Assistant Commissioner of Income Tax, Circle-1(1), Panaji., Panaji V. M/s B. Braun Medical (India) Pvt. Ltd., Panaji

ITA 310/PAN/2014

• Counselvise Citation: 31024114 RSA 2014
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 310/PNJ/2014 : (ASST. YEAR : 2009 - 10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (APPELLANT) VS. M/S. B. BRAUN MEDICAL (INDIA) PVT. LTD., L - 56, 4 TH FLOOR, ALFRAN PLAZA, M.G. ROAD, PANAJI, GOA. PAN : AAACB7394M (RESPONDENT) ASSESSEE BY : MS. SHREYA LOYALKA, CA REVENUE BY : NISHANT K., DR DATE OF HEARING : 18/12/2014 DATE OF PRONOUNCEMENT : 19 /12/2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DT. 24.6.2014 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD CIT(A) HAS ERRED IN DELETING ADDITIONS OF RS. 29,28,000/ - ON ACCOUNT OF SLOW MOVING GOODS ON THE GROUND THAT THE PROVISION FOR SLOW MOVING GOODS IS REAL LOSS WHEN IN FACT T HE LOSS IS NOTIONAL AND CONTINGENT IN NATURE CALCULATED ON ESTIMATED BASIS IN CONTRADICTION TO THE JUDICIAL DECISION AS PROVIDED BY THE DECISION GIVEN BY THE MADRAS HIGH COURT IN THE CASE OF INDIAN OVERSEAS BANK VS. CIT REPORTED IN 250 ITR 146. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ADJUDICATION. 3. GROUND NO. 2 RELATES TO DELETION OF ADDITION MADE ON ACCOUNT OF PROVISION FOR SLOW MOVING GOODS. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURI NG MEDICAL EQUIPMENT. 2 ITA NO. 310/PNJ/2014 (A.Y : 2009 - 10) DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR PROVISION MADE FOR A SUM OF RS. 29,28,000/ - FOR SLOW MOVING GOODS. THE ASSESSEE EXPLAINED THAT IN PHARMA AND SURGICAL INDUSTRY, GOODS HAVE TO BE SOLD WITHIN THE STIPULATED PERIOD OF TIME BASED ON EXPIRY DATES. NEAR EXPIRY DATE GOODS AND OBSOLETE ONES ARE ALLOWED TO SELL AT A LOWER RATE THAN THE COST PRICE. THE COMPANY HAS TO CLASSIFY THOSE NEAR EXPIRY DATE PRODUCTS AND ESTIMATE THE EXPECTED R EVENUE FROM THE SALES OF SUCH PRODUCTS IDENTIFIED AND THE DIFFERENTIAL AMOUNT ARE CHARGED TO THE PROFIT & LOSS ACCOUNT TO REPRESENT THE TRUE AND FAIR VIEW OF THE ACCOUNTS. THE AO TOOK THE VIEW THAT THE ESTIMATED LOSS DEBITED BY THE ASSESSEE IS NOTIONAL AN D CONTINGENT IN NATURE AND DISALLOWED THE SAME. WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 99/ PNJ/2013 DT. 25.10.2013. 4. WE HEARD THE RIVAL SUBMISSIONS AN D CAREFULLY CONSIDERED THE SAME. WE NOTED THAT A SIMILAR ISSUE HAS ARISEN IN THE A.Y 2008 - 09 IN THE CASE OF THE ASSESSEE IN WHICH THIS TRIBUNAL CONFIRMED THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROVISION FOR SLOW MOVING GOODS. WHEN THE MATTER WENT BEFORE THE HON'BLE BOMBAY HIGH COURT, THE HON'BLE HIGH COURT IN TA NO. 40 OF 2014 VIDE ITS ORDER DT. 7.7.2014 CONFIRMED THE FINDING OF THE TRIBUNAL BY HOLDING AS UNDER : 3. AS FAR AS FIRST QUESTION IS CONCERNED, BOTH THE AUTHORITIES BELOW NAMELY COMMISSIONER AND TRIBUNAL CONCURRENTLY HELD THAT THE PRODUCT MANUFACTURED BY ASSESSEE ENGAGED IN PHARMA BUSINESS HAS EXPIRY DATE AND THEREFORE, IN CASE OF SUCH PRODUCT AS THE EVENT OF EXPIRY DATE INCHES CLOSER, THE VALUE OF THE PRODUCT STARTS DIMINISHING AND THIS REDUCTION IN THE VALUE OF THE PRODUCT IS NOT NOTIONAL BUT REAL. THE LOWER AUTHORITIES FURTHER HELD THAT THE CIRCULAR DATED 23.3.2010 ISSUED BY CBDT IS APPLICABLE IN CASE OF N OTIONAL LOSSES ARISING ON VARIOUS TRANSACTIONS. IT WAS ALSO HELD THAT SAID CIRCULAR CANNOT BE MADE APPLICABLE TO THE PRESENT CASE. WE FIND NO ERROR IN THESE FINDINGS, ESPECIALLY WHEN THE PRACTICE FOLLOWED BY ASSESSEE, SINCE 1994, IS NEVER OBJECTED BY REV ENUE. 3 ITA NO. 310/PNJ/2014 (A.Y : 2009 - 10) 5. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT WE DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 /12/2014. S D / - ( D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI DATED : 1 9 /12/2014 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER