2015 (5) TMI 707 - AT - Income Tax

Disallowance of freight inward, freight outward and octroi expenses - CIT(A) allowed the claim - Held that - Since, the facts of the case in the present appeal are similar to that of assessment year 2002-03 and 2004-05, which has been accepted by the learned AR and the learned DR and since on identical facts the Coordinate Bench of the Tribunal has already decided the issue in earlier years in favour of the assessee, we, following the decision of the Co-ordinate Bench cited supra dismiss this ground of appeal of the revenue. - Decided against revenue. Disallowance of suppressed conversion charges - CIT(A) allowed the claim - Held that - We find that in the earlier years, the Coordinate Bench had taken a view and thereupon restored the matter to the file of the Assessing Officer to affirm the correctness of the assessee s claim of loss. We, thus, following the decision of the Coordinate Bench in the earlier years, restore the matter to the file of the Assessing Officer for examining it afresh after giving reasonable opportunity of hearing to the assessee. Thus, this ground of appeal of the revenue is allowed for statistical purposes.

Issues Involved:
1. Deletion of disallowance of freight inward, freight outward, and octroi expenses.
2. Deletion of addition made on account of suppressed conversion charges.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Freight and Octroi Expenses:

The Revenue's appeal contested the deletion of disallowance of Rs. 48,63,066/- for freight inward, freight outward, and octroi expenses. The Assessee, engaged in manufacturing alloys and steel casting, had these expenses debited in its Profit and Loss account. The Assessing Officer (A.O.) noted that according to an agreement with its holding company, AIA Engineering Ltd., these expenses were to be borne by AIA Engineering Ltd., and thus disallowed the expenses. The A.O. referenced similar disallowances in earlier years, which were decided in favor of the Assessee by the Tribunal, but the Revenue had appealed to the Gujarat High Court.

The Commissioner of Income Tax (Appeals) [CIT(A)], following the precedent set in earlier years, deleted the disallowance, noting that the facts remained unchanged and the expenses were incurred on consumables and stores materials, not raw materials or finished goods. The Tribunal upheld the CIT(A)'s decision, referencing its own previous decisions for earlier years (A.Y. 2002-03, 2004-05, 2006-07), which had consistently ruled in favor of the Assessee. The Tribunal found no distinguishing features in the current year's case and dismissed the Revenue's ground.

2. Deletion of Addition Made on Account of Suppressed Conversion Charges:

The second issue involved the deletion of an addition of Rs. 1,33,21,509/- made by the A.O. for suppressed conversion charges due to burning loss/process loss claimed by the Assessee at 10.78%. The A.O. argued that the Assessee did not maintain proper records to justify the loss and invoked Section 145 of the Act to reject the book results, estimating the acceptable loss at 5.78%.

The CIT(A) deleted the addition, noting that similar issues in earlier years had been resolved in favor of the Assessee. The Tribunal, upon reviewing the case, found that the facts were identical to earlier years and that the Coordinate Bench had previously restored similar matters to the A.O. for re-examination. Following this precedent, the Tribunal restored the issue to the A.O. to reassess the burning loss claim afresh, providing the Assessee with a reasonable opportunity to present its case.

Conclusion:

The Tribunal's decision resulted in the appeal being partly allowed for statistical purposes. The deletion of disallowance of freight and octroi expenses was upheld, while the issue of suppressed conversion charges was remanded back to the A.O. for re-examination. This approach ensured consistency with previous rulings and provided a fair opportunity for the Assessee to substantiate its claims.

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