Case Law Details
Deepak Fertilisers & Petrochemicals Corporation Ltd. Vs. DCIT (ITAT Mumbai)- Whether the assessee is entitled to claim expenses for obsolete stores/ spares on provisional basis or it will be allowed in the year in which it is sold –
The assessee had written off the sum of Rs. 11,20,000/- on account of items considered obsolete. Such items included instrument items, cement, paint and paint materials, safety shoes and dress material. The Assessing Officer disallowed the claim of the assessee following the Bombay High Court judgement in the case of Herdilla Chemicals Ltd. 225 ITR 532 wherein it was held that such loss cannot be claimed in any year in which assessee likes.
Such loss can be claimed only in the year in which such items are sold and disposed off. On appeal, the dis-allowance made by Assessing Officer was confirmed. Aggrieved by the same the assessee is in appeal before the Tribunal for all the years. Contention raised on behalf of the assessee is that the decision of the Bombay High Court did not consider the Accounting Standard prescribed by the Institute of Chartered Accountants which were binding on the assessee. Therefore, the said decision should not be relied. It was also contended that the stocks can be valued at cost or market value as per the decision of Honourable Supreme Court in the case of Chainrup Sampatram 24 ITR 481. In our opinion both the contentions are without force. Normally, the Accounting Standards is accepted but it cannot override the provisions of the I. T. Act as held by the Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. 227 ITR 172. The Judgment of Bombay High Court would therefore apply to the present case wherein it has been clearly held that loss can be claimed only in the year in which such items are sold. The decision of Supreme Court in the case of Chainrup Sampatram (supra) is applicable only where stock in trade is to be valued and not other tems. In the present case, the items written off do not form part of stock in trade. Hence, the said decision would not apply. No other contention has been raised. Therefore, following the judgement of Bombay High Court in the case of Heredilla Chemicals Ltd (supra) we do not find any merit in the appeals of the assessee on this issue. The orders of the learned CIT(A) are therefore upheld on this issue.
Whether dis-allowance u/s 14A can be made applying Rule 8D even prior to A.Y. 2008-09 –
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