Prontos Private Limited Vs ITO (ITAT Chandigarh)
ITAT Removes Branch Stock Addition After Holding Unsold Goods Were Not Taxable Income; ITAT Deletes Closing Stock Addition Because Branch Stock Represented Recoverable Sales
The ITAT Chandigarh partly allowed the assessee’s appeal for AY 2013-14 involving two additions: disallowance under Section 40(a)(ia) of Rs.1,26,708 and addition of Rs.7,43,098 relating to branch office closing stock.
On the disallowance under Section 40(a)(ia), the assessee had paid professional charges of Rs.1,26,708 without deducting tax at source under Section 194J, contending that the payment made to each individual payee was below the threshold limit of Rs.30,000. The Assessing Officer disallowed the expenditure due to lack of documentary evidence, and the CIT(A) upheld the disallowance. The Tribunal examined the ledger and found that the payments were made to multiple payees, with no individual payment exceeding the prescribed threshold. Since the assessee was not required to deduct TDS, the Tribunal deleted the disallowance.
Regarding the addition for branch office stock, the Assessing Officer treated the closing inventory of Rs.7,43,098 as omitted from the Profit & Loss Account. The assessee explained that finished goods transferred from the head office to the Dera Bassi branch were recorded as sales, while the branch sold them at the same price, with the remaining stock representing goods yet to be sold. The Tribunal observed that the branch was effectively a debtor of the head office to the extent of the unsold stock, and the difference between opening and closing stock did not constitute profit or loss. It held that the lower authorities had failed to appreciate these facts and deleted the addition. As the appeal succeeded on merits, the Tribunal treated the legal grounds as academic and infructuous.
