Nihon Parkerizing (India) Pvt Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that written off of obsolete inventory allowable as prepared in accordance with accounting standards and duly got prepared audited report of an independent auditor.
Facts- The case of the assessee was selected for scrutiny through CASS and a notice u/s 143(2) of the Income Tax Act, 1961 was sent to the assessee. The assessment order came to be passed by disallowing the expenses claimed u/s 40a(ia) of the Act of Rs. 16,38,113/- further disallowed the provision of bad debts return of Rs. 10,00,000/- and also disallowed the provision for inventory return of income of Rs. 52,51,027/-.
CIT(A) upheld the disallowance of Rs. 52,51,021/- in respect of traded goods written off and also disallowed the non-deduction of tax u/s. 40(a)(ia) of the Act. Being aggrieved, the present appeal is filed.
Conclusion- Coordinate Bench of the Tribunal in the case of M/s BG Exploration and Production India Ltd. Vs. DCIT has held that when the taxpayer has prepared obsolete inventory in accordance with the system of accounting regularly followed by it in compliance to section 211(3C) of the Companies (Accounting Standards) Rules, 2006 as amended and other relevant provisions of the Companies Act, 1956 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law.
