Closing stock valuation and TDS disallowance issues turned on attribution of renovation costs and factual verification of payments.

Renovation expenditure incurred only for specific sold flats could not be included in the closing stock valuation of the remaining unsold flats where the evidence showed the work related to the sold units and no material linked it to the unsold portion; the addition was deleted. Disallowances under section 40(a)(ia) for alleged non-deduction of tax at source on purchases and business promotion payments required fresh factual verification because the supporting bills and documents were incomplete before the Assessing Officer; that issue was remitted for examination.

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Issues: (i) Whether the renovation expenditure incurred only for the sold flats could be excluded while valuing the closing stock of the unsold flats. (ii) Whether the disallowances made under section 40(a)(ia) for alleged non-deduction of tax at source on purchases and business promotion payments required fresh verification.

Issue (i): Whether the renovation expenditure incurred only for the sold flats could be excluded while valuing the closing stock of the unsold flats.

Analysis: The assessee showed that the expenditure was incurred for renovating the specific flats sold to tenants, and not for improving the entire buildings. The Assessing Officer did not bring cogent material to show that the expenditure related to the unsold portions as well. On the facts found, the renovation cost attributable to the sold flats could not be loaded into the value of the closing stock of the remaining unsold flats.

Conclusion: Decided in favour of the assessee; the addition on account of closing stock valuation was deleted.

Issue (ii): Whether the disallowances made under section 40(a)(ia) for alleged non-deduction of tax at source on purchases and business promotion payments required fresh verification.

Analysis: The claim of purchases from the supplier and the claim regarding gift items/business promotion payments were not fully supported by purchase bills and supporting documents before the Assessing Officer. Since the factual basis for the TDS disallowance and the nature of the payments required verification, the matter was restored for examination by the Assessing Officer.

Conclusion: Decided partly in favour of the assessee by remanding the issue to the Assessing Officer for verification.

Final Conclusion: The appeal succeeded on the stock valuation issue and the remaining disallowance issue was sent back for verification, resulting in a partial relief to the assessee.

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