9911796707
TMI Blog2022 (6) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were to recover expenditure between own production and trading of seeds on the cost of goods sold (CoGS), thereby determined the income. Learned Assessing Officer, however did not accept this allocation of common expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 benefits to sales personnel is predominant in the total personal cost, the cost of goods sold and represents the cost of production as adjusted to the opening and closing stock of seeds, which reflects the quantity of sales at c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistration 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 cost of goods sold reflects appropriate allocation of common cost. It is pertinent to note that as rightly observed by the Ld. CIT(A) every methodology of estimation suffers from limitation and such limitations causing variations how to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obable 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 a provision is created for an unascertained liability. He further submitted that, as a matter of fact, the learned Assessing Officer noticed that the return value of the goods was at Rs. 12,77,32,150/- whereas the actual provision for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 year end provisions. 11. We have perused the impugned order. It is a fact that the assessee supplies seeds to its distributors located in the states of Kerala, Andhra Pradesh and Karnataka and after the season is complete the sales distributo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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