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2019 (7) TMI 1495 - AT - Income TaxAllowability of write off of obsolete and non-usable inventory - 10% of the total inventory - HELD THAT:- No real time correspondence has been brought on record (which is an ordinary feature of e-governance of corporates these days) to suggest creation of non-moving and obsolete stock of such magnitude which represents nearly 10% of the total inventory. Prima Facie, the onus is on the assessee to establish that the stocks of staggering amount have lost its usable value. The issue is factual and while there can be no denial that assessee is entitled to claim loss towards obsolete stock in a given year, it is also the corresponding duty of the assessee to prove the existence of such obsolete material by direct or circumstantial evidences. The assessee has totally failed in its corresponding duties. The Auditor in the instant case while stating that, inventories have been physical verified by the management, have not pointed out such large scale recognition of obsolete item. On conspectus of facts noted above, we find it difficult to entertain the claim of the assessee in entirety when tested on the touchstone of evidences in this regard. However, keeping in mind the narrative of the assessee and difficulty posed in furnishing objective justification of many items in practice, we consider it appropriate to assume loss on account of obsolete item at 5% of the closing stock to be fair and plausible which works out to ₹ 58,65,680/-. The assessee thus gets relief to this extent. It shall be open to the assessee to make amends in the opening stock of subsequent financial year in accordance with law. While holding so, we are not inclined to discuss various case laws cited on behalf of the assessee which are rendered in totally different facts. Disallowance of bad debt written off in respect of excise duty refund - HELD THAT:- We find merit in the claim of the assessee. The excise duty received as refund naturally forms part of the revenue operations of the assessee. The version of the assessee has been confirmed by the Auditors requires to be ordinarily believed. The action of the Revenue authorities are accordingly reversed. Disallowance u/s 14A - disallowance to extent of the exempt income - HELD THAT:- Disallowance is restricted to the aforesaid amount in view of the decision of the Hon’ble Delhi High Court in Joint Investment [2015 (3) TMI 155 - DELHI HIGH COURT] Adjustment to the book profit towards disallowance u/s 14A - HELD THAT:- In view of the decision of the Special bench in ACIT vs. Vireet Investments Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and having regard to Clause (f) to Explanation below 115JB, the adjustment to the books profit is restricted to the extent of ₹ 1134/- only.
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