TaxTMI 
TaxTMI 
2022 (10) TMI 354
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.... typographical error in CIT appeal order and showing confirmed addition of Rs. 21,99,689/- in place of Rs. 66,72,802/- towards purchase of component which is mistake apparent from records. The assessee has filled 154 applications for rectification of amount. The addition made be deleted. 3. Ground no.2 relates to disallowance of claim of repairs & maintenance expenses amounting to Rs.1,81,420/-. 4. Taking us through the facts of the case, ld.counsel for the assessee pointed out that this issue has been dealt with by the Assessing Officer (AO) at page no.6 para 5 of his order wherein noting that the assessee had claimed repairs & maintenance expenses to the tune of Rs.2,25,000/-,the assessee was asked to justify the said claim. The ld.counsel for the assessee pointed out that the assessee had explained the claim as being on account of construction of temporary weather shed in its rented premises and the same not being in the nature of capital expenditure was accordingly claimed by the assessee as revenue expenditure. He drew our attention to para 5.2 of the assessment order, wherein the AO disagreed with the contentions of the assessee stating that as per the assessee's claim ....
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....e explanation of the assessee treated the entire expenditure as capital in nature as under: "5.2 The reply filed by the assessee have been gone through. The assessee itself stated in its reply that the amount of Rs.2,01,600/- is incurred for the purpose of construction of temporary weather shed. It cannot be considered for repairs but, it is for construction of a structure having enduring benefit to the assessee, therefore, the same cannot be treated as revenue expenditure but capital in nature and requires to be capitalized. Therefore, the claim of the assessee towards repairs and maintenance to the extent of Rs.2,01,600/- is disallowed and added to the total income of the assessee as the same has been capitalized and depreciation of at the rate of 10% on the building and structure being Rs 20,160/- is allowed. So far as the amount of Rs.2,25,000/-, the reply of the assessee is found to be tenable and hence no inference-is drawn." 5. The ld.counsel for the assessee, thereafter took us through para-7 of the CIT(A)'s order wherein he dealt with the issue in appeal upholding order of the AO stating that construction of weather shed would not tantamount to repairs to the e....
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.... being a temporary shed there was no question of treating the same as capital expenditure, not even as per the depreciation rates prescribed under Income Tax Rules, 1962,prescribing depreciation @ 100% on temporary building structures. He drew our attention to Appendix- I, Part-I being table of rates at which the depreciation was admissible as per the Rule 5 of the Income Tax Rules, pointing out therefrom that for temporary erection in the nature of building, the rate of depreciation prescribed was 100%. 7. The ld.DR on the other hand, relied on the orders of the authorities below. 8. We have heard both the parties. The issue before us is vis-à- vis the assessee's claim of treating the entire expenditure incurred on constructing a weather shed as revenue in nature as opposed to the Revenue treating it as capital in nature. The quantum of expenditure in this regard claimed by the assessee amounts to Rs.2,01,600/-. The assessee's claim that it was a temporary weather shed has not been disputed or controverted by the Revenue authorities at any stage. Considering the same, and taking note of the fact that temporary structures are entitled to depreciation at the rate of 100....
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....ring the year since invoices for the same have not been received, but subsequently reversed and offered to tax in the subsequent year of receipt of invoice. The ld.counsel for the assessee contended that since purchases to this extent had been excess booked in the impugned year, the profits were accordingly required to be re-worked by adjusting the excess purchases so considered, and after making such adjustment the profitability ratio of the assessee would be comparable to that of comparable cases requiring no adjustment to be made to the international transactions of purchases of spare parts. In this regard, the ld.counsel for the assessee drew our attention to the submissions made before the ld.CIT(A) reproduced at page no.2 & 3 of the PB as under: "In Continuation of the previous submission, we have to state as under. * The assessee Company made purchases from the Associated Enterprise. * The assessee company selected Transaction Net Margin Method to determine the profit at the Arms' length Price. * The assessee Company made the Profit comparative statement by selecting the financial data of Praj Industries as Comparable. * The P....
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....year under consideration, we have the income shown under the head Prior Period income of RS 85.53,770/-. Till the financial year 2004-05, the Raw Material provisions were made of RS 129,88,895/-. During the year under consideration, the excess provision made towards Raw material provision from the past years is written back since no longer payable in view of the rate differences etc. Such excess provision towards raw material provision (towards purchases) of RS 66,92,252/- are shown under the prior period income. In fact, such written back could have been adjusted-from the Raw material consumption since related to material purchases. In view of the Accounting Standard 4, it is mandatory to make a separate disclosure for prior period income and therefore, it is separately shown under the head Prior Period Income. The details of CRN -Raw Material provision are enclosed along with a separate list showing the list of excess provision written back is enclosed for your review. We hope the information will meet with your requirement." KHS MACHINERY PVT. LTD. ASSESMENT YEAR : 2006-07 ITEM NO. - 45 Details of Prior Period Income for the year ended 31-03-2005 Sr. No. ....
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....eversed were offered to tax as income also in the subsequent year. Evidences to this effect reflecting the provision claimed in the books of the assessee, and its reversal to the extent of Rs.66,72,802/- in subsequent year were all placed before the Revenue authorities. No infirmity has been pointed out by the Revenue authorities in the same - neither before us nor in the orders passed which are impugned before us. Therefore, for all purposes, the assessee's contentions that the actual purchases relating to the impugned year were excess claimed to the extent of Rs.66,72,802/- is correct, and therefore, the claim of the assessee that its profitability ratio should be computed considering the actual expenses incurred on purchases is also, we hold correct. The entire exercise of determining ALP of an international transaction by comparing profitability ratio of the assessee-company with that of a comparable entity indulging in the same type of transactions, requires the comparison of the correct profits of both the entities, after making all necessary adjustment to arrive at the correct profits. Now since the assessee has clearly demonstrated that it had booked excess purchases in the....