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2015 (1) TMI 435 - HC - Income TaxHireing of plastic moulds - Nature of expenditure incurred on plastic moulds - TDS liability u/s 194C - Applicability of findings recorded by the Settlement Commission relating to valuation of good for levy of excise duty in the Income tax proceedings - Held that:- There is no dispute about the payments made by the respondent-assessee to the overseas group entities for hire of moulds. The international transactions were not made subject matter of any transfer pricing adjustments. - it is difficult to understand the logic and reasoning of the Assessing Officer and the stand of the Department that hire charges paid for the moulds, which were used to manufacture the products sold by the respondent-assessee after being manufactured at their behest and cost, should not be treated as expenditure under Section 37(1) of the Act. TDS u/s 194C- Held that:- Reliance placed on Section 194C is also misconceived as the respondent-assessee had not charged any amount from Dart Manufacturing India Private Limited and Innosoft Technology Limited. In fact, Section 40(a)(ia) was not invoked and applied by the Assessing Officer. On hire charges paid to the overseas group companies, tax at source would have been deducted under Section 195 of the Act. It is not stated that tax at source had not been deducted. Provision for obsolete stock - valuation of stock - Held that:- One cannot appreciate and understand how the principle of matching can apply, without examining the question whether the market price of obsolete and unsalable items was less than or lower than the manufacturing costs. If the market price of obsolete or unsaleable items is less than or lower than the cost price, the said position can be the basis for computing closing stock. It is noticeable that the respondent-assessee has been following this practise for several years and similar issue had arisen in the assessment year 2005-06, but the Revenue has not filed any appeal in respect of the said year. In fact, in the assessment year 2008-09, some of the obsolete items were sold and sale consideration received has been duly accounted for. This fact has been noted by the Tribunal in the impugned order. Thus, on the second issue, we see no reason to interfere. - Decided against Revenue.
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