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2016 (9) TMI 1209 - AT - Income TaxValuation of material - addition on the account stock lying with the assessee u/s 28(iv) - ownership of the said stock was not vested with the assessee - During the subsequent years, assessee used such stock as raw material - Held that:- We find that the assessee has taken a consistent plea during the all rounds of litigation that the material used by the assessee was taken at no cost and that the corresponding sales were offered for taxation. However, the Ld. CIT(A) has rejected the contention observing that the said fact could not be verified from the record. From the facts of the case, it is revealed that the assessee had not become the owner of the material in question. The third party/suppliers did not collect the excess material lying with the assessee though they had reimbursed/paid back the cost of material to the assessee. The excess material lying with the assessee was of no use to the assessee. Out of the total material imported worth ₹ 9,09,79,393/-, the assessee had reshipped the goods worth ₹ 7,18,25,299/-. Out of the remaining material worth ₹ 1,91,54,094/-, the Customs & SEEPZ Board Authorities have destroyed the material worth ₹ 1,58,33,067/-. So far as the remaining material of ₹ 33,25,027/- is concerned, the plea of the assessee is that the worth value of the material at the time of use was not that of invoice value. The material at the time of use had reduced to the scrap value which was used by the assessee for its manufacturing activity and the value of the material used was taken at ‘zero’ cost. The profits from the corresponding sales have already been offered for taxation by the assessee. Under such circumstances, in our view, the Ld. CIT(A) was not justified in confirming the additions of ₹ 33,25,027/- at original bill value. Since the assessee has offered the profits from the sales of the goods and the raw material used has been taken at ‘zero’ value, hence, in our view, the value of the material has already been taxed and adding the bill value of the goods at ₹ 33,25,027/- would amount not only to the excess addition but also to the double addition. We, therefore, direct the AO to verify whether the raw material worth ₹ 33,25,027/- (as per their original bill value) was used in the manufacturing activity at ‘zero’ cost and if the corresponding profit from the sale of goods manufactured from the use of the said raw material has been offered for taxation, then no additions be made in respect of the said value of ₹ 33,25,027/-. The action of the Ld. CIT(A) in deleting the remaining additions is upheld.
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