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2022 (2) TMI 337 - AT - Income TaxDisallowance of loss incurred on hedging of copper scrap imports against the income of the appellant considering the said loss as speculative loss - HELD THAT:- The commodity hedged being Copper and Zinc are raw material of the assessee and is considered for the purpose of business of the assessee. As regards the recognition of the exchange we have relied upon the argument of assessee that the transaction of the assessee does not fall in to clause (d) of section 43(5). It is immaterial whether transaction is carried out at the recognized stock exchange or not. Even the circular of CBDT cited in the assessment order states that once it is established that the assessee has entered in the transaction of the commodity that they deal the other technical details have no material impact. Hence, this reasoning of the assessing officer also fails. Thus, we believe that the assessee by filling the bills, quantitative information, the same is in accordance with the audited books and there is not adverse remark on it. The fact that they are using brass as their raw material which is metallurgic combination of copper and zinc and they have hedge that copper and zinc No fault in the finding of the “Ld. CIT(A)” in allowing this loss against the income of the assessee, since the Ld. DR has not contracted any of the facts placed before us and before the “Ld. CIT(A)”. Therefore, we are inclined to agree with the views of “Ld CIT(A)” and based on the above finding the ground of Revenue that appellant is not eligible to set off the hedging loss having no merits and same is dismissed. Disallowance of the raw material consumption, treating the same as suppressed income from production @ 2 % - HELD THAT:- There is no abnormal increase in byproduct yield and drastic fall in finished goods but the same is due to change in the product mix, development of new product, import of material which contains higher impurities. The Ld. AO has provided the assessee with unjustifiable or invalid reasons without any basis by considering the excessive claim of 2% on generation of by-product during the manufacturing process as 'unaccounted income from suppression of production. The Ld A.O. has compared the yield figures of F.Y. 2010- 11 & F.Y. 2009-10 and considered the decrease in yield as manipulative tactic of the assessee to avoid taxes. Mere arithmetical comparison of figures doesn't lead to any sort of manipulative tactic of the assessee to mislead or misguide the A.O. particularly when the assessee has maintained the stock records which are audited by Statutory auditor, VAT auditor, Excise authorities. Moreover, there cannot be comparison of current year data with the earlier years where there is constant change in technology, product mix, upgradation of machineries, demand and supply of products and economic conditions prevalent in particular year. A.O. has also made reference to data of M/s Shri Bhavani Extrusion, Jamnagar (Manufacturing Brass rods) & compared the same with the assessee record, and held that assessee co. is manipulating the production results to reduce the tax-burden. Again in our considered opinion comparing the figures of one firm with the assessee co., does not serve as an important base for proving that the assessee has done any sort of manipulation or any accounting jugglery to minimize the tax burden without pointing any defect in record maintained by the assessee. We further note that no opportunity was provided to assessee to cross verify the details of those companies/ firms. AR before us submitted that that those firm/companies which figure were compared with assessee company were engaged in mere extrusion business at a very small scale, therefore same cannot be comparable with the assessee at all as they do not engaged in manufacture of components manufactured by the assessee. Further, there are no provisions referred in the Act, that increase in slag yield leads to accounting jugglery to evade taxes. There is a force in the arguments of the assessee and we hold that the view of the Ld. CIT(A) in deleting are finding of facts and there is no error on the facts brought before us by the DR - Ground of appeal of the Revenue is hereby dismissed. Addition being the amount paid and debited to the profit loss account under the head stamp duty expenses - HELD THAT:- AO even though the details were placed before him, without giving any reasons, simply added the sum by stating that the stamp duty is not of a revenue expenditure. Whereas, the ld. AR before us argued that the CIT(A) has rightly deleted the addition made the AO by observing that the expenses are not related to purchase of assets, it does not create any enduring benefit and expenditure were incurred wholly and exclusively for the purposes of the business and same is allowable. In our considered view the finding of ld. CIT (A) is correct and department has not objected to any of the arguments on facts. Therefore, this ground of appeal of the Revenue is dismissed. Disallowance u/s. 40(a)(ia) - non deduction of tax on the reimbursement of expenses paid the C&F agent - HELD THAT:- The issue being covered by the jurisdictional High court in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co Ltd [2014 (4) TMI 235 - GUJARAT HIGH COURT] CIT(A) has rightly deleted the addition and we found no error of facts and in law and therefore, this ground of appeal of the Revenue is dismissed. Addition of abnormal increase of store and spare expenses - HELD THAT:- The argument of the ld. DR which is repeated from the assessment order are general in nature. As such the ld. DR has not pointed any single defects in the books of account and the supporting evidence placed before the AO. Whereas the ld. AR brought our attention to paper books where all the details and evidences are placed and stated that the claim is supported by a third party bill and books of accounts are audited by independent auditor. As regards the use of coal as an alternate fuel and explaining the corresponding decrease in the electric expenses and in respect of packing charges the reasoning given is also supportive that the exports and its corresponding margin of the assessee is increased. The difference in claim of expenses has been explained before the AO as well as before CIT(A) and in the absence of any specific details the general and adhoc lumpsum disallowance is unwarranted and uncalled for. CIT(A) also observed that the profit margins have been improved, export have been increased compared to last year, the expenditure incurred is backed by proper evidence and justification given. The finding of the CIT(A) is purely on merits which has not been contravened by the learned DR. considering the facts in totality we find more force in arguments and supporting explanation placed on record by the ld. AR and we are inclined to agree with the finding of “Ld. CIT(A) - Decided against revenue. Late deposit of employee’s contribution toward P. F. - HELD THAT:- We find no mistake of facts and in law in the action of the “Ld. CIT(A)” in the ground taken by the revenue on this disallowance. The payment was made within the grace period. Accordingly, no interference in the order of the ld. CIT-A is required. Hence, the ground of appeal of the Revenue is dismissed.
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