DCIT CC 7(2), MUMBAI V. ANCHOR HEALTH & BEAUTY CARE P.LTD, MUMBAI

ITA 1050/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8839 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE LD
• Assessee Lawyers: M SUBRAMANIAN LD
• Keywords: Depreciation; Rule of consistency
• Section: 143(3); 80IC

Judgement Text

1 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1050/MUM/2016 ( / ASSESSMENT YEAR:2009-10) & ./ I.T.A. NO.1051/MUM/2016 ( / ASSESSMENT YEAR:2010-11) D CIT - CC - 7(2) ROOM NO.655 AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 / VS. M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. 201, INNOVA C WING, MARATHON NEXTZONE OFF G.K. MARG, LOWER PAREL (W) MUMBAI-400 013. => ./ ./PAN/GIR NO. AAACA-4990-N ( >@ /APPELLANT ) : ( AB>@ / RESPONDENT ) REVENUE BY : SHRI SATISH CHANDRA RAJORE-LD. DR A SSESSEE BY : SHRI M. SUBRAMANIAN-LD.AR / DATE OF HEARING : 04/09/2019 / DATE OF PRONOUNCEMENT : 16/09/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [AY] 2009-10 & 2010-11 CONTEST SEPARATE ORDERS OF FIRST APPELLATE AUTHORITY. SINCE COMMON 2 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 ISSUES ARE INVOLVED, WE DISPOSE-OFF THE APPEALS BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. FIRS T, WE TAKE UP APPEAL FOR AY 2009-10. THE GROUNDS RAISED BY REVENUE READ AS U NDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THAT ALL THE EXPENSES HAVE TO BE APPORTIO NED BETWEEN THE SALE OF MANUFACTURED PRODUCTS AND SALE OF TRADING GOODS ON THE BASIS OF THE SALES TURNOVER FOR THE PURPOSE OF WORKING OUT DEDUCTION U/S 80IC W ITHOUT APPRECIATING THE FACT THAT DEPRECIATION MAINLY PERTAINS TO THE MANUFACTURING U NIT AND HAS TO BE ADJUSTED AGAINST THE PROFIT ON SALE OF MANUFACTURED GOODS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THAT DEPRECIATION HAS TO BE APPORTIONED O N THE BASIS OF SALES TURNOVER FOR THE PURPOSE OF WORKING OUR DEDUCTION U/S 80 IC WITH OUT APPRECIATING THE FACT THAT DEPRECIATION MAINLY PERTAINS TO THE PLANT AND MACHI NERY OF MANUFACTURING UNIT AND APPORTIONING THE SAME ON THE BASIS OF THE SALES TUR NOVER WILL PRESENT AN UNREALISTIC PICTURE AS THE SALES OF THE MANUFACTURED GOODS AMOU NTS TO RS.70.73 CR. WHEREAS THE SALES OF TRADING GOODS AMOUNT TO RS.212.70 CR. ITA NO.1050/MUM/2016 AY 2009-10 2.1 FACTS IN BRIEF ARE THAT ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN MANUFACTURING & TRADING OF FMCG PRODUCTS WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) O F THE ACT ON 28/12/2011 AT RS.13.98 CRORES AFTER CERTAIN ADDITIONS / ADJUST MENTS AS AGAINST RETURNED INCOME OF RS.10.51 CRORES FILED BY THE ASSESSEE ON 24/09/2009. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE HAD A MANUFACTURING UNIT AT HARIDWAR WHICH WAS ELIGIBLE F OR 100% PROFIT DEDUCTION U/S 80-IC. THE TOTAL TURNOVER OF THE ASSESSEE WAS S TATED TO BE RS.283 CRORES INCLUDING TURNOVER AT HARIDWAR PLANT FOR RS. 62.34 CRORES. THE DIRECT SALES AT HARIDWAR PLANT WAS STATED TO BE RS.7.88 CR ORES WHEREAS SALES THROUGH BRANCH TRANSFER STOOD AT RS.54.41 CRORES. T HE ASSESSEE FURNISHED SEPARATE PROFIT & LOSS ACCOUNT OF THE MANUFACTURING UNIT AND THE BRANCHES, 3 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 UPON PERUSAL OF WHICH IT WAS OBSERVED THAT MOST OF THE SELLING EXPENSES AND OTHER INDIRECT EXPENSES WERE NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT OF THE HARIDWAR UNIT. IT WAS ALSO NOTED THAT ALL IN DIRECT EXPENSES RELATING TO SALES WERE DEBITED TO PROFIT & LOSS ACCOUNT OF THE BRANCHES AND NO SUCH EXPENSES WERE DEBITED TO HARIDWAR UNIT. IN DEFENSE, THE ASSESSEE SUBMITTED THAT THE PROFITS OF HARIDWAR UNIT WERE AR RIVED AT BY DIVIDING OF BUSINESS PROFIT OF RS.12.98 CRORES (AS PER INCOME T AX COMPUTATIONS) IN THE RATIO OF SALES OF MANUFACTURING ITEMS (I.E. HARIDWA R UNIT) AMOUNTING TO RS.70.78 CRORES AND SALES OF TRADING ITEMS FOR RS.2 12.73 CRORES AND ACCORDINGLY, DEDUCTION U/S 80-IC FOR RS.3.24 CRORES WAS CLAIMED ON THE RESULTANT PROFITS OF HARIDWAR UNIT. THE ATTENTION W AS DRAWN TO THE FACT THE SIMILAR WORKING WAS ACCEPTED IN AY 2008-09 ALSO AND THIS WAS THE 3 RD YEAR OF CLAIMING DEDUCTION U/S 80-IC. 2.3 HOWEVER, NOTICING THAT PURCHASES MADE BY THE BR ANCHES STOOD AT RS.187.07 CRORES WHICH WERE SHOWN TO BE MADE ONLY F ROM ONE PARTY AND NO PURCHASES WERE SHOWN TO BE MADE FROM HARIDWAR UN IT, IT WAS CONCLUDED THAT THE ASSESSEE HAD NOT ACCOUNTED-FOR ITEMS RECEI VED FROM HARIDWAR UNIT AS PURCHASES. IT WAS ALSO OBSERVED THAT THE VALUE O F THE SALES MADE BY THE BRANCHES WERE ACCOUNTED IN THE PROFIT & LOSS ACCOUN T OF HARIDWAR UNIT. THEREFORE, IN THE FINAL ANALYSIS, REAPPORTIONING TH E INDIRECT EXPENSES, THE PROFITS OF HARIDWAR UNIT WERE WORKED OUT AT LOSS OF RS.15.45 LACS AND A CONCLUSION WAS DRAWN THAT THE ASSESSEE WAS NOT ELIG IBLE TO CLAIM ANY DEDUCTION U/S 80-IC. 4 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 3.1 AGGRIEVED, THE ASSESSEE ASSAILED THE WORKING MA DE BY LEARNED AO BEFORE FIRST APPELLATE AUTHORITY WITH SUCCESS VIDE IMPUGNED ORDER DATED 01/12/2015 WHEREIN THE ASSESSEE, EXPLAINING THE NAT URE OF ITS BUSINESS, SUBMITTED THAT THE EXPENSES INCURRED AT BRANCHES AS WELL AS AT HEAD OFFICE WOULD PERTAIN TO BOTH MANUFACTURING ITEMS AS WELL A S TRADING ITEMS. THEREFORE, IN VIEW OF EXCEPTIONAL DIFFICULTY IN ALL OCATING THE EXPENSES OVER MANUFACTURING AND TRADING ITEMS AND TO SIMPLIFY, TH E ASSESSEE HAS CALCULATED PROFIT OF MANUFACTURING UNIT ON PROPORTI ONATE BASIS ADOPTING SALES TURNOVER AS THE BASIS, AS DONE IN AY 2008-09 WHICH WAS ACCEPTED BY THE REVENUE IN AN ASSESSMENT FRAMED U/S 143(3) R.W.S. 1 47 OF THE ACT. THE ASSESSEE ALSO FURNISHED SUPPORTING DATA TO SUBMIT T HAT THE SALE OF MANUFACTURED ITEMS & TRADING GOODS STOOD AT RS.70.7 8 CRORES & RS.212.73 CRORES RESPECTIVELY AS AGAINST RS.62.34 CRORES & RS .221.24 CRORES TAKEN BY LEARNED AO. 3.2 THE ASSESSEES SUBMISSIONS WERE SUBJECTED TO RE MAND PROCEEDINGS. IN THE REMAND REPORT, LEARNED AO ACQUIESCED WITH AS SESSEES SUBMISSIONS AND WORKED OUT PROPORTIONATE PROFIT OF HARIDWAR UNI T TO BE RS.3.24 CRORES. ACCEPTING THE FINDINGS GIVEN IN REMAND REPORT, LEAR NED FIRST APPELLATE AUTHORITY DIRECTED LD. AO TO GRANT DEDUCTION U/S 80 -IC FOR RS.3.24 CRORES. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE ADVANCED ARG UMENTS IN SUPPORT OF THE GROUND OF APPEAL AND SUBMITTED THAT DEPRECIA TION ON FIXED ASSET MAINLY PERTAINED TO MANUFACTURING UNIT AND THE ALLO CATION OF THE SAME IN THE RATIO OF SALES WAS NOT JUSTIFIED. ON THE OTHER HAND , LD. AR SUBMITTED THAT 5 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 SIMILAR WORKING WAS ACCEPTED BY THE REVENUE IN AY 2 008-09 AND SECONDLY, LD. CIT(A) ACCEPTED THE FINDINGS OF LD.AO AS GIVEN IN THE REMAND REPORT AND THEREFORE, THERE COULD NO OCCASION FOR THE REVE NUE TO BE AGGRIEVED. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD. THE UNDISPUTED POSITION THAT EM ERGES IS THE FACT THAT LEARNED AO, REJECTING THE SALES FIGURES OF HARIDWAR UNIT AND BRANCHES, AS SUBMITTED BY THE ASSESSEE, REALLOCATED THE EXPENDIT URE BY REVISING THE SALES FIGURES. THE ASSESSEES SUBMISSIONS BEFORE FI RST APPELLATE AUTHORITY WERE SUBJECT MATTER OF REMAND PROCEEDINGS BEFORE LE ARNED AO. IN THE REMAND PROCEEDINGS, THE WORKINGS FURNISHED BY THE A SSESSEE WERE FOUND TO BE ACCEPTABLE AND LEARNED AO RECOMPUTED THE PROPORT IONATE PROFITS OF THE HARIDWAR UNIT. THE LD. CIT(A), CONSIDERING THE FIND INGS GIVEN IN THE REMAND REPORT, DIRECTED LD. AO TO GRANT THE DEDUCTION U/S 80-IC. THIS BEING THE CASE, THERE COULD BE NO OCCASION FOR THE REVENUE TO BE AGGRIEVED BY THE DIRECTIONS OF FIRST APPELLATE AUTHORITY SINCE THE A DJUDICATION HAS BEEN DONE ONLY IN ACCORDANCE WITH FINDINGS GIVEN BY LEARNER A O IN THE REMAND REPORT. FOR THE SAID CONCLUSION, WE DRAW STRENGTH FROM THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN JIVATLAL PURTAPSHI V/S CIT [65 ITR 261 15/02/1967] WHEREIN IT HAS BEEN HELD THAT WHAT IS VOLUNTARILY A CCEPTED CANNOT GIVE RISE TO A GRIEVANCE WHICH COULD BE TAKE N FURTHER IN APPEAL. 5.2 IN THE GROUNDS OF APPEAL, THE REVENUE HAS CONTE NDED THAT THE DEPRECIATION MAINLY PERTAINED TO MANUFACTURING UNIT AND ALLOCATING THE SAME 6 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 ON THE BASIS OF RATIO OF SALES WOULD NOT BE A CORRE CT APPROACH. HOWEVER, UPON PERUSAL OF QUANTUM ORDER AS WELL AS APPELLATE ORDER, IT IS QUITE EVIDENT THAT THIS FACTUAL ASPECT WAS NEVER THE SUBJECT MATT ER OF EXAMINATION / VERIFICATION BY LEARNED AO. IN THE ORIGINAL ASSESSM ENT ORDER, LD. AO, HIMSELF, HAS ALLOCATED THE INDIRECT EXPENDITURE IN THE RATIO OF SALES. THEREFORE, THIS BEING AN ALTOGETHER DIFFERENT ASPEC T, COULD NOT BE TAKEN UP AT THIS STAGE. THIS IS FURTHER FORTIFIED BY THE FAC T THAT SIMILAR WORKING MADE BY ASSESSEE FOR AY 2008-09 HAS BEEN ACCEPTED BY THE RE VENUE IN AN ASSESSMENT FRAMED U/S 143(3) R.W.S 147. THEREFORE, FROM THE POINT OF VIEW OF RULE OF CONSISTENCY ALSO, THIS PLEA HAS TO BE RE JECTED. THE SAID CONCLUSION IS DULY SUPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT V/S WESTERN OUTDOOR INTERACTIVE P. LTD. [349 IT R 309] WHICH FOLLOWS THE EARLIER DECISION OF CIT V/S PAUL BROTHERS [216 ITR 548]. 5.3 KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMS TANCES, NO FAULT COULD BE FOUND IN THE IMPUGNED ORDER. RESULTANTLY, THE AP PEAL STANDS DISMISSED. ITA NO.1051/MUM/2016 AY 2010-11 6. FACTS AS WELL AS GROUNDS OF APPEAL ARE PARI-MATERIA THE SAME IN THIS AY. THE LEARNED FIRST APPELLATE AUTHORITY, HAS GRAN TED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF 2009-10 IN ACCORDANCE WITH THE FINDINGS GIVEN IN THE REMAND REPORT WHICH IS EVIDENT FROM PARAS 8.3 T O 8.5 OF THE IMPUGNED ORDER. THIS BEING THE CASE, OUR OBSERVATION, ADJUDI CATION AS WELL AS 7 ITA NO.1050-51/MUM/2016 M/S. ANCHOR HEALTH & BEAUTY CARE PVT. LTD. ASSESSMENT YEARS-2009-10 AND 2010-11 CONCLUSION AS FOR AY 2009-10, SHALL MUTATIS MUTANDIS APPLY TO THIS YEAR ALSO. IN RESULT, THE APPEAL STANDS DISMISSED. CONCLUSION 7. BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH SEPTEMBE R, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/09/2019 SR.PS:-JAISY VARGHESE ! '! / COPY OF THE ORDER FORWARDED TO : 1. >@ / THE APPELLANT 2. AB>@ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. H I A J , J , / DR, ITAT, MUMBAI 6. I KLM / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.