M/s. Vipor Chemicals Pvt.Ltd., Baroda V. The Addl.CIT.,Circle-4(2), Baroda

ITA 4142/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5504 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: M K PATEL
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M M/S VIPOR CHEMICALS P. LTD., 301, IVORY TERRACE, R.C. DUTT ROAD, BARODA. VS. THE ADDL. CIT, CIRCLE- 4(2), BARODA. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI M. K. PATEL, AR REVENUEBY:- SHRI R. K. DHANESTA, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THAT THE LD. CIT(A), HAS GRIEVOUSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.1,60,285/- BEING LOSS ON ASSETS DISCARDED. (2) THAT ON FACTS, THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,13,873/- MADE OUT OF SALES PROMOTION EXPENSES (3) THAT IN LAW AND ON FACTS, THE LD. CIT(A) HAS GRIEVO USLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,86,469/- MADE T OWARDS UNDERVALUATION OF CLOSING STOCK U/S 145A OF THE ACT . 2. OUT OF THE ABOVE, THE LD. AR HAS WITHDRAWN GROUN D NO.1 AND HENCE IT IS TREATED AS REJECTED. ITA NO.4142/AHD/2008 ASST. YEAR :2004-05 2 3. REGARDING GROUND NO.2 THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY CLAIMED AN EXPENDITURE OF RS.2,13,873/- ON SALES PROMOTION. THE DETAILS OF THE EXPENDITURE AS SUBMITTED BY THE ASSESSEE ARE AS UNDER :- THE AO DISALLOWED THE CLAIM ON THE GROUND THAT NAME S AND ADDRESSES OF THE PARTIES TO WHOM GIFTS WERE GIVEN OR THE DETAILS OF THE PARTIES WHO ATTENDED THE PONK AND UNDHIYA PARTY HAVE ALSO N OT BEEN GIVEN. THE ASSESSEE ALSO COULD NOT EXPLAIN THE BENEFIT DERIVED BY IT IN THE BUSINESS BY SPENDING THESE SUMS ON VARIOUS PARTIES. 4. THE LD. CIT(A) CONFIRMED THE ADDITION ON THE GRO UND THAT ASSESSEE HAS NOT DISCHARGED THE ONUS WHILE CLAIMING THESE EX PENSES WHOSE NATURE IS PRIMA FACIE NON-BUSINESS. ACCORDING TO HIM EXPEN SES ON PURCHASES OF COLOUR TV OR GIFT ITEMS ARE ALLOWABLE ONLY WHEN THE Y ARE INCURRED FOR THE CUSTOMERS OR PERSONS RELATED TO THE BUSINESS. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEE HAS OBVIOUSLY NOT FURNISHED EVIDENCE IN SU PPORT OF THE CLAIM THAT ENTIRE EXPENDITURE WAS INCURRED FOR BUSINESS PURPOS ES OR THAT BY INCURRING EXPENDITURE ASSESSEE COMPANY IS ANY HOW BENEFITED. BUT IT IS ALSO NOT DISPUTED THAT IN THE COURSE OF BUSINESS ASSESSEE HA S TO ENTERTAIN GUESTS BY OFFERING FOOD AND BEVERAGES. HOWEVER, IN THE PRESEN T CASE EXPENDITURE CLAIMED ARE SPECIFIC SUCH AS EXPENDITURE ON SONY CO LOUR TVS, OR ON ORGANIZING VARIOUS PARTIES, WHICH ARE APPARENTLY NO T RELATED TO BUSINESS. SONY MAKE COLOUR T.V. GIVEN TO GUEST RS.19,000 GIFT ITEMS PURCHASED FROM DUTY FREE SHOP RS.13,584 GIFT ITEMS PURCHASED BY MR. P.S. PATEL RS.28,182 GIFT ITEM PURCHASED FROM DUTY FREE SHOP RS.34,510 BEING EXPENSES INCURRED FOR PONK UNDHIYA PARTY RS.9 2,587 SALES PROMOTION EXPENSES INCURRED FOR WHICH AMOUNT IS LESS THAN RS.1000 RS.15,449 TOTAL RS.2,13,873 3 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE WE ALLOW AN EXPENDITURE OF RS. 1 LAC AS FOR BUSINESS P URPOSES AND CONFIRM DISALLOWANCE OF RS.1,13,873/-. THIS GROUND OF ASSES SEE IS PARTLY ALLOWED. 6. THE THIRD GROUND RELATES TO VALUATION OF CLOSING STOCK UNDER SECTION 145A AND RESULTANT ADDITION OF RS.1,86,469/- ON ACC OUNT OF EXCISE DUTY COMPONENT OF THE CLOSING STOCK. THE ISSUE IS NOW CO VERED BY THE DECISIONS OF HON. BOMBAY HIGH COURT IN CIT VS. MAHA LAXMI GLASS WORKS (P) LTD. (2009) 318 ITR 116 (BOM), CIT VS. MA HAVIR ALLUMINIUM LTD. (2008) 297 ITR 77 (DEL) ACCORDING TO WHICH ELE MENT OF EXCISE DUTY RELATING TO STOCK HAS TO BE CONSIDERED WHILE VALUIN G OPENING STOCK AS WELL AS CLOSING STOCK. IN THE PRESENT CASE THE AO HAS ON LY CONSIDERED THE EFFECT OF EXCISE DUTY COMPONENT IN THE CLOSING STOCK WHICH IS NOT PROPER. HE SHOULD ALSO CONSIDER THE EFFECT OF EXCISE DUTY IN O PENING STOCK AS WELL AND WORK OUT THE RESULTANT ADDITION. THE VALUATION OF C LOSING STOCK THIS YEAR DONE AFTER INCLUDING DUTY COMPONENT WOULD OBVIOUSLY BE OPENING STOCK FOR SUBSEQUENT YEAR AS CONTENDED BY THE LD. AR. ACC ORDINGLY WE RESTORE THIS ISSUE TO THE FILE OF AO TO CALCULATE THE RESUL TANT ADDITION AFTER ADJUSTING BOTH OPENING AS WELL AS CLOSING STOCK WIT H THE EXCISE DUTY COMPONENT. THIS GROUND OF ASSESSEES APPEAL IS ALLO WED BUT FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 30/7/2010 SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD, DATED : 30/7/2010 4 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD