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TMI Blog2014 (8) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law the learned CIT(A) erred in deleting the disallowance of Rs. 9,13,519 of bond issue expenses without appreciating the fact that it had been incurred for raising capital and hence be treated as capital expenditure. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of 2% of the total value of raw material, stores and spares in closing stock made u/s 145A on account of direct expenses like freight, storage, etc." 2. As regards the first issue i.e., disallowance of bond issue expenses of Rs. 9,13,519, it is seen from the material placed on record that the assessee has incurred bond issue expenses of Rs. 248,98,771 out of which the assessee has debited an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal and after relying upon the Tribunal order for the assessment year 2006-07, directed the Assessing Officer to allow the expenditure as revenue expenditure. 5. Before us, both the parties agreed that this issue stands covered by in favour of the assessee by the order of the Tribunal for the assessment year 2006-07. The learned counsel for the assessee Mr. K. Gopal, brought to our notice that the High Court has also confirmed this order of the Tribunal in the appeal filed by the Department in CIT v/s Hindustan Organic Chemicals Ltd., ITA no.399/2012 order pronounced on 11th July 2014. 6. In view of the aforesaid submissions and also the fact that the High Court is confirmed the order of the Tribunal for the assessment year 2006-07, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be representing the direct expenses incurred on account of raw material and accordingly an addition of Rs. 54,35,420, was made in the closing stock under the provisions of section 145A. 8. Before the learned Commissioner (Appeals), the assessee submitted as under:- "The appellant, vide submission dated 05.12.2011, had submitted that the value of closing stock of raw material and stores includes freight charges and other direct charges incurred on raw material and stores. In support of the claim; appellant has submitted sample copy of purchase day book of item having purchase value of Rs. 3,56,54,540 (inclusive freight of Rs. 30,260/-) and General Ledger of the same item reflecting the closing value of stock at Rs. 3,56,54,540 (which is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identical. For the sake of convenience the relevant portion of the order of the Tribunal dated 13/01/2011 in ITA No.2201/Mum/2010 on the similar issue is reproduced below: "11. Ground No.3 is directed against the action of the CIT(A) in deleting the disallowance of Rs. 58,09,097/- u/s. 145 of the Act. 12. The AO noted that the tax audit report showed that the assessee company had not considered the direct expenses while computing the value of closing stock. The AO, therefore, was of the view that such expenses were required to be loaded with for valuing the closing stock and the direct expenses, freight, storage, etc. were incurred on account of purchase of raw material. Since no details of the direct expenses had been furnished, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght charges as reflected from the purchase day book and general ledger of item having the value of Rs. 2.90 crore. It is further seen that there is no change in the valuation of the stock. I find that the valuation method has not been changed by the AO in past year and that no adjustment to this effect was made in the subsequent year. The closing stock of previous year would be the opening is stock of the year and therefore estimation of the stock is not justified. Further the appellant is consistently following the same method of valuation of closing stock. This issue is also covered in favour of the appellant by the order of CIT(A) for assessment years 1999-00, 2002-03, 2004-05 and 2006-07 dated 17/12/2010. In view of these facts, the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition following the earlier orders of CIT(A) in assessee's own case." 5. The facts of the present year are similar. The A.O applied section 145A of the Act. He has observed that audit report has revealed that assessee company did not consider direct expenses while computing value of closing stock. According to AO raw material was required to be loaded with the direct expenses like freight, storage etc. incurred on account of the same. In absence of details he estimated direct expenses to the tune of 2% of the total value of the closing stock of raw material and accordingly addition of Rs. 6,81,25,800/- was made which has been deleted by Ld. CIT(A) as mentioned above. 6. We have heard both the parties on this issue. The facts being id ..... X X X X Extracts X X X X X X X X Extracts X X X X
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