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TMI Blog2020 (12) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to complete the assessment on the basis of the Revised Return based on the audited books of accounts. This ground of appeal is allowed. Disallowance being sundry charges and additional ground is that said amount has not claimed as deduction in the Return of Income - HELD THAT:- It is appropriate to remit this issue to the file of Assessing Officer for reconsideration to decide whether it is revenue expenditure or capital expenditure , if it is a capital expenditure, depreciation is to be granted at applicable rate. Both additional ground and main ground are allowed for statistical purposes. Disallowance being 25% of charges of tools which are written off during the year - According to the Assessing Officer, it has to be grouped under the head Block of Assets and depreciation to be claimed at applicable rate - AO disallowed the amount and granted depreciation @ 10% - HELD THAT:- Assessee has been following the Inventory Policy on valuation of loose tools which is disclosed in Schedule 18 (vii) to audited financial statements. Loose Tools are charged of consumption @ 25% p.a on the reducing balance method. The net realizable value of inventory are considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re expenditure on them is liable to be written off at 100% and not just at 25%. 3.3. The Learned Commissioner (Appeals) is not justified in holding that the tools are plant and machinery by misconstruing the same with the spare parts. 3.4. Without prejudice to the above, the Learned Commissioner (Appeals) is not justified in allowing only 15% depreciation that too only on 25% of the purchase value [instead of on the purchase value of tools] thereby granting depreciation effectively at the rate of 3.7 5%. 3.5. Without prejudice to the above, the Learned Commissioner (Appeals) having held that the aforesaid expenditure is required to be capitalised, ought to have directed allowance of additional depreciation under section 32(1)(iia). 4. As regards disallowing ₹ 1,15,897/- being sundry purchases: 4.1. The Learned Commissioner (Appeals) is not justified in disallowing ₹ 1,15,897/- being the sundry purchases which were written off during the year. 4.2. The Learned Commissioner (Appeals) and Learned Assessing Officer are not justified in treating the aforesaid expenditure as capital and allowing depreciation at the rate of 10% without even categorizing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance made u/s.14A of ₹ 1,65,000. v. Disallowance of ₹ 1,15,897 being sundry charges. vi. Addition of ₹ 4,49,519 as prior period expenses. vii. Levy of interest u/s. 234B of ₹ 4,39,258. Refusal on the part of JCIT to accept the revised return which reflected lower income. On appeal, inter alia, confirming the disallowances and finally made disallowances by CIT(Appeals) as follows : (i) Purchase of loose tools : ₹ 3,50,544. (ii) Disallowance of ₹ 1,15,897 being sundry charges. (iii) Confirming the addition of ₹ 84,49,131 being difference between original return and revised return. Hence the assessee is in appeal before us. 5.1 First ground is regarding refusal to accept the revised return of income and upholding the addition of ₹ 84,49,131 being the difference between the original return and revised return of income. 6. The learned Authorised Representative submitted that due to change over in Accounting System during the assessment year, the assessee had some major problem to be sorted out tallying the completion of accounts in the F.Y. 2007-08. Hence the assessee failed to file its audited accounts withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed return at ₹ 84,49,131 giving various technical reasons. In our opinion, unless and until the Assessing Officer rejected the Revised Return on the basis of discrepancies in Books of Accounts it is not possible to make such an addition. If there is any defect in the Books of Accounts he specifically point out the same and make specific addition. Being so, when the Books of Accounts are duly audited and approved by the AGM, the assessment has to be completed on the basis of Revised Return. There is no scope of taking the difference in income declared in the original return and revised return as additional income of the assessee. We are completely in agreement with the contention of the ld. Counsel for the assessee that the Assessing Officer cannot consider the income declared in the original return based on the unaudited books of accounts over the income declared in revised return based on the audited books of accounts. We direct the Assessing Officer to complete the assessment on the basis of the Revised Return based on the audited books of accounts. This ground of appeal is allowed. 8. The ground relating to disallowance of ₹ 1,15,897 being sundry charges and addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed at applicable rate. The Assessing Officer disallowed the amount and granted depreciation @ 10%. On appeal, the CIT(Appeals) confirmed the action of the Assessing Officer on this issue. Aggrieved by the assessee, the assessee is in appeal before us. 11. We have heard the rival contentions, perused and carefully considered the material on record. The learned Authorised Representative submitted that the loose tools is nothing but inventories and have no span of life and the loose tools to be considered as inventories awaiting to use in product process and same to be accounted at cost or net realizable value whichever is lower as prescribed in A.S. II of ICAI. According to ld. AR, the assessee has been following the Inventory Policy on valuation of loose tools which is disclosed in Schedule 18 (vii) to audited financial statements. Loose Tools are charged of consumption @ 25% per annum on the reducing balance method. The net realizable value of inventory are considered and valued at 75% of the processing value. In our opinion, the method adopted by the assessee to value the loose tools is justified. The loose tools are neither plant nor machinery nor buildings nor furniture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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