TaxTMI 
TaxTMI 
2012 (6) TMI 649
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....ce under section 43B of the Act, etc. Aggrieved, the assessee carried the matter before first appellate authority, wherein the Commissioner (Appeals) granted relief partially. Further aggrieved, the assessee is in appeal before the Tribunal raising following grounds of appeal:- "1. The Commissioner (Appeals) has erred by upholding the order of ACIT regarding the addition made of Rs. 2,14,16,107 being amount added, as stated in the assessment order, due to the change in the method of valuation of closing stock. The Commissioner (Appeals) ought to have appreciated that the change of method was bonafide and was regularly followed thereafter and the method of valuation of closing stock was in accordance with accepted trade practice. 2a. The Commissioner (Appeals) was wrong in upholding the disallowance made under section 14A amounting to Rs. 18,56,000. 2b. It was stated by the appellant with evidence that the borrowed money has not been utilized for the purpose of the investment in shraes and secondly, the Commissioner (Appeals) should have appreciated the fact that the ACIT had also failed to prove that there was nexus between the borrowed money and the investment. 3. The Commissi....
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....e in the factual scenario and the marketing conditions. The learned Counsel filed a chart to demonstrate that it has been following this changed policy of valuation in all the subsequent assessment year and that the Assessing Officer has accepted this change in the subsequent assessments made under section 143(3) of the Act. Thus, he submits that even on the principles of consistency, the Assessing Officer should not have made an addition on account of valuation of closing stock. He contends that the assessee has followed the practice as followed by others in similar trade. He relied on the following case laws:- 1. Echke Limited v/s CIT, (2009) 221 CTR (Guj.) 642; and 2. Snow White Food Products Co. Ltd. v/s CIT, (1982) 141 ITR (Cal.) 861. 4. Coming to ground no.2, learned Counsel submits that the disallowance is wrongly made under section 14A. He pointed out that own funds are Rs. 90,47,73,000, and the Assessing Officer has wrongly taken the investment at Rs. 6,62,29,100. He pointed out that out of Rs. 6,62,29,100, Rs. 110 crores of investment pertained to debenture and investment of Rs. 5,00,00,000, was made in the previous year and also that as on 31st March 2001, i.e., the e....
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....t this issue should also be restored to the file of Assessing Officer for adjudication denovo. 12. Rival contentions were heard. On careful consideration of the facts and circumstances of the case and on perusal of the papers on record, orders of the authorities below as well as the case laws cited before us, we hold as follows. i) As pointed out by the learned Counsel, there was no change in the method of valuation of closing stock. The assessee was always following the method which is known as "Cost or Net Realizable Value, whichever is less". The issue hear is, whether the assessee has properly arrived at a net realizable value? When a news programme has been produced, the assessee was originally taking the net realizable value @ 2% of the production cost after first exploitation. From the current year, the value after 1st exploitation is taken as "nil". We have perused the accounting policy of Zee News Limited, as well as the policy of NDTV Ltd., on this issue. In both the cases, programmes which are current and topical in nature, are entirely amortized on first exploitation i.e., they are fully expensed. This shows that the valuation of a news programmes done by the assessee....
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.... to the decision of Beck India Ltd., (supra), the issue was adjustment in opening inventory when corresponding adjustment is to be made in the closing inventory consequent to introduction of section 145A. This case law has no relevance to the facts of the present case. vii) Coming to the decision of Delhi Bench of this Tribunal in Ajanta Raj Proteins Ltd. (supra), the Tribunal was dealing with change in the method of accounting. The assesse had earlier adopted method of valuation of stock at cost and subsequently, wanted to change the method to net realizable value. No such circumstances exist in our case. viii) In view of the above discussion, we uphold the contention of the learned Counsel and delete the additions of Rs. 2,14,16,107, made on the ground that there is undervaluation of closing stock. In our opinion, there is no such undervaluation and the assessee had undertaken a bonafide exercise. Thus, assessee succeeds on this ground. ix) Coming to the ground no.2, which is on the issue of disallowance under section 14A, the Assessing Officer in his assessment order, has, at last para, at Page-5, determined own funds of the assessee at Rs. 90,47,73,000. These funds are non-i....