Foxconn India Pvt. Ltd., Kancheepuram V. DCIT Company Circle 2(1), CHENNAI

ITA 2118/CHNY/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3471 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-10-2021
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON LD
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ ITA NO.2118/CHNY/2018 ( / ASSESSMENT YEAR: 2008-09) M/S. FOXCONN INDIA PVT. LTD. NOKIA TELECOM SEZ, SIPCOT INDUSTRIAL PARK CHENNAI-BANGALORE NATIONAL HIGHWAY SRIPERUMBUDUR TALUK, KANCHEEPURAM / VS. D CIT COMPANY CIRCLE-2(1), CHENNAI-600 034. ././PAN/GIR NO. AAACF-9390-F (- /APPELLANT ) : (01- / RESPONDENT ) -/ APPELLANT BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE 01-/ RESPONDENT BY : SHRI G.JOHNSON LD. SR. DR / DATE OF HEARING : 12/10/2021 / DATE OF PRONOUNCEMENT : 12/10/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THIS APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2008-09 ARISES OUT OF THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI [CIT(A)] DATED 07/05/2018 IN THE MATTER OF ASSESSMENT FRAMED BY LD. ASSESSING OFFICER [AO], U/S.143(3) OF THE AC T ON 28/11/2011. IN THIS APPEAL, THE GRIEVANCE OF THE ASSESSEE IS TWO-F OLD (I) DISALLOWANCE OF CUSTOM DUTY PAID FOR RS.38.33 LACS; (II) ADDITIO N OF RS.80.94 LACS ON 2 ACCOUNT OF VALUATION OF STOCK. HAVING CONSIDERED RI VAL SUBMISSIONS, OUR ADJUDICATION WOULD BE AS UNDER: - 2. DISALLOWANCE OF CUSTOM DUTY PAID FOR RS.38.33 LA CS THE ASSESSEE PAID ADVANCE CUSTOM DUTY OF RS.38.33 L ACS AND MADE PROVISION OF THE SAME IN EARLIER YEARS. IN THIS YEA R, THIS WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME. HOWEVER, LD . AO DENIED THE SAME SINCE THE CLAIM WAS U/S 36(1)(VII) AND THE ASS ESSEE DID NOT FULFILL THE CONDITIONS OF SEC.36(2) WHICH PROVIDE THAT NO D EDUCTION WOULD BE PROVIDED UNLESS DEBTS HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME. 3. ADDITION OF RS.80.94 LACS ON ACCOUNT OF VALUATIO N OF STOCK IT WAS NOTED THAT VALUATION OF CLOSING STOCK OF FIN ISHED GOODS WAS LESS IN COMPARISON TO UNIT PRICE OF THE SAME MATERIAL SOLD TO NOKIA. THE ASSESSEE SUBMITTED THAT STOCK WAS VALUED AT STANDAR D COST IN ACCOUNTING SOFTWARE AND THE VARIATION BETWEEN THE S TANDARD COST AND ACTUAL COST WAS ADJUSTED WHILE VALUING THE CLOSING STOCK. THE VALUATION WAS STATED TO BE DONE AS MANDATED BY RELEVANT ACCOU NTING STANDARDS AND INCOME TAX PROVISIONS. THE METHOD ADOPTED WAS C OST PRICE OR NET REALIZABLE VALUE (NRV), WHICHEVER IS LOWER. HOWEVER , NOT CONVINCED LD. AO ADDED THE DIFFERENCE OF STANDARD COST AND ACTUAL COST TO THE INCOME OF THE ASSESSEE. THE SAME RESULTED INTO AN ADDITION OF RS.80.94 LACS IN THE HANDS OF THE ASSESSEE. 4. THE STAND OF LD. AO ON BOTH ISSUES, UPON CONFIRM ATION BY LD. CIT(A), IS IN FURTHER CHALLENGE BEFORE US. 5. SO FAR AS THE WRITE-OFF OF ADVANCES IS CONCERNED , WE FIND THAT THE ASSESSEE PAID CUSTOM DUTY IN EARLIER YEARS AND REFL ECTED THE SAME AS ADVANCES. SUBSEQUENTLY, THE ASSESSEE WAS NOT ABLE T O GET BACK THE 3 DEPOSITS AND ACCORDINGLY, WROTE-OFF THE SAME IN THI S YEAR AS BUSINESS LOSS. THE PERUSAL OF ASSESSEES FINANCIAL STATEMENT S (PAGE-10) WOULD SHOW THAT THE AMOUNT HAVE BEEN WRITTEN-OFF AGAINST PROVISION FOR DOUBTFUL ADVANCES AND LD. AO WEIGHED ASSESSEES CLA IM U/S 36(1)(VII) WHICH WAS NOT THE CASE. THE ASSESSEES CASE WAS THA T THE DEPOSITS WERE MERELY ADVANCES IN NORMAL COURSE OF BUSINESS W HICH BECAME IRRECOVERABLE AND HENCE WRITTEN-OFF. SUCH CLAIMS AR E ALLOWABLE AS BUSINESS LOSSES IN TERMS OF DECISION OF HONBLE MAD RAS HIGH COURT IN THE CASE OF CIT V/S INDEN BISELLERS (181 ITR 69) WHEREIN IT WAS HELD THAT LOSS OF SUCH ADVANCES WOULD BE ALLOWABLE AS TRADING LOSS. DRAWING STRENGTH FROM THE SAME, WE DIRECT LD. AO TO ALLOW T HE DEDUCTION OF THE SAME. THIS GROUND STAND ALLOWED. 6. SO FAR AS THE VALUATION OF INVENTORIES IS CONCER NED, WE FIND THAT THE ASSESSEE WAS FOLLOWING RECOGNIZED METHOD OF VALUATI ON OF CLOSING STOCK I.E. LOWER OF COST PRICE AND NET REALIZABLE VALUE. THE SAME HAS BEEN MENTIONED IN NOTES TO ACCOUNTS. THIS METHOD WAS CON SISTENTLY BEING FOLLOWED AND THERE ARE NO CONTRARY FINDINGS IN THIS RESPECT. IN ACCOUNTING SOFTWARE, THE ASSESSEE WAS VALUING THE STOCK ON STA NDARD COST WHICH WAS ADJUSTED TAKING INTO ACCOUNT ACTUAL COST OF MAT ERIAL CONSUMED. ANOTHER ASPECT WHICH COULD BE NOTED THAT INCREASE I N VALUATION OF STOCK IN THIS YEAR WOULD IMPACT THE OPENING STOCK OF NEXT YEAR. HOWEVER, IT WAS SUBMITTED BY LD. AR THAT IN SUBSEQUENT YEARS, T HE METHOD OF STOCK VALUATION HAS BEEN ACCEPTED BY THE REVENUE. THIS BE ING THE CASE, THE IMPUGNED ADJUSTMENT AS MADE BY LD. AO HAS NO LEGS T O STAND. BY DELETING THE SAME, WE ALLOW THIS GROUND OF APPEAL. 4 7. THE APPEAL STAND ALLOWED IN TERMS OF OUR ABOVE O RDER. ORDER PRONOUNCED ON 12 TH OCTOBER, 2021. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER < CHENNAI ; DATED : 12/10/2021 DS 57 / COPY OF THE ORDER FORWARDED TO : 1. - / THE APPELLANT 2. 01- / THE RESPONDENT 3. C ( ) / THE CIT(A) 4. C / CIT CONCERNED 5. 0 , , < / DR, ITAT, CHENNAI 6. H / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , < / ITAT, CHENNAI