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TMI Blog2015 (3) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... s as cessation liabilities as since there was no response to the notice issued to these parties under section 133(6) of the Act. Just because the parties did not appear personally before the AO it cannot be deemed that liabilities ceased to exist. There is no positive material brought on record to suggest that this liability ceased to exist. More so, when the assessee itself offered as income in respect of sl.no.4 of the above item and payments were made in respect of sr.no.2,3, and 5 and in respect of s.no.1 the amount is still shown as outstanding in the books of account of the assessee it is pre-postrous to treat these credits as non-existing in the assessment year under consideration by AO. Accordingly, in our opinion the deletion in addition made by the AO under section 41(1) by CIT(A) is justified - Decided in favour of assessee. Undervaluation of closing stock - CIT(A) deleted the addition - assessee follows FIFO method of valuation of closing stock - AO taken value of purchases made during last week of the month - Held that:- In this case the assessee consistently valuing closing stock based on the weighted average purchase of last three months for the last several years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business connection in India and no income accrued to it in India. The respondent is also not having any permanent establishment in India. Thus the provisions of section 9(1)(i) is not applicable and the said amount is not taxable in India. Being so CIT(A) is justified in deleting the addition made by the AO - Decided in favour of assessee. - ITA No. 4580/Mum/2012 - - - Dated:- 24-2-2015 - Shri I. P. Bansal And Shri Chandra Poojari,JJ. For the Appellant : Shri Premanand J.-DR For the Respondent : Ms. Sonalee Godbole - AR ORDER Per Chandra Poojari, A. M: This appeal by the revenue is directed against the order passed by the CIT(A) dated 24/4/2012 for the assessment year 2008-08. The first ground in this appeal is as follows :- 1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing to verify and allow the correct payment of employees contribution towards provident fund of ₹ 66,700/- under section 36(1)(va) of the Act by relying on the judgment of Hon'ble Supreme Court in the case of Alom Extrusion Ltd. reported in 319 ITR 306, whereas the judgment relates to employers contribution and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liabilities were outstanding for quite long time and as per law of limitation, the liabilities were unpaid for more than three years and there was no likelihood of making any payment to the creditors. Relying on various case laws the AO made and addition of ₹ 6,09,832/- under section 41(1) of the Act. 4.2 During the course of appellate proceedings the ld. AR of the assessee submitted a chart containing the details of five creditors on whom additions were made, which is as under :- DETAILS OF CREDITORS OUTSTANDING FOR MORE THAN ONE YEAR S.NO. NAME AND ADDRESS OF THE PARTY NATURE OF LIABILITY DATE SINCE WHEN OUTSTANDING AMOUNT OF BILL (RS.) AMOUNT OUTSTANDING (RS.) 1. SUPERIOR MARKETING 7 SERVICES 225-A, Vardhman Tower, Preet Vihar Community Centre Purchase of Raw Material 2005-06 1,87,127 1,87,127 Delhi-110032. 2. DR. GANGULY ENGINEERS 7 CONSULTANTS 57, Churchgate Chambers, 5, New Marine Lines, Mumbai-400 020. Commission Payable 2005-06 4,48,654 60,336 3. MARS FORGE PVT. LTD. Rajkot-Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income tax Act and deleted the addition made by AO under section 41(1) of the Act as cessation liability. Against this, the Revenue is in appeal before us. 5. We have heard both parties and perused the material available on record. It is submitted by the ld. AR that most of the above liabilities were settled by the assessee in subsequent assessment years and in the assessment year under consideration these liabilities were very much existing. The AO cannot unilaterally treat it as cessation liability. The AO treated these liabilities as cessation liabilities as since there was no response to the notice issued to these parties under section 133(6) of the Act. Just because the parties did not appear personally before the AO it cannot be deemed that liabilities ceased to exist. There is no positive material brought on record to suggest that this liability ceased to exist. More so, when the assessee itself offered as income in respect of sl.no.4 of the above item and payments were made in respect of sr.no.2,3, and 5 and in respect of s.no.1 the amount is still shown as outstanding in the books of account of the assessee it is pre-postrous to treat these credits as non-existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of inventory to the other than those dealt with within para 14 should be assigned by using the first and first out are weighted average cost of the formula. The formula used reflect the fairness but possible proximisation to the cost incurred in bringing the items of inventory to their present location and condition. 6.4 He also observed that AS-2 recognizes both FIFO as well as weighted average cost. The assessee has followed the later and there is nothing wrong in following the weighted average cost method. 6.5 Further ld. CIT(A) observed that Section 145A clearly stipulates that the valuation of the inventory should be in accordance with the method of accounting regularly employed by the assessee. When the assessee has been following consistently one particular method of valuation of inventory, it was opined by the CIT(A) that the AO cannot think of altering the same unless he is satisfied with the correctness or completeness of the accounts of the assessee . 6.6. The ld. CIT(A) was of the view that the addition made to the closing stock cannot be regarded as a source of profit which is nothing but a principle of balancing. The true purpose of crediting the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was appearing in annexure B C of its submissions. When the AO had added VAT and ED to the closing stock, then he should have done a similar adjustment to the opening stock also. But this was not done by the AO. The AO without appreciating this fact had arrived at a wrong conclusion. 9. We have carefully gone through the above finding of ld. CIT(A) . We find that the finding of ld. CIT(A) is in conformity with the judgment in the case of ACIT vs. Torrent Cables Ltd. (354 ITR 163)(SC), wherein it was held that where the assessee is following net method of valuation of closing stock, and included excise duty at the time of removal of goods. The Hon ble High Court upheld the order of the Tribunal stating that Tribunal was right to exclude the excise duty at the time of valuing closing stock at the end of the accounting period. In view of this we are of the opinion that the ground of the Revenue is to be dismissed. 10. Ground No.4 is as follows:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 48,94,765/- made u/s. 40(a)(ia) without taking into consideration decision of the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent, who had made payment on its behalf. In such circumstances no disallowance can be made u/s. 40(a)(ia) of the Act, on the amount reimbursed where obligation to deduct tax at source for payment was complied with by the agent. The SLP filed against this was dismissed by the Hon'ble Supreme Court in CC 175/2014 dated 17/01/2014. It was also brought to our notice that co-ordinate Bench in the case of Shri Altaf I. Motorwala in ITA No.4755/Mum/2012 dated 26/08/2013 considering similar issue and observed as follows :- 5. We have heard both the parties and their contentions have carefully been considered. Ld. CIT(A) has given a categorical finding that amount of ₹ 61,72,427/- paid by the assessee to clearing and forwarding agent is merely reimbursement expenditure for which the agent has raised a separate bill for these expenditure. Wherever TDS was to be deducted has been deducted by the agent and paid to Government account on behalf of the assessee. Therefore, assessee cannot be asked to deduct tax out of the same amount. For this purpose Ld. CIT(A) has also considered copy of Form No.16A, which reflected the deduction of tax by the agent. Ld. CIT(A) has also found tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k P. Ltd., and Grandprix Fab P. Ltd. (supra) also support the case of the assessee and hence, by respectfully following all the above Tribunal decisions, we hold that no TDS is required to be deducted in the present case for reimbursement of expenses for which separate bills were raised by the commission agent and hence, the provisions of Section 40(a)(ia) is not applicable to such payments. Therefore, disallowance made by the Assessing Officer is to be deleted . 5.1 In view of the above discussions we find no infirmity in the relief granted by Ld. CIT(A). We decline to interfere and the appeal filed by the revenue is dismissed. 10.4 In view of the above we are inclined to dismiss the ground taken by the Revenue. 11. Ground No.5 of the appeal is as follows:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 2,60,864/- made u/s. 40(a)(ia) without taking into consideration decision of ITAT Mumbai in Satellite Television Asia Region Ltd. vs. Dy. Commissioner of Income-tax reported in 99 ITD 91. 11.1 The facts of the case are the assessee firm exported certain goods to Tri-lad Flanc, Canada. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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