STAR CHEMICALS (BOMBAY) P. LTD, MUMBAI V. DCIT 3(3), MUMBAI

ITA 2538/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0183 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 28-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Earning of tax free income
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 2538 / MUM/20 1 2 ( ASSESSMENT YEAR : 2008 - 09 ) ITA NO.2539/MUM/2012 ( ASSESSMENT YEAR : 2009 - 10 ) ITA NO.6888/MUM/2013 ( ASSESSMENT YEAR : 20 10 - 11 ) ITA NO.961/MUM/2015 ( ASSESSMENT YEAR : 2011 - 12 ) M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 55/58, JOLLY MAKER CHAMBER NO.2, NARIMAN POINT, MUMBAI 400 021 VS. DCIT 3(3), 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 PAN/GIR NO. AAACS7485E APPELLANT ) .. RESPONDENT ) ASSESSEE BY DR. K. SHIVRAM & SHRI RAHUL HAKANI REVENUE BY SHRI RAM TIWARI DATE OF HEARING 03 / 07 /201 7 DATE OF PRONOUNCEME NT 07 / 07 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 7, MUMBAI DATED 16/01/2012 FOR THE A.Y.2008 - 09 TO 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS E NGAGED IN THE MANUFACTURING OF ALLIED DERIVATIVES OF PHOSPHOROUS, TRADING, LEASING AND HIRE PURCHASE, BILL DISCOUNTING AND FINANCING. DURING THE COURSE OF SCRUTINY ASSESSMENT FOR THE A.Y.2008 - 09 , THE AO MADE DISALLOWANCE U/S.14A R.W.R 8D. WHILE ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 2 ASSESSING I NCOME U/S.115JB, AO ADDED THE AMOUNT DISALLOWED U/S.14A R.W.R. 8D. 4. LEARNED AR INVITED OUR ATTENTION OF THE WORKING FURNISHED BY THE ASSESSEE WITH REGARD TO THE AMOUNT OFFERED FOR DISALLOWANCE U/S.14A R.W.R.8D. OUR ATTENTION WAS ALSO INVITED TO THE STT P AID BY THE ASSESSEE IN THE A.Y. 2009 - 10 TO 2011 - 12. ATTENTION WAS ALSO INVITED TO THE BIFURCATION OF THE EXEMPT INCOME IN THE FORM OF DIVIDEND ON SHARES, DIVIDEND ON MUTUAL FUNDS AND LONG TERM CAPITAL GAINS. 5. IT WAS VEHEMENTLY ARGUED BY LEARNED AR THAT D ISALLOWANCE SO OFFERED BY THE ASSESSEE WITH RESPECT TO THE EXEMPT INCOME HAS NOT BEEN DISPUTED BY THE AO . R ELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD., AND WHICH WAS PARTLY AFFIRMED BY THE HONBLE S UPREME COURT . V IDE ORDER DATED 08/05/2017 , IT WAS CONTENDED THAT WITHOUT REJECTING ASSESSEES OFFER OF DISALLOWANCE WITH RESPECT TO THE EXEMPT INCOME, AO CANNOT MAKE THE DISALLOWANCE ARBITRARILY. OUR ATTENTION WAS ALSO INVITED TO THE PARA 37 OF THE HONBLE SUPREME COURT ORDER WHEREIN FOLLOWING WAS THE OBSERVATION OF THE HONBLE SUPREME COURT: - SUB - SECTION (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8 D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMINATION OF EXPENDITURE INCURRED IN RELATION TO I NCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT 'SATISFIED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFI CER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM', IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SA TISFACTION WITH REGARD TO THE CORRECTNESS OF THE ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 3 CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8 D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. 6. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, AO MADE AN ADDITION OF RS.47,52,634/ - TO THE RETURNED INCOME BY APPLYING THE PROVISIONS OF RULE 8D READ WITH SECTION 14A OF THE ACT. THE A.O. HAS DISCUSSED THE ISSUE IN PARA 4 OF THE ASSESSMENT ORDER. DURING THE CURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASKED TO FURNISH DETAILS OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME AND ALSO TO SHOW CAUSE AS TO WHY THE EXPENSES INCURRED AND CLAIMED IN RESPECT OF EXEMPT INCOME SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. WE FOUND THAT ASSESSEE HAS FURNISHED DETAILED WORKING AND OFFERED DISALLOWANCE OF RS.9,90,000/ - , RS.6,93,852/ - , RS.2,41,311/ - AND RS.9,91,574 FOR THE A.Y.2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 RESPECTIVELY. 8 . IN THE WORKING SO FURNISHED AND PLACED AT P AGE 26,22,3 AND 16 OF THE PAPER BOOK OF THE RESPECTIVE ASSESSMENT YEARS, NOWHERE AO HAS POINTED OUT THAT ASSESSEE HAS INCURRED EXPENDITURE MORE THAN THE SUM OFFERED BY THE ASSESSEE. AS PER THE VERDICT OF HONBLE SUPREME COURT SUB - SECTION (2) & (3) OF SECTI ON 14A R.W.R. 8D PRESCRIBES A FORMULA FOR DETERMINATION ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 4 OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. AS PER THE SUPREME COURT, THIS IS TO BE DETERMINED HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE AS PLACED BEFORE THE AO AND ONLY WHERE IT IS NOT POSSIBLE TO GENERATE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, AO SHOU LD GO FOR COMPUTATION AS PER RULE 8D. 9. FROM THE RECORD WE FOUND THAT METHOD ADOPTED BY ASSESSEE FOR DISALLOWANCE U/S.14A IS CONSISTENT METHOD WHICH WAS ALSO FOLLOWED IN EARLIER YEARS AS DECIDED BY AO U/S.143(3) OF THE IT ACT. THE METHOD SO FOLLOWED BY T HE ASSESSEE TAKES INTO ACCOUNT ALL THE ADMINISTRATIVE EXPENSES WHICH COULD HAVE BEEN INCURRED TO EARN THE EXEMPT INCOME. WE ALSO FOUND THAT FOR A.Y.2008 - 09 & 2009 - 10 AO HAS NOT RECORDED ANY SATISFACTION FOR INVOKING RULE 8D AND FOR A.Y. 2010 - 11 & 2011 - 12 N OT RECORDED ANY OBJECTIVE SATISFACTION. 10. WE ALSO FOUND THAT DIVIDEND FROM MUTUAL FUND AS A PERCENTAGE OF TOTAL DIVIDEND INCOME AS UNDER: - A.Y.2008 - 09 85.57% A.Y. 2009 - 10 89.26% A.Y.2010 - 11 95.80% A.Y.2011 - 12 95.43% 11 . ASSESSEE HAS SUO - MOTO DI SALLOWED STT EXPENSES OVER AND ABOVE 14A DISALLOWANCE COMPUTED BY ASSESSEE. HOWEVER THE AO HAS MECHANICALLY PROCEEDED TO COMPUTE THE NOTIONAL DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. RULE 8D CAN BE INVOKED ONLY IF THE AO, ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 5 HAVING REGARD TO THE ACCO UNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. FOR THIS PROPOSITION, RELIANCE CAN BE PLACED ON GODREJ & BOYCE MFG. CO. LTD., VS. DY. CIT (2010) 328 ITR 81 (BOM) (HC)(109) AND CIT VS. HERO MANAGEMENT SERVICES LTD., (2014) 360 ITR 68 (DELHI)(HC). IN ORDER TO INVOKE RULE 8D, THE AO HAS TO FIRST RECORD A FINDING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM FOR EXPENDITURE MADE BY THE ASSESSEE IN RELATION TO INCOME, WHICH DID NOT FORM PART OF THE TOTAL I NCOME. 1 2 . HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LIMITED ITR 347 ITR 272 HELD THAT THE CONDITION PRECEDENT FOR THE AO TO DETERMINE THE AMOUNT OF EXPENDITURE UNDER RULE 8D IS THAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNESS O F THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE OR WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT IS ONLY WHEN THIS CONDITION PRECEDENT IS SATISFIED, THAT THE AO IS REQUIRED TO DETERMINE THE AMOUNT OF EXPEN DITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME IN THE MANNER INDICATED IN RULE 8D(2). FURTHERMORE, IN VIEW OF THE JUDICIAL PRONOUNCEMENTS SECTION 14A READ WITH RULE 8D IS NOT APPLICABLE TO INVESTMENTS WHICH HA VE NOT YIELDED ANY EXEMPT INCOME. HENCE, WHILE COMPUTING RULE 8D SUCH INVESTMENTS MUST BE EXCLUDED. 13 . KEEPING I N VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND APPLYING THE PROPOSITION OF LAW LAID DOWN BY HONBLE BOMBAY HIGH COURT, PART OF WHICH HAS BEEN AFFIRMED BY THE HON BLE SUPREME COURT, WE ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 6 RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH THE DISALLOWANCE WARRANTED UNDER RULE 8D HAVING REGARD TO THE GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD., IN ITS O RDER DATED 08/05/2017. WE DIRECT ACCORDINGLY. 1 4 . SIMILAR GROUNDS HAVE BEEN TAKEN IN ALL THE FOUR YEARS UNDER CONSIDERATION, FOLLOWING THE REASONING GIVEN HEREINABOVE, WE RESTORE THE DISALLOWANCE MADE UNDER RULE 8D BACK TO THE FILE OF THE AO FOR DECIDING A FRESH IN TERMS INDICATED HEREINABOVE. 1 5 . ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE U/S.115JB R.W.S. 14A AND R.W.R 8D. 1 6 . AT THE OUTSET, LEARNED AR PLACED ON RECORD THE ORDER OF THE ITAT SPECIAL BENCH IN CASE OF VIREET INVESTMENT PVT. LTD., IN ITA NO.50 2/DEL/2012 DATED 16/06/2017, WHEREIN ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. OUR ATTENTION WAS ALSO INVITED TO PAGE 48 PARA 6.22, WHEREIN TRIBUNAL OBSERVED AS UNDER: - . 6.22 IN VIEW OF THE ABOVE DISCUSSION, WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S.14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 1 7 . IN VIEW OF THE D ECISION OF THE SPECIAL BENCH, WE DIRECT THE AO TO RECOMPUTE THE INCOME U/S.115JB(2) WITH REFERENCE TO THE DISALLOWANCE SOUGHT U/S.14A R.W.R.8D, IN TERMS OF THE DETAILED DISCUSSION IN THE ORDER OF THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT PVT. LTD. , IN ITA NO.502/DEL/2012 DATED 16/06/2017. WE DIRECT ACCORDINGLY. ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 7 18 . AS THE FACTS AND CIRCUMSTANCES IN ALL THE YEARS UNDER CONSIDERATION ARE SAME, WE DIRECT THE AO TO RECOMPUTE THE INCOME U/S.115JB IN TERMS OF OUR ABOVE DISCUSSION, FOLLOWING THE PROPOSITI ON LAID DOWN BY SPECIAL BENCH OF THE TRIBUNAL IN CASE OF VIREET INVESTMENT PVT. LTD., IN ITA NO.502/DEL/2012 DATED 16/06/2017. 19 . GROUND NO.4 FOR A.Y.2008 - 09 WAS NOT PRESSED. THE SAME IS DISMISSED IN LIMINI. 2 0 . ASSESSEE I S ALSO AGGRIEVED FOR ADDITION OF O BSOL E TE STOCK WRITTEN OFF AMOUNTING TO RS.15,35,101/ - IN THE A.Y. 2008 - 09. THE AO HAS DISCUSSED THE ISSUE AT PARA 5 AND THE CIT(A) AT PARA 8 TO 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1 5,36,101/ - ON ACCOUNT OF WRITE OFF OF OBSOLETE STORES MATERIALS. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND COPY OF BOARD RESOLUTION AUTHORIZING THE WRITE OFF OF OBSOLETE STOCK. ON PERUSAL OF THE MINUTES OF THE MEETING FURNISHED BY THE ASSESSEE COMP ANY, THE AO OBSERVED THAT THE COMPANY HAS RESOLVED TO WRITE OFF STORES MATERIALS AS OBSOLETE AMOUNTING TO RS.15,35,101/ - IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2006. THE SAID BOARD RESOLUTION WAS PASSED ON 01.09.2008. AO OBSERVED THAT T HE WRITE OFF WAS ONLY ON ACCOUNT OF DIMINUTION IN THE VALUE. THE AO HELD THAT SUCH REDUCTION WAS IN THE NATURE OF PROVISION FOR DIMINUTION IN THE VALUE OF ASSET AND HENCE CANNOT BE CLAIMED AS DEDUCTIBLE FROM THE PROFITS. AS T HE ASSESSEE COMPANY FOLLOWED MERCA NTILE SYST EM OF ACCOUNTING, THE AO WAS OF THE VIEW THAT ANY EVENT ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 8 OCCURRING AFTER THE CLOSURE OF THE BALANCE SHEET HAS NO BEARING ON THE PROFITABILITY OF THE YEAR ENDING ON 31ST MARCH, 2008. IT WAS ONLY FOR THE PURPOSE OF CLAIMING DEDUCTION THAT THE MATERI ALS WERE CLAIMED TO HAVE BEEN WRITTEN OFF IN THE AYR.2008 - 09. HE FURTHER HELD THAT MERE WRITING OFF OF THE STOCK IN THE BOOKS OF ACCOUNTS CANNOT BE ALLOWED FOR COMPUTING THE INCOME AND THAT THERE HAS TO BE SOMETHING POSITIVE TO SHOW THAT THE VALUE HAD BECO ME NEGLIGIBLE IN THE YEAR OF CLAIM OF DEDUCTION AND THAT IT IS ONLY WHEN THE MATERIAL HAS BEEN DISPOSED OFF THAT THERE CAN BE ANY JUSTIFIABLE CLAIM FOR DEDUCTION. RELYING ON THE DECISION IN THE CASE OF CIT V/S. HERDILLA CHEMICALS LTD. REPORTED IN 225 ITR P AGE 532, AO HELD THAT THE ASSESSEE COMPANY HAD NOT BROUGHT ANYTHING ON RECORD TO INDICATE THAT THE VALUE OF SCRAP HAD IN FACT COME TO NIL IN THE YEAR UNDER CONSIDERATION AND HENCE THE DEDUCTION IF ALLOWABLE AT ALL, CAN BE CLAIMED ONLY IN THE YEAR WHEN THE SCRAP HAD BEEN DISPOSED OFF. ACCORDINGLY, AO MADE AN ADDITION OF RS.15,35,101/ - TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT. FURTHER, THE AMOUNT OF WRITE OFF CLAIMED BY THE ASSESSEE WAS ON ACCOUNT OF PROVISION FOR WRITE OFF O F SCRAP MATERIALS, THEREFORE FOLLOWING THE RATIO OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF USHA MARTIN INDUSTRIES LTD. REPORTED IN 104 ITD 249, HE HELD THAT THE PROVISION FOR WRITE OFF OF SCRAP MATERIAL IS NOTHING BUT A PROVISION FOR DIMINUTION IN TH E VALUE OF ASSET. AS PER AMENDMENT BROUGHT IN BY FINANCE ACT, 2009, THE SAME IS REQUIRED TO BE ADDED BACK U/S.115JB OF THE ACT. ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 9 ACCORDINGLY, HE MADE AN ADDITION OF RS.15,35,101/ - TO THE BOOK PROFIT U/S.115JB OF THE ACT. 21 . WE HAVE CONSIDERED RIVAL CONTE NTIONS AND FOUND FROM RECORD THAT DURING THE A.Y.2008 - 09, THE ASSESSEE CLAIMED EXPENSE OF RS.15,35,101/ - ON ACCOUNT OF WRITE OFF OF OBSOLETE STORES MATERIALS. THE WRITE OFF WAS PURSUANT TO BOARD RESOLUTION DATED 01/09/2008. AS PER BOARD RESOLUTION WRITE OF F WAS OF ITEMS 5 - 7 YEARS OLD BELONGING TO PLANT WHOSE OPERATIONS WERE CLOSED. SAME WAS MADE ON THE BASIS OF ENGINEER S AND AUDITOR S REPORT. A.O. ADDED THE SAID WRITE OFF UNDER NORMAL COMPUTATION OF INCOME AS WELL AS U/S. 115JB AS DIMINUTION IN VALUE OF AS SETS MAINLY ON THE GROUND THAT OBSOLETE ITEMS WERE ALSO PRESENT IN STOCK OF ASSESSEE. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. THE AO HAS DECLINED ASSESSEES CLAIM BY RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HEREDILLA CHEMICALS LTD., (1997) 225 ITR 532 WHICH IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THE CASE OF HEREDILLA CHEMICALS THE ASSESSEE HAD PURCHASED THE PAN CATALYST PLANT WHICH WAS KEPT AS A STAND - BY. OVER THE YEARS, THE PRODUCTION P ROCESS HAVING CHANGED, THE SAID PAN CATALYST HAD BECOME OBSOLETE AND ON ACCOUNT OF OBSOLESCENCE, THE ASSESSEE IN THAT CASE HAD CLAIMED OBSOLESCENCE ALLOWANCE UNDER SECTION 32(1)(III) OF THE INCOME TAX ACT. IT WAS IN THAT FACT SITUATION, THAT IT WAS HELD TH AT THE ASSESSEES METHOD OF VALUING THE CLOSING STOCK COULD NOT BE ACCEPTED. THE SAID DECISION IS SUBSEQUENTLY CONSIDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIAN RARE EARTHS LTD., (2015) 375 ITR 276 (BOMBAY) ITA NO. 2538/MUM/2012 & 2539/MUM/2012 ITA NO.6888/MUM/2013 & 961/MUM/2015 M/S. STAR CHEMICALS (BOMBAY) PVT. LTD., 10 WHEREIN IT IS HELD THAT WHERE ASSESSEES NON MOVING STORES AND SPARES WERE CORRODED OVER A PERIOD OF TIME DUE TO WEAR AND TEAR, ASSESSEE WOULD BE ENTITLED TO WRITE OFF SAME IN PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE INSTANT CASE BEFORE US IT IS NOT CLEAR AS TO WHETHER THE ITEMS WROTE OFF WERE PART OF PLANT AND MACHINERY AND FORMING PART OF BLOCK OF ASSETS OR SAME WAS IN THE NATURE OBSOLETE STOCK HAVING NO MARKETABLE VALUE, WE THEREFORE, RESTORE THE MATTER BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER CONSIDERING THE NATU RE OF OBSOLETE STOCK. WE DIRECT ACCORDINGLY. 22 . IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 07 / 07 /2017 SD/ - ( AMARJIT SINGH ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 07 / 07 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//