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2017 (5) TMI 259 - HC - Income TaxAddition made on account of provisions for losses in stores stock, raw material, finished goods deleted. Guest house expenses are not allowable for claiming depreciation of assets in light of the provisions of Section 37(4) of the Act of 1961. Disallowance on account of change in valuation of closing stock - Held that - As closing stock becomes the opening stock of the next year and as such the Income Tax Appellate Tribunal was justified to adjust the alleged loss by excluding the interest on government loan and office expenses from the cost of closing stock.See VKJ. BUILDERS AND CONTRACTORS P. LTD. Versus COMMISSIONER OF INCOME-TAX 2009 (8) TMI 101 - SUPREME COURT . Deletion of levy of interest under Sections 234-B and 234-C when assessment is made on basis of book profit under Section 115-J - Held that - Hon ble Supreme Court in Kwality Biscuits Limited case(2006 (4) TMI 121 - SUPREME Court) has already taken the view that in absence of specific provision in the Act for payment of advance tax in cases where income is taxed under Section 115-J or 115-JA, the tax payer is not liable to pay any advance tax.
Issues:
1. Disallowance of deduction for provision for loss in stores stock, raw material, finished goods 2. Deletion of additions for depreciation of assets used in guest house 3. Adjustment of alleged loss from closing stock profits 4. Increase in value of closing stock and basis of valuation 5. Deletion of additions on valuing stock and non-moveable stores 6. Disallowance of adjustment in book profit for depreciation 7. Deletion of additions on account of amortization expenses 8. Levy of interest under Sections 234-B and 234-C when assessed on book profit basis Issue 1: The court upheld the deletion of additions made on account of provisions for losses in stores stock, raw material, and finished goods. Referring to previous judgments and the Income Tax Appellate Tribunal's decision, the court found that the issue had already been settled, and the order to delete the additions was justified. Issue 2: The court disallowed the claim for depreciation of assets used in a guest house, citing Section 37(4) of the Income Tax Act, 1961. The court referenced previous judgments and held that guest house expenses are not allowable for claiming depreciation, in line with Section 37(4) of the Act. Issue 3: Regarding the change in valuation of closing stock, the court referred to Supreme Court judgments and ruled that the Income Tax Appellate Tribunal was justified in adjusting the alleged loss by excluding certain expenses from the cost of closing stock. Issue 4: The court addressed the valuation of closing stock and held that it becomes the opening stock of the next year. Referring to Supreme Court judgments, the court decided this issue in alignment with the findings related to the change in valuation of closing stock. Issue 5: The court decided to delete additions made on account of the valuation of slow and non-moveable stores and spares, valuing them less by 25%, in the same terms as previous decisions. Issue 6 & 7: The court chose not to examine questions regarding adjustments in book profit for depreciation and amortization expenses, deeming them of an academic nature. Issue 8: Regarding the levy of interest under Sections 234-B and 234-C when assessed on the basis of book profit, the court referred to a Supreme Court decision and concluded that the Income Tax Appellate Tribunal did not commit any error in this regard, as there is no specific provision for payment of advance tax in such cases. The appeal was disposed of based on the findings provided for each issue.
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