https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=261647 https://www.taxtmi.com/caselaws?id=261647 Increase in stock - Disallowance made on account of bifurcation of expenses by application of Rule 8D - CIT(A) deleted addition - Held that:- The formula adopted by the AO is non-scientific and irrational. We find from the facts of the case that while completing the assessment the AO has made an addition of Rs. 51,12,814/- on account of increase in closing stock. The above addition on account of increase in stock is neither permitted under the principle of accountancy nor under the law. Closing stock is always valued under the settled principle of law and accountancy i.e, cost or market value whichever is lower. The auditor of assessee has already certified the value of closing of assessee in his audit report and the said value has been taken in trading and profit and loss account in arriving at the gross profit of the business of the assessee. The increase or decrease in closing stock as compared with the last year cannot be a basis for making any addition under the above head and assessed income is at Rs. 62,91,510/- and the addition on account of increase in closing stock is Rs. 51,12,814/- and if this addition is deleted then the assessed income will stand at Rs. 11,78,696/- and the returned income of assessee was at Rs. 20,28,108/-. Ld. counsel for the assessee strongly raised that the formula adopted by the AO is unscientific and CIT(A) did not accept the said formula but for argument sake if the formula accepted then the net profit as per the above formula will be much lesser then the returned income of assessee and in that case there will be a revenue loss to the government. Total expenditure incurred for manufacture of tea out of green leaf purchased by assessee as per calculation of the AO is erroneous, hence profit on tea manufacture out of our own leaf is also erroneous. And the formula adopted by the AO gives distorted figures for profit made out of the assessee’s own leaf and bought leaf. In the field of agriculture particularly in produce of green tea leaf there is no mechanism to divide the profit as agriculture and nonagriculture i.e. while after giving deep thought to the point and after taking expert opinion on this subject the government introduce Rule 8 of IT Rules for arriving the income and dividing the same at 60:40 ratio for agriculture and non-agriculture income and assessee also applied the same in its computation from long paste years and it was accepted by the Department. CIT(A) has rightly deleted the addition and we confirm the same. - Decided against revenue. Rebate u/s 33AB of the Act - AO did not allow the rebate in view of the fact that there was a loss after determination of composite income of the assessee - CIT(A) allowed the rebate - Held that:- We find that assessee in its return income claimed deduction of Rs. 12 lakhs u/s 33AB of the act and assessee filed a receipt dated 1809.2008 evidencing deposit of Rs. 12 lakh with NABARD in Tea Development Scheme in 2007. In view of this, CIT(A) directed the AO to allow the rebate to the assessee. We find no infirmity in the order of CIT(A) and same is confirmed. - Decided against revenue. Case-Laws Income Tax Fri, 10 Jul 2015 00:00:00 +0530