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TMI Blog2015 (6) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, i.e., the assessee could establish that there was no change in the income under both methods by furnishing necessary workings. Accordingly, we are of the view that the assessee should be given one more opportunity to demonstrate this fact. - Decided in favour of assessee for statistical purposes. - ITA No.9128/M/2010 - - - Dated:- 20-2-2015 - SHRI R.C. SHARMA AND SHRI SANJAY GARG, JJ. For the Appellant : Shri Madhur Agrawal, A.R. For the Respondent : Shri Narendra Kumar Chand, D.R. ORDER Sanjay Garg (Judicial Member).- The present appeal has been preferred by the assessee against the directions passed by the Dispute Resolution Panel-I (hereinafter referred to as the DRP) dated September 16, 2010. 2. The assessee has taken the following grounds of appeal : 1(a) The Deputy Commissioner of Income-tax Circle-8(1), Mumbai (hereinafter referred to as the 'AO') while passing the order dated October 25, 2010 under section 143(3) read with section 144C(13) pursuant to the directions of the Dispute Resolution Panel-II (hereinafter referred to as the DRP) dated September 16, 2010 erred in upholding the disallowance under section 14A of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 234D of ₹ 12,61,817 as against ₹ 4,74,766 payable as per computation enclosed. Ground No. 1(a) : disallowance under section 14A 3. Ground No. 1(a) is relating to disallowance under section 14A of the Income-tax Act. During the assessment proceedings the Assessing Officer (hereinafter referred to as the AO) noticed that the assessee has earned sufficient exempt income. He therefore made the disallowance under section 14A of the Income-tax Act applying rule 8D of the Income-tax Rules. The Dispute Resolution Panel also directed the Assessing Officer to compute the said disallowance as per the provisions of rule 8D of the Income-tax Rules. 4. We have heard the learned representatives of both parties and have also gone through the records on this issue. It may be observed that in the case of Godrej and Boyce Manufacturing Co. Ltd. v. Deputy CIT [2010] 328 ITR 81 (Bom) the hon'ble Bombay High Court has held that rule 8D read with section 14A(2) is not arbitrary or unreasonable but can be applied only if the assessee's method is not satisfactory. It has been further held that rule 8D is not retrospective and applies from the assessment year 2008-09. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s (assessment year 2005-06) adjustment of ₹ 52,33,736 to the value of the opening stock of the current year the net addition of ₹ 94,95,102 was made under section 145A of the Act. The assessee contended before the Dispute Resolution Panel that credit for unutilised service tax should also be given in the opening stock of the current year. The Dispute Resolution Panel, however, held that since service tax does not form part of cost of goods, the Assessing Officer's action for not adding the unutilised service tax to the value of the opening stock in the current year was correct and therefore was upheld. The assessee has, thus, come in appeal before us against the said directions. 9. Vide ground No. 2(a), the assessee has agitated the addition of ₹ 1,47,28,838 to the value of the closing stock under section 145A of the Act on account of cenvat credit and service tax credit. The assessee alternatively, vide ground No. 2(b), has contended that if the above amount is to be added to the closing stock, the Assessing Officer ought to have added ₹ 1,18,01,670 to the opening stock on account of addition made to closing stock for assessment year 2005-06 as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount adjusted to the closing stock should be correspondingly allowed as deduction as expenditure. Another alternative contention was that the opening stock should have been increased by a sum of ₹ 1,18,01,670, since the Assessing Officer has increased the value of closing stock as on March 31, 2005 with the abovesaid amount. 13. The Dispute Resolution Panel has however held that the opening stock should be increased by ₹ 52,33,736 only, since (the remaining amount apparently pertain to service tax) does not form part of cost of goods. 14. We have already noticed that the valuation of purchase and sale of goods and inventory is required to be adjusted to include only with the amount of tax, duty, cess or fee (by whatever name called) actually paid or incurred to bring the goods to the place of its location and condition on the date of valuation. If the Dispute Resolution Panel is taking the view that service tax does not form part of cost of goods, apparently meaning that the same was not incurred to bring the goods to the place of its location and condition on the date of valuation, then the Dispute Resolution Panel should not have upheld the adjustment of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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