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2019 (4) TMI 261 - AT - Income TaxDisallowance on account of handsets issued on FOC basis to employees, dealers and After Market Service Centers - capitalization of marketing expenses - HELD THAT:- Referring to the findings of the tribunal [2018 (1) TMI 1366 - ITAT DELHI] and Hon’ble High Court in assessee’s own case [2018 (9) TMI 877 - DELHI HIGH COURT] on the above issue hold the field, and we do not find any reason to take a different view from the same. While respectfully following, we hold that the assessee could not have claim title and depreciation, once the mobile phones had been given and ownership had been transferred to the employees, dealers, sales personnel and after sales service centres, and consequently the addition made by the learned AO on this aspect needs to be deleted. Closing Stock on account of handsets damaged in transit - HELD THAT:- In respect of the value of the handsets damaged in transit is concerned, it comes only to ₹ 20,64,911/-which constitutes only 0.31% of appellant’s total turnover for the year and while respectfully following the order in ACIT vs. Grohe India private limited [2014 (3) TMI 104 - ITAT DELHI], we hold that it is not unlikely that some of the items may have been damaged or lost during transit, therefore, such a shortage due to damage or loss has to be considered reasonably keeping in view the magnitude of such short is being 0.31% of the total turnover and hence cannot be held as an unusual loss. Further, we are convinced with the argument that if valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method and the closing stock of a particular year is the opening stock of the subsequent year as such it does not materially affected the accounts and profits disclosed by the assessee. the adjustment now sought to be made is revenue neutral and at best may result in requirement or postponement of revenue and in view of the concept of materiality which is well recognized both in accountancy and the law. Accounting standards notified by the CBDT under section 145(2) mandates that the concept of materiality be taken into consideration when finalizing the accounts of an assessee. Keeping in view all these things we are of the considered opinion that no addition on account of the closing stock due to the handsets damaged in transit is warranted in this matter - Decided in favour of assessee.
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