TMI Blog2022 (6) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier assessment years the assessee adopted the basis of cost of goods sold as a reasonable method of apportionment of the agricultural and non-agricultural expenses out of the common expenses. As both the cost of goods sold and also the turnover of different activities, to be the basis for allocation of the common expenses to have their own way and cess and variations, what is required is the following of the consistent method. Inasmuch as there is no dispute that the assessee has been consistently following the method by forgetting the common expenses on the basis of cost of goods sold, the rule of consistency demands that the same shall not be disturbed for a particular assessment year because it goes against the interest of Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals)-4, Hyderabad ( Ld. CIT(A) ) in the case of M/s Prabhat Agri Biotech Ltd. ( the assessee ) for the assessment years 2012- 13 to 2014-15, Revenue preferred these appeals. 2. Brief facts of the case are that the assessee company is engaged in the business of seed production, research, marketing of field and vegetable crops and wind power generation. Assessee is deriving income from their own production of seeds as well as trading of seeds. Assessee has been claiming deduction under section 10 (1) of the Income Tax Act, 1961 (for short the Act ) for the income arose out of own production of seeds. The assessee, however, submitted a single Profit and Loss Account (P L Account) for both the businesses, but they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of sales promotion, administration etc., are incurred jointly for both the segments; and that, therefore, it is necessary that a reasonable basis should be adopted to apportion the expenses between the two segments; and that where the assessee followed the matter of allocation of the common expenses on the basis of the cost of goods are sold, which was accepted by the Department in the earlier assessment years it is reasonable to follow the same thing for these assessment years also. The reason attributed by the Ld. CIT(A) for reaching this finding is that certain uniform procedures of allowing discounts to customers and the expenditure on personnel consists of salaries and other benefits to production and sales manpower, staff b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Each method will have its own variance of the estimate. 7. As observed by the Ld. CIT(A), the sale of hybrid seeds comprises of seeds produced on loan and seeds purchased from outside, and all the activities of sales promotion, administration etc., are incurred jointly for both the segments. Further according to the Ld. CIT(A) staff benefits to sales personnel is predominant in the total personal cost and the cost of goods sold represents the cost of production as adjusted to the opening and closing stock of seeds, which reflects the quantity of sales at cost price. For these reasons, Ld. CIT(A) accepted the contention of the assessee that the expenditure allocation between agricultural and non-agricultural activities on the basis of cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of the Hon ble Apex Court reported in Rotork Controls India (P) Ltd Vs.CIT (2009) 180 Taxman 422 (SC) for the principle that a provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation - and then only a protein can be recognised. He submitted that the learned Assessing Officer clearly held that the assessee, for the 1st time, has created a provision for sales written which is nowhere adopted in the previous assessment years, and the said provision for sales written in itself does not qualify to be allowable as Revenue expenditure because such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 5,78,55,610/- as sales returns, as per the information available before the finalisation of the financial statements and the cost attributable to the sales returns was Rs. 3.29 Crores which was shown as part of the closing stock as reflected in the schedule. In the circumstances he submits that the assessee provided the actual sales returns for the month of April, May and June, 2014 for each grade of seeds sold. He further submits that the financial statements are drawn based on certain assumptions and estimates and is not possible to estimate accurately the provisions that may have to be made to finalise the financial accounts and a reasonable basis of estimation developed over a period of business experience is used to establish the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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