The DCIT, 1(1), Indore V. M/S. BRIDGESTONE INDIA P. LTD., Dhar

ITA 548/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5941 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY
• Keywords: Transfer pricing
• Section: 143(3); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER T.P.A.NO.615/IND/2010 A.Y. : 2006-07 BRIDGESTONE INDIA PRIVATE LIMITED, DY. CIT, 1(1), POST-SAGORE, PITHAMPUR, VS INDORE. DISTT. DHAR APPELLANT RESPONDENT PAN NO. AABC2304E T.P.A.NOS. 547, 548 & 738/IND/2014 A.YS. : 2005-06, 2008-09 & 2009-10 DY. CIT/ACIT, 1(1), INDORE. BRIDGESTONE INDIA PRIVATE LIMITED, VS PITHAMPUR APPELLANT RESPONDENT ASSESSEE BY : SHRI MANOJ FADNIS, C. A. DEPARTMENT BY : SHRI RAJEEV VARSHNEY, CIT DATE OF HEARING : 02 . 0 5 .2016 DATE OF PRONOUNCEMENT : 20 . 0 6 .2016 BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 2 2 O R D E R PER D.T.GARASIA, J.M. APPEAL NO. 615/IND/2010 BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 IS FILED CONSEQUENT UPON TH E ORDER DATED 17.09.2010 PASSED BY DRP-I AND THEN PASSED BY DY. CIT, 1(1) DATED 6.10.2010, WHEREAS THE APPEALS IN I .T.A.NOS. 547, 548 & 738/IND/2014 FOR ASSESSMENT YEARS 2005-06, 2008-09 AND 2009-10 FILED BY THE REVENUE ARE DIRECT ED AGAINST THE ORDERS OF CIT(A)-I, INDORE, DATED 9.5.2 014, 9.5.2014 AND 21.08.2014 RESPECTIVELY. 2. THE SHORT FACTS OF THE CASE IN I.T.A.NO. 615/IND/20 10 ARE THAT THE ASSESSEE IS A COMPANY AND IT HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. THE AO HAS VERIFIED RELEVANT BOOKS OF ACCOUNTS AND EXAMINED BY TEST CHE CK. THE ASSESSEES CASE WAS REFERRED TO TRANSFER PRICING OFF ICER, AHMEDABAD. ON RECEIPT OF ORDER U/S 92CA(3) PASSED B Y THE TRANSFER PRICING OFFICER, AHMEDABAD, THE ASSESSEE WA S GIVEN OPPORTUNITY AND DRAFT ASSESSMENT ORDER WAS FRAMED AN D SERVED ON THE ASSESSEE. THE ASSESSEE OBJECTED TO TH E DRAFT BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 3 3 ASSESSMENT ORDER AND MOVED TO THE DISPUTE RESOLUTIO N PANEL, MUMBAI UNDER SECTION 144C OF THE INCOME-TAX ACT, 19 61. THE DISPUTE RESOLUTION PANEL HAS APPROVED THE DRAFT ASS ESSMENT ORDER ON THE ISSUE RELATING TO THE ORDER U/S 92CA(3 ). AS REGARDS VALUATION OF CLOSING STOCK, THE DISPUTE RES OLUTION PANEL DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE . THE AO HAS VERIFIED AND EXAMINED THE ASSESSEES FINAL ACCOUNTS , COMPUTATION OF INCOME AND TAX AUDIT REPORT. IT WAS O BSERVED THAT THE ASSESSEE HAS NOT INCORPORATED THE INGREDIE NT OF CENTRAL EXCISE IN THE VALUATION OF CLOSING STOCK AS DISCUSSED IN THE ASSESSMENT ORDER. THE AO WAS OF THE VIEW THAT TH E ASSESSEES CLAIM CANNOT BE ALLOWED AND IT IS UNDER- VALUATION OF CLOSING STOCK. THEREFORE, SHOW CAUSE NOTICE WAS GIVE N. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THA T AS PER METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE COM PANY, IN ITS CASE, INVENTORY OF FINISHED GOODS IS CALCULATED INCLUSIVE OF EXCISE DUTY, WHILE RAW MATERIALS, STORES AND SPARES, FUEL & OIL ARE SHOWN IN THE BALANCE SHEET NET OF EXCISE DUTY, A S THE TAX PAID ON INPUTS IS AVAILABLE FOR SET-OFF AGAINST THE TAX PAYABLE BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 4 4 ON SALES OR IS REFUNDABLE AS PER AS-2, THE COST OF PURCHASES CANNOT INCLUDE DUTIES AND THE TAXES WHICH ARE SUBSEQ UENTLY RECOVERABLE OR AVAILABLE FOR SET-OFF AGAINST THE TA X PAYABLE. IT WAS CONTENDED THAT SECTION 145 IS FOR DETERMINING TH E INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAIN OF BUSINE SS OR PROFESSION. AFTER CONSIDERING THE REPLY, THE AO HEL D THAT THE ASSESSEES CONTENTION IS NOT ACCEPTABLE. SECTION 14 5A OF THE INCOME-TAX ACT, 1961, PROVIDES THAT THE CLOSING STO CK WORKED OUT IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGU LARLY EMPLOYED BY THE ASSESSEE AND FURTHER ADJUSTED TO IN CLUDE THE AMOUNT OF ANY CESS, DUTY OR TAX ACTUALLY PAID OR IN CURRED. THE ABOVE PROVISION HAS OVERRIDING EFFECT ON SECTION 14 5. THE PHRASE THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145 CLARIFIES THAT WHATEVER MAY BE THE METHOD OF ACCOUNTING AS PER SECTION 145; THE PROVISIONS OF SE CTION 145A WOULD APPLY. THERE IS NO SCOPE FOR ANY ADJUSTMENT ON ACCOUNT OF ANY HEAD, THEREAFTER. AS REGARDS, AVAILABILITY O F CENVET ON GOODS PURCHASED, IT HAS NO IMPACT ON THE VALUATION OF CLOSING STOCK. THE INGREDIENT OF CENTRAL EXCISE IN THE INPU T ITEMS IS THE BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 5 5 COST OF PURCHASE OF GOODS; HENCE BY ANY METHOD OF S TOCK VALUATION, THE SAME IS INCLUDIBLE IN THE VALUE OF C LOSING STOCK. THUS THE WORKING PROVIDED IN TAX AUDIT REPORT CANNOT BE ACCEPTED. AS REGARDS THE ACCOUNTING STANDARDS, THEY CANNOT OVERRIDE THE STATUTORY PROVISIONS. AS SUCH THE ASSE SSEES ARGUMENTS ARE NOT ACCEPTED. THE TOTAL EXCISE DUTY O N ABOVE ITEMS WORKS OUT TO RS. 3,34,04,090/-, WHICH IS INCLUD IBLE IN THE VALUE OF CLOSING STOCK. WHILE CREDITING THE CLO SING STOCK, THE ASSESSEE HAS NOT INCLUDED THE ABOVE AMOUNT. AS SUCH, AN ADDITION OF RS. 3,34,04,090/- IS MADE UNDER THIS HE AD. THE AO WAS SATISFIED THAT THE ASSESSEE HAS UNDERVALUED THE CLOSING STOCK TO THE ABOVE EXTENT. HENCE, PENALTY PROCEEDIN GS U/S 271(1)(C) OF INCOME-TAX ACT, 1961, WERE SEPARATELY I NITIATED. AS THE ORDER WAS PASSED U/S 143(3) READ WITH SECTION 144 C, THE APPEAL IS BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE MADE ORAL ARGUMENTS AND ALSO FILED THE SYNOPSIS. TH E MAIN CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE AO HAS ONLY CONSIDERED THE EXC ISE DUTY ON BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 6 6 CLOSING STOCK AND HAS NOT GIVEN EFFECT TO THE EXCIS E DUTY ON OPENING STOCK, PURCHASES AND CONSUMPTION. AS PER TH E LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE NET EFFECT OF THE ADJUSTMENT UNDER SECTION 145A IS REVENUE NEUTRA L. IN THE WRITTEN SYNOPSIS, IT IS SUBMITTED AS UNDER :- THE DETAILS OF THE ADDITIONS MADE IN DIFFERENT YEARS IS SUMMARIZED AT PAGE 1 OF THE ENCLOSED PAPER BOOK. AS DIRECTED ON THE LAST DATE OF HEARING THE ADJUSTMENTS MADE U/S 145A OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2002-03 TO 2009-10 ARE ENCLOSED. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LIMITED, REPORTED, IN (2008) 214 CTR 0045, HAS HELD THAT TO GIVE EFFECT TO SECTION 145A, IF THERE IS A CHANGE IN THE CLOSING STOCK AS ON 31 ST MARCH, 1999, THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT IN THE OPENING STOCK AS ON 1 ST APRIL, 1998. BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 7 7 IN THE ABOVE REFERRED DECISION, THE HON'BLE DELHI HIGH COURT HAS TAKEN NOTE OF THE FOLLOWING :- (A) NOTES ON CLAUSES IN FINANCE BILL WHEN SECTION 145A OF THE ACT WAS INSERTED WHERE IT IS CLEARLY MENTIONED THAT THE INVENTORY AS ON THE 1 ST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, SHOULD BE ADJUSTED. (PARA 8 OF THE ORDER). (B) DECISION OF THE PRIVY COUNCIL IN THE CASE OF CIT VS AHMEDABAD NEW COTTON MILLS CO LIMITED AIR 1930 PC 56 WHERE THE EFFECT OF ALTERING THE VALUATION METHOD WAS CONSIDERED (PARA 9 OF THE ORDER). THE COURT HAS IN PARA 10 HAS REITERATED THE OPINION OF THE PRIVY COUNCIL THAT WHEN THERE IS A CHANGE IN THE VALUATION METHOD AT ' ONE END THERE MUST NECESSARILY BE A CHANGE IN THE OTHER END, OTHERWISE THE TRUE PROFITS WOULD NOT BE REFLECTED. BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 8 8 (C) PARA 52.2 OF THE CIRCULAR NO 772 OF THE CBDT DATED 23 RD DECEMBER 1998 WHERE IT IS MENTIONED THAT BOTH THE OPENING AND THE CLOSING STOCK SHOULD REFLECT THE CORRECT VALUE AND THAT IS WHY SECTION 145A WAS INSERTED IN THE STATUTE BOOK. (PARA 11 OF THE ORDER) THAT THE ABOVE DECISION OF DELHI HIGH COURT HAS BEEN FOLLOWED BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MAHALAXMI GLASS WORKS (P) LIMITED (2009) 318 ITR 0116. THAT HON'BLE ITAT INDORE IN THE CASE OF RAJRATAN GUSTAV WOLF LTD. VS ACIT ITA NO. 768/IND/2006 FOR AY 2003-04; RAJRATAN GLOBAL WIRE LIMITED ITA NO. 350/IND/2008 AND ITA NO. 351/IND/2008 FOR AY 2005- 06 HAS HELD BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 9 9 THAT THE NECESSARY ADJUSTMENTS NEED TO BE CARRIED OUT TO PURCHASES, SALES, OPENING STOCK AND THE CLOSING STOCK. THE HON'BLE ITAT HAS FOLLOWED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAHAVIR ALUMINIUM LIMITED. IT HAS ALSO HELD THAT IF THE ADJUSTMENTS ARE CARRIED OUT TO ALL THE FOUR ITEMS, THEN THERE WOULD NOT BE ANY IMPACT ON THE PROFITS OF THE YEAR UNDER CONSIDERATION. THAT IN THE MATTER OF DCIT MUMBAI VS. M/S AXIS ELECTRICAL COMPONENTS (I) PRIVATE LIMITED ITA NO. 4577/MUM/09(AY 2006- 07) HAS CONFIRMED THE ORDER OF CIT(A) DELETING THE ADDITION OF RS 4,69,459/- TO THE CLOSING STOCK MADE VI] S 145A ON ACCOUNT OF UNUTILIZED CENVAT CREDIT. THE CIT(A) HAD OBSERVED THAT THERE IS NO IMPACT ON PROFIT ON ACCOUNT OF ADJUSTMENT BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 10 10 OF MODVAT CREDIT, ON THE APPLICATION OF SECTION 145A OF THE ACT. THAT IT IS ALSO SUBMITTED THAT THE LD. AO HAS MADE AN ADDITION OF RS 3,62,74,585/- FOR AY 2005-06. THE LD. CIT(A) HAS DELETED THE ADDITION FOR WHICH THE DEPARTMENT IS IN APPEAL IN ITA NO. 547/IND/2014. IN THE PRESENT APPEAL, THE LD. AO IS NOT ADJUSTING THE VALUE OF THE OPENING STOCK TO THE EXTENT, ADDITION IS MADE BY HIM IN AY 2005-06. THAT IT IS ALSO SUBMITTED THAT IN AY 2009- 10 THE LD. AO HAS MADE THE ADDITION OF THE DIFFERENCE IN THE EXCISE DUTY ON THE OPENING STOCK AND THE CLOSING STOCK, BUT HAS NOT CONSIDERED THE ADJUSTMENT TO THE PURCHASES. THE ADDITION WAS DELETED BY THE CIT(A) FOR WHICH THE LD. AO IS IN APPEAL IN ITA NO738JINDJ2014. THUS THE BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 11 11 DEPARTMENT'S STAND IS DIFFERENT IN DIFFERENT YEARS. THAT IN COMMISSIONER OF INCOME TAX VS. INDO NIPPON CHEMICALS LIMITED, THE HON'BLE BOMBAY HIGH COURT (2000) 164 CTR 0078: (2000) 245 ITR 0384 HAS HELD THAT MODVAT CREDIT IS RELATED ONLY TO THE RAW MATERIAL CONSUMED, THE CREDIT HAS DIRECT LINKAGE WITH THE CONSUMPTION OF THE RAW MATERIAL. THE COURT HAS HELD THAT WHETHER THE NET METHOD OR THE GROSS METHOD IS APPLIED, THE NET PROFIT REMAINS THE SAME. ALTHOUGH THIS DECISION IS IN RELATION TO SECTION 145(1) OF THE ACT AND NOT WITH RESPECT TO SECTION 145A, NEVERTHELESS THE PRINCIPALS ENUNCIATED ARE APPLICABLE TO THE PRESENT APPEAL. THAT IT IS ALSO SUBMITTED THAT THE GUIDANCE NOTE ON TAX AUDIT ISSUED BY BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 12 12 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAS ALSO FOUND THAT THE ADJUSTMENTS MADE UNDER SECTION 145A OF THE ACT, WILL HAVE NO IMPACT OF THE PROFITS OF THE YEAR. COPY OF THE RELEVANT PORTION OF THE GUIDANCE NOTE IS ENCLOSED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DEPARTMENTA L REPRESENTATIVE PLACED RELIANCE ON THE ORDER OF HON' BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. CORPORATI ON BANK LIMITED, (1988) 41 TAXMAN 151 (KARNATAKA): 174 ITR 616 AND THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF MALMOULD CORPORATION VS. CIT, (1993) 202 ITR 789 ( BOM ). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE ASSESSEES CONTENTION THAT REGARDING A DDITION OF VALUE OF CLOSING STOCK IN RESPECT OF EXCISE DUTY, T HE EXCISE COMPONENT IN CLOSING STOCK OF RAW MATERIALS AND SPAR ES IN ACCORDANCE WITH CLOSING STOCK BY INVOKING THE PROVIS IONS OF BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 13 13 SECTION 145A OF THE ACT BY OBSERVING THAT SUCH PROV ISIONS REQUIRE THAT CLOSING STOCK HAS BEEN WORKED OUT IN AC CORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY CESS, DUTY OR TAX ACTUALLY PAID OR INCURRED. THE AB OVE PROVISION HAS OVERRIDING EFFECT ON SECTION 145. THE ASSESSEES CONTENTION THAT AS PER THE AUDIT REPORT, THE ASSESS EE HAS ACCOUNTED THESE PURCHASES OF RAW MATERIALS AND INCID ENTAL GOODS NET OF EXCISE DUTY AS CENVET IS AVAILABLE. TH EREFORE, THE ASSESSEE SUBMITTED THAT IF THE EXCISE DUTY IS ADDED ONLY TO THE CLOSING STOCK OF RAW MATERIAL AND INCIDENTAL GOODS, THEN IT WILL RESULT TO DISTORTION OF PROFIT UNLESS PURCHASES AND OPENING STOCK ARE INCREASED BY COMPONENT OF EXCISE DUTY. WE ARE OF THE VIEW THAT AS PER SECTION 145A OF THE INCOME-TAX ACT, 1961, WHEREIN METHOD OF VALUATION WILL BE APPLICABLE NOT ON LY IN CLOSING STOCK, BUT ON INVENTORY I.E. OPENING AND CL OSING STOCK AS WELL AS ON BOTH PURCHASES AND SALES. THEREFORE, T HE AO IS NOT JUSTIFIED IN ADDING THE EXCISE DUTY IN CLOSING STOCK OF RAW MATERIALS AND INCIDENTAL GOODS. WE, THEREFORE, DIRE CT THE AO TO BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 14 14 COMPUTE THE TOTAL INCOME BY ADDING CESS, DUTY OR TA X PAID INCURRED NOT ONLY IN CLOSING STOCK BUT ALSO IN PURC HASES, OPENING STOCK, SALES, WHEREVER SUCH EXCISE DUTY IS A LREADY ADDED. THE AO IS DIRECTED TO VERIFY THE WORKING GIVE N BY THE ASSESSEE ON PAGES 3, 4, 5, 6, 7, 8, 9 AND 10 FOR TH E ASSESSMENT YEAR 2002-03 TO ASSESSMENT YEAR 2009-10. THE AO IS DIRECTED TO VERIFY THE SAME AND PASS THE ORDER ACCORDINGLY. WE ALSO GET SUPPORT FROM THE DECISION OF HON'BLE DELHI HIGH COU RT IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LIMITED, (2008) 2 97 ITR 0077, WHEREIN IT IS HELD AS UNDER :- IN THE PRESENT CASE, THERE IS NO QUESTION OF ANY DOUBLE BENEFIT BEING GIVEN TO THE ASSESSEE. PARA 23.13 OF THE GUIDANCE NOTE ISSUED BY THE ICAI ON TAX AUDIT UNDER S. 44AB ITSELF MAKES IT CLEAR THAT W HENEVER ANY ADJUSTMENT IS MADE IN THE VALUATION OF INVENTORY, THIS WILL AFFECT BOTH THE OPENING AS WELL AS THE CLOSING STOCKS. IT IS ALSO TO BE NOTED THAT IF ANY ADJUSTMENT IS REQUIRED TO BE MADE BY A STATUTE (AS FOR EXAMPLE S. 145A), EFFECT TO THE BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 15 15 SAME SHOULD BE GIVEN IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX PURPOSES. SEC. 145A BEGINS WITH A NON OBSTANTE CLAUSE, AND ,THEREFORE, TO GIVE EFFECT TO S. 145A, IF THERE IS A CHANGE IN THE CLOSING STOCK AS ON 31ST MARCH, 1999, THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK AS ON 1ST APRIL, 1998. PARA 23.14 OF THE GUIDANCE NOTE POSTULATES THAT ADJUSTMENT SHOULD BE MADE IN SUCH A MANNER THAT NO DOUBLE DEDUCTION IS CLAIMED FOR THE SAME EXPENDITURE. IN THE PRESENT CASE, THE QUESTION OF DOUBLE DEDUCTION DOES NOT ARISE, SINCE NO ADJUSTMENT WAS MADE BY THE ASSESSEE IN THE P&L A/C FOR THE YEAR ENDING 31ST MARCH, 1998, TRIBUNAL WAS CORRECT IN LAW IN ALLOWING THE ADJUSTMENT OF RS. 54,83,272 TO THE ASSESSEE IN THE OPENING STOCK FOR THE PREVIOUS ASST. YR. 1998-99 (BEING A TRANSITIONAL YEAR) UNDER S. 145A. BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 16 16 6. WE ALSO GET SUPPORT FROM THE DECISION OF CIT VS. MAHALAXMI GLASS WORKS (P) LIMITED, (2009) 318 ITR 0 116, WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER :- ACCOUNTS VALUATION OF STOCK ADJUSTMENT OF UNUTILIZED MODVAT CREDIT TO THE OPENING STOCK TO GIVE EFFECT TO S. 145A, IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE END OF THE YEAR THEN THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK OF THAT YEAR THIS WOULD NOT AMOUNT TO GIVING DOUBLE BENEFIT TO THE ASSESSEE AND WOULD BE NECESSARY TO COMPUTE THE TRUE AND CORRECT PROFIT FOR THE PURPOSE OF ASSESSMENT FURTHER, BEFORE THE TRIBUNAL, THE DEPARTMENTAL REPRESENTATIVE DID NOT OBJECT TO THE ASSESSEES PLEA THAT THE VALUE OF STOCK OF EARLIER YEAR SHOULD BE TAKEN AS OPENING STOCK THIS ALSO FORTIFIES ASSESSEES PLEA CIT VS. MAHAVIR ALUMINIUM LTD., (2008) BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 17 17 214 CTR (DEL) 45: (2008) 297 ITR 77 (DEL) AND CIT VS. AHMEDABAD NEW COTTON MILLS CO.LTD., AIR 1930 PC 56 RELIED ON. 7. WE, RESPECTFULLY, FOLLOWING THE SAME, ALLOW THE APPEA L IN I.T.A.NO. 615/IND/2010 FOR ASSESSMENT YEAR 2006- 07. 8. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPO N THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. CORPORATION BANK LIMITED, (1988) 174 ITR 61 6 (KARNATAKA). THIS JUDGMENT RELATES TO THE VALUATION OF CLOSING STOCK WHICH HAS TO BE TAKEN AS PER COST OR AS PER MA RKET PRICE WHICHEVER WAS LOWER AT ANY TIME PROVIDED THE CHANGE WA S BONA FIDE AND FOLLOWED REGULARLY THEREAFTER AND ASS ESSEE WANTED TO CHANGE THIS METHOD, WHICH IS NOT PERMISSIBL E AS PER THIS DECISION. SIMILARLY, HE HAS ALSO RELIED UPON T HE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF MALMOULD CORPORATION VS. CIT, (1993) 202 ITR 789 ( BOM ) AN D SUBMITTED THAT UNDER SECTION 145, THE ASSESSEE CAN ADOPT THE METHOD OF VALUATION WHICH IS TO BE FOLLOWED REGULARL Y, BUT THE ASSESSEE HAD HIS WILL OF THE CHANGE OF METHOD OF VA LUATION TO BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 18 18 CLOSING STOCK AT COST OR MARKET PRICE, WHICHEVER IS LOWER IN ANY YEAR. BUT, WE ARE OF THE VIEW THAT THIS JUDGMENT R ELATES TO SECTION 145 AND IT DOES NOT REFER TO SECTION 145A, WHICH HAS COME INTO FORCE BY FINANCE ACT, 1998, WITH EFFECT FR OM 1.4.1999 I.E. IN ASSESSMENT YEAR 1999-2000. BOTH TH ESE JUDGMENTS RELATE TO ASSESSMENT YEAR 1975-76 AND ASS ESSMENT YEAR 1969-70. THEREFORE, IT IS NOT NECESSARY TO DIS CUSS THIS ISSUE IN DETAIL AND IT IS NOT APPLICABLE TO THE FAC TS OF THIS CASE. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2006-07. 9. IN RESPECT OF ASSESSMENT YEARS 2005-06, 2008-09, AN D 2009-10, THE LD. CIT(A) HAS ALREADY ALLOWED THE CLA IM OF THE ASSESSEE AS WE HAVE HELD ABOVE. THEREFORE, ON THE S AME REASONING, DEPARTMENTAL APPEAL FOR ALL THE THREE YE ARS ARE DISMISSED. BRIDGESTONE INDIA PVT. LTD. VS. ACIT, 1(1), INDORE. AND DCIT VS. BRIDGESTONE INDIA PVT.LTD., IN T.P.A. NOS. 615/IND/2010,547,548, 738/IND/2014 A.YS. 2006-07, 2005-06, 2008-09 AND 2009-10 19 19 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D AND THE REVENUES APPEALS ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH JUNE, 2016. CPU* 26