TaxTMI 
TaxTMI 
2018 (5) TMI 1599
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....rovision of Warranty. 3. That the department craves leave to add or alter any further grounds of appeal before or during the course of hearing." 3. The first issue raised by the Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 30,29,969/- u/s 145A of the Act. 4. Briefly stated facts are that the assessee is a partnership firm and engaged in the Manufacturing business of Energy Saving Devices, Spare Parts etc. The assessee in its balance sheet has shown closing stock as on 31-03-2012 for Rs. 3,15,46,606/- without including the amount of VAT/Excise expenditure incurred on the purchases. The necessary details of the closing stock as on 31-03- 2012 without including amount of VAT/Excise vis-à-vis after including the amount of VAT/Excise stands as under : Product Amount Rs. (Without VAT/Excise) Amount Rs. With VAT/Excise Difference Burner 3283709 3375101 91392 Consumable Items 3089966 3318419 228453 Electric Goods 756651 812331 55680 Semi Finished Goods 4490772 4785044 294272 Raw Materials 5943208 6359097 415889 Burner Spares 1398847 14549....
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....or using the exclusive method of accounting. The assessee, in this regard, demonstrated the impact on the profit by using exclusive method of accounting, which is represented as under: Increase in Profit (in Rs.) Decrease in Profit (In Rs.) Increase in opening stock as a result of inclusion of VAT on which VAT credit is available/availed 96,467/- Increase in cost of raw material on inclusion of VAT on which VAT credit was available/availed 91,35,663/- Increase in sales of finished goods on inclusion of VAT/CST 90,94,139/- Increase in closing stock on inclusion of VAT 1,37,991/- 92,32,130/- 92,32,130/- 8. The Ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: "5.2 I have considered the assessment order and the submissions made by the appellant. The Hon'ble Supreme Court in the case of CIT Indo Nippon Chemicals Co. Ltd. (2003) 130 Taxman 179 has held as under: ".......there are two possible methods of valuation of stock. The first would be the "gross method", in which the stock is valued at cost pr....
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....iled of. Correspondingly, the stock of unconsumed materials is also valued as per exclusive method. In our considered view, if the provisions of section 145A has to be followed, the purchases would have to be adjusted for the duty/tax credits and correspondingly unconsumed stock of materials would also be valued at billed cost. In any case, parity has to be maintained and while making the addition on account of unutilised MODVAT/CENVAT credit, it disturbs the party of accounting. We also find that the assessee has also given a statement showing inclusive method and exclusive method under section 145A of the Act vide annexure to form 3CD by which it has proved that even if inclusive method of accounting has been followed by the assessee, there would not have been any impact on the profit of the assessee for the assessment year under consideration. 8. Considering the fact in totality, we do not find any reason to interfere with the findings of the CIT(A)." 9. In the result, appeal filed by the Revenue is dismissed." The Ld. AR vehemently supported the order of Ld. CIT(A). 9. We have heard the rival contentions and perused the materials available on record. The issue....
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....ovision of guarantee in the books of accounts. Accordingly, the AO was of the view that the deduction claimed for the provisions of warranty represents un-accrued/un-ascertain/contingent liability. Therefore, same was disallowed and added to the total income of the assessee. 11. Aggrieved assessee preferred an appeal to Ld. CIT(A). Assessee before the Ld. CIT(A) submitted that it has supplied various energy saving devices and spare parts to GSML, which inter alia included following payments terms : 10.0 Terms of payment: The terms of payment shall be as under: 1. 10% advance against ABG 2. 70% Against delivery 3. 10% Against performance bank guarantee 4. 10% Against performance norms. Bank guarantees issued by any nationalized bank shall only be acceptable. In view of above, GSML has retained a sum of Rs. 30,76,230/- from the payment to be made to the assessee. However, the assessee booked the sales at 100% value without reducing the amount retained by GSML. But the assessee created a provision in its profit and loss accounts against the amount retained by GSML. Therefore, the assessee has created a provision in the round figure of....
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....consideration could not be added to the total income of the appellant for the year under consideration and the addition made on this account is deleted. However, the AO is directed to ascertain when this amount was actually received by the appellant subsequently on completion of contract with GSML and to tax it as income in the year in which it has been received. Ground of appeal Nos. 3.1 to 3.3 are allowed, subject to verification by the Assessing Officer." Being aggrieved by the order of ld. CIT(A) Revenue is in appeal before us. The Ld. DR before us submitted that the assessee has booked all the expense in respect of the goods supplied to M/s. GSML but the entire income on account of such supplies has not been offered to tax. In fact the amount withheld by GSML does not represent the retention of the money of the assessee rather it represents the profit on the goods supplied to GSML. Therefore, as per matching principle between the income and expense the assessee is required to offer the entire amount of sales without creating any provision for warranty against it. The Ld. DR vehemently supported the order of the AO. On the other hand, the Ld. AR submitted that the assesse....