TMI Blog2015 (6) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... d reject the Revenue’s ground. - Decided in favour of assessee. - ITA No.1752/Ahd/2011 - - - Dated:- 9-6-2015 - S/Shri Pramod Kumar and S. S. Godara,JJ. For the Petitioner :Shri Dinesh Singh, Sr. DR For the Respondent :Shri S. N. Soparkar, AR ORDER PER S. S. Godara, Judicial Member. This Revenue s appeal for AY 2007-08 arises from the order of CIT(A)-I, Baroda, dated 29.4.2011, passed in the case No.CAB-I/199/09- 10, in proceedings under section 143(3) of the Income-tax Act, 1961 (in short the Act). 2. The Revenue s source of substantive ground seeks to restore addition of ₹ 18,40,920/- arising from alleged difference in valuation of closing stock . The assessee is a company in the business of purchasing manganese ore. The said mineral is sorted out in different qualitative categories and sold. We find that the CIT(A) s order comprises AO s findings, assessee s submissions in the lower appellate proceedings as well as the finding under challenge before us which are as under :- 3. Next ground Of appeal is regarding addition of ₹ 18,40,920/- being difference in valuation of closing ;tock. Appellant company was in the business of purchasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince only the raw material stock is shown, the value of such stock should be the purchase price i.e. ₹ 27 5/-. Hence the value of such stock should be computed at ₹ 96, 86,628/- (275* 35224.104). The assessee has shown the value of closing stock at ₹ 78, 45,708/-. Hence the difference of ₹ 18, 40, 920 was added to the total income of the assessee. Appellant's Submission : Your appellant submits that it values the closing stock of raw material at lower of cost or net realizable value. This policy is in agreement with AS 2 issued by the Institute of Chartered Accountants of India. The raw material i.e. Manganese Ore produces different realizable products after sorting. Hence the value of such stock of Manganese ore is taken at cost or market value, whichever is lower. Various realizable products obtained after sorting and their sale price range is as shown below: Description of item Sale price Range (Rs) 1 7%-20% sorted manganese ore Dump 500-600 Mix waste churl of manganese duly sorted 1600-1800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold at throw away price and accordingly at the end of the year valuation is made at a cost or market value whichever is lower. In light of the above we request you to consider the valuation of stock made by the assessee at cost or market value whichever is lower as correct and delete the additions. 3.1.1 Further submissions as under were made: Further to our earlier submission we have been instructed to submit as under: ^ 1 ) List of machinery used for the sorting process is as follows: - Loader - Tractor - Submersible pump - Electro Weight Machine - Electric Motors \ -Hopper with conveyor 's Belt - Jaw crusher - Pilot Plant 2 ) Sorting process adopted by the company: The manganese ore is collected from GMDC Ltd situated at Shivrajpur Tal. Halol Dist Panchmdhal. Manganese waste dump is lifted by trucks or tractors to the assessee 's premises and dumped at vibrating screen area. Vibrating screens separate big size particles and small size particles and dust. Then the machines separate the dump category wise and the laborers manually sort manganese contains depending on sizes like from Omm to 2mm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng stock at the average purchase rate of material from GMDC i.e. ₹ 275 per MT. AO did not accept appellant's explanation that closing stock included unsorted material as we I as sorted material and valuation of closing stock was done after physical verification. During the year, appellant purchased 40,375.336 MT of Manganese Ore from GMDC Ltd at a price of ₹ 111,03,218/- i.e. at average rate of ₹ 275 per MT. Appellant carried out sorting of a portion of ore purchased as per the process explained and sold 5151.232 MTs of sorted good quality Manganese Ore as well as some Waste for ₹ 1,15,23,157/- i.e. at average rate of ₹ 2,237/- per MT. Appellant showed balance quantity of 35224.104 MT (i.e. 4037! .336 MT' less 5151.232 MT) as closing stock valued at ₹ 78,45,708/- as per break up submitted to the AO. After sorting out 5151.232 MTs of high quality Manganese -Ore which was sold fetching a price much above the average purchase price, remaining material could very well be of lower realizable value than the average purchase price from GMDC of ₹ 275 per MT. Partly sorted material categorized as raw material in Form 3CD report was valued be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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