Business expenditure – Obsolescence allowance – Sections 36 and 145A of ITA, 1961 – Assessee following particular accounting policy from year to year consistent with provisions of section 145A – Concurrent finding of fact by appellate authorities that stock had been rendered obsolete – Loss allowable

1. CIT vs. Gigabyte
Technology (India) Ltd.

[2020] 421 ITR 21 (Bom.)

Date of order: 7^th
January, 2020

Business expenditure –
Obsolescence allowance – Sections 36 and 145A of ITA, 1961 – Assessee following
particular accounting policy from year to year consistent with provisions of
section 145A – Concurrent finding of fact by appellate authorities that stock
had been rendered obsolete – Loss allowable

In its return, the assessee
claimed losses towards stock obsolescence in respect of laptops and
motherboards. The A.O. held that the laptops and the motherboards which had a
long shelf life could not be considered to have become obsolete and disallowed
the losses in his order passed u/s 143(3) of the Income-tax Act, 1961.

The Commissioner (Appeals)
allowed the appeal filed by the assessee. The Tribunal held that the obsolete
stock which was not disposed of or sold was allowable as expenditure and
dismissed the appeal filed by the Department.

On appeal by the Revenue, the
Bombay High Court upheld the decision of the Tribunal and held as under:

‘i)    There were concurrent findings of fact recorded by the
Commissioner (Appeals) as well as the Tribunal that the laptops and
motherboards had been rendered obsolete. There were findings of fact in respect
of the assessee consistently following a particular accounting policy from year
to year, which was consistent with the provisions of section 145A.

ii)    The Tribunal was right in holding that the obsolete stock which
was not disposed of or sold was allowable as expenditure.’