2015 (3) TMI 106 - HC - Income Tax

Undervaluation of the closing stock - Tribunal upholding the order of the CIT(A) in deleting the addition - Held that - As relying on assessee s own case 2013 (10) TMI 16 - ALLAHABAD HIGH COURT wherein held that the changed method of accounting was more scientific and did not result any evasion of tax. - Decided in favour of assessee. Sale of the bagasse to its sister concern - Held that - As relying on assessee s own case 2015 (3) TMI 94 - ALLAHABAD HIGH COURT Tribunal was legally justified in upholding the order of the CIT(A) in deleting the addition on account of under statement of sale proceeds of baggase disallowance on account of treatment of capital expenses as revenue expenses in molasses fund - Decided in favour of assessee. Depreciation on tube-well - Tribunal directing the Assessing Officer to allow depreciation treating it as plant and machinery - Held that - As relying on assessee s own case 2015 (3) TMI 94 - ALLAHABAD HIGH COURT we decline to interfere with the impugned order passed by the Tribunal on this issue. - Decided in favour of assessee. Excess provision of gratuity - Held that - Deduction of gratuity is allowable as per Section-43B on the basis of actual payment. The A.O. in its order has observed that if this amount is pertaining to the assessment year 1984-85 onwards then assessment order will be rectified on this point to that extent. None of the parties was able to tell whether any rectification was made out or not. Thus we set-aside the impugned orders passed by the appellate authorities pertaining to this issue and restore the matter back to the A.O. to examine whether any rectification order has been passed or not. The A.O. is directed to decide the issued denovo whether the claim is merely written back of the provision or the actual payment but after providing necessary opportunity to the assessee as per law. - Decided in favour of revenue for statistical purposes. Business loss on account of export of sugar - Tribunal upholding the order of the CIT(A) in treating the expenditure incurred by the assessee against export quota sales of sugar as loss - Held that - It is not evident whether the amount in question is penal in nature or not if it is penal in nature then the same cannot be allowed as a business loss if it was optional either to export the sugar or to pay the amount then the same can be allowed as business loss. Hence we set-aside the impugned order and restore the issue to the A.O. to decide the same on merit in view of above discussion and by providing reasonable opportunity to the assessee. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Valuation of closing stock
2. Sale of bagasse to sister concern
3. Depreciation on tube-well
4. Excess provision of gratuity
5. Business loss on export of sugar

Issue 1: Valuation of Closing Stock
The department challenged the undervaluation of closing stock amounting to Rs. 2,85,81,310. The Tribunal upheld the order of the CIT(A) in favor of the assessee based on a previous decision where it was held that the changed accounting method was scientific and did not result in tax evasion. The High Court sustained the Tribunal's decision, ruling in favor of the assessee.

Issue 2: Sale of Bagasse to Sister Concern
The dispute involved the sale of bagasse to a sister concern at a lower rate, resulting in an addition of Rs. 1,07,92,714 by the A.O. The CIT(A) and the Tribunal deleted this addition based on previous decisions favoring the assessee. The High Court, following precedent, upheld the decision in favor of the assessee against the department.

Issue 3: Depreciation on Tube-well
The question revolved around allowing depreciation on a tube-well as plant and machinery. The High Court referred to a previous decision in favor of the assessee and declined to interfere with the Tribunal's decision, ruling in favor of the assessee against the department.

Issue 4: Excess Provision of Gratuity
The A.O. observed an excess provision of gratuity returned by the assessee but without a specific breakdown for different assessment years. The High Court set aside the appellate authorities' orders and directed the matter back to the A.O. for examination and rectification if necessary, emphasizing the need for actual payment basis as per Section-43B.

Issue 5: Business Loss on Export of Sugar
The controversy centered on a claimed business loss of Rs. 25,82,825 due to non-compliance with export obligations under the Sugar Export Promotion Act, 1958. The A.O. disallowed the claim, but the appellate authorities allowed it as a business loss. The High Court remanded the issue to the A.O. for further examination to determine if the amount was penal in nature, emphasizing the need for a merit-based decision.

In conclusion, the High Court partly allowed the department's appeal while ruling in favor of the assessee on various issues based on legal precedents and interpretations of tax laws.