ITAT deletes additions of Rs. 20.89 Lakhs on account of passing of the expiry date of product

The Income Tax Appellate Tribunal (ITAT), Delhi Bench in a relief to Hindustan Coca Cola deleted the additions of Rs. 20.89 Lakhs on account of passing of the expiry date of the product.

The assessee, Hindustan Coca Cola is a company engaged in the business of trading of non-alcoholic beverages. It filed its return of income declaring a loss of Rs. 25,80,27,830.

The assessee stated that approximately 10000 cases were pulled back by the assessee from the market in view of the exceptional quality issues. The assessee submitted that the quality issue is the pull back of inventory from the market on account of expiry of the products.

The assessee submitted that there is a life span of the beverages and beyond that it cannot be consumed and therefore, it has to be pulled back from the market. There cannot be any claim on this issue from anybody else as it is product risk, which is attached to the assessee only.

The AO did not believe in the assessee and held that there is no evidence with the risk of stock being on the assessee. The CIT(A) relying on his own decision for AY 2008-09 allowed 70% of such claims and confirmed the disallowance to the extent of 30%.

The coram consisting of Amit Shukla and Prashant Maharishi noted that naturally, the distributors will never make such a claim on their account when they are clearly distributing stock only. Naturally, that is the risk of marketing companies.

The ITAT did not find any justification to restrict allowance of such claims to the extent of 70%. Accordingly, the ITAT held that it should be allowed in its entirety. Such loss is neither stated to be contingent or non-existent.

Therefore, the ITAT reversed the order of the ld CIT (A) and directed the ld AO to delete the additions/ disallowances of Rs. 20,89,501 being lost on account of passing of the expiry date of the product.

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