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M/s Sunrise Overseas Versus Income Tax Officer, Ward-1 (4) , Kanpur.

2015 (11) TMI 1438 - ITAT LUCKNOW

Capitalization of Insurance Expenses incurred in respect two new Cars - Held that:- Disallowance of Assessing Officer on the basis that it is capital expenditure because the same is required to be incurred before the new car can be used. Before CIT(A), reliance was placed by Learned A.R. of the assessee on a judgment of Hon'ble Andhra Pradesh High Court rendered in the case of Nathmal Bankatlal Parikh And Company vs. CIT, A.P.-III [ 1979 (8) TMI 46 - ANDHRA PRADESH High Court]. Learned CIT(A) ha .....

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tal or revenue in nature is immaterial. The deduction on account of insurance expenses is allowable u/s 31 of the Act. Therefore, for allowing the claim of insurance expenditure u/s 31 of the Act, this aspect is not relevant as to whether this is capital expenditure or not as per this judgment of Hon'ble Andhra Pradesh High Court. Respectfully following this judgment of Hon'ble Andhra Pradesh High Court, we hold that the disallowance made by the Assessing Officer and confirmed by CIT(A) on accou .....

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ing Officer is not justified because he cannot reject a recognized method of valuation of closing stock followed by the assessee and accepted by the Department in assessment year 1997-98 and 2004-05 as per assessment orders passed by the Assessing Officer in those years u/s 143(3) of the Act. The judgment of Hon'ble Rajasthan High Court cited by Learned A.R. of the assessee rendered in the case of CIT vs. Wolkem India Ltd. (2009 (1) TMI 241 - RAJASTHAN HIGH COURT) also supports this view of us b .....

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ssee and by adopting FIFO method is not justified. We, therefore, delete the same.- Decided in favour of assessee.

Disallowance of claim of deduction U/s 80IB - Held that:- We find that as per the assessment order a clear finding has been given by the Assessing Officer that the assessee has not adduced any documentary evidence to show that the assessee is manufacturing or producing any article or thing. He has also observed that the assessee has employed its sister concern M/s Sunrise .....

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n a finding that all the hides have been processed on job basis. Learned CIT(A) has also given a finding that no evidence have been brought on record to substantiate that manufacturing and production is undertaken by the assessee to justify its claim of deduction u/s 80IB of the Act. But in the present case, this is not coming out that the manufacturing was done by sister concern under direct supervision and control of the assessee because the assessee is not debiting any amount on account of sa .....

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Kanpur dated 06/02/2015 for the assessment year 2001-2002. 2. Ground No. 1 is as under: 2. That the learned C.I.T.(Appeals) has erred in law and on facts in confirming the disallowance of ₹ 5,000/- under the head General Expenses without appreciating the assessee's written submissions filed before her on the above issue and judicial pronouncements relied upon therein. 3. It was submitted by Learned A.R. of the assessee that ground No. 1 is not pressed and therefore, ground No. 1 is re .....

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e assessee that the written submissions filed before learned CIT(A) are available in paper book on pages A to K. He reiterated the same submissions. 6. Learned D. R. of the Revenue supported the orders of the authorities below. 7. We have considered the rival submissions. We find that the issue involved in this ground is regarding capitalization of insurance expenses paid in respect of two new cars amounting to ₹ 32,112/-. The same was disallowed by the Assessing Officer on the basis that .....

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ct this is the ratio of this judgment of full Bench of Hon'ble Andhra Pradesh High Court that the question whether a particular expenditure is capital or revenue in nature is only relevant for the purpose of allowing a claim u/s 37(1) of the Act and for allowing the claim of deduction u/s 30 to 36, the condition whether the expenditure is capital or revenue in nature is immaterial. The deduction on account of insurance expenses is allowable u/s 31 of the Act. Therefore, for allowing the clai .....

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Ground No. 3 to 8 are inter-connected, which read as under: 3. That the learned C.I.T.(Appeals) has further erred in law and on facts in confirming the addition of ₹ 26,15,237/- in the value of closing stock by discarding the recognized method of valuation of closing stock, namely, weighted average cost as consistently adopted by the assessee and accepted by the Department and by imposing the Fifo- Method of valuation of closing stock by the A.O. 4. That the learned C.I.T.(Appeals) has fu .....

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the method of stock valuation adopted by the assessee and the written submissions and case law filed by the assessee before her and in erroneously trying to distinguish the same. 6. That the learned C.I.T.(Appeals) has further erred in not applying her mind to the explanation filed by the assessee for fall in the gross profit rate. 7. That the learned C.I.T. (Appeals) has further failed to appreciate that there were inconsistencies in the stand of the A.O. even while applying the Fifo-Method of .....

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Assessing Officer u/s 143(3) for assessment year 97-98 is available on pages 148 to 150 of the paper book. He also submitted that on pages 146 and 147 is assessment order passed by the Assessing Officer u/s 143(3) for the assessment year 2004-05. Thereafter he submitted that in all earlier years and later years, the assessee is following the same method of valuation of closing stock and as per these two assessment orders passed by the Assessing Officer u/s 143(3), no addition was made in those y .....

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n support of this contention that if the method of valuation of closing stock adopted by the assessee is a recognized method, it cannot be rejected. 10. Learned D. R. of the Revenue supported the orders of the authorities below. 11. We have considered the rival submissions. We find that this is admitted position of fact that the assessee is following the weighted average method for valuing the closing stock in the present year as well as in earlier years and also in later years. This is also see .....

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adopted by the assessee is same in the present year, in earlier years and later years also. As against this, this is the case of the Assessing Officer that adopting FIFO method for valuation of closing stock is more suitable in present case. In our considered opinion, on this reasoning, an accepted and recognized method of valuation of closing stock as being adopted by the assessee cannot be discarded and another method cannot be adopted by the Assessing Officer. This is not the case of the Asse .....

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ficer in those years u/s 143(3) of the Act. The judgment of Hon'ble Rajasthan High Court cited by Learned A.R. of the assessee rendered in the case of CIT vs. Wolkem India Ltd. (supra) also supports this view of us because it was held by Hon'ble Rajasthan High Court in this case that if the method of valuation adopted by the assessee is a recognized method, it cannot be rejected on the ground that the net realizable value/market value has been determined on the basis of estimate. Respect .....

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sallowance of claim of deduction U/s 80IB of the I.T. Act amounting to ₹ 11,99,090/- without applying her mind properly to the written arguments filed before her and the judicial pronouncement relied upon therein. 10. That the learned C.I.T.(Appeals) has further erred in law and on facts in not appreciating that the assessee was fully entitled to claim the deduction U/s 80IB as it satisfied all the conditions laid down therein. 13. Learned A.R. of the assessee placed reliance on a judgment .....

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e considered the rival submissions. We find that as per the assessment order in Para 13, a clear finding has been given by the Assessing Officer that the assessee has not adduced any documentary evidence to show that the assessee is manufacturing or producing any article or thing. He has also observed that the assessee has employed its sister concern M/s Sunrise Tannery for tanning of raw hides to finished hides and manufacture of shoe upper on job basis as also purchase of finished hides and ex .....

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