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2008 (12) TMI 681 - HC - Income TaxWhether the Tribunal was correct in holding that the provision made by the assessee for bad and doubtful debt is an allowable deduction ? Whether the Tribunal committed an error in holding that section 80-O deduction should be allowed on the gross income received by the assessee by ignoring the provisions of section 80AB of the Act ? Whether, on the facts and in the circumstances of the case, the Tribunal is right in allowing the notional /hypothetical cost for ascertainment of purchase price of raw materials for deduction under section 80HH and section 80-I of the Act by ignoring the computation contemplated in the said provisions read with section 80AB of the Act ? Held that:- Questions Nos. 1 and 2 are answered against the assessee by following the judgment of this court dated June 25, 2008, passed in 2008 (6) TMI 338 - KARNATAKA HIGH COURT. It is an undisputed fact that the FAGP, after manufacturing the goods transfers it to its toilet soap unit and that neither octroi nor local taxes are being paid when such transfer/sale is made. However, determination sought for in terms of the Explanation to section 80-I(8) of the Income-tax Act is not the cost of the goods but the market value of the goods. The goods to be sold in the open market would naturally include not only the cost of the goods but also such additional expenses. In addition to the expenses referred to above, the notional profit to which the seller would be entitled to, could be added to arrive at the market rate of the inputs. The availability of the goods at the nearest market is a question of fact. The said market could either be next door or miles apart either way, the cost of the goods at the nearest avail- able market would have to be reckoned and to that the cost of transportation, octroi, local taxes, etc., has to be added. The figures so arrived at would in terms of the Explanation to section 80-I(8) would constitute the market value. Question No. 3 is answered against the Revenue and in favour of the assessee.
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