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TMI Blog2017 (9) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... ome - Decided in favour of assessee Addition made on account of inclusion of cenvat credit in valuation of closing stock - Held that:-the profit computed under the inclusive and the exclusive method of accounting are the same and there would not be any change even if the profit computed by the assessee is adjusted in accordance with the provisions contained u/s 145A of the I.T. Act because to the extent the closing stock will be increased. In respect of raw materials the cost of the purchase and the opening stock will be increased by the component of the excise duty. Since the issue involved related to the valuation of the closing stock in respect of raw material, the question of any disallowance u/s 43 B will also not arise. We have already held that he profit of the assessee cannot be effected if the assessee followed the inclusive method of accounting or the exclusive method of accounting because in any case the stock is increased to that extent the debit side in the P 97,15,541/-, the sum of 4,42,822/- is very small. Non-production of bills relating to this amount should not be considered as these expenses are non-genuine. Thus, this ground is allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation this disallowance was withdrawn. The Auditors also in Annexure K corresponding to clause 17(1) in Form 3CD computed the disallowance under section 14A at ₹ 73,81,010/-. When asked for the assessee submitted that no disallowance is required to be made. The AO did not agree with the submission of the assessee but made disallowance as per para 7 of the order under section 14A r.w. Rule 8D amounting to ₹ 1,31,19,335/-. Assessee went in appeal before the CIT(A. The CIT(A) partly allowed the appeal of the assessee. 4. The learned A.R. before us referred to page 2 of the paper book which contains the computation of income and on that basis it was submitted that the assessee got the dividend from foreign subsidiary companies amounting to ₹ 15,47,12,858/- and the same has been shown as income from other sources. It is not the case that the dividend earned by the assessee has been claimed as exempt. It was also submitted that the assessee has not earned any dividend from the investments made in Indian companies. Therefore, in view of the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR 33 no disallowance under section 14A ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g stock but on the issue of correctness of the calculation of the AO he directed the AO to take into consideration the grievances of the assessee and verify the calculation as made at the time of assessment proceedings by strictly keeping in view the provisions of Section 145A alongwith the directions of the CIT(A) as given in A.Y. 2006-07. Thus allowed this ground statistically. 9. We heard the rival submissions and gone through the orders of the tax authorities below. We noted that provisions of Section 145A were effective from 01.04.1999 and applies from A.Y. 1999-200 onwards. The scope and effect of section 145A have been elaborated by the Departmental circular No. 772 dated 23rd December, 1998 as under: - "52.1 Method of accounting in certain cases:-52.1 The issue relating to whether the Value of the closing stock of the inputs, work-in-progress and finished goods must necessarily include the clement for which MODVAT credit is available, has been a matter of considerable litigation over the years. 52.2 Consistent with the other provisions of the Finance (No.2) Act, 1998, with a view to put an end to this point of litigation and in order to ensure that the value of openin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cr. Particulars Rs. Opening Stock 200 Sales 1950 Purchases 1500 Closing Stock 400 Excise Duty 0 Gross Profit 650 Total 2350 2350 Under the Inclusive Method: P & L Account Dr Particulars Rs. Cr. Particulars Rs. Opening Stock 240 Sales 2600 Purchases 1800 Closing Stock 480 Excise Duty 650 Credit obtained on consumption 260 Gross Profit 650 Total 3340 3340 From the aforesaid illustration it is clear that the profit computed under the inclusive and the exclusive method of accounting are the same and there would not be any change even if the profit computed by the assessee is adjusted in accordance with the provisions contained u/s 145A of the I.T. Act because to the extent the closing stock will be increased. In respect of raw materials the cost of the purchase and the opening stock will be increased by the component of the excise duty. Since the issue involved related to the valuation of the closing stock in respect of raw material, the question of any disallowance u/s 43 B will also not arise. We have gone through the decision of the Hon'ble Supreme Court in the case of CIT vs. Indo Nippo Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The definition of speculative transactions under section 43(5) is an exhaustive one and the term 'commodity' including shares and stocks but does not include currency. (a) The term 'commodity' is defined neither in the Income-tax Act nor in the General Clauses Act. (b) Dictionary meaning of the term 'commodity' is 'raw material or agricultural product that can be bought and sold - something useful or valuable'. (c) Another definition for the term 'commodity' is 'any product that can be used for commerce or an article of commerce which is traded on an authorised commodity exchange is known as commodity'. The article should be movable of value, something which is bought or sold and which is produced or used as the subject of barter or sale. (d) In short, commodity includes all kinds of goods. The Forward Contracts (Regulation) Act, 1952 (FCRA) defines 'goods' as 'every kind of movable property other than actionable claims, money and securities'. (e) The Delhi Bench of ITAT in the case of Munjal Showa Ltd. v. DCIT 94 TTJ 227 has held as under: "Foreign currency or any currency is neither commodity nor share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finding of the CIT (Appeals), independently come to the conclusion that the transaction entered into by the Respondent assessee is not in the nature of speculative activities. Further the hedging transactions were entered into so as to cover variation in foreign exchange rate which would impact its business of import and export of diamonds. These concurrent finding of facts are not shown to be perverse in any manner. In fact, the Assessing Officer also in the Assessment Order does not find that the transaction entered into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safeguard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed. So far as the reliance on Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us vehemently relied on the order of the CIT(A) but could not convince us that the facts involved in the case of the assessee are different to the decisions as has been given by the Hon'ble Bombay High Court in the above noted case law. 16. Respectfully following the decisions of the Hon'ble Bombay High Court we set aside the order of the CIT(A) on this issue and delete the disallowance of ₹ 1,40,84,283/-. 17. Ground No. 4 relates to the disallowance of repairs and maintenance of plant and machinery amounting to ₹ 4,42,922/-. The facts relating to this issue are that the AO noted that the assessee has claimed a sum of ₹ 97,15,541/- on repairs and maintenance of plant and machinery. The AO disallowed a sum of ₹ 4,42,922/- as the assessee failed to produce bills of the said amount to Topwin Equipment System. When the matter went before the CIT(A), the CIT(A) confirmed the addition. The learned A.R. before us vehemently contended that the assessee has produced the bills before the AO. The amount of ₹ 4,42,822/- relates to the repairs of the plants which were duly accounted and paid after deduction of TDS by the assessee. The learned D.R., o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of depreciation by the assessee on UPS @60% but allowed by the AO and confirmed by the CIT(A) @15% and thereby a sum of ₹ 21,69,239/- was disallowed out of the depreciation claimed by the assessee. After hearing the rival submissions and going through the orders of the Tax Authorities below we noted that this issue is duly covered by the decision of the Mumbai Special Bench in the case of DCIT vs. Datacraft India Ltd. 40 SOT 295 [9 ITR(T) 712] in which it was specifically held that the UPS shall be entitled for depreciation @60%. Similar view has been taken by "B" Bench of this Tribunal in the case of Macawber Engineering Systems (I) P. Ltd. 19 ITR(T) 302 in which it was held that UPS was an essential ingredient in order to run computer effectively, therefore the assessee shall be entitled for depreciation @60%. No contrary decision was brought to our knowledge by the learned D.R. Even though he has vehemently relied on the order of the CIT(A), we are bound to follow the decision of the Coordinate Bench. We accordingly direct the AO to allow depreciation to the assessee @60%. This, this ground of the assessee is allowed. 20. In the result, the assessee's appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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