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TMI Blog2016 (6) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence to substantiate such claim and therefore the order is perverse as it is not supported by material ? 2. We have heard Mr. K.V.Aravind, the learned Counsel appearing for the appellants and Ms. S.R.Anuradha, the learned Counsel appearing for the respondent - assessee. 3. The learned Counsel appearing for both sides, fairly conceded that so far as question (a) is concerned, it is already covered by a decision of this Court dated 19-01-2016 passed in ITA 902/2008 and they pray that, similar view may be taken by this Court, so far as that question is concerned. 4. We may record, that in ITA 902/2008 there were various questions, but so far as the relatable question is concerned, the same was question No.6, which was at par with question (a) in the present appeal. This Court in ITA 902/2008, while dealing with question No.6, which is at par with question (a) in the present appeal, observed thus : "17. Learned Counsel appearing for the revenue seeks to remand this issue also to the Assessing Officer as no adequate material was made available before the authorities to come to a conclusion that the allocation of expenditure as worked out by the assessee on account of consumables, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Indo Nippan's case (supra). In the circumstances, we are of the view that CIT and ITAT proceeded on a misconception that Assessing Officer has disturbed the consistent method of accountancy followed by the assessee for many years. In view of the aforesaid reasons, we are of the opinion that the finding given by the CIT confirmed by the ITAT on this issue is not sustainable and accordingly, we decide this question in favour of the revenue and against the assessee. The issue is remanded to the A.O. to redo the assessment in the light of the observations made above, after providing an opportunity of hearing to the assessee. All contentions are left open to the parties. " 5. As there is agreement on the part of the learned Counsel appearing for both the sides, we need not discuss the matter further, except that question (a) shall stand covered by the above reported decision of the Division Bench of this Court. Accordingly, the finding given by the CIT and confirmed by the Tribunal, is found to be not sustainable and the question is decided in favour of the Revenue against the assessee. For further consideration of the issue, the matter is remanded to the A.O. to redo the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deletion of the disallowance in the interests of justice. I have looked into the discussion on this issue in the assessment order and the details submitted. After considering the same, I am of the view, there is no case for any disallowance when the details have been furnished, and its accounts have been audited and have been written off on the advice of technical team. Moreover such stock obsolence is a commercial reality in any kind of business due to change in technology, lack of demand, old stock, etc., I accordingly delete the addition made on this issue." 8. The Tribunal in the further appeal at para 19(ii) has concluded thus : "19(ii). We have gone through the orders of authorities below on this issue and after considering the arguments, we do not see any need to disturb the order of the Id. CIT(A) as it is a commercial reality that stocks become obsolete due to change in technology, wear and tear, lack of demand, etc., more so, in today's fast changing developments in technology and various fields. Further it is not for the AO to decide or determine how the assessee conducts its business. Assessee is the best judge of the market conditions, business requirements, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed not be answered. 12. At this stage, we may usefully refer to one decision of Delhi High Court, wherein more or less, similar question arose for consideration and at paragraphs 3 and 4, it was observed thus : "3. The Tribunal, while considering the Revenue's appeal, confirmed the findings of the CIT(A). The Tribunal also came to the conclusion that neither was there any change in the method of valuation in comparison to previous years nor was there any deviation from the method adopted by the assessee by valuing the stock at market price. The Tribunal concluded that the assessee had valued its closing stock at the approximate market value as estimated by a qualified chartered engineer and that the AO could not point out any defect in the valuation report. Consequently, the Tribunal was of the view that the valuation report prepared by a technically qualified person cannot be disregarded keeping in view the facts and circumstances of the case of the assessee and the nature of its business. The assessee was in the business of manufacturing television sets which required electronic components in respect of which technical obsolescence was a well known fact. On the basis of this, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter ITA 902/2008. 17. We may record that so far as question No.1 in the present appeal is concerned, the same was question No.1 in the above referred ITA 902/2008. Question No. 2 in the above ITA 902/2008, was same as in the present matter vide question No.2. So far as question No.3 in the present matter is concerned, it was at par with question No.6 in the above referred ITA 902/2008. 18. The Division Bench of this Court in the above referred appeal, while considering question No.1 and question No.2, observed thus : "Regarding Question No.1: 4. Sri. K. V. Aravind, learned counsel appearing for the revenue placing reliance on the Judgment of the Apex Court in the case of Rotork Controls India (P)Ltd., vs Commissioner of Income Tax reported in ((2009)314 ITR 62 ) wherein, the assessee herein was also a party would strongly contend that, what is a provision is elaborately considered by the Apex Court and the parameters are set-out by the Apex Court to examine the recognition of provision for the purposes of the Act. The three conditions to be satisfied for the recognition of the provision are: a) an enterprise should have a present obligation as a result of past event. b) it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is mercantile wherein the income and expenditure is on accrual basis. We have examined this issue in the light of the Judgment pronounced by the Apex Court in Rotork Controls Case (supra), wherein the three tests are laid down to recognize a provision under the act. The ITAT being a last fact finding authority has held that all these ingredients which goes to the recognition of provision are satisfied and as such, there is no need to remit the matter back to the Assessing Officer. In such circumstances, we do not see any ground made out by the revenue to remand the matter back to the Assessing Officer. The claim of expenditure being consistent with the method of accounting followed and the provision has been made on concluded transactions, the order of the Assessing Officer is held to be incorrect. We do not see any reason to differ from this view, which is in accordance with Section 145 of the Act. Re-Question No.2 7. The learned counsel Mr. K. V. Aravind appearing for the Revenue reiterated the grounds urged before the ITAT and sought for remanding the matter back to the Assessing Officer to examine the issue in the light of the Judgment of the Apex Court in Rotork Control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allocation of expenditure as worked out by the assessee on account of consumables, salary, etc. are applicable to the sales made through franchises. However, learned counsel appearing for the assessee would contend that Appellate Commissioner deleted the allocation of expenses made by the Assessing Officer based on the order of ITAT in the very same assessee's case reported in 81 TTJ 455 and the decision of the Apex Court in Indo Nipan Limited's case (261 ITR 775). It is noticed that over 5.6% of the sales is made through franchises, however, the assessee adopted sales as basis for allocation. The sale made through the franchises stands on a different footing than the sale made directly by the assessee company. In the case of sale made through franchise, no effort is involved by the assessee except getting commission whereas the direct sales made by the assessee requires much more efforts and obviously the expenditure of the nature of consumables, salary and benefits etc., are incurred. It is also significant to observe that the Assessing Officer has not disturbed the method adopted by the assessee for the purpose of allocation of expenses in the trading turnover. What the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the further direction that the matter is remanded to the A.O. to redo the assessment, in the light of the observations made above, after affording opportunity of hearing to the assessee. All contentions are left open to the parties. 22. The aforesaid, now will lead us to decide question No.4. The relevant discussion in the order of the CIT (A) is at para 9, the relevant of which for ready reference may be reproduced. "9. Deduction u/s 80HHE: For the AY: 2003-2004 the assessing officer has not allowed deduction u/s. 80HHE inspite of the accounts being audited and audit report as required under the Act being furnished along with the return and the assessee having complied with all the conditions prescribed under the Act. The reasons and the discussion of the AO for not allowing deduction u/s 80HHE is extracted hereunder: "The assessee has filed a Report in form No.10CCAF computing a deduction of Rs. 7,22,58,704/- u/s. 80HHE duly certified by an auditor. The assessee has not claimed the deduction u/s. 80HHE as the profit of the business is showing a loss. However, after making adjustments as per Transfer Pricing Officer's order and other additions / disallowances made, the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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