Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Monday, 31 August 2015 12:28

Obsolete stock of software not saleable over a period of time is an allowable deduction - Hyderabad Tribunal

Written by
Rate this item
(1 Vote)


Obsolete stock not saleable over a period of time is an allowable deduction


1. Assessee engaged in the business of information technology and has two separate units - one for export oriented uniot and another for domestic tariff area unit

2. During the course of assessment proceedings u/s 143(3) A.O. observed that the assessee has debited Rs. 1,77,30,083/- to its P & L A/c on account of decrease in stock

3. assessee explained that the decrease in stock is on account of the software product written off i.e., “SEEC Mosaic Studio” which is a proprietary software product of Intellect SEEC Inc., USA, imported by the assessee company for re-sale in India

4. A.O. held that the claim of the assessee is a colourable device to set off the capital gain income that has arisen during the year. He, thus,
disallowed the debit of Rs.1,77,30,083 made to the P & L Account of the DTA Unit and brought it to tax

5. Assessee preferred appeal befor the CIT(A) who deleted the addition

6. Revenue moved to ITAT who after hearing both parties confirmed the view of CIT(A)

7. Appeal decided in favour of the assessee


The assessee has been importing the product at approximately half the price at which it resold. Thereafter, the assessee has waited for a reasonable period to sell the product and after three years when it could not sell the same only, the assessee has taken a commercial decision to write off the value at cost and therefore in our opinion, it is not a colourable device as held by the A.O. In view of the same, we do not see any reason to interfere with the order of the Ld. CIT(A) and ground raised by the Revenue is dismissed

Cases referred to

CIT vs. Hotline Teletube and Components Ltd. 12 DTR 311 (Del.) (HC)

Additional Info

Read 3523 times Last modified on Saturday, 13 February 2016 16:04
Anil B.

A practicing Chartered Accountant Anil B. acquired CA, CS and LL.B degrees with over 12 years of rich and diverse management experience across Banking & Financial Services, Insurance and the Logistics industry spanning various markets and geographies globally.

This email address is being protected from spambots. You need JavaScript enabled to view it.

Leave a comment

Thank you for reading! We welcome and appreciate your comments, but at the same time, make sure you are adding something valuable to this article. If you have any serious queries, suggestions or anything related to this article, feel free to share them, we really appreciate that.

If you want to give us any feedback or report any errors, you can email your concerns on and we'll revert back soon.

Most Popular Case Summary

  • Default
  • Title
  • Date
  • Random
load more hold SHIFT key to load all load all

Recommended Articles


Have you done Analysis of any Case? Tell Us About It.


All content herein is the copyright of Taxpundit. No images, text, or any other content may be, reproduced or redistributed without the express written consent of Taxpundit.

All Rights Reserved. All Content Copyright.


Subscribe to our newsletter and stay updated on the latest developments and special offers!

Company Master Data Since 1900. More than 1.75 Million Records. Register/Login to get FREE access. Read more
Toggle Bar