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2018 (6) TMI 1505 - AT - Income TaxRate of depreciation allowable on printers and UPS/inventories i.e. computer accessories - Held that - CIT(A) followed the proposition of law laid down by the ITAT, Kolkata Benches in the case of ITO vs. Samiran Majumdar 2005 (8) TMI 293 - ITAT CALCUTTA-B and allowed 60% depreciation on these computer accessories. We see no infirmity in the same. Hence we uphold the same and dismiss the grounds of appeal. Disallowance of bad debts - Held that - Claim u/s 36(1)(vii) of the Act is allowable once the assessee writes off debts as bad debts in its accounts and no further conditions need be satisfied. In the case appellant, the trade debts had been written off in the books of accounts in the year under consideration and hence allowable as deduction. In view of the above facts, and respectfully following the decision TRF Ltd 2010 (2) TMI 211 - SUPREME COURT direct the AO to delete the disallowance made by him on account of bad debts. Computing book profits u/s 115JB - Held that - AO that the provision for reduction of slow moving goods should be reduced from computation of book profits u/s 115JB. Adjudicating ground no.1 of the assessee s appeal, we uphold the order of the CIT(A) and dismiss this ground of the revenue.
Issues Involved:
1. Disallowance of ?2.22 crore on account of 'Inventory Written off'. 2. Allowability of ?34,92,603/- as commission expenditure. 3. Addition of ?14,26,50,526/- on account of low GP rate. 4. Addition on account of difference in finished goods of ?8,62,26,753/-. 5. Addition on account of reduction in 'Value of Inventory' of ?91,94,216/-. 6. Allowability of ?4,12,458/- expenditure on account of 'Computer software' as revenue expenditure. 7. Disallowance of bad debt of ?29,60,481/-. 8. Consideration of 'reduction in inventory' of ?91,94,216/- for computing book profit u/s 115JB. Issue-wise Detailed Analysis: 1. Disallowance of ?2.22 crore on account of 'Inventory Written off': The Revenue argued that the CIT(A) admitted additional evidence without granting the AO an opportunity to examine it, violating Rule 46A. The Tribunal found that the case was transferred to Kolkata, and the CIT(A) did not call for a remand report after receiving the file. The Tribunal set aside this issue to the AO for fresh adjudication, allowing the AO to verify the matter. 2. Allowability of ?34,92,603/- as commission expenditure: The Revenue claimed that no new evidence was filed by the assessee before the CIT(A), and the factual findings of the CIT(A) could not be disputed. The CIT(A) found that the AO disallowed the commission without proper justification and directed deletion of the disallowance. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground. 3. Addition of ?14,26,50,526/- on account of low GP rate: The CIT(A) held that the AO did not reject the book results or prove that the appellant suppressed production or inflated expenses. The Tribunal found no additional evidence was filed, and the factual findings of the CIT(A) were not controverted. The Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's ground. 4. Addition on account of difference in finished goods of ?8,62,26,753/-: The CIT(A) followed the principle of consistency, as similar issues were decided in favor of the assessee in earlier years. The Tribunal noted that while res judicata does not apply to income tax proceedings, the principle of consistency should be followed when facts are similar. The Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's ground. 5. Addition on account of reduction in 'Value of Inventory' of ?91,94,216/-: The CIT(A) found that the assessee consistently valued its inventory using the 'Lower of the cost or net realizable value' method and provided detailed working statements. The Tribunal noted no additional evidence was filed, and the CIT(A)'s findings were not controverted. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's ground. 6. Allowability of ?4,12,458/- expenditure on account of 'Computer software' as revenue expenditure: The CIT(A) followed the ITAT Kolkata Bench's decision in ITO vs. Samiran Majumdar, allowing 60% depreciation on computer accessories. The Tribunal found no infirmity in this decision and dismissed the Revenue's ground. 7. Disallowance of bad debt of ?29,60,481/-: The CIT(A) allowed the bad debt claim as the debts were written off in the books and met the conditions under section 36(1)(vii) read with section 36(2) of the Act. The Tribunal found no additional evidence was filed and upheld the CIT(A)'s findings, dismissing the Revenue's ground. 8. Consideration of 'reduction in inventory' of ?91,94,216/- for computing book profit u/s 115JB: The CIT(A) directed the AO to reduce the provision for slow-moving goods from the computation of book profits u/s 115JB. The Tribunal upheld this direction, consistent with its earlier findings, and dismissed the Revenue's ground. Conclusion: The Tribunal dismissed both appeals of the Revenue, upholding the CIT(A)'s decisions on all grounds. The order was pronounced on 27.06.2018.
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