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TMI Blog2019 (12) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,10447/2016-17 vide dated 23.07.2018, 25.06.2018. The Assessments were framed by the Asst. Commissioner of Income Tax, Circle-1(1)(1), Mumbai (in short ACIT/ AO) for the A.Ys. 2013-14 & 2014-15 vide orders dated 26.12.2016 & 26.12.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter 'the Act'). 2. The first common issue in this appeal of Revenue in ITA No.5792/Mum/2018 for AY 2013-14 and cross objection of the assessee in CO. No. 204/Mum/2019 is against the order of CIT(A) deleting the addition of value of closing stock made by Assessing Officer being diminution in the value of closing stock and claiming depreciation therein. For this, Revenue has raised the following two grounds: - "1. Whether on the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. on 1st April 2013 should be taken as same value as taken of closing stock as on 31st March 2013;" 3. At the outset, the learned counsel for the assessee stated that the Assessing Officer has disallowed assessee's claim of reduction of closing stock based on earlier years. He drew our attention to the assessment order, wherein the Assessing Officer vide Para 5 has noted as under: - "5. Disallowance of reduction claimed on closing stock: During AY 2012-13, AO has disallowed assessee's claim of reduction on closing stock. Issue is pending to be decided by CIT(A) office. To maintain consistency, assessee's claim of reduction of Rs.7,94,91,704/- from closing stock during AY 2013-14 is rejected." Even, CIT(A) relying on the order of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable on record. During the assessment the Assessing Officer made addition of Rs.6,16,55,838/- by disallowing depreciation on closing stock holding that the depreciation on the closing stock is not eligible deduction. Before the ld. CIT(A), the assessee given the breakup of depreciation on various inventory, demo-vehicles, accessories and consumable Auto Parts in the following manner: Sr. No. Description Cost NRV Cost/NRV whichever is lower A. Inventories/ Demo-vehicles - - - Sub-total 1,20,75,65762 1,15,19,43,005 1,15,19,43,005 B Accessories, Consumables and parts Sub-total 12,27,19,312 11,66,86,232 11,56,86,232 C Service Wip-TML - - - Sub-total 1,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile system of accounting in term of section 145 of the Act and accounting standards notified by the Government of India from time to time. The assessee values its closing stock at lower than the cost or net reliable value and to arrive at the valuation of closing stock from the perspective of accounting standards. The assessee reduced the value of certain items from closing stock to appropriate reflect its net reasonable value which is lower than the cost. The said reduction from the cost represents the wear and tear of the stocks of the items which are lying in the inventory/showrooms. We noted that there is no factual difference in this year and any adjustment in the closing stock for the year no. 1 would consequently result in the adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, we confirm the order of CIT(A) deleting the addition. 8. The only issue in the cross objection of the assessee in CO No. 205/Mum/2019 for AY 2013-14 is as regards to the order of CIT(A) confirming the disallowance of provision for leave encashment under section 43B of the Act. For this, assessee has raised the following ground No. 3:- "Disallowance for leave encashment under section 43B of the Act erred in confirming the disallowance made by the AO for provision for leave encashment under section 43B(f) of the Act of Rs. 12,76,830/- without appreciating that he said provision is not covered under section 43B(f) of the Act and thereby allowable as deduction;" 9. At the outset, the learned counsel for the assessee stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this, Revenue has raised the following two grounds: - "1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs. 5,94,98,161/- being diminution in the value of closing stock and claiming depreciation thereon, without appreciating that the A.O. has given categorical finding in the assessment order on the said issue? 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs. 5,94,98,161/- by relying on the judgement in the case of Alfa Laval (India) Ltd, 295 ITR 451 is totally distinguishable on the facts and circumstances of the case, as in the said case, the issue was that the assessee had reduced the value at a fixed rate 100/c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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