ACIT, Cuddalore V. M/s. M.R.Krishnamurthy Coop Sugar Mills Ltd., Cuddalore

ITA 1054/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51767 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2011
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2000-2001
• Appeal Filed On: 07-06-2011
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V JAGA DESAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NOS. 1053 & 1054/MDS/2011 AND CO NOS.113 & 114/MDS/2011 (ASSESSMENT YEARS : 1999-2000 & 2000-01) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-I, CUDDALORE 607001. VS. M/S. M.R.KRISHNAMURTHY COOP. SUGAR MILLS LTD., D.S.NO.7, KILANGADU VILLAGE, SETHIATHOPE, CUDDALORE DIST. PAN AAAAK 0095 A (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY : SHRI V. JAGA DESAN, FCA DATE OF HEARING : 16 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 16 TH AUGUST, 2011 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THE TWO APPEALS ARE FILED BY THE REVENUE AND THE CR OSS OBJECTIONS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEARS ARE 1999-2000 AND 2000-01. THESE APPEALS AND CROSS- OBJECTIONS ARE DIRECTED AGAINST THE ORDERS OF THE C OMMISSIONER OF ITA 1053, 1054 & CO 113 & 114/11 :- 2 -: INCOME-TAX (APPEALS)-XII, AT CHENNAI DATED 11.3.201 1 AND ARISE OUT OF THE ASSESSMENTS COMPLETED UNDER SEC.143(3) R EAD WITH SEC.147 OF THE INCOME-TAX ACT, 1961. 2. AS FAR AS THE APPEALS FILED BY THE REVENUE ARE C ONCERNED, THE ONLY ISSUE RAISED IS WITH REFERENCE TO THE TREA TMENT OF DIFFERENTIAL AMOUNT GENERATED OUT OF SALE OF FREE A ND LEVY SUGAR, CREDITED BY THE ASSESSEE SOCIETY TO ITS CAPITAL RES ERVE ACCOUNT. THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE DIFFERENTIAL AMOUNT SHOULD BE TREATED AS CAPITAL IN NATURE. IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. PONNI SUGARS AND CHEMICALS LTD. (306 ITR 392), T HE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS JUST IFIED BOTH IN FACTS AND ON LAW. 3. ACCORDINGLY, THE APPEALS FILED BY THE REVENUE AR E LIABLE TO BE DISMISSED. 4. REGARDING THE CROSS OBJECTIONS FILED BY THE ASSE SSEE, THE COMMON GROUND IS THAT THE COMMISSIONER OF INCOME-TA X (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION IN R ESPECT OF THE CLOSING STOCK MADE BY THE ASSESSING AUTHORITY BY UP LOADING THE ITA 1053, 1054 & CO 113 & 114/11 :- 3 -: EXCISE DUTY PAID BY THE ASSESSEE, BUT WITHOUT MAKIN G SUCH AN UPLOADING IN THE CORRESPONDING OPENING STOCK. 5. WE CONSIDERED THIS ISSUE. THE QUESTION OF ADJUS TMENT OF EXCISE DUTY PAID BY THE ASSESSEE EMBEDDED IN ITS ST OCK IS A RECURRING ONE; AT THE OPENING OF THE YEAR, IT WILL BE IN THE NATURE OF OPENING STOCK AND AT THE CLOSING OF THE YEAR, IT WI LL BE IN THE NATURE OF CLOSING STOCK. IF THE ASSESSING OFFICER HAS MAD E AN ADJUSTMENT IN THE AVAILABLE CLOSING STOCK BY ADDING UP THE EXC ISE DUTY ELEMENT, EQUAL ADJUSTMENT SHOULD BE REFLECTED IN TH E OPENING STOCK OF THE SUCCEEDING YEAR. IN THAT WAY, IT IS O FFSETTING IN NATURE. WHAT IS ADDED IN THE CLOSING STOCK HAS EQUALLY TO B E ADDED IN THE OPENING STOCK. THEREFORE, THE ADDITIONAL CREDIT FO R THE EARLIER YEAR IS OFFSET BY THE ADDITIONAL DEBIT OF THE SUCCEEDING YEAR. IT IS NOT PROPER ON THE PART OF THE ASSESSING OFFICER, THEREF ORE, TO MAKE THE ADJUSTMENT ONLY IN RESPECT OF CLOSING STOCK. THAT IS ONLY HALF WAY THROUGH. HE SHOULD MAKE THE CIRCLE FULL. ACCORDING LY, HE IS DIRECTED TO MAKE SUCH EQUAL ADJUSTMENT IN RESPECT O F THE OPENING STOCK AS WELL. 6. THE ASSESSEE SUCCEEDS IN THEIR CROSS OBJECTIONS. ITA 1053, 1054 & CO 113 & 114/11 :- 4 -: 7. IN RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING, ON TUESDAY, THE 16 TH DAY OF AUGUST, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH AUGUST, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR