9911796707
TMI Blog2022 (5) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Income Tax Act, 1961 ("the Act") was framed vide order dated 28.03.2016. Thereby, the Assessing Officer ("AO") assessed the income at Rs.6,48,35,150/- against the NIL income declared by the assessee. The AO made addition on account of adhoc disallowance of telecom expenses @ 5 % of Rs.9,45,712/-; deferred grant of Rs.2,42,47,861/- and disallowance of expenses claimed in respect of inventory obsolescence amounting to Rs.3,96,41,576/-. 3. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions and material placed on record, sustained the addition qua deferred grant and rest of the two additions were deleted. 4. Aggrieved against this, both the Revenue and the assessee challenged the impugned order by way of appeal and cross-objection respectively. 5. First, we take up Revenue's appeal in ITA No.1110/Del/2018 pertaining to Assessment Year 2012-13 wherein the Revenue has raised following grounds of appeal:- 1. "Whether on the facts and circumstances of the case, Id. CIT(A) is justified in deleting the addition made of Rs. 3,96,41,576/ - made on account of provision for inventory obsolescence despite the failure on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts. In view of the submissions filed by the Appellant, the addition is deleted, Hence, the Ground No.1 is allowed." 10. We find that there is no dispute with regard to the fact that the assessee has claimed provision for inventory of obsolescence as allowable expenditure. The AO disallowed the same being a provision and not the actual expenses. As per the Assessing Officer, the expenses being uncertain is not allowable expense u/s 37(1) of the Act. We find that this reasoning of AO is contrary to ratio laid down by the binding precedents. Hon'ble Delhi High Court in the case of CIT, New Delhi vs Hotline Teletube & Components Ltd.(supra) has held as under:- 5. "In the instant case we find that the principle for valuing stock at cost or realizable market price whichever is lower is applicable. The assessee has demonstrated that the stock being obsolete did not move for over three years and also the fact that it could only be sold if at all as scrap. As a matter of fact, the assessee also established that in the event it is sold as scrap the burden of excise duty would be much more than what it could realize on sale of the said stock as scrap. The Tribunal has returned this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly demonstrate instead of showing cost price as nil in the profit and loss account, cost price of the items are given in profit and loss account and a provision is made for obsolescence in inventory showing that the market value is nil and that is the mode in which the assessee was also following even for the previous years. Under these circumstances, we do not see any justification to interfere with the well considered order passed by both the authorities. Accordingly, substantial questions of law are answered in favour of the assessee and against the revenue. No merit. The appeal is dismissed." 12. In the light of the above binding precedents, we do not see any reason to interfere in the finding of Ld.CIT(A), the same is hereby affirmed. Thus, Ground No.1 raised by the Revenue is dismissed. 13. Now, coming to Ground No.2 raised by the Revenue is against the admitting the additional evidences without affording an opportunity to AO. 14. At the outset, Ld. Counsel for the assessee submitted that no additional evidences were filed before Ld.CIT(A). Therefore, there was no reason to call for Remand Report from the AO. 15. Ld.Sr.DR supported the orders of the authorities below. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to add, alter, amend or withdraw all or any of the above grounds of cross-objections at or before the time of hearing." 25. The assessee is aggrieved by sustaining the addition to the total income on account of deferred grant of Rs.2,42,47,861/-. 26. Ld. Counsel for the assessee submitted that Ld.CIT(A) failed to appreciate the fact that the assessee himself had offered this income in the Assessment Year 2016-17. Therefore, this amount cannot be allowed to be taxed twice. 27. Ld. Counsel for the assessee reiterated the submissions as made before Ld. CIT(A). He submitted that the grantor remit the money to the assessee with a direction that such moneys was required to be spent only for specified purposes and any amount remaining unspent/unutilized shall be held by the assessee in trust for and on behalf of the grantor. He further submitted that since the assessee had not any right over the unutilized amount of grant, the grant received in advance and remaining unutilized during the previous year cannot be taxed as a revenue receipt. He further submitted that without prejudice to above, the grant was received by the assessee for capital purposes. Since the grant was received for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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