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2013 (9) TMI 674 - AT - Income TaxDisallowance of commission payment - payment to directors without rendering any service - Held that:- The assessee has not produced any evidence before the lower authorities, to show that the commission was paid for rendering any service, which resulted in enhancing the profitability of the company. - Payment of commission cannot be allowed as expenditure simply because, it is approved by the board and it is in accordance with the provisions of the Companies Act, 1956. An expenditure which falls within the ambit of section 37 of the Act can be allowed, if it is incurred wholly and exclusively for the purpose of business. In the present case, the assessee has failed to prove that the expenditure incurred was wholly and exclusively for the purpose of business - Decided against assessee. Valuation of closing stock - Held that:- The contention of the learned authorised representative for the assessee that the assessee is consistently following the same method of valuation of closing stock, which has also been accepted by the Department in the earlier as well as the subsequent years also requires to be considered. The Assessing Officer in the assessment order accepts the fact that the method of accounting followed by the assessee is not questioned. The Commissioner of Income-tax (Appeals) has also not given any basis for estimating the undervaluation of closing stock at Rs.45 lakhs. There is nothing in the order of the Commissioner of Income tax (Appeals) to suggest why he has adopted the figure of Rs. 45 lakhs. The assessee however is required to substantiate with supporting evidence, which are the stocks lying with it, which are not considered for the purposes of valuation, and the reason for doing so. The assessee also had to explain the specific instances pointed out by the Commissioner of Income tax (Appeals), where the assessee has taken into consideration lesser number of books for valuation of closing stock from the current year's printing, when the assessee himself has adopted a formula, as per which the current year's printing is valued at 75 percent of the cost. The assessee is also required to reconcile the discrepancy between the number of copies considered for arriving at the closing stock figure of Rs. 4,23,61,003 as per the consolidated stock statement submitted before the Commissioner of Income-tax (Appeals) and the details given before the Assessing Officer - Matter remitted back - Decided in favour of assessee.
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