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2019 (10) TMI 603 - AT - Income TaxUnder valuation of closing stock of Guar Seeds - AO adopted cost price @19.15 per kg. presuming that goods purchased on 30.07.2009 @ 22.11 per kg. have been sold out and goods out of opening stock were remained in closing stock - HELD THAT:- We are of the considered view that it would be reasonable and justifiable if average rate were applied for valuation of closing stock. We find that rate of opening stock was at ₹ 19.15 per kg. whereas closing stock was at ₹ 9.49 per kg. The average realization value is at ₹ 17.75 per kg. therefore, it would meet end of justice if average of 19.15+9.49+ 17.15= 46.14/3 = 15.83 per kg. may be adopted for valuation of closing stock as on 31.03.2010. Accordingly, the AO is directed to recalculate the closing stock by taking rate of ₹ 15.83 per kg. Thus, the Ground No. 1to 4 are partly allowed. So far, Ground No. 5 is concerned, since the closing stock is opening stock for next year. Therefore, as a corollary to increase in closing stock would lead to increase in opening stock of next year, therefore, the AO would take opening stock as on 1st April of next financial year as worked out on the basis of average rate as per our observation given herein above. Accordingly, this ground is allowed. Disallowance of salary payment in respect of person specified under section 40A(2)(b) - HELD THAT:- Recipient of remuneration are have requisite qualification and rendered service for handling of banking services, moreover, as the AO has accepted part payment reasonable, meaning thereby that they have rendered some services. If that is so, then, no disallowance under section 40A (2) (b) could be made as the recipient and payer are assessed to tax at same rate, hence, there is no evasion of tax. The copy of acknowledgement of return of income filed showed that both the person specified under section 40A (2) (b) of the Act are assessed at maximum marginal rate. Therefore, the issue is covered by the decision of Tribunal in the case of H.C. Sons v. ACIT Circle -12 Ahmedabad [2017 (1) TMI 1688 - ITAT AHMEDABAD] wherein following the ratio laid of PWS Engineers Limited v. DCIT [2016 (6) TMI 596 - GUJARAT HIGH COURT] held as long as the amount paid by the assessee to specific persons are taxed in the hands of specific persons at the same rate , disallowance under section 40A(2)(b) will be meaningless inasmuch as “permitting the Revenue to tax the same income again at the same rate in the hand of principal payer would amount to double taxation". We are of the considered opinion that disallowance made under section 40A(2)(b) of the Act are not justified. Hence, same are directed to be deleted
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