2016 (1) TMI 361 - AT - Income Tax

Addition made towards valuation of stock of scrap - Held that - There is no scope for valuation of stock at market price as worked out by the Learned AO. The valuation of stock at cost or net realizable price whichever is lower is an accepted and established rule of commercial practice as was held by the Hon ble Supreme Court in the case of Chainrup Sampatram vs CIT reported in (1953 (10) TMI 2 - SUPREME Court). Even otherwise we find that the Learned AO had taken the last realized selling price of M.S.Scrap whereas the closing stock needs to be valued as realisable value or cost whichever is lower. Even on this count the valuation made by the Learned AO is not appreciated. We find that the main buyer of the assessee M/s Tata Motors Ltd had reduced the rate per MT of M.S. scrap to 15107.4 per MT with effect from 1.7.2005 is very crucial and is already on records which fact is not disputed by the revenue. Based on the reduction in the rate with effect from 1.7.2005 the net realizable value had automatically come down and the assessee had valued the stocks applying that rate after deducting direct expenses incurred for realizing the sale and hence we find no infirmity in the valuation method adopted by the assessee. We find that the assessee had valued the closing stock by the method that it has regularly and consistently followed for valuation of stock. - Decided against revenue Addition towards commission - non deduction of tds - CIT(A) deleted the addition - Held that - CIT(A) had categorically given clear findings in respect of this addition as that the TDS was indeed remitted by the successor concern i.e proprietary concern of the assessee on 31.5.2006 which is well within the due date of filing the return of income u/s 139(1) of the Act and hence the disallowance u/s 40(a)(ia) of the Act could not be made on that account and is self explanatory and none of these findings were refuted by the Learned DR during the course of hearing before us . Hence we do not find any reason to interfere with the order of the Learned CIT(A) in this regard. - Decided against revenue

Summary

Issues:
1. Valuation of stock of scrap
2. Addition towards commission

Valuation of stock of scrap:
The appeal pertains to the valuation of stock of scrap by an assessee partnership firm, now a proprietorship concern. The revenue challenged an addition of &8377; 12,54,947 made by the AO towards the valuation of closing stock of M.S. Scrap. The AO substituted the value based on market price, while the assessee argued for the lower of cost or net realizable value. The CIT(A) deleted the addition, emphasizing the assessee's consistent valuation method. The tribunal upheld the CIT(A)'s decision, citing the established commercial practice of valuing stock at cost or net realizable value, whichever is lower. The tribunal found no fault in the assessee's valuation method, dismissing the revenue's appeal.

Addition towards commission:
The second issue revolved around an addition of &8377; 23,00,000 towards commission payments made by the assessee to two parties. The AO doubted the nature of services rendered by the commission agents and disallowed the expenditure. The CIT(A) found in favor of the assessee, noting the genuineness of the payments and compliance with TDS provisions by the successor concern. The tribunal upheld the CIT(A)'s decision, observing that the findings were self-explanatory and not refuted by the revenue during the hearing. Consequently, the tribunal dismissed the revenue's appeal, affirming the deletion of the addition towards commission payments.

In conclusion, the tribunal dismissed the revenue's appeal on both issues, upholding the CIT(A)'s decisions regarding the valuation of stock of scrap and the addition towards commission payments.