TMI Blog2021 (3) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessee appeal - We provide an opportunity to the revenue by restoring the disputed issue for limited purpose to the file of the CIT(A) to call for the remand report from the AO and also adequate opportunity of hearing be provided to the assessee and pass a reasonable and speaking order and allow this ground of appeal of the revenue for statistical purposes. Addition on account of depreciation of Bizerba weighing scales - AO has made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items - HELD THAT:- In assessee s own case for the earlier assessment year relying on CIT Vs. BSES Yamuna Power Ltd., [ 2010 (8) TMI 58 - DELHI HIGH COURT ] claim of depreciation @ 60% on Bizerba weighting scales is concerned, in our opinion nothing has been on record to demonstrate that this particular asset functions integral part of computer and cannot function independently. A photocopy (xerox) machine can also be attached to a computer, however, that does not entitle it for depreciation @ 60%. CIT(A) has allowed assessee s claim of depreciation on the weighing scales with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of documentary proof regarding clear verifiable evidence in support of the expenditure claimed by the assessee? 2. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of depreciation of Bizerba weighing scales whereas the AO has rightly made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items? 2. The Brief facts of the case are that, the assessee company is engaged in the business of running super markets and filed the return of income for the A.Y 2009-10 on 25.09.2009 declaring a total loss of ₹ 128,14,82,205/-, the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny and notice u/s 143(2) of the Act was issued. In compliance to the notice, the Ld. AR of the assessee along with company representative appeared from time to time and furnished the details and the case was discussed. The A.O on perusal of the profit and loss account find that, the assessee has debited an amount of ₹ 27,94,92,526/- on account of stock losses d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls which are required to allow the claim. Further no method/ methodology has been filed/explained with evidence for calculation/quantification and therefore any loss of stock or any asset is not deductable and made addition of ₹ 24,24,09,476/-. Similarly, the A.O. observed that the assessee has claimed depreciation on UPS and other computer peripherals @ 60% whereas depreciation allowable is only @15% as it falls under the block of plant and machinery. Therefore, the A.O disallowed the excess depreciation claim of ₹ 45,45,885/- and assessed the total loss of ₹ 103,45,26,844/- and passed the order u/s 143(3) of the Act dated 29.12.2011. 3. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). In the Appellate proceedings, the Ld.CIT(A) considered the submissions and the grounds of appeal raised by the assessee. The CIT(A) dealt on the findings of the A.O in respect of shrinkage, expiry of stock write off and slow and non moving stocks, and the contentions of the assessee that they should be allowed considering the turnover of the assessee. The assessee company filed the submissions on 18.07.2017 referred at page 4 of the CIT(A) order along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of 60% and prayed for allowing the Revenue appeal. 6. Contra, the Ld. AR relied on the orders of the CIT(A) and submitted that the information submitted before the CIT(A) are not new material but only the information from the books of accounts. The ld. AR further submitted that it is a common practice of stock losses on account of shrinkage, stock loss on account of expired goods write off and also the provisions for non moving stock in the accounts. The Ld.AR further emphasized on applying the various bench markings in respect of stock losses and shrinkages and the claim is comparatively lower and also made submissions on ground of appeal with respect to claim of depreciation and prayed for dismissal of the revenue appeal. 7. We heard the rival submissions and perused the material on record. The revenue has filed the appeal on the disputed issued of claim of loss on account of stock loss, diminution and higher claim of depreciation. The Ld.DR submissions are that the assessee for the first time has filed the information before the Ld.CIT(A) and the A.O was not provided the said information in the assessment proceedings. We on perusal of the Ld.CIT(A) order find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.18% 27.95 4.31% 29.50 3.71% Particulars FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) Amount (Rs) % of T/O Amount (Rs) % of T/O Amount (Rs) % of T/O Turnover 918.85 911.59 952.25 Stock loss and diminution Shrinkage 12.17 1.32% 13.70 1.50% 10.40 1.09% Expiry and Damage 10.46 1.14% 10.63 1.17% 9.35 0.98% Slow and non moving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pen drive. However, the same can be printed and submitted on instructions of Your Honour. (c) In response to Point 3 - Inventory is valued on weighted average cost basis and such disclosure is also made in the financials vide Point 'F' to Significant Accounting Policies and Notes forming a part of accounts which is reproduced below for your ready reference; Stock-in-trade is valued at the lower of cost and net realizable value Cost of inventories is computed on a 'weighted average basis' Inventory in this case consists of large number of identical products valued at weighted Average Cost (WA of opening stock purchases made during the year and thins loss on account of shrinkage or expiry for a particular product cannot be tied / l inked to a particular bill, V/AC is system generated number winch comprises mainly the opening inventory cost and purchase cost and various overheads loaded on inventory cost. In order to substantiate and further explain such: method of arriving at weighted average cost, the appellant company had attached 11w samples of invoices along with their weighted average cost of items as reflected in the system. (d) In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars Pg. No. of report 1 Country wise statistics of shrinkage borne by retail industry 21 2 Country wise periodical comparative analysis of shrinkage borne by retail industry 22 3 Asia-Pacific: Statistics Shrinkage rates 2009 and 2010 84 4 Asia-Pacific: Percentage change in Shrinkage expressed as a percentage of sales 85 5 Contribution of various causes to the total shrinkage loss 87 Thus the above statistics clearly conclude that India has the highest shrinkage rate as compared to other countries whether comparison is made globally or restricted to Asia- Pacific. d. Below is the summary of shrinkage loss borne by the appellant vis- vis the industry standard. AY Loss on stock (Rs. Crore) Turnover (Rs. Crore) Percentage of loss As reported in G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceries fruits and vegetables, stapes, general merchandise, etc. and by the nature of business reasonable level of losses on account of shrinkage expiry are inevitable and part and parcel of the business operations of the appellant. In the written submission the appellant has relied on various court cases to substantiate that the losses are allowable u/S 37(1) and treated as incurred wholly and exclusively for the purpose of the business. The Hon'blc Bombay High Court in the case of Indian Rare Earth Ltd. (375 ITR 376) has deal t in detailed allowability of the losses write-off on account of non-moving stores. The Hon'ble High Court held that, write-off claimed on the basis of deterioration for various materials including raw materials, and in particular slow moving items would be entitled for deduction. 6.1.3 Similarly, the Hon'ble Jurisdictional High court in case of G I G Dandekar (202 ITR 161) held that, embezzlement of the amount from assesses current account which was maintained by it for running of its business was incidental to business of assessee and was, therefore allowable. 6.1.4 The appellant company also relied on Hon'ble Mumbai Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orne by the retail industry i.e. Global Retail Theft Barometer (GRTB), KPMG and attached articles from prominent newspapers (Enclosed vide letter dated 08/09/2017). As per the report the losses suffered by the Indian retailers on account of Shrinkage is 2.72% and 2.90 % while the appellant suffered the shrinkage loss which is 1.99% of the Sales. It also noteworthy that the losses on account of shrinkage, etc. is separately disclosed under the schedule no. 25, 'Other Expenses' of Prof it and Loss account duly audited by one of the Big 4 Audit firms. 6.1.8 After considering the Prof it and Loss account, details submitted by the appellant during the hearings, and various evidences placed on records, I am of the view that, the losses claimed by the appellant is allowable under section 37(1), hence this ground of appeal is allowed. 9.On perusal of the information submitted by the assessee, the Ld.CIT(A) has dealt on the disputed issues considering the percentage of shrinkage available to the industry and other factors. We found that the assessee company considering the turnover of ₹ 608 crores has claimed as shrinkage other losses of ₹ 24.69 crores in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the theft, zone wise stock report and details of stocks along with sample, item wise details of expired and written off stock and details of percentage of stock loss and diminution of turnover and the certificate of statutory auditor and report by the global retail theft barometer 2010. We find though the assessee company was making out its case stronger by filling the supporting details before the Ld.CIT(A) but as it was rightly pointed out by the Ld.DR that the assessee in the assessment proceedings before the A.O. has not filed the said details nor any iota of information except making a submissions as referred in the assessment order. We find when such a huge disallowances were made by the A.O, the Ld.CIT(A) upon calling for the information from the assessee and having accepted the same should have called for the information / comments from the A.O. before granting the relief. Further, in the circumstances, where the assessee deals in thousands of stocks of goods, it is practically impossible to verify each and every aspect of claim of shrinkage, theft and expiry written off. But the assessee should explain the basis and the criteria of claim. As rightly pointed out by the Ld.D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld include all input and output devices. It was held that external hardware devices like Monitor, Keyboard, Mouse, Printer Router, Scanner, Switches, etc., would fall under the category of computer hardware. The same is also the case with router and switches. The other decisions relied upon by the Ld. AR also have expressed similar view. As far as the decision of M/s. Dinamater (supra) relied upon by the Ld. DR is concerned, it cannot be interpreted in a manner to propound that depreciation @ 60% is not allowable on the items referred to above. The being the case, we do not find any infirmity in the order of the CIT(A) in allowing assessee s claim of depreciation on printer, router, scanner, switches etc., However, as far as the claim of depreciation @ 60% on Bizerba weighting scales is concerned, in our opinion nothing has been on record to demonstrate that this particular asset functions integral part of computer and cannot function independently. A photocopy (xerox) machine can also be attached to a computer, however, that does not entitle it for depreciation @ 60%. CIT(A) has allowed assessee s claim of depreciation on the weighing scales without proper reasoning. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard? 17. We have already dealt on ground of appeal No. 1 and No 3 in above paragraphs in respect of stock losses and diminution where the disputed issue was restored to the file of the CIT(A) with specific directions and in respect of claim of depreciation on weighing scales the ground of appeal was allowed. As the facts and circumstances in this appeal is identical to ITA No. 7187/Mum/2017 for A.Y. 2009-10, The decision rendered in appeal would apply mutatis mutandis for this case also. 18. Now we shall take up ground of appeal Nos. 2 4 raised by the revenue. The A.O has made disallowance under section 14A r.w.r. 8D of the Act of ₹ 5,06,483/-and the Ld.CIT(A) considered the facts and financial statements and relied on the judicial decisions and deleted the addition. 19. Whereas, theLd.DR submitted that the CIT(A) has erred in deleting the addition without considering the provisions mandatory for disallowance.Contra, the Ld.AR submitted that in assessee s successor M/s Aditya Birla Retail Ltd case for the A.Y 2011-12 2012-13 the appellate authority has granted relief. The Ld. AR submitted that addition cannot be made u/s 14A as there is no exempted inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the facts and the observations find that the CIT(A) has relied on the provisions and judicial decision and deleted the addition. Accordingly we are not inclined to interfere with the order of CIT(A) on this disputed issue and upheld the same and dismiss the ground of appeal of the revenue. 22.. The second disputed issue that, the assessee has claimed in the books of accounts the doubtful debts and advances written off, the A.O found that out of the said amount of ₹ 1,22,494/- being insurance claim is receivable has been written off. Since there are no explanations submitted , the A.O has made an addition. Whereas the CIT(A) considered the submissions of the assessee and observed at para 6.4.2 to 6.4.4 of the order and has allowed the claim of the assessee. The Ld.DR relied on the order of the A.O but could not controvert the observations of the CIT(A)with any cogent evidence or new information. The Ld.AR supported the orders of the CIT(A) and relied on the judicial decisions. Accordingly we are not inclined to interfere with the findings of the CIT(A) on this disputed issue and upheld the same and dismiss the ground of appeal of the revenue. The revenue appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
