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TMI Blog2010 (7) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of dying and printing of fabrics on job work basis. The AO during the course of assessment proceedings considered that assessee should have some work-in-progress in the closing stock. He determined closing stock of work-in-progress at ₹ 4,96,625/- as under :- Therefore, the value of closing stock of WIP has to be worked out and added to the total income. The assessee has processed 21372201 meters during the year under consideration. Taking into consideration 26 days as working days per month, the total working days of the year works out to 312 days, the average of process of cloth per day works out to 68,500 meters. It is common knowledge that to complete a circle of process in textile processing unit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Therefore, as per accounting principles as well as, as per the decision of the Hon'ble Supreme Court In the case of British Paints (supra), the appellant should show work-in-progress in the closing stock. The decision of the Hon'ble ITAT in the case of Bajrang Processors Pvt. Ltd. (supra) is a single bench decision whereas in the case of Akruti Dyeing Printing Mills in ITA No.2551, 2752/Ahd/2GQ6 for A,Y, 2003-04 dated 26.10.2007, which is a two member bench, has upheld the addition on account of work-in-progress- The Hon'ble ITAT has stated as under:- 13. Having heard the rival submissions and perused the of the lower authorities we find that the assesses is doing job work of dyeing of doth. The A.O. found that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is dismissed, In view of the above, I agree with the A.O. that since the assessee has not made any addition of work-in-progress to the closing stock, the action of the A.O. is correct. The A.O. is, therefore, directed to consider the same as opening stock in the subsequent year. The ground No.1 is, therefore, dismissed and ground No.2 is allowed. 3. Before us, ld. AR submitted that in case of job work, assessee could not have any work-in-progress of his own because entire goods belonged to 3rd parties. Though there may be some labour input but this as such could not be identified. Assessee has been maintaining similar accounts from year to year, therefore, as per accounting standard AS-2 no addition can be made, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is engaged in the business of dyeing and printing of cloth on job work basis and where the assesses had not shown any work-in-progress at the year end, the same was estimated to be 50% of the job receipt of the likely stock remaining in process. However was deleted by the ld. CIT(A) by observing as under: 12 I have carefully considered the fact of the case and submissions made by the Id AR. As regards the addition made in respect of estimated work in progress, it is seen that the appellant in the instant case is a job-worker and process grey cloth for its customers according to their requirement. The appellant not engaged in any manufacturing activities of its own. The cloth processed by the appellant thus belong to its customers is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AS-2 Inventories have been defined as assets (a) held for sale m the ordinary course of business (b) in the process of production, for such sale or (c) in the form of materials or supplies to be consumed in the production for sale or in the rendering of services. Since the appellant was not engaged in the business of sale of the processed cloth or in the production for sale of the processed cloth but was engaged in the business of rendering of services for processing of grey cloth for its customers the principles laid down in AS-2 for ;he valuation of Inventories were not applicable in its case in accordance with item l(b) thereof. However, the materials or supplies to be consumed in the production process or in the rendering of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of work-inprogress is this case. The addition of ₹ 12.56.970/- made by the AO in respect of estimated work in progress is therefore deleted. This ground of appeal is allowed Thus deletion was confirmed by the Tribunal. Therefore in, the present case also following the decision of the Tribunal confirm the order of the CIT(A), the addition on account of estimated value of work-in-progress is required to be deleted. 4. Ld Sr. DR on the other hand submitted that if assesses has spent money which has been debited in the profit loss account and to the extent the assessee does not get receipt from the principle, work-inprogress should be estimated. 5. After considering the rival submissions of the parties, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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