INDOKEM LTD, MUMBAI V. ASST CIT CIR 6(1), MUMBAI

ITA 6402/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2596 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 05-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2013
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: NATWAR THAKRAR; UJWAL THAKRAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JM & SHRI R.C.SHARMA, AM ./ ITA NO. 6402 / MUM/201 3 ( / ASSESSMENT YEAR : 200 9 - 2010 ) INDOKEM LIMITED, 410/411, KHATAU HOUSE, MOGUL LANE, MAHIM (WEST), MUMBAI - 400016 VS. ITO - 6(1)(3), MUMBAI - 20 ./ ./ PAN/GIR NO. : A A AC I 2959 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NATWAR THAKRAR & SHRI UJWAL THAKRAR /REVENUE BY : SHRI ASGHARZAIN VP / DATE OF HEARING : 5 TH AUGUST , 201 5 / DATE OF PRONOU NCEMENT 30 - 10 - 20 15 / O R D E R PER R.C.SHARMA, AM TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI, DATED 13 - 8 - 2013 , FOR THE ASSESSMENT YEAR 2009 - 2010, IN THE MATTER OF ORDER PASSED U/S.14 3(3) OF THE IT ACT. 2. IN THIS APPEAL, TH E ASSESSEE IS AGGRIEVED BY THE ACTION OF THE AO FOR NOT ALLOWING REDUCTION IN THE VALUATION OF WORK - IN - PROGRESS BY 5%. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURE AND TRADING OF SYNTHETIC DYESTUFFS, CHEMICALS AND DYES. FROM THE RECORD WE FOUND THAT THE ASSESSEE C OMPANY IS VALUING WORK - IN - ITA NO. 6402 /M/1 3 2 PROGRESS AT LOWER OF COST OR NET RELIABLE VALUE. THE APPELLANT COMPANY IS CONSISTENTLY FOLLOWING THE SAID METHOD OF VALUAT ION OF WORK - IN - PROGRESS. D URING THE SUBJECT YEAR, THE APPELLANT COMPANY HAS REDUCED BY 5% ITS INVENTORY OF NON - MOVING WORK - IN - PROGRESS AT ANKLESHWAR FACTORY, WHICH CAME TO RS.35,92,OOO/ - . DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT COMP ANY WAS ASKED TO GIVE JUSTIFICATION FOR SUCH 5% REDUCTION IN THE VALUE OF WORK - IN - PROGRESS. THE SAID J USTIFICATION HAS BEEN GIVEN BY THE ASSESSEE COMPANY BY MEANS OF A NOTE. T HE MAIN REASON FOR REDUCTION IN THE VALUE OF WORK - IN - PROGRESS WAS THAT UNTIL F.Y . 2007 - 08, THE APPELLANT COMPANY WAS MANUFACTURING CRUDE VAT DYESTUFFS AND EXPORTING THE SAME TO THE U.S. MARKET AND ONLY A SMALL PORTION OF THE PRODUCTION OF CRUDE DYESTUFFS WAS USED FOR FORMULATED PRODUCTS. THE DEMAND FOR CRUDE VAT DYESTUFFS STARTED DECR EASING IN 2008 AND BY MID 2008 THE EXPORT ORDERS OF CRUDE DYESTUFF HAD MORE OR LESS STOPPED. SINCE THE PLANT OF THE COMPANY WAS DESIGNED TO PRODUCE CRUDE DYESTUFFS, THE COMPANY CONTINUED PRODUCTION IN LOW PROFILE AND CHANGED THE PRODUCT MIX SO AS TO GET FR ESH MARKET. HOWEVER, THE INTERMEDIATES PRODUCED EARLIER WERE LYING IN STOCK FOR LONGER PERIOD, WHICH HAS RESULTED IN DETERIORATION OF QUALITY DUE TO OVER EXPOSURE. THE MANAGEMENT OF THE COMPANY THEN RE - ASSESSED THE WORK-IN - PROGRESS AT THE END OF THE YEAR AND FOUND THAT ABOUT 5 TO 6% OF THE INVENTORY OF WORK - IN - PROGRESS HAS DEGRADED IN QUALITY AND WAS NOT REUSEABLE. HENCE, THE MANAGEMENT OF THE COMPANY TOOK A CAUTIOUS DECISION OF 5% VALUE REDUCTION ON AN OVERALL B ASIS FOR SUCH WORK - IN - PROGRESS. ACCORDINGLY , WE DO NOT FIND ANY MERIT IN ITA NO. 6402 /M/1 3 3 THE ACTION OF LOWER AUTHORITIES FOR NOT ALLOWING 5% RE DUCTION IN THE VALUE OF WORK - IN - PROGRESS, WHICH WAS MADE IN RESPECT OF WORK - IN - PROGRESS IN DEGRADED QUALITY AND WAS NOT REUSEABLE. 4 . IN THE RESULT, APPEAL OF THE ASSESSE E IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 /10 /2015 . 30 /10 /2015 SD/ - SD/ - ( ) ( JOGINDER SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / AC COUNTANT MEMBER MUMBAI ; DATED 30 /10 /201 5 . . /PKM , . / 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//