The Ahamedabad bench of the Income Tax Appellate Tribunal ( ITAT ) allowed sale expenditure on packing material in jute bags that had been rendered unusable due to damage sustained during loading and unloading.
The Assessing Officer during the assessment proceedings that the assessee had claimed sales and administrative expenses amounting to Rs. 10,87,725/-, as indicated in Schedule-3 of the Audit Report, which included a write-off for “bardan” amounting to Rs. 1,31,875/-.
The Assessing Officer’s perspective was that since the packing material “bardan” was part of the inventory, depreciation on it would not be permissible. Consequently, the Assessing Officer concluded that the entire amount of Rs. 1, 31, 875/- written off for “bardan” is not allowable, and thus added this amount to the taxpayer’s total income.
The counsel for the assessee Kinjal Shah argued that the total sum of Rs. 1,31,875/- charged to the Profit & Loss Account is entirely and exclusively for the purpose of reducing the value of jute bags. These bags were written off as business expenses and have been consistently claimed and allowed in previous years.
The counsel for the assessee argued that the mentioned sum of Rs. 1,31,875/- pertains to jute bags utilized as packing material, which are now deemed unusable. Consequently, these bags have been written off and accounted for as an expense in the Profit & Loss Account. The representative contended that the Assessing Officer did not question the authenticity of this expenditure. Therefore, considering the circumstances, the Learned Commissioner of Income Tax ( Appeals ) appropriately approved the aforementioned expenses.
The counsel for the revenue Saumya Pandey Jain, primarily based their argument on the findings put forth by the Assessing Officer in the aforementioned order. Conversely, the representative for the taxpayer predominantly referred to the remarks made by the Commissioner of Income Tax (Appeals) in the appellate decision. Additionally, the Cross Objection submitted by the taxpayer primarily supports the observations made by the Commissioner of Income Tax ( Appeals ) in the appellate decision.
The two member bench of the tribunal comprising Anupama Gupta ( Judicial member ) and Siddartha Nautiyal ( Accountant member ) found that the Commissioner of Income Tax ( Appeals ) accurately determined in the ITO vs. M/s. J. K. Patel & Brothers for Assessment Years 2008-09 & 2009-10, that the entire expense of Rs. 1, 31,875/- was solely and exclusively for business purposes and was supported by evidence. Additionally, the bench believed that this expenditure pertained to packing materials in jute bags that had been damaged or torn during loading and unloading, rendering them unusable and therefore written off as an expense in the Profit & Loss Account. Consequently, we saw no reason to question the decision of the Commissioner of Income Tax ( Appeals ) and thus found no grounds for intervention.
In the result, the revenue appeal was dismissed
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