TMI Blog2015 (1) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were used to manufacture the products sold by the respondent-assessee after being manufactured at their behest and cost, should not be treated as expenditure under Section 37(1) of the Act. TDS u/s 194C- Held that:- Reliance placed on Section 194C is also misconceived as the respondent-assessee had not charged any amount from Dart Manufacturing India Private Limited and Innosoft Technology Limited. In fact, Section 40(a)(ia) was not invoked and applied by the Assessing Officer. On hire charges paid to the overseas group companies, tax at source would have been deducted under Section 195 of the Act. It is not stated that tax at source had not been deducted. Provision for obsolete stock - valuation of stock - Held that:- One cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenditure should have been claimed by Dart Manufacturing India Private Limited and Innosoft Technology Limited, who were the contract manufacturers for the assessee. The Assessing Officer primarily relied upon the order dated 10th November, 2006 passed by the Settlement Commission under the Central Excise Act, 1944, holding that the manufacturing cost would include the rent paid for the moulds and accordingly the excise duty would be chargeable. It is accepted and admitted that the order passed by the Settlement Commission related to the cost of excisable goods, which were manufactured. 2. Excise duty is leviable and collected as per the manner and method prescribed in the Central Excise Act, 1944. Section 4 of the said Act states th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Dart Manufacturing India Private Limited and Innosoft Technology Limited. The payment for the hire charges was made by the respondent-assessee to the overseas group entities. There is no dispute about the payments made by the respondent-assessee to the overseas group entities for hire of moulds. The aforesaid international transactions were not made subject matter of any transfer pricing adjustments. These are undisputed and unchallenged facts. 6. Appropriate in this regard would be to reproduce the relevant portion of written submission filed by assessee before the Assessing Officer:- The Company is engaged, inter-alia, in trading activities in respect of plastic kitchenware products since its set up of business. It purchases t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to be allowed as deduction, following conditions specified under section 37(1) are required to be met:- (a) Expenditure should not be covered under section 30 to 36 of the Act; (b) Expenditure should not be of capital or personal nature; (c) Expenditure should laid out wholly and exclusively for the purposes of business; (d) Expenditure should be incurred during the previous year; (e) Expenditure should not be incurred for any purpose which is an offence or which is prohibited by the law. For the purpose of business is a word of wide import and includes expenditure which a businessman incurs for business and commercial expediency. The question of reasonableness is not for the revenue to decide. Further, expression w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted under Section 195 of the Act. It is not stated that tax at source had not been deducted. 11. The second issue raised by the Revenue pertains to assessment year 2007-08. The respondent-assessee had made provision of obsolete stock amounting to ₹ 72,77,736/-. It was explained that there were obsolete and unsalable furnished goods, which formed part of the closing stock. Similarly, there were bags and stickers which could not be used as matching quantities were not available. The respondent-assessee had accordingly made a provision based upon the principle that closing stock has to be valued at cost price or market price, whichever is lower. The respondent-assessee has relied upon decision of the Supreme Court in Chainrup Sampa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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