2014 (4) TMI 1074 - AT - Income Tax

Addition in the closing stock of Press mud - CIT(A) deleted the addition - Held that - This issue is covered in favour of the assessee by the Tribunal decision in assessee s own case for assessment year 2008-09. We decline to interfere in the order of CIT(A) - Decided against revenue. Addition in the closing stock of baggase - CIT(A) deleted the addition - Held that - In the statement of facts on page No. 2 filed by the Assessing Officer it is stated that opening stock of baggase has been shown at 4, 400 quintals and after deducting sales of 5, 107 quintals closing stock of baggase remains at 3, 262 quintals. The Assessing Officer has made addition on account of closing stock but he has not given any credit for opening stock which was not valued by the assessee since the assessee is following this system of accounting that closing stock of baggase is not valued by it. It is true that the system adopted by the assessee is faulty and the assessee should have valued the closing stock year after year but since inception the assessee is following this system and the same was accepted by the Department and therefore to make any change in the system we have to give effect in value of opening stock also. Considering the entire facts and smallness of amount involved we feel that this defect in the system of accounting followed by the assessee can be ignored because the amount involved is small and to rectify the same change will be required in several years. We therefore decline to interfere in the order of CIT(A) on this issue. - Decided against revenue. Addition on account of molasses in Kachha pit - CIT(A) deleted the addition - Held that - It is stated by the Assessing Officer on page No. 2 of the statements of facts that the assessee has valued the closing stock of molesses weighing 11, 205 quintals @Rs.11/- per unit which is substantially low in comparison to molasses kept in tanks. The claim of the assessee is that the molasses stored in Kachcha pit is not saleable. This is by now a settled position of law that valuation of closing stock can be at cost or market price whichever is lower. This fact has to be accepted that molasses stored in Kachcha pit is defective and is not comparable with the molasses stored in tanks. Hence the addition made by the Assessing Officer is not justified in the facts of the present case.- Decided against revenue. Addition on account of bond money payable - CIT(A) deleted the addition - Held that - There is opening balance of Rs. 13, 01, 473.10 as on 01/04/2004 and there is deduction of Rs. 3, 93, 417/- on 31/03/2005 but there is no payment against this opening balance. When this position is considered along with the facts that the assessee has not furnished any detail regarding grower-wise list of money payable it has to be accepted that such payment is not made by the assessee and the growers are also not claiming the same. Hence to this extent of the amount deducted from cane price payable to growers the assessee has not incurred the expenses but debited the same to the profit & loss account in the form of cane price paid and created a liability in the books for which the assessee is not making any payment to anybody and the assessee is not in a position to give partywise details. Under these facts in our considered opinion the addition made by the Assessing Officer is justified - Decided against assessee. Addition of legal expenses u/s 40(a)(ia) - CIT(A) deleted the addition - Held that - The first person is Shri Raghvendra Singh Advocate to whom payment of Rs. 25, 575/- was made which included Rs. 18, 500/- on account of his fees and Rs. 6, 775/- on account of misc. expenses. The CIT(A) has correctly deleted this disallowance made by the Assessing Officer u/s 40(a)(ia) of the Act on the basis that since the amount paid on account of fees was less than the limit of Rs. 20, 000/- on which TDS has to be deducted there was no requirement for any addition.The second person to whom the payment of Rs. 54, 454/- was made is Satish Arora & Co. which included Rs. 3, 092.50 on account of travelling expenses and photocopy expenses. It is held by CIT(A) that there was no requirement of TDS from the reimbursement of expenses and deleted the disallowance made by the Assessing Officer. Considering the facts of the case we do not find any infirmity in the action of CIT(A)- Decided against revenue. Addition made u/s 40(a)(ia) on account of commission payment - CIT(A) deleted the addition - Held that - From the para of CIT(A) we find that a clear finding is given by CIT(A) that as per certificate of UP Co-operative Sugar Factories Federation TDS was deducted on sale of sugar and TDS was deposited with Central Government. This finding of CIT(A) could not be controverted and hence we decline to interfere in the order of CIT(A).- Decided against revenue. Addition u/s 36(1)(va) on account of late deposit of employee s deduction of P.F. and on account of G.I.S. recoveries from employee s late deposited u/s 36(1)(va)- CIT(A) deleted the addition - Held that - This issue is covered in favour of the assessee by the Tribunal decision in which the Tribunal has followed the judgment rendered in the case of CIT vs. Manoj Kumar Singh 2012 (5) TMI 176 - ALLAHABAD HIGH COURT . Respectfully following this Tribunal decision we decline to interfere in the order of CIT(A).- Decided against revenue. Addition on account of non refundable deposit - CIT(A) deleted the addition - Held that - This issue is covered in favour of the assessee by the judgment of Commissioner of Income-tax Vs Siddheshwar Sahakari Sakhar Karkhana Ltd. 2004 (9) TMI 6 - SUPREME Court and Commissioner of Income-tax Vs Ramala Sahkari Chini Mills Ltd. as reported in (2005 (3) TMI 82 - ALLAHABAD High Court ).- Decided against revenue. Addition on account of payment of subscription to federation u/s 40(a)(ia) - CIT(A) deleted the addition - Held that - This issue is covered in favour of the assessee by the Tribunal decision rendered in the case of this very assessee for assessment year 2006- 07 2007-08 and 2008-09 - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition in the closing stock of Press mud.
2. Deletion of addition in the closing stock of baggase.
3. Deletion of addition on account of molasses in Kachha pit.
4. Deletion of addition on account of bond money payable.
5. Deletion of addition on account of legal expenses under Section 40(a)(ia) of the IT Act.
6. Deletion of addition on account of commission payment under Section 40(a)(ia) of the IT Act.
7. Deletion of addition under Section 36(1)(va) of the IT Act on account of late deposit of employee's deduction of P.F.
8. Deletion of addition on account of G.I.S. recoveries from employees late deposited under Section 36(1)(va) of the IT Act.
9. Deletion of addition on account of non-refundable deposit.
10. Deletion of addition on account of payment of subscription to federation under Section 40(a)(ia) of the IT Act.

Detailed Analysis:

1. Deletion of addition in the closing stock of Press mud:
The Tribunal found that the issue was covered in favor of the assessee by a previous decision for the assessment year 2008-09. The Revenue could not point out any difference in facts for the current year. Thus, the Tribunal declined to interfere with the order of CIT(A) and rejected Ground No. 1.

2. Deletion of addition in the closing stock of baggase:
The Tribunal noted that the assessee followed a cash system of accounting and did not value the closing stock of baggase. The CIT(A) observed that the system had been consistently followed and accepted by the Department. The Tribunal agreed with CIT(A) that any change in the system would require adjustments over several years, and due to the small amount involved, the defect could be ignored. Ground No. 2 was rejected.

3. Deletion of addition on account of molasses in Kachha pit:
The Tribunal agreed with CIT(A) that the molasses stored in Kachha pit were defective and not comparable to those stored in tanks. The valuation of closing stock should be at cost or market price, whichever is lower. As the molasses in the Kachha pit were not saleable, the addition by the Assessing Officer was not justified. Ground No. 3 was rejected.

4. Deletion of addition on account of bond money payable:
The Tribunal found that the assessee had not provided details regarding the grower-wise list of money payable and had not made any payment against the opening balance. The Tribunal agreed with the Assessing Officer that the expenses were not incurred by the assessee and reversed the order of CIT(A). Ground No. 4 was allowed.

5. Deletion of addition on account of legal expenses under Section 40(a)(ia) of the IT Act:
The Tribunal upheld the CIT(A)'s decision that the payment to Shri Raghvendra Singh, Advocate, was below the TDS threshold and that there was no requirement for TDS on reimbursement of expenses to Satish Arora & Co. Ground No. 5 was rejected.

6. Deletion of addition on account of commission payment under Section 40(a)(ia) of the IT Act:
The Tribunal agreed with CIT(A) that TDS was deducted and deposited with the Central Government as per the certificate from the UP Co-operative Sugar Factories Federation. Ground No. 6 was rejected.

7. Deletion of addition under Section 36(1)(va) of the IT Act on account of late deposit of employee's deduction of P.F.:
The Tribunal noted that the issue was covered in favor of the assessee by a previous Tribunal decision and the judgment in CIT vs. Manoj Kumar Singh. Ground No. 7 was rejected.

8. Deletion of addition on account of G.I.S. recoveries from employees late deposited under Section 36(1)(va) of the IT Act:
Similar to Ground No. 7, the Tribunal found that the issue was covered by the same previous decisions. Ground No. 8 was rejected.

9. Deletion of addition on account of non-refundable deposit:
The Tribunal found that the issue was covered in favor of the assessee by the judgments of the Hon'ble Apex Court and the Hon'ble Allahabad High Court. Ground No. 9 was rejected.

10. Deletion of addition on account of payment of subscription to federation under Section 40(a)(ia) of the IT Act:
The Tribunal noted that the issue was covered in favor of the assessee by a previous Tribunal decision for assessment years 2006-07, 2007-08, and 2008-09. Ground No. 10 was rejected.

Conclusion:
The appeal of the Revenue was partly allowed, specifically on the issue of bond money payable (Ground No. 4), while all other grounds were rejected.