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2015 (6) TMI 246 - ITAT AHMEDABAD

2015 (6) TMI 246 - ITAT AHMEDABAD - TMI - Addition of closing work in progress - CIT(A) deleted the addition - Held that:- Similar issue arose in Assessment Years 2004-05, wherein the CIT(A) has granted the relief to the assessee on similar issue by deleting the addition for closing work-inprogress amounting to ₹ 8,37,568/-. Facts being similar, so following the same reasoning as mentioned in the case of Bajaj Fashions Pvt Ltd ( 2009 (7) TMI 1214 - ITAT AHMEDABAD), this issue in the appeal .....

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reason why the full amount expended should not have been allowed. It is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or that it is not laid out wholly and exclusively for the purpose of the business of the assessee and to disallow it. But it is not the function of the Tribunal to determine the remuneration which in their view should be paid to an employee of the assessee , we are .....

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ORDER Per Bench: This bunch of appeals by the Revenue and Crossobjections by the assessee have been filed against the separate orders of learned CIT(A)-II, Ahmedabad for Assessment Years 2003-04, 2004-05, 2006-07, 2007-08 and 2008-09. 2. Before us, at the outset, the ld. Authorized Representative submitted that the facts and circumstances in all the appeals are identical except the assessment years and amount involved; therefore, the submissions made by him in case of one assessment year will al .....

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erred in law and on facts in deleting the addition of closing work in progress of ₹ 7,62,728/- even though the Assessing Officer has categorically analyzed in the assessment order that there ought to be some stock as work in progress at the end of the year. 2. The Ld.ClT(A) has erred in law and on facts in deleting the addition of closing work in progress of ₹ 7,62,728/- even though the Assessing Officer is not bound by the method followed in the earlier years by the assessee in vie .....

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oncern of ₹ 13,65,558/- even though the issue has not been decided by the Hon'ble High Court in the case of the assessee itself. 5. On the facts and In the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent. 4. The first issue is with regard to addition of closing workin-progress of ₹ 7,62,728/-. The Assessing Officer .....

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, CIT(A) granted relief to the assessee observing that the assessee is engaged in the business of dyeing and printing of cloth on job work basis for which fabric is supplied by parties and the assessee has been following consistent method of valuation of closing stock wherein it does not value chemicals consumed in respect of fabrics lying on machines at year end whereas Assessing Officer estimated value of such chemicals and colour and made addition on the ground that by not showing closing wor .....

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achine at the end of relevant previous year belongs to other parties and chemicals and colours which are used in respect of such fabrics lying on machine at year-end did not have separate market value or cannot be sold separately; hence it was impossible to make valuation of such stock. The CIT(A) agreed with the stand of the assessee that till the completion of the job, no right to receive any amount of job charges accrues to assessee and in case the assessee does not further process fabric in .....

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erein similar issue has been decided in favour of the assessee, after considering the decision in the case of CIT vs. EMA Inida Ltd, (2008) 296 ITR 510 (All), by observing as under:- "11. In view of the above decision, in our considered opinion on the facts and circumstances mentioned above, we do not find any error in the consistently followed system of valuation of stock by the assessee. As the said system was accepted by the Department also in past in the case of the assessee, we do not .....

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.2 Nothing contrary was brought to our knowledge on behalf of the Revenue. Facts being similar, following the same reasoning as mentioned in the case of Bajaj Fashions Pvt Ltd (supra), we are not inclined to interfere with the findings of the CIT(A) who has rightly deleted the addition of closing work-inprogress of ₹ 7,62,728/-; accordingly, the same is upheld. 4.3. Similar issue arose in Assessment Years 2004-05, wherein the CIT(A) has granted the relief to the assessee on similar issue b .....

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paid to sister concern disallowed u/s 40A(2)(b) of the Act. The Assessing Officer observed that the assessee had taken unsecured loan of ₹ 1,90,00,000/- from Varelli Fabrics Pvt Ltd, on which interest @ 18% amounting to ₹ 36,41,487/- has been paid as against prevailing market rate of 11.25%. Having considered the submission in this regard, the Assessing Officer observed that the rate of interest paid at 18% was in excess of market rate, therefore he disallowed interest expenditure to .....

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ed 7th February 2006 and such addition was further confirmed by learned Commissioner of Income Tax (Appeals) vide order dated 16th October, 2006. However, Hon'ble ITAT vide its order dated 28th February, 2007 referred supra has deleted addition made by Assessing Officer. No new facts or incriminating documents in respect of this addition was found during the course of search at the business premises of Appellant. Therefore, in my considered view the Assessing Officer was not justified in mak .....

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n opposed on behalf of the Revenue inter alia stating that CIT(A) erred in deleting the addition of excess payment of interest to sister concern of ₹ 13,65,558/- even though the Assessing Officer has justified in the assessment order that parties are inter related and that loan could have been obtained at the prevailing market rate and accordingly, the order of CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, ld Authorized Representative for the assessee su .....

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ase of Walchand and Co. Private Ltd. (supra), relied on by the learned advocate for the respondent-assessee, wherein it is held that if the Tribunal was satisfied that the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the assessee there was no reason why the full amount expended should not have been allowed. It is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in .....

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rriving at the conclusion. We are in complete agreement with the view taken by the Tribunal. 12. Considering the facts of the case and also considering the principle laid down in the case of Walchand and Co. Private Ltd. (supra), we are of the considered opinion that the present appeals deserve to be dismissed and the same are accordingly dismissed. Therefore, we hold that the Tribunal was right in deleting disallowance out of interest expenditure paid to M/s Vareli Fabrics Private Limited." .....

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