2017 (12) TMI 296 - AT - Income Tax

Tribunal dismisses Revenue's appeals on stock valuation, allows depreciation claims on Plant & Machinery

The Revenue's appeals challenging the deletion of additions for under valuation of closing stock were dismissed by the Tribunal. The Tribunal upheld the ... Addition in respect of under valuation of closing stock - Held that:- While it is the case of the Revenue that CENVAT credit of ₹ 59,30,117/- represents the part of the closing stock of the assessee in terms of section 145A of the Act, it is the case of the assessee, on the other hand, that the action of assessee is revenue neutral and there is no infringement of s.145A in essence. In this regard, we notice that the issue is no longer res integra and adjudicated in favour of the assessee in its own case in the preceding AY 2008-09 on similar facts. Claims of depreciation allowances on plant & machinery which was stated to be not claimed in the return of income inadvertently - Held that:- The assessee having not claimed the depreciation eligible to it under law, will not operate as estoppel when relevant facts are available on record. In the circumstances, we do not subscribe to the dismissal of the claim of depreciation allowances stated to eligible to the assessee by the CIT(A). The aforesaid view finds support from plethora of decisions including judgement of Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt.Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT]. We are not inclined at this stage to go into the merits of the claim of depreciation allowance. We set aside and restore the issue to the file of the AO for its de novo examination with a direction to allow the depreciation allowances in accordance with law regardless of its not having been claimed in the return of income. The AO however shall be entitled to make suitable adjustments/corrections in the consequential claim of depreciation allowance in the subsequent years after verification. Issues Involved:1. Deletion of addition in respect of under valuation of closing stock.2. Disallowance of amount under section 40(a)(ia) of the Act.3. Dismissal of depreciation claim on Plant and Machinery.Analysis:Issue 1: Deletion of addition in respect of under valuation of closing stock- The Revenue's appeal challenged the deletion of the addition made by the Assessing Officer regarding under valuation of closing stock.- The Assessing Officer added the CENVAT amount to the value of closing stock, increasing the taxable income.- The CIT(A) found merit in the assessee's contention and deleted the addition.- The Tribunal, after examining the issue, noted that the issue was previously adjudicated in favor of the assessee in a similar case.- The Tribunal declined to interfere with the CIT(A)'s order based on the previous decision and dismissed the Revenue's appeals for both assessment years.Issue 2: Disallowance under section 40(a)(ia) of the Act- The assessee raised a Cross Objection against the disallowance made by the AO under section 40(a)(ia) of the Act.- Ground No.1 of the Cross Objection was dismissed as it was not pressed.- Ground No.2 related to the claim of depreciation allowances on Plant and Machinery inadvertently not claimed in the return of income.- The Tribunal noted that the assessee had not claimed depreciation allowances entitled to it, and the CIT(A)'s dismissal of the claim was not justified.- The Tribunal set aside the issue to the AO for re-examination, directing the AO to allow depreciation allowances in accordance with the law, irrespective of not being claimed in the return of income.Conclusion:- The Revenue's appeals were dismissed, and the assessee's Cross Objection was partly allowed.- The Tribunal ordered the re-examination of the depreciation claim on Plant and Machinery by the AO.- The decision was pronounced on 23/11/2017 by the Appellate Tribunal ITAT Ahmedabad with detailed analysis and legal reasoning provided for each issue involved.