2017 (3) TMI 1256 - HC - Income Tax

Valuation of depleted/unusable/unsalable/rat bitten stock - Held that - After examining the entire material on record, it has been categorically recorded by the Tribunal that nothing was brought on record by the assessee to prove that the stock was very old. The assessee was not able to produce the last purchase invoice to prove how old the stock was which could be written off/rejected. Thus, the Tribunal rightly upheld the finding recorded by the CIT(A) disallowing the claim made by the assessee. Disallowance of claim under Section 24(1) against rental income derived - Held that - Tribunal concurred with the findings recorded by the Assessing Officer as well as the CIT(A) that since the income was to be assessed under the head income from other sources , deduction under Section 24(1) of the Act was not allowable.

Summary

Issues:
1. Valuation of depleted stock
2. Claim of deduction under Section 24 of the Income Tax Act
3. Perversity of ITAT findings
4. Misdirection by ITAT in deciding the issue

Valuation of Depleted Stock:
The appellant-assessee challenged the addition of ?17,07,358 for the valuation of depleted stock. The Tribunal upheld the decision, stating that the appellant failed to prove the age of the stock or provide evidence for write-off. The Tribunal noted that the Assessing Officer ignored the appellant's business closure and disposal of stock during open clearance sales. The Tribunal found no error in the CIT(A)'s decision to disallow the claim, as the appellant did not substantiate the stock's age or condition. The Tribunal dismissed the appellant's appeal on this issue.

Claim of Deduction under Section 24:
Regarding the claim of deduction under Section 24 of the Income Tax Act for rental income of ?78,000, the Tribunal agreed with the Assessing Officer and CIT(A) that since the income was categorized as "income from other sources," deduction under Section 24(1) was not permissible. The Tribunal cited Section 22 of the Income Tax Act, emphasizing that the factory building let out by the assessee did not fall under the "income from house property" category, hence disallowing the deduction. The Tribunal dismissed the ground related to this issue.

Perversity of ITAT Findings:
The appellant contended that the ITAT's findings were perverse and against the evidence on record. However, the Tribunal found no illegality or perversity in its own findings, leading to the dismissal of the appeal as no substantial question of law arose from this issue.

Misdirection by ITAT:
The appellant raised concerns about the ITAT being influenced by irrelevant factors and applying erroneous criteria in deciding the issues under the Income Tax Act. However, since the Tribunal's findings were not shown to be illegal or perverse, the appeal was dismissed without any substantial question of law arising.