9911796707
TMI Blog2021 (3) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of documentary proof regarding clear & verifiable evidence in support of the expenditure claimed by the assessee? 2. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of depreciation of 'Bizerba weighing scales' whereas the AO has rightly made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items? 2. The Brief facts of the case are that, the assessee company is engaged in the business of running super markets and filed the return of income for the A.Y 2009-10 on 25.09.2009 declaring a total loss of Rs. 128,14,82,205/-, the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny and notice u/s 143(2) of the Act was issued. In compliance to the notice, the Ld. AR of the assessee along with company representative appeared from time to time and furnished the details and the case was discussed. The A.O on perusal of the profit and loss account find that, the assessee has debited an amount of Rs. 27,94,92,526/- on account of stock losses & diminution disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her no method/ methodology has been filed/explained with evidence for calculation/quantification and therefore any loss of stock or any asset is not deductable and made addition of Rs. 24,24,09,476/-. Similarly, the A.O. observed that the assessee has claimed depreciation on UPS and other computer peripherals @ 60% whereas depreciation allowable is only @15% as it falls under the block of plant and machinery. Therefore, the A.O disallowed the excess depreciation claim of Rs. 45,45,885/- and assessed the total loss of Rs. 103,45,26,844/- and passed the order u/s 143(3) of the Act dated 29.12.2011. 3. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). In the Appellate proceedings, the Ld.CIT(A) considered the submissions and the grounds of appeal raised by the assessee. The CIT(A) dealt on the findings of the A.O in respect of shrinkage, expiry of stock write off and slow and non moving stocks, and the contentions of the assessee that they should be allowed considering the turnover of the assessee. The assessee company filed the submissions on 18.07.2017 referred at page 4 of the CIT(A) order along with judicial decisions. The contentions raised by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AR relied on the orders of the CIT(A) and submitted that the information submitted before the CIT(A) are not new material but only the information from the books of accounts. The ld. AR further submitted that it is a common practice of stock losses on account of shrinkage, stock loss on account of expired goods write off and also the provisions for non moving stock in the accounts. The Ld.AR further emphasized on applying the various bench markings in respect of stock losses and shrinkages and the claim is comparatively lower and also made submissions on ground of appeal with respect to claim of depreciation and prayed for dismissal of the revenue appeal. 7. We heard the rival submissions and perused the material on record. The revenue has filed the appeal on the disputed issued of claim of loss on account of stock loss, diminution and higher claim of depreciation. The Ld.DR submissions are that the assessee for the first time has filed the information before the Ld.CIT(A) and the A.O was not provided the said information in the assessment proceedings. We on perusal of the Ld.CIT(A) order find that the CIT(A) considering the submissions and claims of the assessee has calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of retail business the normal shrinkage and expiries are inevitable. Also the regular stock Shortages are known on regular stock taking. Company cannot lodge FIR in case of normal business losses. However, in cases where there are cases of theft, break open of locks, cash theft, etc. the FIR's has been lodged and copies of the sample FIRs lodged for theft and burglary is attached. (b) In response to Point 2 - Details of item wise inventory of opening & closing stock is attached herewith. We would like to humbly submit that Company deals in thousands of Stock Keeping Units (herein after referred as SKU's"). The losses provided in books on account of the Shrinkages etc. is thoroughly checked and verified by auditors as part of the audit process. The same losses have been disclosed as a separate line item tit duly audited signed profit and loss account. The auditors have issued audit report without any qualification. The audit is done by the one of the most prestigious firm of auditors M/s Deloitte. Auditors have not provided any separate certificate for the inventory valuation and losses on account of shrinkage, expiry etc. In support of this point company enclosed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents:- ('a) Certificate (enclosed with the submission) issued by the Statutory Auditors of the company certifying the loss incurred by the appellant on account of shrinkage and expired stock. The certificate mentions the details verified by the statutory auditors before certifying that such losses are in agreement with the audited financials of the Appellant. (b) Further, the appellant company also relied on the reports issued by Global Retail Theft Barometer and KPMG India which have conducted an exhaustive research on the retail industry and derived the average percentage of shrinkage borne by the retail industry for the year under consideration. The results of such research are detailed below: Global Retail Theft Barometer (GRTB): The Global Retail Theft Barometer is a global research on the cost of shrink, comprised of shoplifting, employee or supplier fraud and administrative errors. The study provides data to help retailers around the world benchmark their performance against averages for specific merchandise, vertical markets and regional geographies. This report has been prepared from details provided in confidence by 1,103 of the largest retailers with combined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t disallowance of Rs,24,24,09,476/- on account of stock losses and diminution u/s 37 of Income Tax Act. In para 2 of assessment order the ld. A.O, had mentioned that in absence of clear & verifiable evidence in support of expenditure claimed, the same cannot be al lowed under provisions of Income Tax Act. According to the Id. A,O. stock losses and diminution debited to prof it and loss account is not the deductible item under Income Tax Act. After considering the reply of the appellant, the Ld. AO. Disallowed Rs. 24,24,09,476/- on account of shrinkage of stock losses and diminution. 6.1.2 During appellate proceedings a written submission was filed which find place in Para 5 of this order. I have carefully considered the submissions and evidences filed by the appellant during course of hearings. it is not a dispute that the appellant is engaged in the business of operating a chain of Food and Grocery retail stores, and the appellant is dealing in thousands of varieties of articles viz, food and groceries fruits and vegetables, stapes, general merchandise, etc. and by the nature of business reasonable level of losses on account of shrinkage & expiry are inevitable and part and parc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Stock, Purchases, COGS, shrinkages, W-off / expiries loss and Closing , stock. Since the file is heavy/voluminous and containing line items of approx. 30 - 35 thousands in each sheets, the appellant company provided the same in soft copy on the pen drive. (submitted vide letter dated 21/08/2017 on pen drive) 5. Samples of invoices along with their weighted average cost of items (submitted(1 vide letter dated 21/08/2017 as Annexure 3) 6. Items wise details of the expired / written off stocks of few samples (submitted vide letter dated 21/08/2017 as Annexure 4) 7. Certificate issued by the Statutory Auditors of the company certifying. the loss incurred by the appellant on account of shrinkage and expire stock.(Enclosed vide letter dated 08/09/2017) 6.1.7 I have carefully considered the details and evidences submitted by the appellant. The Appellant Company also submitted the report issued by various research institute on percentage of shrinkage borne by the retail industry i.e. Global Retail Theft Barometer (GRTB), KPMG and attached articles from prominent newspapers (Enclosed vide letter dated 08/09/2017). As per the report the losses suffered by the Indian retailers on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the books are treated as shrinkage loss. The assessee could not produce or not able to produce all the details corresponding to the loss under the head stock losses on account of shrinkage and stock losses on account of expired stocks written off and the criterion followed by the assessee is in itself not suitable for verification. The assessee is always having option of provision which he made and disallowed and could have claimed insurance on the stock loss. The said heads of expenditure cannot be allowed under the provision of income tax Act. By its mere nature, the desertion involved and as per the above discussion. Any loss of stock, or any asset, is not a deductible item in income tax Act. 10.The Ld.AR in the course of hearing before us has referred to the paper book emphasizing on the submissions at page 40 to 45, where the details were filed before the Ld.CIT(A) on 24.07.2017 &21.08.2017 along with the copies of FIR lodge for the theft, zone wise stock report and details of stocks along with sample, item wise details of expired and written off stock and details of percentage of stock loss and diminution of turnover and the certificate of statutory auditor and report by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 27.11.2017, the Honorable Tribunal has dealt on this disputed issue in the revenues appeal at page 14 para 19 & 20 of the order as under: "19. We have head rival contentions and perused the material available on record. It is evident, the dispute between the assessee and the department in respect of claim of depreciation @ 60% is on the items bizerba weighing scales, printers, router, scanner, switches etc. 20. The issue before us is whether these i tems on which the assessee has claimed depreciation @ 60% can be considered to be part of computer. The Hon'ble Delhi High Court in CIT Vs. BSES Yamuna Power Ltd., (Supra) has held that computer accessories and peripherals such as, printer, router, scanner, switches, etc., formed integral part of computer system, hence, entitled to depreciation at highs rate of 60%. The special Bench decision of the Tribunal, Mumbai Bench, in data craft India Ltd., held that computer system would include all input and output devices. It was held that external hardware devices like Monitor, Keyboard, Mouse, Printer Router, Scanner, Switches, etc., would fall under the category of computer hardware. The same is also the case with router and switch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition u/s 14A rwr 8D whereas the AO has rightly made the addition as assessee was having investment in share, income from which is exempt from tax? 3. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of depreciation on bizerba weighing scales whereas the AO has rightly made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items? 4. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of insurance claim receivable written off whereas the AO has rightly made the addition as during the assessment proceedings, assessee had not submitted any explanation in this regard? 17. We have already dealt on ground of appeal No. 1 and No 3 in above paragraphs in respect of stock losses and diminution where the disputed issue was restored to the file of the CIT(A) with specific directions and in respect of claim of depreciation on weighing scales the ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on this ground is allowed . However, appellant had itself disallowed and amount of Rs. 13,74,31,390/-. Therefore, net relief to the appellant will be Rs. 73,41,47,975/- (Rs. 87,15,79,365/ -Rs. 13,74,31,390/-) 6.3.8. Since, the appellant had not earned any exempt income during the year under consideration and the facts are similar to earlier years i.e AY 2011-12 & 2012-13 (in case of appellant's successor Aditya Birla Ltd,) where the company had not earned exempt income. The same were adjudicated in favour of appellant's successor. Therefore, I have no reason to deviate from the findings given by my processor in above mentioned cases of the successor or appellant. In view of these facts, the appeal of the appellant on this ground is allowed and the disallowance of Rs. 50,06,483/- made by the AO is deleted. 21.We considering the facts and the observations find that the CIT(A) has relied on the provisions and judicial decision and deleted the addition. Accordingly we are not inclined to interfere with the order of CIT(A) on this disputed issue and upheld the same and dismiss the ground of appeal of the revenue. 22.. The second disputed issue that, the assessee has claimed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
