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2015 (12) TMI 767 - AT - Income TaxSet off of unabsorbed depreciation - Held that:- Perusal of the wordings of Section 32(2) as applicable to assessment year 2007-08 i.e. the impugned assessment year will reveal that the wordings are similar to the wordings as applicable for assessment year 2002-03. Respectfully following the decision of Hon’ble Supreme Court in the case of CIT v. Virmani Industries Private Limited (1995 (10) TMI 1 - SUPREME Court ) we hold that the assessee company is entitled to set off of unabsorbed depreciation against long term capital gain earned during the year by the assessee company. We order accordingly. Invoking provisions of Section 145A - additions to the closing stock and that too without making corresponding adjustments to the opening stock , purchase and sale of the assessee company - Held that:- in the instant case , the assessee company is consistently and regularly following the method of accounting by following ‘exclusive method’ also called ‘net method’ which is one of the accepted method of accountancy whereby the taxes paid on purchase of raw material are not included in the cost of purchase on the premise that the assessee company is entitled for Cenvat credit on the same to be adjusted against the excise duty liability on finished goods manufactured by the assessee company , while the basic fallacy in contention of the Revenue is that the Revenue is contemplating adding the excise duty paid to the value of closing inventory following the ‘inclusive method’ also called as ‘gross method’ and not to the totality of all relevant transactions during the previous year to arrive at a correct income chargeable to tax as per the Act and hence , in our considered view, , the ‘inclusive method’ also called as ‘gross method’ as mandated by Section 145A of the Act, is to be applied to the totality of all relevant transactions during the previous year to arrive at a correct income chargeable to tax as per the Act and the same cannot be applied in a piecemeal and ad-hoc manner to a few handful chosen and selected transactions as is done by the revenue in the instant case which will lead to distortion of income chargeable to tax which is not permissible under the Act. Our above observations and discussions in preceding para’s are equally applicable to VAT/sales tax on the raw materials, WIP and finished goods. Thus the interest of justice will be best served , if the matter is restored to the file of the AO to re-determine the correct income chargeable to tax as per the Act after considering the provisions of Section 145A of the Act in light of our observations as contained in the preceding para’s.
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