Case Law Details
DCIT Vs Prabhat Agri Biotech Limited (ITAT Hyderabad)
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 distributors identify the stock of seeds of various varieties which are not sold by the end of Ruby season of plantation. As a matter of fact Ld. CIT(A) noted that the distributors how to return the unsold stock after the end of the season and if such receipts are to be sold subsequently they need appropriate preservation and chemical treatment to sustain its utility; and that the stock of seeds is subsequently received in April, May, June and July; that at the time of receipt of the stock the seeds are taken into stock with appropriate adjustment to the customers/sales distributors outstanding balance and such a practice is part of the said business and is driven more by the seasonal nature of the business and also on account of short shelf life of the seeds. In the circumstances Ld. CIT(A) satisfied that, inasmuch as all the sales returns are subsequently taken into stock in the books of the assessee, the provision for sales return cannot be treated as an asset and liability.
We do not find anything perversity in the findings of the Ld. CIT(A). In view of the seasonal nature of the business and also the short shelf life of the seeds, it is imperative for the assessee to take into account the quantity of unsold seats at the end of the year and the need to revalidate their further utility and to take them into stock in the next season. In the circumstances it cannot be said that the provision for sales returns is unascertained or unreasonable. With this view of the matter, we allow the contentions of the assessee and uphold the findings of the Ld. CIT(A).
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
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