Tax Appeal v. Gigabyte Technology (India) Ltd.l-5, Verna Electronic City, Goa – 403 722.…

1 txa28-14dt.07-01-20 Santosh IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.28 OF 2014 Commissioner of Income Tax “Aaykar Bhavan”…... Patto, Panaji, Goa. Appellant. Versus Gigabyte Technology (India) Ltd.L-5, Verna Electronic City, Goa – 403 722.…...Respondent. Ms. Susan Linhares, Standing Counsel for the Appellant. Coram : M.S. Sonak & Smt. M.S. Jawalkar, JJ. Date : 7[th]January, 2020. ORAL JUDGMENT : (Per M.S. SONAK, J.) Heard Ms. Linhares for the Appellant. The Respondent,though served neither present, nor their Counsel is present. 2.This Appeal was admitted on the following substantialquestion of law : “Under the facts and circumstances of the case, whether theITAT is right in holding that the obsolete stock which isnot disposed off or sold is allowable as expenditureignoring the decision of Bombay High Court in the caseof CIT vs. Heredilla Chemicals Ltd.(Bom) 255 ITR 532 ? The circumstances in which the aforesaid substantial 2 txa28-14dt.07-01-20 question of law arises for determination, are as follows : (A)The Assessee filed e-return of income on 27[th] October,2007, declaring a total income of Rs.10,510/-, which was processedand assessment order was made under Section 143(2) of the IncomeTax Act, 1961 (IT Act); (B) The Assessee had claimed Rs.56,54,837/- as losses towardsstock obsolescence. The Assessing Officer, however, issued a showcause notice to the Assessee on the issue of obsolete in respect ofLaptops valued at Rs. 34,35,618/- and motherboards valued atRs.14,01,600/-; (C)Upon considering the response of the Assessee, the AssessingOfficer held that the laptops and the motherboards which have longshelf life cannot be considered as having become obsolete and,accordingly, disallowed the losses. (D)The Assessee appealed to the Commissioner of Income-tax(Appeals) and this appeal was allowed. (E)The Department then appealed to the Income TaxAppellate Tribunal (ITAT) which has, by the impugned Judgmentand Order dated 27[th] September, 2013, agreed with the view takenby the CIT (Appeals) and consequently, dismissed the Department'sappeal. Hence, the present Appeal on the aforesaid substantialquestion of law. 4.Ms. Linhares, learned Counsel for the Appellant has relied 3 txa28-14dt.07-01-20 upon the decision of this Court in Commissioner of Income-tax vs.Heredilla Chemicals Ltd.[1] to submit that mere writing off somemachinery by claiming that the same has become obsolete, is not agood ground for claiming any deduction for losses. She submits thatfor the present, there was no material on record that the laptops andmotherboards had actually been sold by the Assessee in order to makeany legitimate claim for the losses. She submits that inasmuch as thedecision in Heredilla Chemicals Ltd. (supra) of the jurisdictionalHigh Court has not been considered by the ITAT, the impugnedJudgment and Order warrants interference. 5.We have considered the contentions raised by Ms.Linhares, particularly in the context of the decision in HeredillaChemicals Ltd. (supra). However, according to us, the decision inHeredilla Chemicals Ltd. (supra) is distinguishable on facts and, willreally not apply to the fact situation in the present case. In thepresent case, there are concurrent findings of fact recorded by theCIT(Appeals), as well as ITAT that the laptops and motherboardshad indeed been rendered obsolete. There are findings of factregards the Assessee consistently following a particular accountingpolicy from year to year, which is quite consistent with the provisionsof Section 145A of the IT Act. Upon taking cognizance of thesedistinguishing features, the ITAT following the decisions of various 4 txa28-14dt.07-01-20 High Courts which are referred to in paragraph 6 of the impugnedJudgment and Order, has held in favour of the Assessee. 4 txa28-14dt.07-01-20 High Courts which are referred to in paragraph 6 of the impugnedJudgment and Order, has held in favour of the Assessee. 6.There is no case made out that the findings of fact recordedby the CIT (Appeals) and the ITAT concurrently, suffer from anyperversity as such. The ruling in Heredilla Chemicals Ltd. (supra)turns on its own peculiar facts. In the said case, the issue related to aparticular item of machinery i.e. PAN catalyst being renderedobsolete, was claimed merely by attempting to write off losses in itsaccounts in the previous year and relevant to the assessment year.This Court noted that even at the time of hearing of the Appeal, themachinery had not been sold despite the fact that the Assessee hadassured the authorities to bring back the sale proceeds of the same forassessment as and when it was sold. It is in such a situation that thisCourt held that the Assessee cannot said to have suffered any loss inthe previous year relevant to the assessment year under consideration.Such facts, obviously, are not found in the present case. The ruling inHeredilla Chemicals Ltd. (supra) is, therefore, distinguishable and,consequently, inapplicable to the fact situation in the present case. 7.We also found that the tax effect in the present case isRs.19.00 lakhs or thereabouts. Normally, the Appeal was, therefore,required to be withdrawn by the Appellant, taking into considerationthe CBDT Circular No.17/2019. However, it was pointed out that 5 txa28-14dt.07-01-20 this was a case in which audit objections had been raised. Withoutgoing into the issue of the CBDT Circular No.17/2019, we now findthat there is really no case made out to interfere with the impugnedJudgment and Order made by the ITAT. 8.We, therefore, answer the substantial question of law asframed, against the Department. This appeal is consequently liableto be dismissed and is, hereby, dismissed. There shall be no order asto costs. Smt. M.S. Jawalkar, J. M.S. Sonak, J.