9911796707
TMI Blog2008 (2) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... d 28th July 2006, the Tribunal has deleted the addition made in that year on identical grounds. Briefly stated, the facts are that in the course of the assessment proceedings the Assessing Officer noted that the excise authorities had conducted enquiries in the assessee's case which revealed that the assessee was selling the entire production to M/s. Oriflame and the MRP (maximum retail price) of the products was more than four times the price at which the assessee sold them to Oriflame. The Assessing Officer further noted that, in the year 1995, Oriflame had decided to start manufacturing and selling activity in India and subsequently it had created a separate corporate body the present assessee to carry out the manufacturing and marketing activity.. The assets of the manufacturing division of Oriflame were transferred to the assessee, which was incorporated in 1996 with a nominal share capital of ₹ 200/- which was held by the wives of the directors of Oriflame. It was the view of the Assessing Officer, based on the view taken by the central excise authorities who considered the above arrangement, as one for evasion of excise duty. that the prices at which the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the capacity due to unfavourable market conditions, (f) The gross profit shown by the assessee for the assessment year 1998-99 was 21% compared to 15% in the assessment year 1997-98. (g) No adverse material has been brought on record, nor any defect has been pointed out in the books of account. 4. On a careful perusal of the order of the Tribunal and the findings recorded therein and taking into account the admitted position that the facts for the year under appeal are identical with those for the assessment year 1998-99. We delete the addition of ₹ 2,74,38,300A respectfully following the Tribunal's order for the assessment year 1998-99, The ground is 5. The second ground is that the CIT (Appeals) erred in holding that the expenditure of ₹ 2,44,702/- on art work, proofing and design charges for packing does result in an enduring benefit and, therefore, must be disallowed as capital expenditure. The issue is discussed at paragraph 3 at page 12 of the assessment order, After referring to the nature of the expenditure, the Assessing Officer has opined that artwork and design, apart from advertisement, goes a long way in establishing the salability of a product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock of raw materials. The assessee submitted in writing that there was a separate provision account in which the actual write-off is adjusted and also explained the figures for the year under consideration. It was submitted that any inventory written off against the provision was not claimed as a deduction and any excess-provision written back was also offered to taxation and that this was the consistent practice adopted by the assessee, which has been accepted in the past by the income-tax department and, therefore, should not be disturbed, The Assessing Officer examined the accounts for the earlier year and found that in the return of income the assessee had claimed write-off to the extent of the provision created, Faced with this situation, the Assessing Officer asked the assessee to provide the basis for the provision, evidence for destruction of the obsolete goods, explanation as to why they cannot be sold, etc. The assessee seems to have filed a reply but the Assessing Officer has stated that the reply cannot be accepted since nothing new has been stated therein. He, therefore, disallowed the claim to the extent of Rs,30,05,581/-The disallowance having been confirmed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the past does not mean that it should be accepted forever. It was further pointed out that the procedures adopted for the disposal of the obsolete material whose life has expired, under the Central Excise Rules are not binding, on the income tax authorities. It was, therefore, submitted that the claim was rightly disallowed in the assessment. 9. We have carefully considered the rival contentions. Firstly, it is not correct to say that the assessee did not submit the relevant details relating to the claim before the Assessing Officer; Actually, Note No,7 to the final accounts itself drew the attention of the Assessing Officer that there was a write-off of obsolete raw material during the relevant accounting year (page 37 of the paper book). Secondly, by letter dated 12th December 2002, the assessee had submitted the complete details of material written off and this is supported by the details filed at page 80 of the paper book which lists out the items valued at ₹ 30,05,581A and written off in the accounts. In the above letter, the assessee has also explained the accounting entries made and the same has also been explained in the written submissions before the CIT (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The facts are also identical. In line with our decision for the assessment year 2000-2001, we delete the addition and allow the ground. 13. Ground No.3 is directed against the disallowance of ₹ 44,63,696/-being provision made for write-off of inventory. The facts relating to this ground is identical with the facts relating to ground no.3 in the appeal for the assessment year 2000-2001 and in line therewith, we delete the disallowance and allow the ground. 14. Ground No,4 is that the income-tax authorities were no! justified in not allowing consequential benefit under section 80HHC when the returned loss was converted into positive income by reason of the additions. This ground is consequential to our decision in respect of ground nos.2 and 3. 15. Ground Nos.5 and 6 are directed against the levy of interest under section 234B, 234C and 234D as well as against the withdrawal of the interest granted under section 244A. These grounds are stated to be consequential and the assessee will get consequential relief, if any, 16. In the result, the appeal is partly allowed, 17. To sum up : whereas the appeal for the assessment year 2000-2001 is allowed, that for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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