Atofina Peroxides India Ltd. Vs DCIT (Madras High Court)
Summary: The Madras High Court considered two appeals filed by Atofina Peroxides India Ltd. against a common order of the Income Tax Appellate Tribunal concerning Assessment Years 1993-94 and 1994-95. The Tribunal had upheld disallowances relating to foreign travel expenses, an addition based on estimated variation in consumption of raw materials, and a contribution of Rs.3,00,000/- made to Lady Ampthill Hospital.
The Tribunal found that the assessee had not substantiated its foreign travel expenses with the necessary bills and vouchers. On the issue of raw material consumption, the assessee, which was engaged in manufacturing polymerization initiators and cross-linking agent formulations, had been asked by the Assessing Officer to furnish details of the manufacturing processes, including the quantity of finished products, wastage, shortages, handling loss and other losses. According to the Tribunal, the brief note furnished by the assessee did not provide the necessary information. The Assessing Officer compared the quantitative information relating to raw materials consumed and goods manufactured and made an addition of Rs.13,02,479/- on account of excess consumption of raw materials. The CIT(A) upheld the addition.
The Tribunal further observed that the assessee had not furnished the necessary information regarding shortages, wastages and losses. It also noted that the information relating to quantity and percentage of production, wastage, yield and shortage was required in the audit report under Section 44AB, but that information had not been provided. According to the Tribunal, the material furnished by the assessee was insufficient to establish the comparative variation in consumption of raw materials with reference to production. It consequently upheld the addition.
