Patel Air Temp(India) Ltd, Gandhinagar V. The Dy.CIT Circle -5, Ahmedabad

CO 280/AHD/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7107 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 27-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P M MEHTA
• Assessee Lawyers: ILAVARASI
• Keywords: Business income; Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2803 / AHD/2009 (ASSESSMENT YEAR 2006-07) DCIT, CIRCLE 5, AHMEDABAD VS. M/S. PATEL AIRTEMP (INDIA) PVT. LTD., 805-806, RAKANPUR, TAL. KALOL, GANDHINAGAR, AHMEDABAD. PAN/GIR NO. : AABCP1375K C.O.NO.280/AHD/2009 (ASSESSMENT YEAR 2006-07) M/S. PATEL AIRTEMP (I)P.LTD., VS. DCIT, CIRCLE 5, 805-806, RAKANPUR, TAL. KALOL, AHMEDABAD GANDHINAGAR, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: MS. ILAVARASI, SR. DR RESPONDENT BY: SHRI P M MEHTA, AR DATE OF HEARING: 04.04.2012 DATE OF PRONOUNCEMENT: 18.05.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THE APPEAL IS FILED BY THE REVENUE AND THE CROSS O BJECTION IS FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDE R OF CIT(A), GANDHINAGAR, DATED 31.07.2009 FOR THE ASSESSMENT YE AR 2006-07. THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL ARE AS UNDER: I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 2 1. THE ID. COMMISSIONER OF INCOME-TA X(A) GANDHINAGAR HAS ERRED IN LAW AND ON FACTS IN DELETING THE AD DITION OF RS.25,13,417/- MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IB OF THE IT ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E. THE LD. COMMISSIONER OF INCOME-TAX (A), GANDHINAGAR OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. , 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE I D. COMMISSIONER OF INCOME-TAX, GANDHINAGAR MAY BE SET ASIDE AND THAT O F THE ASSESSING .OFFICER BE RESTORED. 2. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, TH E GROUNDS RAISED BY THE ASSESSEE ARE THAT LD. CIT(A) HAS ERRED IN NOT A LLOWING ENTIRE DEDUCTION OF RS.29,85,313/- CLAIMED BY THE ASSESSEE U/S 80-IB AND RESTRICTING THE SAME TO RS.25,36,658/-. 3. BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 2.2 OF HIS ORDER WHICH IS REPRODUCED BELOW: THE A.O. WHILE VERIFYING THE PURCHASE BILLS AND MA TERIAL EXPENSES BILLS OF UNIT-III, CAME ACROSS CERTAIN DISCREPANCIE S LIKE THE ADDRESS OF THE COMPANY WRITTEN AS 805-810 OR NO SPECIFIC PL OT NUMBER WRITTEN ETC. THE DISCREPANCIES ARE DETAILED IN PAR A-5.1 OF THE ASSESSMENT ORDER. THIS LED HIM TO ASK FOR UNIT-WISE ACCOUNTS, WHEN HE FURTHER FOUND THAT THE ASSESSEE HAS NOT DEBITED SOME OF THE EXPENSES TO UNIT-IV. HE ALSO OBSERVED THAT THE APPE LLANT HAS SHOWN A PROFIT OF ONLY 7.36 % ON SATES-WITH RESPECT TO UN IT-III WHILE IT HAS SHOWN A PROFIT OF 43.4% OF THE SALES WITH RESPECT T O UNIT-IV. CONSEQUENTLY, HE FORMED THE OPINION THAT THE ASSESS EE HAS BEEN CHARGING ITS EXPENDITURE OF UNIT-IV TO UNIT-III FOR CLAIMING THE EXTRA BENEFIT OF DEDUCTION U/S.80IB. IN AN EFFORT T O COUNTER THE EXPLANATION GIVEN BY THE APPELLANT, THE ASSESSING O FFICER HAS APPENDED THE DETAILED PROFIT & LOSS ACCOUNT OF THE TWO UNITS ALONG WITH THE ASSESSMENT ORDER TO HIGHLIGHT MS POI NT THAT SOME OF THE MAJOR EXPENSES HAVE NOT BEEN DEBITED TO UNIT-IV . REJECTING THE APPELLANT'S CONTENTION, WHICH HAS BEEN PRODUCED IN DETAIL IN THE ASSESSMENT ORDER ALSO, THAT THE PROFITS EARNED FROM UNIT-IV ARE QUITE NOMINAL IN THE OVERALL WORKING OF THE APPELLA NT AND THAT UNIT- IV IS MANUFACTURING PRODUCTS DIFFERENT FROM THAT OF UNIT-III AND WHICH IS A MONOPOLISTIC ITEM, THE ASSESSING OFFICER PROCEEDED TO I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 3 RE-COMPUTE THE ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S.80IB. THE METHOD ADOPTED BY-THE ASSESSING OFFIC ER WAS TO COMPUTE THE PROFIT IN THE RATIO OF SALES' TURNOVER OF UNIT-IV TO THE TOTAL SALES TURNOVER OF THE COMPANY. CONSEQUENTLY, THE SAID ELIGIBLE PROFIT WAS WORKED OUT AT RS.18,91,873/-. FURTHER, T HE NON-ELIGIBLE PROFITS PERTAINED TO 'OTHER INCOME' WAS WORKED OUT AT RS.3,18,884/- AND THEREBY THE RESULTANT AMOUNT OF D EDUCTION AVAILABLE U/S.801B WAS WORKED OUT AT RS.4,71,896/-. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) WHO HAS HELD THAT THE ASSESSEE IS ELIGIB LE FOR DEDUCTION U/S 80-IB TO THE EXTENT OF RS.25,35,658/-. HE DIRECTED THE A.O. ACCORDINGLY. NOW, THE REVENUE IS IN APPEAL FOR THE RELIEF ALLOWE D BY CIT(A) AND THE ASSESSEE HAS FILED CROSS OBJECTION FOR DISALLOWANCE CONFIRMED BY THE LD. CIT(A). 5. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A) FOR REVE NUES APPEAL. HE FURTHER SUBMITTED THAT LD. CIT(A) SHOULD HAVE ALLOW ED THE ENTIRE DEDUCTION U/S 80-IB CLAIMED BY THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT CIT(A) HAS DECIDED THE ISSUE ON THE BASIS OF R ELEVANT WORKING OF PROFIT OF UNIT III AND UNIT IV SUBMITTED BEFORE HIM , WHICH ARE REPRODUCED BY HIM IN PARA 2.3.3 AND 2.3.4 OF HIS ORDER. BOTH THESE PARAS OF THE ORDER OF LD. CIT(A) ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 2.3.3. DURING THE APPELLATE PROCEEDINGS, THE APPEL LANT'S AUTHORISED REPRESENTATIVE CAME UP WITH A STATEMENT THAT CONSEQ UENT TO QUERIES RAISED BY THE ASSESSING OFFICER, IT V FOUND BY THE APPELLANT THAT SOME OF THE INDIRECT EXPENSES REMAINED TO BE ALLOCA TED TO UNIT-1 ALL OF THEM HAVING BEEN ALLOCATED TO UNIT-111. T HESE EXPENSES WERE UNDER THE HEAD EMPLOYEE'S EMOLUMENTS, MANUFACT URING EXPENSES AND ADMINISTRATIVE AND SALES EXPENSES CONS EQUENTLY IF I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 4 11.25% OF THESE EXPENSES I.E. IN .THE RATIO OF THE TURNOVER OF UNIT- IV WITHDRAWN FROM UNIT-111 ARE ALLOCATED TO UNIT-IV , THE PROFIT OF THE UNIT SHALL GET REDUCED RS.86,95,903/- INSTEAD OF RS.L,34,76,878/- AND THE, DEDUCTION ON. SUCH PROFIT WOULD RS.25.37 LAKHS AFTER CONSIDERING THE DEPRECIATION AS PER THE IT. ACT. THE COMPUTATION PROVIDED BY-HIM IS AS FOLLOWS: SR: NO. PARTICULARS UNIT-HI LESS 11.25% * UNIT-IV NET UNIT-HI UNIT-IV (A) 1. INCOME SALES 217,389,870 217,389,870 27,529,01 2. INCREASE / DECREASE STOCK (10,709,117) -' (10,769,117) (5,485,820 3. OTHER INCOME 11-,066,763 - 11,066,763 .129,58 TOTAL 217,747,516 : 217,747,516 22,172,78 (B) 1. EXPENDITURE MATERIAL CONSUMED 132,702,728 . - 132,702,728 6,439,262 2. INTEREST & FINANCE CHARGES 10,752,393 -. 10,752,393 816;714 3. DEPRECIATION & BAL. WRITTEN OFF ' 8,434,511 . . . 8,434,511 1,758,651 4.' EMPLOYEE'S EMOLUMENTS 5,582,681 - 5,582,681 648,766 5. EMPLOYEE'S EMOLUMENTS 1,708,363 - 1,708,363 * . 6. MANUFACTURING ACTUAL EXP. 36,397,858 - 36,397,858 7. 'MANUFACTURING EXP. 4675,605 526,005 4,149,600 2,946,614 8. ADMINISTRATIVE & SELLING EXP. 2,795,572 - 2,795,572 866,871 9. ADMINISTRATIVE & SELLING EXP. 6,879,897 '773,988 6,105,909 ' TOTAL EXPENDITURE 210,172,608 1,492,184 208,680,424 13,476,878 (Q' PROFIT BEFORE TAXES (A-B) 7,574,908 (1,492,184) 9,067,092 8,695,903 11.25 IS TURNOVER OF UNIT-IV OF THE TOTAL TURNOVER OF UNITS III + IV. I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 5 2.3.4 BASED ON THE DEDUCTION U/S 80IB WAS WORKED AS FOLLO WS: PROFIT OF UNIT IV RS. 86,95,903/- ADD: DEPRECIATION PROVISIONS RS. 17,58,651/- RS.1,04,54,554/- LESS: DEPRECIATION AS PER STATEMENT RS. 19,95,6 95/- PROFIT RS. 84,58,859/- 30% THEREOF RS. 25,37,658/- 7. THEREAFTER, IT WAS HELD BY LD. CIT(A) IN PARA 2 .4.2 OF HIS ORDER THAT AS PER THE WORKING DISCUSSED IN PARA 2.3.4 OF HIS ORDER, PROFIT OF UNIT IV IS ELIGIBLE FOR DEDUCTION U/S 80-IB WHICH COMES TO RS.84,58,859/- AND 30% OF THE SAME IS RS.25,35,658/- WHICH SHOULD BE T HE AMOUNT OF DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80-IB. WE FIND THAT THE REVISED WORKING WAS SUBMITTED BY THE ASSESSEE ITSELF BEFORE LD. CIT(A) AND THE ISSUE WAS DECIDED BY LD/. CIT(A) IN ACCORDANCE WITH THE SAID WORKING ONLY. AS PER THE REVISED WORKING, AN AMOUNT OF RS. 5,26,005/- UNDER THE HEAD MANUFACTURING EXPENSES AND FURTHER AMOUNT OF R S.7,73,988/- UNDER THE HEAD OF ADMINISTRATIVE AND SALARY EXPENSES WERE ALLOCATED TO THE EXPENSES OF UNIT IV AND TO THIS EXTENT, EXPENSE OF UNIT III WERE REDUCED AND AS A RESULT, THE PROFIT OF UNIT III GONE UP AND PROFIT OF UNIT IV WENT DOWN. IT IS ALSO NOTED BY THE LD. CIT(A) IN PARA 2 .4.1 OF HIS ORDER THAT THE EXPENSE WHICH ARE ALLOCATED BY THE ASSESSEE TO UNIT IV AS PER THE REVISED WORKING ARE EITHER INDIRECT AND OVER HEAD E XPENSE OR THE EXPENSES RELATING TO MARKETING, PRODUCTION AND DIRECTORS SA LARY WHICH HAS BEEN CHARGED EITHER TO UNIT III OR BOMBAY PROJECT OFFICE BUT THE SAME IS REQUIRED TO BE CHARGED PROPORTIONATELY TO UNIT IV A LSO. IN THE REVISED WORKING ONLY THIS ADJUSTMENT WAS DONE BY THE ASSESS EE ITSELF AND, THEREFORE, ON THIS ASPECT, THE ORDER OF LD. CIT(A) IS REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE ACTION OF THE A.O. IN WORKING I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 6 OUT PROFIT OF BOTH THE UNITS IN PROPORTION TO THE T URNOVER OF BOTH THE UNITS, CANNOT BE APPROVED WHEN AS PER THE CHART GIVEN BY T HE ASSESSEE REGARDING PROFIT PERCENTAGE OF BOTH THESE UNITS FOR EARLIER F OUR YEARS SHOWS THAT PROFIT OF UNIT III WAS ALWAYS AROUND 67% WHEREAS TH E PROFIT OF UNIT IV IS AROUND 40% IN ASSESSMENT YEAR 2004-05. WHEN THERE IS SO MUCH DIFFERENCE IN THE PROFIT PERCENTAGE OF BOTH THE UNI TS AS PER SEPARATE ACCOUNTS MAINTAINED BY THE ASSESSEE IN WHICH NO SPE CIFIC DEFECT HAS BEEN POINTED OUT BY THE A.O., THE ENTIRE PROFIT OF THE A SSESSEE CANNOT BE ALLOCATED TO BOTH THESE UNITS IN THE RATIO OF TURNO VER OF THESE TWO UNITS. CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REA SON TO INTERFERE IN THE ORDER OF LD. CIT(A) BECAUSE HIS ORDER IS AFTER CONS IDERING ALL THE RELEVANT FACTS AND, THEREFORE, WE DECLINE TO INTERFERE IN TH E ORDER OF LD. CIT(A). 8. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS C.O. FILED BY THE ASSESSEE ARE DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.2803 /AHD/2009 C.O.NO.280/AHD/2009 7 1. DATE OF DICTATION4/5 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER15/5.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.15/5 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 18/5 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.18/5 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18/ 5/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .