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Tripti Menthol Ind. Versus Dy. Commissioner Of Income Tax Central Circle-1, Surat

2016 (5) TMI 961 - ITAT AHMEDABAD

Claim of deduction u/s. 80IB(4) - Held that:- If the valuation of closing stock made by the ld. CIT(A) is accepted, there is a net loss as computed by the ld. CIT(A) and, therefore, the claim of deduction u/s. 80IB(4) would be only of academic interest

Addition u/s 68 - Held that:- The additions made by the A.O, being difference between the profit credited by the assessee and the loss determined by the A.O as per his own valuation of closing stock is illogical and without any reasonin .....

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eated as a capital receipt which has been confirmed by the Hon’ble High Court of J & K which has been followed by the First Appellate Authority; therefore, no interference is called for. - ITA. No: 998 & 1050/AHD/2012 - Dated:- 13-4-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri Ramesh Malpani, AR For The Respondent : Smt. Vibha Bhalla, CIT/ D.R. PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA Nos. 998 & 1050/Ahd/2012 are cross app .....

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the addition of ₹ 5,58,22,466/- made u/s.68 of the Act even though the assessee had failed to explain the nature of source of credit of such profits. 2. The Ld.CIT(A) has erred in law and on facts in holding that the assessee was entitled to deduction u/s.80IB(4) even though it has been categorically analyzed in the body of assessment order that the assessee had not employed 10 or more workers in the year under consideration. 3. The Ld.CIT(A) has erred in law and on facts in deleting the .....

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w.s.80IA(8) & 80IA(10) of the Act even though the Assessing Officer had categorically analyzed in the body of assessment order that that the benefits of Section 80IA could be availed only of natural profits and not for unnatural, artificial or exaggerated profits. 5. The Ld.CIT(A) has erred in law and on facts in allowing the deduction u/s.80IB(4) on excise duty refund of ₹ 4,44,289/- even though excise duty refund does not constitute to be a part of manufacturing activity of the busin .....

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ction u/s. 80IB(4) of the Act. 6. On scrutinizing the statement of accounts of the assessee, the A.O noticed that the assessee has shown closing stock at ₹ 11.26 crores. Assessee was asked to furnish the working for the calculation of closing stock valued at ₹ 11,26,21,568/-. Vide letter dated 26.12.2011, the assessee stated that the finished goods and WIP have been valued at net realizable value which is at ₹ 7.78 crores and after considering the cost of depreciation and inter .....

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made overvaluation of closing stock by ₹ 5,58,22,466/-. 7. The A.O further found that the assessee has shown net profit at ₹ 3,48,77,602/- by taking the value of closing stock at ₹ 11,66,58,592/-. The A.O was of the opinion that if the closing stock value is taken at ₹ 6,08,36,126/- as computed by him, the assessee would incur a loss of ₹ 2,09,44,864/-. The A.O observed that since assessee s books of account do not reflect the true picture, therefore, the books are .....

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the A.O computed the net loss at ₹ 2,09,44,864/- and concluded by holding that the assessee has inflated the profit by overvaluation of closing stock and denied the claim of deduction u/s. 80IB(4) of the Act. 9. The A.O further treated the difference between the total income shown in the profit and loss account at ₹ 5,58,22,466/- and the total loss computed by him from the manufacturing activity at ₹ 2,09,44,864/-, and treated the difference of ₹ 3,48,77,602/- as unexplai .....

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ken the figure of closing stock at ₹ 11,66,58,592/- instead of actual figure of ₹ 11,26,21,568/- which mistake has resulted into overvaluation of the stock by the A.O by ₹ 4037024/-. It was strongly contended before the ld. CIT(A) that the method of valuation of closing stock adopted by the assessee is correct and is as per well recognized method. It was further brought to the notice of the ld. CIT(A) that if the valuation of closing stock is altered then the net profit of the .....

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ter giving a thoughtful consideration, the ld. CIT(A) recomputed the value of closing stock and took the correct value at ₹ 6,31,36,656/- and recomputed the correct net profit of the assessee which is loss of ₹ 1,46,07,310/- and directed the A.O to make the assessment accordingly. 12. In respect of eligibility of the assessee for deduction u/s. 80IB(4) of the Act, the ld. CIT(A) was convinced that the assessee has fulfilled all the mandatory conditions mentioned u/s. 80IB(4) of the A .....

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lved in the present case. 14. The ld. CIT(A) observed that even if it is accepted that the assessee has inflated its profit by overvaluing the closing stock but this in itself does not disentitle, the assessee to claim the deduction u/s. 80IB(4) of the Act. Therefore, the additions made by the A.O on the basis of the overvaluation of closing stock does not hold any water and accordingly directed the A.O to delete the addition of ₹ 3,48,77,602/-. 15. In so far as the claim of deduction of 8 .....

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closing stock made by the ld. CIT(A) is accepted, there is a net loss as computed by the ld. CIT(A) and, therefore, the claim of deduction u/s. 80IB(4) would be only of academic interest. The ld. D.R. strongly relied upon the findings of the A.O. 18. We have given a thoughtful consideration to the orders of the authorities below. We have already discussed the specific observations of the First Appellate Authority on the issues under consideration. As pointed out by the ld. counsel, if the workin .....

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