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2022 (6) TMI 1401 - ITAT HYDERABADAllocation of the common expenses - CIT(A) accepting the cost of goods sold as the basis for allocation of the common expenses - assessee claiming deduction under section 10 (1) as engaged in the business of seed production, research, marketing of field and vegetable crops and wind power generation - HELD THAT:- It is pertinent to note that as rightly observed by the Ld. CIT(A) every methodology of estimation suffers from limitation and such limitations causing variations how to be smooth and on consistent application of the same principle. CIT(A) was of the opinion that inasmuch as for the earlier assessment years the assessee adopted the basis of cost of goods sold as a reasonable method of apportionment of the agricultural and non-agricultural expenses out of the common expenses. As both the cost of goods sold and also the turnover of different activities, to be the basis for allocation of the common expenses to have their own way and cess and variations, what is required is the following of the consistent method. Inasmuch as there is no dispute that the assessee has been consistently following the method by forgetting the common expenses on the basis of cost of goods sold, the rule of consistency demands that the same shall not be disturbed for a particular assessment year because it goes against the interest of Revenue. We, therefore, accept the reasoning adopted by the Ld. CIT(A) and hold that there is nothing wrong in the Ld. CIT(A) accepting the cost of goods sold as the basis for allocation of the common expenses. Allowing the “provision for sales returns" - It is a fact that the assessee supplies seeds to its distributors located in the states of Kerala, Andhra Pradesh and Karnataka and after the season is complete the sales distributors identify the stock of seeds of various varieties which are not sold by the end of Ruby season of plantation. No perversity in the findings of the Ld. CIT(A). In view of the seasonal nature of the business and also the short shelf life of the seeds, it is imperative for the assessee to take into account the quantity of unsold seats at the end of the year and the need to revalidate their further utility and to take them into stock in the next season. In the circumstances it cannot be said that the provision for sales returns is unascertained or unreasonable. With this view of the matter, we allow the contentions of the assessee and uphold the findings of the Ld. CIT(A). Decided against revenue.
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