Video Electronics Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3796/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2183 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation; TDS
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI DEEPAK R SHAH, ACCOUNTANT MEMBER SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A NO. 3796/DEL./09 ASSESSMENT YEAR 2006-07 VIDEO ELECTRONICS PVT. LTD. E-45/7, OKHLA INDUSTRIAL AREA, PHASE-11, NEW DELHI 110 020. VS. ACIT CIRCLE 17 (1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.P. RASTOGI, ADVOCATE. RESPONDENT BY : SHRI ALOK SINGH, DR ORDER PER DEEPAK R SHAH, AM: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A),XIX, NEW DELHI DATED 6.7.2009 IN AN APPEAL AGAINST ASS ESSMENT ORDER FRAMED U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS), NEW DELHI ERRED IN CONFIRMING AN ADDITION OF RS. 6,17,357/- I N THE RETURNED INCOME, BEING THE LOSS ON SALE OF OLD AND OBSOLETE STOCK. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , NEW DELHI ERRED IN DISALLOWING THE PAYMENT OF PROFESSIONAL FEE OF R S. 70,000/- AS THE TDS DEDUCTED ON THE SAME WAS DEPOSITED IN SUBSEQUEN T YEAR. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , NEW DELHI ERRED ITA NO. 3796/DEL/09 2 IN NOT ADJUSTING THE BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AND DID NOT ALLOW THE SAME TO BE CARRI ED FORWARD. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF T.V.S AND ELECTRONIC GOODS. 4. THE AO NOTED THAT THE ASSESSEE HAS DECLARED LOSS OF RS. 6,17,357/- ON THE TOTAL SALES OF RS. 6,67,410/-. THE AO NOTED THA T OPENING STOCK OF RAW MATERIAL AND COMPONENTS WAS RS. 8,72,107/-. PARTS OF STOCK W ERE SOLD FOR A SUM OF RS. 2,13,565/-. THE CLOSING STOCK OF SUCH RAW MATERIAL AND COMPONENTS WERE RS. 41,185/-. THIS RESULTED INTO LOSS OF RS. 6,17,357/- . THE AO NOTED THAT WHEN THE COST OR MARKET VALUE (WHICHEVER IS LOWER) WAS RS. 8 ,72,107/- AT THE BEGINNING OF THE YEAR AND THE STOCK AT THE END OF THE YEAR IS ON LY RS. 41,185/-, HOW IT CAN INCUR LOSS. THIS IMPLIES THAT EITHER THE SALE PRICE HAS B EEN SUPPRESSED OR THE CLOSING STOCK HAS BEEN UNDER VALUED. THEREFORE, THE LOSS OF RS. 6,17,357/- WAS DISALLOWED. 5. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT THE COMPANY WAS ENGAGED IN MANUFACTURING AND TRADING OF BLACK & WHITE AND COLO UR T.V. SETS,. VCR, VCD, AUDIIOS, LEASING & FINANCING ACTIVITY FROM 1973 TIL L 31 ST OCTOBER 1994. WHEN THE LOCKOUT WAS DECLARED IN ITS FACTORY AT SAHIBABAD (U P). THE COMPANY HAD DISCONTINUED ITS MANUFACTURING ACTIVITY SINCE 1994 AND IS CARRYING ON ITS TRADING AND LEASING ACTIVITY TILL DATE. THE COMPANY DISPOSED OFF ITS OLD, OBSOLETE AND OUT DATED STOCKS OF BLACK & WHITE T.V. IN THE YEAR UNDER CONSIDERATION. THE ASS ESSEE ADVERTISED IN THE NEWS PAPER FOR SALE OF ITS STOCK ON AS IS WHERE IS BASIS AS PER PHOTOCOPY OF ADVERTISEMENT ENCLOSED AT PAGE 9-10 OF THE PAPER BO OK. ITA NO. 3796/DEL/09 3 DURING THE YEAR UNDER ASSESSMENT THE COMPANY SOLD O FF ITS STOCK FOR RS. 2,13,565/- TO M/S. PREMA SAI ELECTRONICS, DELHI AS PER PHOTOCOPY OF INVOICE ENCLOSED AT PAGE 5-6 OF THE PAPER BOOK. 5.1 IT WAS FURTHER SUBMITTED THAT THE COMPANY HAD R IGHTLY VALUED ITS OPENING STOCK (I.E. CLOSING STOCK AT THE END OF LAST YEAR) AND THE COMPANY HAD PUT IN THE EFFORTS TO SELL OFF ITS OLD STOCK OF BLACK & WHITE TELEVISION COMPONENTS BY PUBLISHING IN NEWSPAPERS, COPY ENCLOSED AT PAGE 5-6 OF THE PAPER BOOK. THE COMPANY HAD SOLD OFF THE MATERIAL TO A REGISTERED D EALER AND RECEIVED THE PAYMENT BY CHEQUE IN THE SUBSEQUENT YEAR THE PHOTOC OPY OF INVOICE AND LEDGER ACCOUNT OF THE PARTY APPEARS AT PAGE 7 OF THE PAPER BOOK. THUS THE LOSS IS ACTUAL AND NOT HYPOTHETICAL. 5.2 LD. CIT(A) HELD THAT WHEN THE OPENING STOCK WAS VALUED AT RS. 8,72,107/- THERE IS NO BASIS FOR VALUATION OF SUCH STOCK RESUL TING INTO LOSS. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US RAISING GROUND NO. 1 HEREI N ABOVE. 6. WHEREAS LD. COUNSEL FOR ASSESSES REITERATED THE SUBMISSION MADE BEFORE COMMISSIONER (A), LD. DR SOUGHT TO RELY UPON THE FI NDING OF COMMISSIONER (A). 7. THE ADMITTED FACT IS THAT THOUGH THE STOCK WAS V ALUED AT RS. 8,72,107/- AS ON 31.1.2005 THE SAID STOCK NO LONGER REMAIN IN POS SESSION OF ASSESSEE AT THE END OF THE YEAR. THE SAME WAS SOLD DURING THE YEAR. THERE IS ALSO NO DISPUTE THAT SUCH STOCK WAS OBSOLETE AND WAS TO BE SOLD ONLY THR OUGH AUCTION ADVERTISEMENT IN LOCAL NEWSPAPERS. THE STOCK SOLDS ARE BLACK AND WHITE TV SETS WHICH HAS IN FACT BEEN OBSOLETE IN THE YEAR 2005-06. SINCE THERE IS NO DISPUTE ABOUT SALE PRICE REALIZED ON SALE OF SUCH OBSOLETE STOCK THE RESULTA NT FIGURE OF LOSS IS EXPLAINED ITA NO. 3796/DEL/09 4 AND HENCE THERE IS NO JUSTIFICATION FOR SUCH ADDITI ON. WE THEREFORE DELETE THE ADDITION OF RS. 6,17,357/-. 7. GROUND NO. 2 WAS NOT PRESSED. FOR WANT OF PROSEC UTION THIS GROUND IS DISMISSED. 8. SET OFF OF BROUGHT FORWARD LOSS AND UNABSORBED D EPRECIATION IS CONSEQUENTIAL TO DETERMINATION OF SUCH LOSS AND DEP RECIATION IN EARLIER YEARS. WE THEREFORE DIRECT THE AO TO ALLOW SET OFF OF LOSSES AND DEPRECIATION. THE ASSESSEE NEED NOT MAKE ANY APPLICATION FOR CLAIMING SET OFF OF LOSSES / DEPRECIATION. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2009. [RAJPAL YADAV] [DEEPAK R SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBE R VEENA DATED : 18.12.2009 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT