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2018 (1) TMI 882 - AT - Income TaxWriting off the inventory acquired by the assessee on amalgamation - Method of valuation of inventory at lower of cost or net realizable value - disallowing deduction being difference between cost and net realizable value of certain inventory items - AO further adding the said amount to the book profits u/s 115JB by wrongly concluding it as provision for diminution in value of asset - Held that:- The assessee had demonstrated at length the specific reasons for writing off each and every item of the inventory forming part of the aggregate value of ₹ 14,40,81,661/- during the year under consideration. As the assessee company had carried the value of the assets and liability as appearing in the books of the amalgamating company, viz. Sequent Scientific Company while filing its return of income, but however, the value of the said assets and liabilities were thereafter reassessed and the fixed assets were valued as per the valuation report, while for the inventory was valued at lower of cost or net realisable value, as per the accounting policy which was followed by the assessee. Lower authorities had dislodged the claim of the assessee as regards the writing off the inventories of the amalgamating company, without placing record any material which could go to conclusively disprove the said claim of the assessee - now when the assessee had given specific reasons for having written off the stock inventories, therefore, in case if the A.O had a conviction that there was no justification for the assessee to have raised such a claim or that the same was found to be incorrect, then he remained under an obligation to have rebutted the explanation of the assessee by placing on record concrete material which would have conclusively disproved beyond doubt the authenticity of the claim of the assessee. No such exercise had been done by the lower authorities and no such material had been placed on record which could persuade us to conclude that the claim of writing off the inventory by the assessee was not found to be in order. Also unable to persuade ourselves to subscribe to the view of the CIT(A) that the claim of the assessee as regards the writing off the inventories was not to be accepted, for the reason that the items falling under the said bracket had less than one year of age. CIT(A) while arriving at the aforesaid view had lost sight of the fact that the assessee who is engaged in the business of manufacturing of bulk drugs, speciality chemicals and formulations, had specifically explained the reason for having written off the said inventories.- Decided in favour of assessee. Addition u/s 14A r.w. Rule 8D - sufficiency of own funds - Held that:- ow when the assessee had sufficient own funds of ₹ 96.55 crores available with it, therefore, it could safely be presumed that the said amount was utilized for making investment in the exempt income yielding investments of ₹ 6,08,36,459/- by the assessee during the year. We find that our aforesaid view stand fortified by the judgment of the Hon’ble High Court of Bombay in the case of Commissioner Of Income-tax Vs. HDFC Bank Limited. (2014 (8) TMI 119 - BOMBAY HIGH COURT). We further find that the ld. A.R had averred before us that as the assessee had not received any exempt dividend income during the year under consideration, therefore, there was no occasion for making any disallowance under Sec.14A MAT computation - without prejudice to our aforesaid observations that no disallowance under Sec. 14A is called for in the hands of the assessee, we find that the contention of the assessee that the lower authorities had erred in failing to appreciate that the disallowance under Sec. 14A is not to be considered for computing the MAT liability of the assessee under Sec. 115JB is no more res integra in light of the judgment in the case of CIT Vs. Bengal Finance & Investments Pvt. Ltd. (2015 (2) TMI 1263 - BOMBAY HIGH COURT) wherein held that amount disallowed under Sec. 14A cannot be added to arrive at the book profit for the purposes of Sec. 115JB of the Act. - Decided in favour of assessee
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