TMI Blog2017 (3) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... e administrative expenses on proportionate basis towards work in progress and restore the matter to the file of Assessing Officer with the direction to examine all expenses under administrative expenses, other than Director’s remuneration on case to case basis, to find out whether same are directly related to any of the three projects in reference and then includes the specific expenses which are directly related to the projects to the work in progress. - ITA No. 5831/Del/2012 - - - Dated:- 14-2-2017 - SH. S.K. YADAV, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : Sh. Sanjay Gupta, CA For The Respondent : Sh. F.R. Meena, Sr.DR ORDER Per O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 09/08/2012 of learned Commissioner of Income-tax (Appeals) - XVIII, New Delhi, for assessment year 2009-10, raising following grounds: 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in upholding the correctness of method of valuation of work in progress as adopted by the Assessing Officer in which all indirect expenses have also been proportionately a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-). The disallowance of ₹ 20, 55, 593/- is computed as under: Proportionate expenses = 1,11,31,064 *(1,68,19,283/9,10,76,686) = ₹ 20, 55, 593/- 2.3 Before the learned Commissioner of Income-tax (Appeals), the assessee submitted that it has followed the direct cost method for valuing the project which remained under work in progress at the end of the year and all expenses which were incurred on those projects were moved under the head work in progress and shown as current assets. The assessee company cited the decision of the Tribunal, Delhi bench in the case of Sutlej Cotten Mills Ltd Vs. Assistant Commissioner Income Tax in ITA No. 1378/Del/1992 and 988/Del/1993. The learned Commissioner of Income Tax (Appeals) agreed with the view of the Tribunal in the case cited by the assessee, but as far as facts of the assessee are concerned, held that expenses under the head administrative expenses like bank charges, communication expenses, computer expenses etc. were not fixed in nature and directly relatable to various projects being handled by the company. The learned Commissioner of Income-tax (Appeals) further held that only Directors remuneration was not relatable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Communication Expneses 107,530.00 Computer Expenses 240,014.00 Cans Expenses 1,399,964.00 Car Hiring Charges 240,000.00 Conveyance 228,414.00 Directors Remuneration 4,000,000.00 Allowed by CIT(A) Discount 20,000.00 Donation 11,264.00 Electricity Water Expenses 36,850.00 Car Running Maint. Expenses 284,119.00 House Keeping Expenses 92,979.00 Internet Cable Expenses 103,468.00 MemeberShip Fee Subscription 71,056.00 Miscellaneous Expenses 166,717.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bring the goods to the place of its location and condition as on the date of valuation. Explanation. - For the purposes of this section * , any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment; (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. (emphasis supplied) 8. Thus, we find that as per the provisions of the Act, in this case the valuation of work in progress at the end of the year has to be valued by the assessee in accordance with the method of accounting regularly employed by the assessee. 9. Further, in the case of Sutlej Cotton Mills Ltd. Vs. ACIT (supra) the Tribunal after going through the cases of CIT v. British Paints (I) Ltd (1991) 188 ITR 44 (SC) and ITO Vs. Modi Rubber Ltd. (1992) 43 ITD 396 (Delhi-Trib.), identified the costs relatable to the finished goods for valuation at year end. The relevant part of the decision is reproduced as under: 8. We have carefully consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount in this respect has been rightly done. As regards insurance, the assessee has explained that this relates to the comprehensive insurance which is not relatable to goods alone. In this respect we would hold that part of the expenses which are relatable to the goods are also to be taken into consideration while arriving at the direct cost. This would however not be so in regard to depreciation. For this, we find support in the order of the Tribunal in the case of Modi Rubber (supra) where it has been held that while asking for direct cost method, the fixed cost are to be excluded in determining the cost. It is further held that fixed cost is defined as the ones which by its very nature remain relatively unaffected in a definite period of time by variation in the volume of production. After observing so, it has been held that the depreciation is not to be taken into consideration. This would apply to the rent which does not vary with valuation in production. Respectfully following the aforesaid decision, we would hold that the same is to be excluded while working out the cost of the finished goods. The AO is directed to modify the working of the valuation of closing stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
