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2014 (12) TMI 248 - AT - Income TaxDisallowance on claim of expenses on payment of service charges u/s 40A(2)(b) deleted – Held that:- The assessee-company is a Government company which had made payment of service charges to another Government company - A part of the expenses was disallowed by the AO by invoking provisions of Section 40A(2)(b) of the Act - there is no allegation of any evasion of tax - service charges has been paid in pursuance of an agreement dated 25.04.2003 at the rate fixed vide the agreement - Such service charges at the same rate were also paid by the assessee-company to the same company in the AYs 2004-05 and 2005-06 - In the assessment completed u/s 143(3), the Department has not made any disallowance out of the said expenses - the Department in the earlier years accepted the same rate at which service charges were paid during the years under appeal as reasonable - though res judicata is not applicable in the income-tax proceedings but the rule of consistency needs to be adhered to and when the facts remains the same in different years, the Revenue cannot be permitted to draw different inferences in the different years – there was no material to show that the service charges paid by the assessee-company to another Government company were in excess of the fair market value of services – thus, the order of the CIT(A) is upheld – Decided against revenue. Value of inventories written off as obsolete disallowed – Held that:- The assessee debited ₹ 9,45,000/- in the profit and loss account under the head of obsolete inventory - The assessee explained that these inventories became obsolete and therefore, the value of the same was claimed at Nil - the inventories were sold in subsequent years for ₹ 5,00,000/-, therefore, the claim of the assessee that these inventories had Nil value as at the end of the year under appeal cannot be accepted - as no material was brought on record by the Revenue to show that the market value of the inventory was more than ₹ 5,00,000/- as at the end of the relevant previous year, the disallowance to the extent of market value as at the end of the relevant year i.e. ₹ 5,00,000/- and is upheld and the balance amount of disallowance of ₹ 4,45,000/- is set aside – Decided partly in favour of assessee.
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