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TMI Blog2024 (7) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... by it in compliance to section 211(3C) of the Companies (Accounting Standards) Rules, 2006 as amended and other relevant provisions of the Companies Act, 1956 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law. ITAT Bench at Jaipur in the case of Gillette India Ltd. [ 2015 (12) TMI 1800 - ITAT JAIPUR] held that the assessee had given details about the inventory written off along with ledger codes whereby the identified items of inventory are written off in the books of account, and accordingly deduction for written off of obsolete inventory should be allowed to the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds mentioned above. 4. The Ld. Counsel for the assessee submitted that the assessee does not press the Ground No. 2 of the Assessee's Appeal. Recording the submission of the Assessee's Representative, the Ground No. 2 of the assessee is dismissed as not pressed. 5. The Ground No. 1 is regarding disallowance of deduction of Rs. 52,51,027/- in respect of traded goods written off on account of obsolete, damaged, expired stock. The Ld. Counsel for the assessee submitted that the Ld. CIT(A) has not appreciated the various facts along with the documents produced by the Assessee during the course of the assessment proceedings as well as appellate proceedings, therefore, submitted that the Ld. CIT(A) has committed error in upholding the disallowance made by the A.O. 6. Per contra, the Ld. Departmental Representative relying on the Lower Authorities sought for dismissal of the Ground No. 1 of the assessee. 7. Heard the parties and perused the material available on record. From the Balance Sheet and Notes on Accounts it was noted that provision for inventory written off had been reduced from the closing value of inventory. The A.O. by referring to Note No. 13 of Balance Shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he obsolete stock can be written off. Even on the merits of it, as noted from above, no rationale for the quantity and the value of the stock written off. In absence of any explanation on merits as regards write off, lire addition made is upheld. Ground of appeal No. 3 (3.1 and 3.2) is dismissed." 9. The assessee Company written off the inventory of traded goods of Rs. 52, 51,027/- during the relevant Assessment Year. The said inventory has been written off after audited by the independent statutory auditor, which can be corroborated from the paper book page No. 106 to 107 wherein the details of obsolete, damaged and expired stock are placed at Page No. 105 as on 31st March, 2013. The inventory written off included in the traded goods and the Company has disclosed the written off inventories in a separate line items in the notes to the account at Note No. 13 - Inventories of the Audited Financial Statement, which has been produced at Page No. 73 of the Paper Book is extracted as under:- Particulars As at March 31, 2013 As at March 31, 2012 Raw materials and bought out components (at cost) Goods in transit (A) 33,716,428 1,390,769 30,796,511 5,503,691 Finished goods (Cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit', the coordinate Bench of the Tribunal in the case of M/s BG Exploration and Production India Ltd. Vs. DCIT in ITA No. 6791/Del/2017 for Assessment Year 2012-13 vide order dated 17/07/2018 held that when the taxpayer has prepared obsolete inventory in accordance with the system of accounting regularly followed by it in compliance to section 211(3C) of the Companies (Accounting Standards) Rules, 2006 as amended and other relevant provisions of the Companies Act, 1956 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law. The relevant portion of the order of the Tribunal reads as under:- "GROUND NO.17 38. AO/DRP have disallowed an amount of Rs. 1,54,16,938/- claimed by the taxpayer on account of inventory written off on the ground that certain internal documents furnished by the taxpayer are not enough for allowing of theses expenditure. The ld. AR for the taxpayer contended that the expenditure has been claimed as per method of write off obsolete inventory in accordance with the system of accounting reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular method of valuation of its closing stock which it has to follow regularly from year to year. At the same time it is well settled that irrespective of the basis adopted for valuation for earlier years, the assessee has an option to change the method of valuation of closing stock, provided the change is bona fide and followed regularly thereafter." 41. In view of the settlement proposition of law discussed in the preceding paras, we are of the considered view that when the taxpayer has prepared obsolete inventory in accordance with the system of accounting regularly followed by it in compliance to section 211 (3C) of the Companies (Accounting Standards) Rules, 2006 as amended and other relevant provisions of the Companies Act, 1956 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law. 42. Coordinate Bench of the Tribunal in Gillette India Ltd. vs. ACIT (supra) also while deciding the identical issue held in favour of the assessee that when complete details about the inventory written off has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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