TMI Blog2002 (4) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... s no provision for claiming revenue expenditure by spreading the same over a period of years, the same can be claimed as expenditure in terms of the decision of the apex Court in CIT vs. U.P. State Industrial Development Corpn. (1997) 139 CTR (SC) 267 : (1997) 225 ITR 703 (SC). Rs. 42,200 represents the endorsement of lumpsum consideration paid to the Government/various Departments/rural/urban trusts for the acquisition of leasehold rights on land. This practice of claiming such expenditure over the useful life of the lease is an accepted accounting practice. The assessee-company has been following this system of writing off the amount paid towards leasehold for the past years consistently, and as such, this claim is also entitled to be allowed. So much as the appellant s claim to spread the expenditure over a period of years is concerned a similar issue has been adjudicated in the assessee s favour by the Bench, vide ground No. 4 of ITA No. 321/Jp/1996 for asst. yr. 1992-93, vide order dt. 17th Oct., 2001. 6. The learned Departmental Representative relied upon the orders of the authorities below. 7. We have considered the rival submissions. This issue is covered by the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional market. That was, the material, i.e., zinc concentrate was correctly valued at the lesser of sourcewise weighted average cost and realisable value, since international prices are governed by LME (London Metallic Exchange) prices. The same principle was, therefore, adopted during valuation. All these facts were brought to the notice of the lower authorities. In the light of the above, it may clearly be seen that there is no change in the method of valuation adopted by the assessee from year to year. It is a well established principle of accountancy to value the inventory meant for sale at lower of the cost or the net realisable value. The learned authorised representative relied upon the decision of Hon ble Supreme Court, reported in Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC), wherein it was held that the theory underlying the rule that closing stock is to be valued at cost or market value, whichever is lower and it is now generally accepted as an established rule of commercial practice and accountancy. 11. The learned authorised representative further submitted that the AO s allegation in terms of no export sale during the year under consideration having taken place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the rival submissions. We agree with the view of the learned authorised representative that the closing stock is to be valued at cost or market value whichever is lower and it is now generally accepted as an established rule of commercial practice and accountancy. That way, the material, i.e., zinc concentrate was correctly valued at the lesser of sourcewise weighted average cost and realisable value, since international prices were governed by LME prices. There is no change in the method of valuation adopted by the appellant from year to year. These goods have actually been exported in the subsequent year. The appellant has correctly adopted net realisable value for the purpose of valuation of closing stock meant for sale in international market. This method has regularly been followed by the appellant. Even if there is charge in the method of valuation in accordance with the accepted principles of accountancy and the method had regularly been employed by the appellant from year to year, the same will have to be allowed. We reverse the orders of the authorities below on this issue and direct the AO to allow necessary relief to the appellant. 14. Ground No. 3: This groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been valuing the tungsten concentrates at domestic market rate as against LME price adopted in the preceding years. The AO is directed to allow necessary relief to the appellant only after it is found that the change in the method of valuation of tungsten concentrates had regularly been followed by the appellant in subsequent years, or else if it is a change in method of valuation only for the year under appeal, no benefit should be allowed. 18. Ground No. 4 : This ground relates to confirmation by the CIT(A) of disallowance amounting to Rs. 23,25,001 in respect of depreciation of assets for guest house. The AO discussed this issue in para 5 at p. 7 of the order. He observed that since the assessee had not added back depreciation on furniture and fixtures used in quest house while computing its income, the same is to be disallowed. 19. The CIT(A) discussed this issue in para 3 at p. 9 of his order wherein the assessee was allowed partial relief. However, on the issue of allowance of depreciation, the CIT(A) opined that the assessee s plea of depreciation not being covered by s. 37(4) was not correct inasmuch as, the assessee himself offered disallowance out of depreciation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be treated as capital expenditure. 27. The CIT(A) had discussed this issue at p. 16, paras 16.1 and 16.2 of his order. According to him, payment of interest to contractor was effected in relation to a capital asset and therefore, such payment could not be held covered by provisions of s. 37(1) of the Act. With regard to the second amount also, he was not convinced with arguments advanced by the assessee. Therefore, the entire addition was confirmed. He, however, directed the AO to allow depreciation on the amount capitalised. 28. The learned authorised representative submitted that the appellant-company had capitalised the payments made to contractors for procurement of capital assets as per the terms of the agreement. However, certain disputes cropped up between the appellant and the contractors which were referred to arbitration. Out of a total amount of award of Rs. 90,66,000 Rs. 70,13,000 pertains to C.L.Z.S Unit, and this amount of award represents payment of interest. Such amount of expenditure can by no stretch of imagination is treated as a capital expenditure. This interest is an allowable deduction under s. 37(1) of the Act. The interest on delayed payments has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much of such amount as relatable to any period after such asset is first put to use, shall not be included and shall be deemed never to have been included in the actual cost of such assessment. Therefore, the AO is directed to allow deduction of Rs. 70,13,000 if it found that the payment of interest to the contractors has been made after the acquisition of asset and after such asset is first put to use. 33. As regards the payment of Rs. 20,53,000 for additional payment to contractor as a result of arbitration we agree with the view of the learned CIT(A) that this additional payment is in respect of capital asset, towards the cost of it and it is nothing but a capital expenditure. Since the payment has been made towards the cost of capital asset, therefore, we hold that this is a capital expenditure. We decline to interfere with the order of the CIT(A) on this issue. 34. Ground Nos. 7 to 14: These grounds relate to the matters set aside by the CIT(A) and the AO had already adjudicated upon the same and hence they can be taken up in further appeal, if any. Therefore, these grounds are dismissed as having been not pressed. 35. Ground No. 15: This ground is academic in nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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