the assessee. However, in the assessment year in question, since the assessee had offered to tax income pertaining to earlier years, the tribunal held that the CIT (A) was justified in netting prior period income against prior period expenses. The view taken by the tribunal is a reasonable view and we see no substantial question of law arising out of the order of the tribunal. 5. As regards the fourth question is concerned, learned counsel for the revenue fairly states that the same is covered by the decision of the Supreme Court in Madras Industrial Investment Corporation Vs. CIT reported in 225 ITR 802 against the revenue. Hence, the fourth question raised by the revenue cannot be entertained. 6. In the result, the appeal is dismissed with no order as to costs. (J.P. Devadhar, J.) (V.C. Daga, J.)