M/s Ramani Ice Cream Co Pvt. Ltd., Bhopal V. The ACIT 2(1), Bhopal

CO 41/IND/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8705 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: R N GUPTA
• Section: 143(3); 37(1); 194C

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.15/IND/2013 A.Y. 2008-09 ACIT-2(1), BHOPAL :: APPELLANT VS RAMANI ICE CREAM CO. P. LTD., BHOPAL PAN AABCR 4589 H :: RESPONDENT AND, CROSS-OBJECTION NO.41/IND/2013 (ARISING OUT OF ITA NO.15/IND/2013) A.Y. 2008-09 RAMANI ICE CREAM CO. P. LTD., BHOPAL PAN AABCR 4589 H :: OBJECTOR VS. ACIT-2(1), BHOPAL :: RESPONDENT 2 DEPARTMENT BY SHRI R.A. VERMA, SR. DR ASSESSEE BY SHRI R.N. GUPTA, CA DATE OF HEARING 25 . 6. 2013 DATE OF PRONOUNCEMENT 25 . 6 .2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE AND ASSESSEE, BOTH ARE AGGRIEVED BY THE IMPUGNED ORDER DATED 15.10.2012, PASSED BY THE LEARNE D FIRST APPELLATE AUTHORITY, BHOPAL. IN THE APPEAL OF THE REVENUE, THE ONLY GROUND RAISED PERTAINS TO DELETION OF ADDITION OF RS.62,83,022/- MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE CRUX OF THE ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT TO T HE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF 3 PRODUCTION OF ICE CREAM, DECLARED TOTAL INCOME OF RS. 49,24,850/- IN ITS RETURN FILED ON 30 TH SEPTEMBER, 2008. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE DEBITED EXPENSES OF RS.62,83,022/- IN ITS PROFIT AND LOSS ACCOUNT UNDER THE HEAD PACKING MATERIAL. THE DETAILS O F PACKING MATERIAL ARE SUMMARISED AS UNDER :- I S.NO. I PARTICULARS AMOUNT (RS.) 01 LIDS 10,94,933 02 STICKERS 1,59,509 03 FLEXIBLE LAMINATES 26,79,206 04 CORRUGATED BOXES 23,49,374 TOTAL 62,83,022 THE LEARNED ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHETHER TDS HAS BEEN DEDUCTED ON THE CLAIMED EXPENDITURE ON PACKING MATERIAL. THE ASSESSEE EXPLAINED THAT THE PACKING MATERIAL WAS PURCHASED FROM INDEPENDENT MANUFACTURER. IT WAS ALSO EXPLAINED THAT EXCISE DUTY AND SALES TAX ON THE MANUFACTURED MATERIAL WAS PAID BY THE MANUFACTURER WHICH IS INCLUDED IN THE INVOICE RAISED ON THE 4 ASSESSEE. A PLEA WAS ALSO RAISED THAT THE TRANSACTION OF SALE WAS OF PACKING MATERIAL ON PRINCIPAL TO PRINCIPAL BAS IS AND AS SUCH IT WAS NOT A WORKS CONTRACT, THEREFORE, THE SAME DOES NOT FALL WITHIN THE MEANING OF SECTION 194C OF THE ACT. THIS PLEA OF THE ASSESSEE COULD NOT FIND FAV OUR AT THE ASSESSMENT STAGE. THE ASSESSING OFFICER HELD THAT IT WAS NOTHING BUT A WORKS CONTRACT BETWEEN THE ASSESSEE AND THE SUPPLIER AND SINCE THE ASSESSEE HAS NOT DEDUCTE D TDS U/S 194C, THE DISALLOWANCE OF THE CLAIMED EXPENDIT URE OF RS.62,83,022/- WAS MADE U/S 40(A)(IA) OF THE ACT. THE ASSESSMENT WAS ACCORDINGLY COMPLETED U/S 143(3) OF TH E ACT AT AN INCOME OF RS.1,14,57,880/- ON 30 TH OCTOBER, 2010. 2.1 ON APPEAL, THE LEARNED CIT((A) MADE A COMPARATIVE STUDY OF THE PACKING MATERIAL FROM ASSESSMENT YEAR 2006-07 TO 2008-09 AS UNDER :- 5 PARTICULARS ASSESSMENT YEAR 2006-07 2007-08 2008-09 LIDS 1163000 1212600 1094933 STICKERS 214000 107720 159509 FLEXIBLE LEMINATES 2221000 2010800 2679206 CORRUGATED BOXES 1310000 1579000 2349374 MILK POUCH FILM 1006000 763531 TOTAL 5914000 5673651 6283022 THE LEARNED CIT(A) ALSO CONSIDERED FOLLOWING JUDICIAL PRONOUNCEMENTS :- (I) CIT VS. GLENMARK PHARMACEUTICALS LTD. (2010) 324 IT R 199 (BOM) (II) CTI VS. DABUR INDIA LTD. (2006) 283 ITR 197 (DEL.) (III) BDA LTD. VS. ITO (TDS) (2006) 281 ITR 99 (BOM.) (IV) CIT VS. DR. CHIEF ACCOUNT OFFICER. KHANNA (2008) 304 ITR 17 (P & H) (V) ACIT VS. M/S LILASONS INDUSTRIES LTD. - ITA NO.268/ IND/2009 FOR A.Y. 2006- 07, ORDER DATED 25.06.2010. (DECISION OF ITA T, IND ORE BENCH) (VI) ACIT VS. MIS LILASONS INDUSTRIES LTD. - ITA NO .607/IND/2010 FOR A.Y. 2007- 08, ORDER DATED 24.11.2011. (DECISION OF ITAT, IN DORE BENCH) (VII) CIT VS. REEBOK INDIA CO. 17 DTR (DEL) 274 ( 2006) 100 TTJ (DEL) 976 (VIII)TUREG MARKETING PVT. LTD. VS. ACIT (2009) 122 TTJ (DEL.) 343 (IX ) ITO VS. DR. WILLMARE SCHWABLE (INDIA) PVT. L TD. (2005) 95 TTJ 53 (DEL) (X) BANGLORE DISTRICT CO-OP MILK PRODUCERS' SOCIET IES UNION LTD.VS. ITO (2007) 11 SOT 539 (BANG.) (XI)NOVARTIS HEALTH CARE PVC LTD. VS. ITO (2009) 29 SOT 425 (MUM) (XII)JINDAL PHOTO FILMS LTD. VS. ITO (2006) 5 SOT 272 (DEL) (XIII) WADILAL DIARY INTERNATIONAL VS CIT (2002) 81 ITO 238 (PUNE) (XIV)ITO VS. MILLAN DIARY FOODS PVT. LTD. (2006) 10 5 TTJ 252 (DEL.) 6 ON APPRECIATION OF FACTS AND THE AFORESAID JUDICIAL PRONOUNCEMENTS, THE LEARNED CIT(A) CONCLUDED AS UNDE R :- 4.4 I HAVE CAREFULLY CONSIDERED THE SUBMI SSION OF THE APPELLANT AND REASONS RECORDED BY THE AO WHILE MAKING DISALLO WANCE OF RS.62,83,022/- U/S 40(A)(IA) OF THE ACT. IT MAY BE NOTED THAT THE SAME ISSUE WAS INVOLVED IN THE APPELLANT'S CASES IN EARL IER YEARS AND THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE ITAT IN THE APPELLANT'S CASE FOR A.Y. 2006-07 IN ITA NO. 35/IND/20 12 ORDER DATED 12.04.2012. THE HON'BLE ITAT NOTICED THAT THE ASSESSEE WAS PURC HASING MATERIAL FROM INDEPENDENT MANUFACTURERS WHO WERE PRODUCING M ATERIAL AS PER THE SPECIFICATIONS PROVIDED BY THE CUSTOMERS AND WERE U NDERTAKING SALES OF THESE PACKING MATERIALS ON THE BASIS OF PURCHASE OR DERS ISSUED BY THE ASSESSEE. THE EXCISE DUTY AND SALES TAX ON THE MANU FACTURE & SALE OF PACKING MATERIAL WAS INCLUDED IN INVOICE RAISED ON THE ASSESSEE. THERE IS NO DISPUTE THAT OWNERSHIP OF THE PACKING MATERIA L WAS PASSED ON THE ASSESSEE ONLY AFTER THE MATERIAL WAS DELIVERED TO T HE ASSESSEE. IN CASE, PACKING MATERIAL IS DAMAGED OR DESTROYED BEFORE ITS DELIVERY TO THE ASSESSEE, THE LOSS IS TO BE BORNE BY THE MANUFACTUR ER AND NOT BY THE ASSESSEE. FURTHER THE PURCHASE OF PACKING MATERIAL WAS MADE PRINCIPAL TO PRINCIPAL BASIS. AS PER THE PURCHASE ORDER, THER E WAS NO ELEMENT OF WORK INVOLVED AND INVOICE RAISED ON THE ASSESSEE DI D NOT BEAR ANY BREAK UP OF COST OF MATERIAL AND COST OF LABOUR. O N CONSIDERING THESE FACTS, THE ITAT OBSERVED THAT THE TRANSACTION OF THE ASSESSEE WAS TRANSACTION OF SALE & PURCHASE OF PACKING MATER IAL ON PRINCIPAL TO PRINCIPAL BASIS. IT WAS NOT A WORK CONTRACT AND, TH US, DID NOT FALL WITHIN THE MEANING OF SECTION 194C. THE HON'BLE ITAT ALSO REFE RRED TO THE DECISIONS IN THE CASES OF GLENMARK PHARMACEUTICALS LIMITED 324 [TR 199; CIT VS. GIRNAR FOOD & BEVERAGE (P) LTD. (2008) 306 ITR 23; CIT VS. DY. CHIEF ACCOUNTS OFFICER, MARKFED KHANNA BRAN CH (2008) 304 ITR 17; EAST INDIA HOTELS LTD. VS. CBOT (2009) 21 OTR ( BORN.) 244; CIT VS. PODAR CEMENT (P) LTD. (1997) 226 ITR 6 25; ALLIED MOTORS (P) LTD. V. CIT (1997 ) 224 ITR 677; CIT VS., ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 ; BRIJ MOHAN DAS LAXMAN DAS VS. CIT AIR 1997 SC 1651; K. GOVINDAN & SONS VS. CIT (2001) 247 ITR 192; DR. WIL LMOR SEHWABE INDIA PVT. LTD. 95 TTJ 53. THE HON'BLE ITAT CONCLUD ED IN PARA 10 OF THE ORDER AS UNDER:- '10. APPLYING THE PRINCIPLES LAID DOWN IN THE CASES DISCUSSED ABOVE TO THE FACTS OF INSTANT CASE, WE CAN SAFELY R EACH TO THE CONCLUSION THAT PAYMENT MADE BY THE ASSESSEE FOR PU RCHASE OF PRINTED PACKING MATERIALS AS PER SPECIFICATION OF A SSESSEE DOES NOT AMOUNT TO WORK CONTRACT BUT IN THE NATURE OF CO NTRACT OF 7 PURCHASE/ SALE. IT IS NOT IN DISPUTE THAT THE SUPPL IER HAS MANUFACTURED THE PACKING MATERIALS ON THE BASIS OF PURCHASE ORDER ISSUED BY THE ASSESSEE. THE EXCISE DUTY AND S ALES TAX ON THE MANUFACTURE AND SALE OF PACKING MATERIAL WAS BORNE BY MANUFACTURERS AND WAS INCLUDED IN THE INVOICES RAIS ED ON THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT OWNERSHIP A/THE PACKING MATERIAL PASSED ON TO THE ASSESSEE ONLY AFTER THE M ATERIAL WAS' DELIVERED TO THE ASSESSEE. THE PURCHASE OF PACKING WAS DONE ON PRINCIPAL TO PRINCIPAL BASIS AND THERE WAS NO EL EMENT OF ANY WORK INVOLVED. FURTHERMORE, THE INVOICE RAISED ON THE ASSESSEE BY THE MANUFACTURER DOES NOT BEAR ANY BREAK UP OF T HE COST OF MATERIAL OR THE COST OF LABOUR. ALL THE RAW MATERIA LS SO REQUIRED FOR MANUFACTURING OF THE ITEMS ORDERED BY THE ASSES SEE WAS PROCURED BY THE SUPPLIER HIMSELF AND NO MATERIAL WA S SUPPLIED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY JU STIFICATION FOR TREATING SUCH TRANSACTION AS A WORK CONTRACT WI THIN THE MEANING OF SECTION 194C ' THE ISSUE INVOLVED IN THE INSTANT APPEAL FOR A.Y. 2 008-09 IS IDENTICAL AS WAS IN A.Y. 2006-07. RESPECTFULLY FOLLOWING THE DEC ISION OF HON'BLE ITAT IT IS HELD THAT THE PURCHASE OF PACKING MATERIAL AS PER SPECIFICATION WAS DONE ON PRINCIPAL TO PRINCIPAL BASIS AND SUCH TRANS ACTION WAS NOT A WORK CONTRACT WITHIN THE MEANING OF SECTION 194C. THEREF ORE, THE APPELLANT WAS NOT REQUIRED TO DEDUCT TDS U/S 194C ON THE PURC HASE OF PACKING MATERIAL AND THUS THERE IS NO QUESTION OF DISALLOWA NCE U/S 40(A)(IA) OF THE EXPENDITURE IN RESPECT OF PACKING MATERIAL PURCHASE D BY THE APPELLANT. HENCE, THE DISALLOWANCE OF RS. 62,83,022/- U/S 40(A )(IA) OF THE IT ACT MADE BY THE AO IS DELETED. THESE GROUNDS OF APPEAL ARE THUS ALLOWED. 2.2 WE FIND THAT IN EARLIER ASSESSMENT YEAR I.E. 2006- 07 ALSO IN THE CASE OF THE ASSESSEE, ON THE IDENTICAL ISSU E THE MATTER TRAVELLED TO THE TRIBUNAL WHEREIN VIDE ORDER DAT ED 12 TH APRIL, 2012 (ITA NO. 35/IND/2012) THE TRIBUNAL CONSIDERED THE ISSUE AND FURTHER FOLLOWED THE SAME FO R THE A.Y. 2007-08 (ITA NO. 224/IND/2012) ORDER DATED 31 ST 8 JANUARY, 2013 IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE SAID ORDER OF THE TRIBUNAL FOR THE A.Y . 2006- 07 IS REPRODUCED HEREUNDER :- 10 APPLYING THE PRINCIPLES LAID DOWN IN THE CASES DISCUSSED ABOVE TO THE FACTS OF INSTANT CASE, WE CAN SAFELY REACH TO THE CONCLUSION THAT PAYMENT MADE BY THE ASSESSEE FOR PURCHASE OF PRINTED PACKING MATERIALS AS PER SPECIFICATION OF ASSESSEE DOES NOT AMOUNT TO WORK CONTRACT BUT IN THE NATURE OF CONTRACT OF PURCHASE/SALE. IT IS NOT IN DISPUTE THAT THE SUPPLIER HAS MANUFACTURED THE PACKING MATERIALS ON THE BASIS OF PURCHASE ORDER ISSUED BY THE ASSESSEE. THE EXCISE DUTY AND SALES TAX ON THE MANUFACTURE AND SALE OF PACKING MATERIAL WAS BORNE BY MANUFACTURERS AND WAS INCLUDED IN THE INVOICES RAISED ON THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT OWNERSHIP OF THE PACKING MATERIAL PASSED ON TO THE ASSESSEE ONLY AFTER THE MATERIAL WAS DELIVERED TO THE ASSESSEE. THE PURCHASE OF PACKING MATERIAL WAS DONE ON PRINCIPAL TO PRINCIPAL BASIS AND THERE WAS NO ELEMENT OF ANY WORK INVOLVED. FURTHERMORE, THE INVOICE RAISED ON THE ASSESSEE BY THE MANUFACTURER DOES NOT BEAR ANY BREAK UP OF THE COST OF MATERIAL OR THE COST OF LABOUR. ALL THE RAW MATERIALS SO REQUIRED FOR MANUFACTURING OF THE ITEMS ORDERED BY THE ASSESSEE WAS PROCURED BY THE SUPPLIER HIMSELF AND NO MATERIAL WAS SUPPLIED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY JUSTIFICATION FOR TREATING SUCH TRANSACTION AS A WORK CONTRACT WITHIN THE MEANING OF SECTION 194C. 9 2.2 IF THE FACTS OF THE PRESENT ASSESSMENT YEAR ARE KEPT IN JUXTAPOSITION WITH THE FACTS OF EARLIER ASSESS MENT YEARS, WE FIND THAT IN THE IMPUGNED YEAR ALSO THE EXCIS E DUTY ON THE MANUFACTURED GOODS AND SALES TAX ON THE SALE THEREOF WAS PAID BY THE MANUFACTURER HIMSELF WHICH WAS INCLUDED IN THE INVOICE RAISED ON THE ASSESSEE, MEANIN G THEREBY THE FACTS ARE IDENTICAL. IN THE ABSENCE OF ANY CONTRARY MATERIAL AVAILABLE ON RECORD AND MORE SPECIFICALL Y THAT THE OWNERSHIP OF THE PACKING MATERIAL WAS PASSED ON THE ASSESSEE, THE PURCHASE OF PACKING MATERIAL WAS MADE ON PRINCIPAL TO PRINCIPAL BASIS AND THE PURCHASE OF PACK ING MATERIAL WAS AS PER THE SPECIFICATION, IT IS HELD THAT IT WAS NOT A WORKS CONTRACT WITHIN THE MEANING OF SECTION 194 C OF THE ACT, CONSEQUENTLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS U/S 194C OF THE ACT, THUS THERE WAS NO QUESTION OF DISALLOWANCE U/S 40(A)(IA) OF THE EXPENDITU RE IN RESPECT OF PACKING MATERIAL PURCHASED BY THE ASSESSEE. W E, 10 THEREFORE, AFFIRM THE CONCLUSION DRAWN IN THE IMPUGN ED ORDER. IN THIS VIEW OF THE MATTER, THE APPEAL OF THE REVENUE FAILS AND DISMISSED AS SUCH. 3. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE WHEREIN SUSTAINING THE DISALLOWANCE OF RS.1,50,000/- OUT OF REPAIR AND MAINTENANCE, TRAVELLING EXPENSES AND OFFICE EXPENSES, HAS BEEN CHALLENGED. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT IT MAY BE RESTRICTED TO A REASONABLE LIMIT. ON THE OTHER HAND, THE LEARNED SENIOR DR DEFENDED THE DISALLOWANCE. 3.1 WE HAVE PERUSED THE RECORD AND CONSIDERED THE ARGUMENTS ADVANCED FROM BOTH THE SIDES. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED RS.16,35,620/- ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES, RS. 12,74,106/- AS TRAVELLING EXPENSES AND RS. 3,52,718/- AS OFFICE EXPENSES. THE ASSESSING OFFICER NOTICED THAT PART OF THESE EXPENSES WAS CLAIMED ON THE BASIS OF KACHA BILLS/S ELF 11 MADE VOUCHERS, THEREFORE, A LUMPSUM DISALLOWANCE OF RS.2,50,000/- WAS MADE. ON APPEAL BEFORE THE LEARNED CIT(A), THE STAND OF THE ASSESSEE WAS THAT THE DISALLOWAN CE IS AN AD HOC DISALLOWANCE AND ALL THE EXPENSES ARE ADMISSIBLE U/S 37(1) OF THE ACT. THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 1,50,000/- WHICH I S UNDER CHALLENGE BEFORE THE TRIBUNAL. WE ARE OF THE CONSIDERED OPINION THAT SUCH EXPENSES ARE ADMISSIBLE U /S 37(1) OF THE ACT IF THE EXPENSES ARE CLAIMED ON THE B ASIS OF LEGITIMATE DOCUMENTS. THE DISALLOWANCE WAS MADE ON THE BASIS THAT SOME OF THE EXPENSES WERE BASED ON KACHA BILLS/SELF MADE VOUCHERS AND THUS LUMP SUM DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. TO PUT AN END TO T HE LITIGATION, A FURTHER RELIEF OF RS. 50,000/- IS GRANTE D TO THE ASSESSEE. THUS, THE CROSS OBJECTION OF THE ASSESSEE I S PARTLY ALLOWED. 12 FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 25.6.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25.6.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GUARD FILE DN/-