TMI Blog2019 (1) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... about the correctness or completeness of the accounts of the assessee. This condition, in the present case, in our opinion, has remained unfulfilled. Similar additions were made in the quantum assessment for AYs 2011-12 & 2012-13. The matter for AY 2011-12 reached up-to the level of this Tribunal wherein the Tribunal rejected the stand of revenue in rejecting assessee’s books of accounts. During impugned AY, the Ld. first appellate authority, relying upon the stand of Tribunal in AY 2011-12, has over-ruled the stand of Ld. AO in rejecting the books and estimating the income on the basis of GP rate. Nothing on record suggest that the aforesaid order of the Tribunal for AY 2011-12 has ever been overruled by any competent judicial authority. There is no change in the material facts or circumstances during impugned AY - The stand of Ld. AO in rejecting the books of accounts u/s 145(3) and making addition on the basis of GP rate could not be upheld and therefore, we see no reason to interfere with the impugned order. - decided against revenue Disallowance u/s 40(a)(ia) - depreciation u/s 32 disallowed - Held that:- Depreciation being statutory allowance in nature and not an actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being one of the main reasons for rejection of book result u/s. 145. 3. The appellant prays that the order of the Ld. C1T(A) on the above grounds be set aside to the file of the AO or confirm the order of the AO 2.1 Facts germane to the issues are that the assessee being resident corporate entity engaged in the business of manufacturing, refining and trading of edible oil vanaspati was assessed for impugned AY in scrutiny assessment u/s 143(3) on 28/03/2016 wherein the income of the assessee was assessed at ₹ 52.89 Crores after certain additions / adjustments as against returned loss of ₹ 3.46 Crores e-filed by the assessee on 30/09/2013. 2.2 During assessment proceedings, it was noted that the turnover of the assessee increased from ₹ 898 Crore in immediately preceding AY to ₹ 942.30 crores during impugned AY whereas Gross Profit Rate fell from 3.55% to 3.03% despite there being no material change in the activities being carried out by the assessee. The assessee attributed the same to increase in cost of packing material, employee cost and change in grouping of expenses. It transpired that the manufacturing process involved proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distribution expenses during impugned AY were treated as part of manufacturing cost unlike AY 2011-12 where these expenses were treated as part of Commission brokerage expenses . The comparable GP Rate for earlier AYs was also placed on record to fortify the submissions. Finding strength in the same, Ld. CIT(A) remitted the matter back to the file of Ld. AO to verify this aspect of comparison of GP Rate. The addition u/s 40(a)(ia) was deleted by observing that nothing was payable on the last day of the financial year and therefore the additions were not warranted in terms of the decision of Vishakhapatnam Tribunal rendered in Merilyn Shipping Transports Vs. ACIT. 4. Subsequently, the assessee filed a rectification application u/s 154 before Ld. CIT(A) to seek rectification of certain errors. It was pointed out that when the books of accounts were accepted then the addition on the basis of GP Rate was not justified and ground number-3 raised by the assessee, being only an alternative ground, was not required to be adjudicated. Finding strength in the plea, ground number-3 was left open and was not adjudicated upon by first appellate authority. Regarding disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, we find that the assessee is a corporate entity who was mandatorily required to maintain books of accounts as per The Companies Act as well as under The Income Tax Act. The accounts were subjected to Audits under both the Act. The assessee s turnover stood at ₹ 942.30 Crores during the impugned AY and the extensive stock details were being maintained by the assessee. The only basis of rejection of books of accounts was the fact that there was fall in GP Rate in comparison to earlier years and the assessee failed to submit quantitative details of consumption of input material vis- -vis each individual output products. Per contra, it is noted the aforesaid details could not be provided by the assessee since the manufactured products varied in mix, constitution and weight etc. such a correlation of the consumption and output for each such input was not possible. Nevertheless, quantitative details of input material vis- -vis final output as a whole were furnished. Nothing on record suggests any discrepancies / infirmity in the same. The explanation that the very nature of the manufacturing process made it difficult to have any reasonable and determinable correlation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in Merilyn Shipping Transports Vs. ACIT and the revenue is not under appeal against the same. Therefore, the adjudication of this ground is merely academic in nature. Nevertheless, the Ld. AR has urged that the decision of Spaco Carburettors (I) Ltd. [3 SOT 798] as relied upon by Ld. CIT(A) in rectification proceedings, does not apply to the fact of the case since that decision was rendered in the context of expenditure incurred u/s 35AB and not in the contest of depreciation u/s 32 which is the case here. Our attention is drawn to the decision of this Tribunal rendered in Skol Breweries Ltd. [142 ITD 49] to submit that the issue under appeal stood squarely covered in assessee s favor. 7.2 Upon perusal of both the judicial pronouncements, we agree with the contention of Ld. AR that the issue stood squarely covered by the following observations of this Tribunal rendered in Skol Breweries Ltd. [supra]:- 16.2 It is manifest from the plain reading of provisions of sec. 40(a)(i) that an amount payable towards interest, royalty, fee for technical services or other sums chargeable under this Act shall not be deducted while computing the income under the head prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The Tribunal while accepting the plea of the assessee, in para 3, had noticed as under: 3. Ground no. 4 is against deletion of an addition of ₹ 6,88,1751- made by the AO on account of deduction of depreciation on technical know-how as the assessee failed to deduct tax in accordance with the provision contained in section 40(a)(i). The finding of the learned CIT(A) was that the assessee had incurred, expenditure by way of technical know-how, which was capitalized amount as made in the return of income. Since the assessee had not claimed deduction for the amount paid, the provisions contained in section 40(a) (i) were not attracted. The learned DR could not find any fault with this direction of the CIT(A) also although she referred to page 4 of the assessment order, where it was mentioned that the tax deducted in respect of the payment was made over to the Government in the subsequent year and, therefore, depreciation could not be deducted on the capital expenditure incurred by the assessee. In reply, the learned counsel pointed out that the expenditure by way of technical know-how was capitalized and it was not claimed as revenue expenditure. Therefore, there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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