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TMI Blog2019 (10) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the AO would take opening stock as on 1st April of next financial year as worked out on the basis of average rate as per our observation given herein above. Accordingly, this ground is allowed. Disallowance of salary payment in respect of person specified under section 40A(2)(b) - HELD THAT:- Recipient of remuneration are have requisite qualification and rendered service for handling of banking services, moreover, as the AO has accepted part payment reasonable, meaning thereby that they have rendered some services. If that is so, then, no disallowance under section 40A (2) (b) could be made as the recipient and payer are assessed to tax at same rate, hence, there is no evasion of tax. The copy of acknowledgement of return of income filed showed that both the person specified under section 40A (2) (b) of the Act are assessed at maximum marginal rate. Therefore, the issue is covered by the decision of Tribunal in the case of H.C. Sons v. ACIT Circle -12 Ahmedabad [ 2017 (1) TMI 1688 - ITAT AHMEDABAD] wherein following the ratio laid of PWS Engineers Limited v. DCIT [ 2016 (6) TMI 596 - GUJARAT HIGH COURT] held as long as the amount paid by the assessee to spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alued at low rate. It was explained that the goods were purchase before 7 years, which were got wet during monsoon season and got black and became low quality. The assessee follows valuation based on market price or cost whichever is lower therefore, the goods were valued @ 9.49 per kg being market value. Further, the assessee has shown said closing stock as opening stock for subsequent assessment year, which has been accepted by the Department. However, the AO has was of the view that the assessee has not adhered the policy of valuation of closing stock as declared in column 12(a) of audit report filed along with return of income, as the stock is neither valued at market value nor cost value. The AO ascertained market value as on 31.03.2010 from APMC, Kadi that were at ₹ 21.60 per kg. Whereas rate as per NCDEX were at ₹ 22.80 per kg., whereas the assessee has valued closing stock @ 9.49 per kg. With regard to cost, the AO noted that the rainy season has ended by September 2009, whereas last recorded sale bill was issued by the assessee @ 19.50 per kg. on 15.12.2009. Further, the assessee has purchased guar seeds @ 22.11 per kg. Therefore, the theory of goods become wet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 19.53 per kg. in April 2011, these rates were ranging between 25.50 per kg. to 28.20 per kg. in addition, even 30 to 31.01 per kg. This proves that goods seeds could only be realized @ 19.53 per kg. as they were not of good quality. The learned counsel for the assessee placed reliance in the case of DCIT v. Loil Health Foods Ltd. [2017] 82 taxmann.com 324 (Chandigarh-Trib) and Alfa Laval India Ltd. v. DCIT [2003] 133 Taxman 740 (Bombay)/ 266 ITR 418 (Bombay) in support of his claim. 6. Au contraire, the ld. Sr. D.R. supported the order of the lower authorities. The ld. Sr. D.R. submitted that the AO has applied LIFO method of valuation and has arrived at correct finding. The assessee has not been able to substantiate that goods were become wet or lower quality as same goods were sold in April next year on higher rate. 7. We have heard the rival submissions and perused the relevant material on record. We find that no correspondence has been adduced in support of water seeping or any claim of insurance to support that goods were deteriorated. However, it is also facts that goods were lying in godown from A.Y. 2005-06 to A.Y. 2009-10 as same quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Ground No. 6 is against the disallowance of salary payment in respect of person specified under section 40A(2)(b) of the Act. 9. The AO noticed that the assessee has not debited any expenditure on wages payment in last financial year whereas in the current year, it has debited a sum of ₹ 17,80,200 which inter-alia included payment of ₹ 5.80 Lakh each to Smt. Shilpaben Kiranbhai Patel, and Smt. Darshnaben Alpeshbhai Patel (wives of partners of the assessee firm). The AO examined and observed that the assessee has failed to adduce any evidence of the performance of work done by them. Accordingly, concluded that payments made at ₹ 11,60,000 to above two women is excessive. However, considering the increase in turnover by 62% from last year, these women might have been rendered some help to the assessee firm in respect of business activity. In view of this matter, the AO treated payment of ₹ 10,000 per month as reasonable to above person and accordingly, considered payment at ₹ 2,40,000 as reasonable and disallowed balance amount of ₹ 9,20,000 [ 11,60,000- 2,40,000] under the provisions of section 40A(2)(b) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered service for handling of banking services, moreover, as the AO has accepted part payment reasonable, meaning thereby that they have rendered some services. If that is so, then, no disallowance under section 40A (2) (b) could be made as the recipient and payer are assessed to tax at same rate, hence, there is no evasion of tax. The copy of acknowledgement of return of income filed showed that both the person specified under section 40A (2) (b) of the Act are assessed at maximum marginal rate. Therefore, the issue is covered by the decision of Tribunal in the case of H.C. Sons v. ACIT Circle -12 Ahmedabad [I.T.A. No. 2713/Ahd/2013/A.Y. 2009-10 dated 25.01.2017] wherein following the ratio laid down by the Hon ble Gujarat High Court in the case of PWS Engineers Limited v. DCIT [Tax Appeal No. 209 of 2015 dated 06.06.2016] wherein their Lordship have inter-alia held as long as the amount paid by the assessee to specific persons are taxed in the hands of specific persons at the same rate , disallowance under section 40A(2)(b) will be meaningless inasmuch as permitting the Revenue to tax the same income again at the same rate in the hand of principal payer would am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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