TaxTMI 
TaxTMI 
2017 (6) TMI 869
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....ranted part relief in respect of valuation of inventory. Subsequently, the Commissioner of Income Tax (Appeals) vide order dated 09-01-2015 passed u/s. 154 upheld the findings of Assessing Officer in respect of disallowance of contribution towards unapproved gratuity fund. Against the order of Commissioner of Income Tax (Appeals) passed u/s. 154 of the Act, the assessee has filed appeal before the Tribunal in ITA No. 240/PUN/2015. 2. The facts of the case as emanating from records are: The assessee is engaged in manufacturing and processing of chemicals. The assessee filed its return of income for the impugned assessment year on 22-09-2009 declaring total income as Rs. 5,65,65,793/-. The case of the assessee was selected for scrutiny. Statutory notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was issued to the assessee on 19-08-2010. During the course of assessment proceedings the Assessing Officer made certain additions / disallowances in the income returned by the assessee. Aggrieved by the assessment order dated 29-12-2011, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) gr....
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....inding that one of the objectives of the study was to explore acquisition of phosphorous producer and development of toll manufacturing arrangement for existing produces which will bring into existence of new assets which is capital in nature and the decision of Hon'ble Delhi High Court in the case of CIT vs OCL India Ltd. 5. The appellant craves leave to add, amend or alter any of the above grounds of appeal." Since, the relief granted in respect of contribution towards unapproved provident fund Rs. 7,59,685/- was withdrawn by the Commissioner of Income Tax (Appeals) in a subsequent order passed u/s. 154 of the Act, ground Nos. 2 and 3 raised in the appeal by the Department assailing the relief granted on this issue have become infructuous. Therefore, the effective grounds to be decided in the appeal by the Department are Ground Nos. 1 and 4. 4. The assessee in its appeal has raised solitary ground and the same reads as under : 1. "On facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that, the disallowance of Rs. 7,59,685/- on account of premium paid to LIC under Group gratuity scheme u/s. 40A(7)/36(1)(V) is not in accor....
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....he ld. AR placed reliance on the decision of Hon'ble Rajasthan High Court in the case of Commissioner of Income Tax Vs. Jaipur Thar Gramin Bank reported as 388 ITR 228. 6. On the other hand Shri Mukesh Jha representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in rejecting the claim of the assessee with respect to contribution towards unapproved group gratuity scheme with LIC. In support of his submissions the ld. DR placed reliance on the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Petroleum and Minerals P. Ltd. reported as 187 ITR 560. 6.1 In respect of grounds raised in the appeal by the Department, the ld. DR submitted that in ground No. 1 the Department has assailed the findings of Commissioner of Income Tax (Appeals) in restricting the addition in valuation of closing stock to Rs. 3,64,990/-. The assessee in its books has not included the value of non-moving items in closing stock. In the Auditor's report some of the items have been mentioned as non-movable in the inventory and not obsolete items while valuing the stock. Whether the items are slow moving or fast moving, their value has to....
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....ialized industry. The main raw material is yellow phosphorous which is highly inflammable. Considering the specific nature of the product, it is necessary to maintain quality control. Any product lying in inventory for more than 6 months is normally rendered unusable. 7.1 The ld. AR submitted that for the last several years the assessee is consistently following the same method of valuation of closing stock i.e. excluding the stock of raw material from valuation which is more than 6 months old. This practice is followed as part of commercial prudence, as well as accounting standards. The ld. AR pointed that the Assessing Officer while passing assessment orders u/s. 143(3) for the assessment years 2006-07, 2007-08 and 2008-09 i.e. in the last three preceding assessment years and in the succeeding assessment years i.e. assessment years 2010-11 and 2011-12 has accepted the method of valuation of stock consistently followed by the assessee. The ld. AR submitted that the Commissioner of Income Tax (Appeals) has rightly followed the law laid down by the Hon'ble Bombay High Court in the case of Alfa Laval India Ltd. Vs. Deputy Commissioner of Income Tax (supra) while granting relief to t....
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....sessee has been consistently following the same method of valuation of closing stock i.e. excluding the value of raw material which is more than 6 months old while determining the value of closing stock, the Commissioner of Income Tax (Appeals) has restricted the addition to Rs. 3,64,990/- by following the ratio laid down by the Hon'ble Bombay High Court in the case of Alfa Laval India Ltd. Vs. Deputy Commissioner of Income Tax (supra). In the said case, the Hon'ble High Court approved the method of valuation of closing stock of obsolete item at 10% of the cost. We do not find any infirmity in the method and reasoning given by the Commissioner of Income Tax (Appeals) in restricting the addition to Rs. 3,64,990/-. The ld. DR has not been able to controvert the findings of Commissioner of Income Tax (Appeals) on the issue. The ld. DR has prayed for remitting the matter back to the file of Assessing Officer for examination the details of stock. We do not find merit in the submissions of the ld. DR. No useful purpose would be served by remitting the issue back to the file of Assessing Officer. The Assessing Officer has accepted the method of valuation of closing stock during scrutiny ....
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....the assessee is already dealing. The expenditure was not incurred for opening any new line of business hence, the expenditure incurred is not capital in nature. We concur with the findings of Commissioner of Income Tax (Appeals) on this issue hence, ground No. 4 raised in the appeal by the Department is dismissed. In the result, the appeal of the Department is dismissed. 11. Now, we proceed to decide the appeal of the assessee. The solitary issue in appeal is with respect to disallowance of contribution Rs. 7,59,685/- made towards payments of premium of group gratuity fund with Life Insurance Corporation of India. It is an undisputed fact that the assessee has created gratuity trust and the assessee has been regularly contributing towards the fund for the welfare of its staff. The assessee had made an application to the concerned Commissioner of Income Tax for approval of the fund way back on 15-02-2000. The Commissioner of Income Tax neither rejected the application of the assessee nor issued any letter communicating approval of the fund. In the meantime the assessee started contributing towards the said group gratuity fund with LIC. The Assessing Officer granted the benefit of c....