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2014 (7) TMI 1031 - AT - Income TaxRestriction of Labour charges Held that:- A reasonable rate should have been applied by CIT(A) - it would be fair and reasonable to allow labour charges as claimed by the assessee - the short comings of the assessee shall also be addressed - an average rate can be allowed instead as claimed by the assessee The decision in Dy. Commissioner of Income-Tax Versus M/s. M. Kantilal Exports [2014 (7) TMI 819 - ITAT AHMEDABAD] followed - thus, the order of the CIT(A) is modified in respect of an adhoc disallowance Decided partly in favour of Revenue. Under valuation of closing stock of polished diamonds Held that:- This year can be treated as a demarcating year from the past years; hence, without disturbing the value of the opening stock, the AO is authorized to change the method of valuation for valuing the closing stock - an average of the two valuations is the right solution - The average of the two valuations - To resolve this long pending issue is a reasonable and fair approach to compute the value of the stock of the polished diamond at an average value of the closing stock - Closing stock of the diamond was and by applying the rate - The decision in Dy. Commissioner of Income-Tax Versus M/s. M. Kantilal Exports [2014 (7) TMI 819 - ITAT AHMEDABAD] followed - the AO is directed to re-calculate the valuation of the polished diamond by adopting the average rate of the two figures and accordingly compute the under valuation of the polished diamonds Decided partly in favour of Revenue. Valuation of closing stock of polished diamonds - Valuation made without any method Valuation made at average rate of purchases Held that:- The valuation of the stock is to be made at the market price or the cost price, whichever is lower - when the complete information about the quality of the stock is not made available then to resolve the issue a middle path is to be adopted - the assessee was in possession of the rough diamond; hence, the difference of the two, i.e., purchase cost (- minus) sale cost is the correct method for determining the valuation of the rough diamond - The decision in Dy. Commissioner of Income-Tax Versus M/s. M. Kantilal Exports [2014 (7) TMI 819 - ITAT AHMEDABAD] followed - the AO is directed to re-compute the valuation of the closing stock of the rough diamonds by adopting an average rate on the same guidelines Decided partly in favour of Revenue. Admission of additional evidence Deduction u/s 80HHC Export realization during extended period Held that:- The assessee has received approval from the R.B.I, and the realising Bank for extension of period for realisation in terms of section 80HHC (2)(a) of the Act there was no reasons for not allowing deduction u/s 80HHC of the Act on this realization - The AO is directed to include the said late realisation in export sale proceeds and allow deduction u/s 80HHC of the Act on this amount also Decided against Revenue. Defects in Labour payment expenses Held that:- The labour charges are different from lot to lot depending upon the quality of the diamond manufactured - while explaining the correctness of the valuation of the stock in the past year, the assessee himself had taken a plea that the diamonds are of two qualities, a superior quality and inferior quality - the valuation of such type of diamonds effect the overall valuation of the closing stock - it was impractical to pay an identical rate of job charges to all the job workers - Certain other doubts have also been raised such as a huge amount of labour charges remain outstanding at the end of the financial year- the AO is directed to re-compute the disallowance an average is to be taken for the purpose of disallowance of labour expenses Decided partly in favour of Assessee.
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