ACIT, Trichy V. M/s. Vijay Dairy Farm Products Pvt. Ltd., Musiri

ITA 1060/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64222 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 08-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOBADDL
• Assessee Lawyers: V D GOPAL
• Keywords: Gift
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI , ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA , JUDICIAL MEMBER ] I.T.A.NO S . 1059, 1060 & 1061/MDS/2011 ASSESSMENT YEAR S : 2001 - 02, 2002 - 03 AND 2003 - 04 THE ACIT CIRCLE I(2) TRICHY VS M/S VIJAY DAIRY FARM PRODUCTS PVT. LTD TRICHY THURAIYUR MAIN ROAD PERAMANGALAM VILLAGE MUSIRI TK. [PAN AAACV2113N ] ( APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, AD DL. CIT RESPONDENT BY : SHRI V.D.GOPAL, ADVOCATE DATE OF HEARING : 21 - 08 - 2012 DATE OF PRONOUNCEMENT : 28 - 08 - 2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE CIT(A), TIRUCHIRAPALLI, DATED 11.03.2011 PASSED IN ASSESSMENT YEARS 2001 - 02, 2002 - 03 AND 2003 - 04. 2 . THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A.NO. 1059 TO 1061/11 : - 2 - : 2. THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION ULS 80IA(2)( D) TREATING THE ASSESSEE AS A SSI WITHOUT APPRECIATING THE FACT THAT THE ASSESSES IS NOT A SMALL SCALE INDUSTRY ON THE LAST DAY OF THE PREVIOUS YEAR AS PER S EC 11 B OF THE INDUSTRIES( DEVELOPMENT AND REGULATION ) ACT , 1951 . 3 . THE CIT(A) HAS FAILED TO APPRECIATE THAT NO MANUFACTURING OR PRODUCTION OF AN ARTICLE IS INVOLVED/DONE IN THE PROCESS PASTEURIZING OF MILK ON WHICH DEDUCTION U /S 801A HAS BEEN ALLOWED. 4 . THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PERMANENT REGISTRATION CERTIFICATE OBTAINED BY THE ASSESSES FROM THE DIRECTORATE OF INDUSTRIES, TAMILNADU, IS FOR MILK PASTEURIZATION AND CREAM SEPARATION WITH BYPRODUCTS MILK KHOA, FLAVORED MILK, GHEE, B UTTER, CURD AND BUTTER MILK ONLY AND NOT FOR RUNNING ANY COLD STORAGE. 5. FOR THESE AND OTHER REASONS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE CANCELLED AND THAT OF THE AO BE RESTORED. 5 . GROUND NOS.1 & 5 OF THE APPEAL ARE GENERAL IN NATURE AND REQUIRES NO SEPARATE ADJUDICATION BY US. 6 . GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN HOLDING THAT THE ASSESSEE IS A SMALL SCALE INDUSTRIAL UNDERTAKING AS ON THE LAST DAY OF THE PREVI OUS YEARS AS PER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 AND ALLOWING DEDUCTION U/S 80IA(2)(D) OF THE ACT. 7 . AT THE TIME OF HEARING, THE A.R OF THE ASSESSEE FILED BEFORE US A COPY OF THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF PASSED IN ASSESSMENT YEAR 2004 - 05 IN I.T.A.NO. 413/MDS/2009, DATED 22.12.2010 AND SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE I.T.A.NO. 1059 TO 1061/11 : - 3 - : TRIBUNAL IN FAVOUR OF THE ASSESSEE AT PARA 5 OF THE SAID ORDER. THE DR DID NOT DISPUTE THE SUBMISSION MADE BY THE A.R OF THE ASSESSEE. 8 . WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 HAS HELD THAT THE ASSESSEE WAS RUNNING A COLD STORAGE PLANT AND THAT IT WAS REGISTERED AS A SSI UNIT ON 8.3.1996. FURTHER, THE ADDITIONAL DEVELOPMENT COMMISSIONER, SM ALL SCALE INDUSTRIES VIDE COMMUNICATION DATED 14.3.2000 AD 19.10.2000 REDUCED THE CEILING OF INVESTMENT IN PLANT AND MACHINERY FROM ` 3 CRORES TO ` 1 CRORE IN PURSUANCE TO NOTIFICATION NO.SO 1288E DATED 24.12.1999 WHEREIN IT WAS STATED THAT THE COMMUNICATI ON WOULD NOT BE APPLICABLE TO THE UNITS WHICH RECEIVED PROVISIONAL OR PERMANENT REGISTRATION PRIOR TO 24.12.1999. SINCE THE ASSESSEE S UNIT RECEIVED REGISTRATION AS SSI UNIT ON 8.3.1996, WHICH IS PRIOR TO 24.12.1999, THE REDUCED LIMIT OF ` 1 CRORE FOR IN VESTMENT IN PLANT AND MACHINERY WAS NOT APPLICABLE TO THE ASSESSEE AND HENCE, THE ASSESSEE WAS A SSI UNIT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. WE, THEREFORE, DISMISS THE GROUND OF APPEAL OF THE REVENUE IN ALL THE ASSESSMENT YEARS UNDER CONSIDER ATION. 9 . IN GROUND NO.3 & 4 OF THE APPEAL , THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) FAILED TO APPRECIATE THAT NO MANUFACTURING OR PRODUCTION OF ARTICLE WAS INVOLVED IN THE PROCESS OF PASTEURIZING OF MILK AND THEREFORE, DEDUCTION U/S 80IA WAS NOT ALLO WABLE. FURTHER, THE ASSESSEE RECEIVED PERMANENT REGISTRATION CERTIFICATE FROM DIRECTORATE I.T.A.NO. 1059 TO 1061/11 : - 4 - : OF INDUSTRIES, TAMILNADU, FOR MILK PASTEURIZATION AND CREAM SEPARATION AND NOT FOR RUNNING ANY COLD STORAGE AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTI ON U/S 80IA OF THE ACT. 10 . THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER DISALLOWED DEDUCTION U/S 80IA TO THE ASSESSEE FOR THE YEARS UNDER APPEAL ON THE GROUND THAT THE ASSESSEE - COMPANY HAS NOT PRODUCED OR MANUFACTURED ARTICLES OR THINGS. THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE WAS PROCURING MILK FROM DIFFERENT PARTIES AND PASTEURIZING THE MILK AND THEN PACKING AND SELLING THE SAME. DURING OR AFTER PASTEURIZATION, THE ASSESSEE REMOVED OR ADDED FAT CONTENTS TO MILK. IN VIEW OF THE SAME, THE RA W MATERIAL AS WELL AS THE END PRODUCT WAS ONE AND THE SAME I.E MILK ONLY. THEREFORE, THE ASSESSEE DID NOT PRODUCE OR MANUFACTURE ANY ARTICLE OR THING AND HENCE, NOT ELIGIBLE FOR DEDUCTION U/S 80IA. 11 . ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF DEDUCTION TO THE ASSESSEE BY OBSERVING AS UNDER: 5 . ELIGIBILITY CRITERIA FOR DEDUCTION ILLS 80I(A)(IV)(D): WHERE IT IS AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE INDUSTRIAL UNDERTAKING, IT BEGINS TO MANUFACTURE OR PRODUCE, ARTICLES OR THINGS OR TO OPERATE ITS C OLD STORAGE PLANT [NOT SPECIFIED IN SUB - SECTION (4 OR SUB - SECTION (5) ] AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DA Y OF APRIL, 1995 AND ENDING ON THE 31 ST DAY OF MARCH, 2002. 6. AS THE APPELLANT FULFILS THE CONDITION MEANT FOR THE ABOV E DEDUCTI ON AS A SMALL SCALE INDUSTRY WHICH OPERATES COLD STORAGE PLANT, I T IS ELIGIBLE FOR DEDUCTION U/S 80I(A)(IV)(D). DISALLOWANCE MADE BY TH E ASSESSING OFFICER IN THIS REGARD IS NOT CALLED FOR AND HENCE DELETED. I.T.A.NO. 1059 TO 1061/11 : - 5 - : 12 . THE A.R SUBMITTED THAT ON SIMILAR FACTS IN THE CASE OF THE VERY SAME ASSESSEE FOR ASSESSMENT YEAR 2004 - 05, IN I.T.A.NO. 413/MDS/2009, THE TRIBUNAL HAS DECIDED THE ISSUE BY OBSERVING AS UNDER: '2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF PR OCESSING RAW MILK INTO PASTEURIZED MILK AND DURING THE COURSE OF ITS BUSINESS, BUTTER, CURD, BUTTER MILK ARE PRODUCED AS BY - PRODUCTS. THE ASSESSEE HAS CLAIMED ENTIRE PROFIT OUT OF THIS BUSINESS AS DEDUCTION UNDER SECTION 80LB (3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). THE A.O HAS DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE IS NOT ENGAGED IN MANUFACTURE OF ARTICLES OR THINGS AND THE ASSESSEE IS NOT A SMALL SCALE UNDERTAKING AS INVESTMENT IN PLANT AND MACHINERY IS MORE THAN THE LIMIT PRESCRIBED BY THE GOVERNMENT OF INDIA IN THIS REGARD. AGGRIEVED, THE ASSESSEE WENT BEFORE CIT (APPEALS) BEFORE WHOM SIMILAR ARGUMENTS WERE RAISED. IN ADDITION, IT WAS ALSO CONTENDED THAT THE ASSESSING OFFICER IS ENGAGED IN PRODUCTION/MA NUFACTURE OF VARIOUS TYPES OF MILK PRODUCT AS STATED ABOVE. AGAIN, THE ASSESSEE - COMPANY HAS CLAIMED DEDUCTION ON OPERATION AND MAINTENANCE OF COLD STORAGE PLANT FOR THE ENTIRE YEAR AND ON THIS ACCOUNT ITSELF, AND HAS DISPUTED THE DISALLOWANCE MADE BY T HE A.O: BUT THE LEARNED CIT (APPEALS) HAS NOT FOUND FAVOUR WITH THE ASSESSEE AND HAS DISMISSED THE ENTIRE CLAIM. 3. NOW, THE ASSESSEE IS BEFORE US BY RAISING THE FOLLOWING GROUNDS: II. . IN THE FACTS OF THE CASE, THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) SHOULD HAVE BEEN PLEASED TO ALLOW THE APPEAL GRANTING FULL RELIEF U/S 80IA / L80IB(3) OF THE INCOME - TAX ACT, 1961. ILL. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE BEEN PLEASED TO HOL D THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF MILK PRODUCTS AND THEREFORE ENTITLED TO RELIEF UNDER SECTION 801 B (3) AS PRAYED FOR. IV. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE LIGHT OF THE APPELLANT'S LETTER SUBMITTED TO THE ASS ESSING OFFICER DATED 01.12.2006 AND 26.07.2006 SHOULD HAVE BEEN PLEASED TO HOLD THAT THE APPELLANT HAD BEEN MANUFACTURING MILK PRODUCTS ESPECIALLY WHEN THE ULTIMATE PRODUCT MANUFACTURED ARE CAPITAL C OMMERCIALLY DIFFERENT AND DISTINCT FROM I.T.A.NO. 1059 TO 1061/11 : - 6 - : T HE INPUT TAKEN AS RAW MATERIAL (I.E.) MILK AND THEREFORE WOULD QUALIFY FOR RELIEF U/S.80IA(IV)(D)/ 801 B (3). V.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICE R TO DENY RELIEF TO TH E APPELLANT ARE NOT OPPOSITE TO THE FACTS OF THE APPELLANT'S CASE. VI. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)' SHOULD HAVE BEEN PLEASED TO HOLD THAT THE APPE LLANT'S INDUSTRIAL UNDERTAKING IS A SMALL SCALE UNIT THAT HAD BEEN OPERATING A COLD STORAGE PLANT AND THEREFORE IS ENTITLED TO RELIEF UNDER SECTION 801 B (3). VII. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE CEILING OF RS.1 CRORE FIXED BY THE CONCERNED AUTHORITY UNDER THE PROVISIONS OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, BY PROCEEDINGS DATED 10.12.1999 IS NOT APPLICABLE TO THE APPELLANT BECAUSE TH E APPELLANT'S UNDERTAKING WAS ESTABLISHED ON 08.03.1996 AS WILL BE EVIDENT FROM THE CERTIFICATE ISSUED BY THE GENERAL, MANAGER, DISTRICT INDUSTRIES CENTRE, TIRUCHIRAPALLI, WORKING UNDER DIRECTORATE OF INDUSTRIES, GOVERNMENT OF TAMIL NADU. VIII. (A) THE LE A RNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT EVEN AS PER COMMUNICATIONS ISSUED BY THE ADDITIONAL DEVELOPMENT COMMISSIONER, SMALL SCALE INDUSTRIES BY COMMUNICATION DATED 14.0 3,2000 AND 19.10.2000 THE CEILING OF RS.1 CRORE WHICH WAS REDUCED FROM RS.3 CRORES IN PURSUANCE OF NOTIFICATION NO.SO 1288 E DATED 24.12.1999 WOULD NOT BE APPLICABLE TO UNITS WHICH HAVE RECEIVED PROVISIONAL OR PERMANENT RE G ISTRATION PRIOR TO 24.12.1999 . (B) IN THE ADMITTED FACTS THAT THE APPELLANT WAS RUNNING A COLD STORAGE PLANT AND THAT THE CEILING OF ` 1 CRORE IS NOT APPLICABLE TO THE APPELLANT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO ALLOW THE APPEAL AS PRAYE D FOR BY THE APPELLANT. I.T.A.NO. 1059 TO 1061/11 : - 7 - : IX. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CHARGING INTEREST AT THE RATE OF 12% ON THE INTEREST FREE LOANS TO THE DIRECTORS AMOUNTING T O ` 1,32,000 ESPECIALLY WHEN THE APPELLANT COMPANY AT THE RELEVANT POINT OF TIME H A D ITS OWN INTERNALLY GENERATED FUNDS. X. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO ALLOW THE SUM OF ` 2,62,000 CLAIMED UNDER THE SO LES PROMOTION EXPENSES ESPECIALLY WHEN THE SAID SUM OF ` 2,62,000 WAS EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF APPELLANT'S BUSINESS. XI. THE LEARNED CO MM ISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE EXPENSES INCURRED FOR GIVING GIFT ARTICLES TO DEALERS WAS WITH A VIEW TO MOTIVATING THE DEALERS TO PUSH SALES TO THE APPELLANT'S PRODUCTS. XII. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO ALLOW A SUM OF ` 1,20,335 CLAIM UNDER THE HEAD STAFF WELFARE EXPENSES SINCE THE ENTIRE EXPENSES WAS INCURRED IN THE COURSE OF BUSINESS WITH A VIEW TO MAINTAINING THE CORDIAL RELATIONSHIP WITH THE STAFF OF THE COMPANY BY EXPENDING FUNDS ON POOJA AND OTHER ACTIVITIES ORGANIZED BY THE STAFF MEMBERS. ' 4. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE RECORDS AVAILABLE BEFORE US. IT WAS FOUND THAT IN THIS CASE THE NATURE AND CLAIM OF THE END PRODUCT ARE AS UNDER: - SL. NO. DESCRIPTION OF THE PRODUCT TURNOVER ( ` ) 1 . MILK 27,12,94,639 2 . BUTTER MILK 6,61,963 3 . FLAVOURED MILK 38,656 4 . UN - BRANDED BUTTER 2,04,83,270 5. IN SO FAR AS THE CLAIM OF THE ASSESSEE THAT IT IS A SMALL SCALE INDUSTRY, WE ARE IN AGREEMENT WITH THE LEARNED A.R. BECAUSE THE CEILING OF ` 1 CRORE FIXED BY THE CONCERNED AUTHORITY UNDER THE PROVISIONS OF INDUSTRY(DEVELOPMENT & REGULATION) ACT BY THEIR PROCEEDING S DATED 10.12.1999 IS NOT APPLICABLE IN THE ASSESSEE'S CASE BECAUSE THIS UNDERTAKING WAS ESTABLISHED ON I.T.A.NO. 1059 TO 1061/11 : - 8 - : 08.03.1996 WHICH IS EVIDENT FROM THE CERTIFICATE ISSUED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, TIRUCHIRAPALLI, WHO IS WORK ING UNDER DIRECTORATE OF INDUSTRIES, GOVERNMENT OF TAMIL NADU, A COPY OF WHICH IS ENCLSOED THEREWITH. EVEN AS PER THE COMMUNICATION ISSUED BY THE ADDITIONAL DEVELOPMENT COMMISSIONER, SMALL SCALE INDUSTRIES, BY COMMUNICATION DATED 14.03.2000 AND 19.10.2 000, THE CEILING OF ` 1 CRORE WHICH WAS REDUCED FROM ` 3 CRORES, IN PURSUANCE OF NOTIFICATION NO.SO 1288E DATED 24.12.1999, WOULD NOT BE APPLICABLE TO THE UNITS WHICH RECEIVED PROVISIONAL OR PERMANENT REGISTRATION PRIOR TO 24.12.1999. IT IS THE FACT THAT THE ASSESSEE WAS RUNNING A COLD STORAGE PLANT AND THE CEILING OF ` 1 CRORE WAS NOT APPLICABLE TO IT BECAUSE IT WAS REGISTERED ON 08.03.1996. THE OTHER CONDITION THAT THE ASSESSEE SHOULD EITHER MANUFACTURE OR PRODUCE ANY ARTICLE OR THING IS CONCER NED, THIS ISSUE HAS NOT BEEN CORRECTLY EXAMINED BECAUSE THE LETTERS OF THE ASSESSEE DATED 01.12.2006 AND 26.07.2006 HAVE NOT BEEN CORRECTLY APPRECIATED AND CONSIDERED BY THE A.O TO ASCERTAIN WHETHER THE ASSESSEE PRODUCES ANY NEW ARTICLE OR THING OR NOT . THEREFORE, THIS ISSUE IS RETORED BACK TO THE FILE OF THE A.O WITH A DIRECTION THAT HE SHALL EXAMINE THIS ISSUE IN THE LIGHT OF THE CLAIM MADE BY THE ASSESSEE BEFORE HIM.' 13 . THE DR COULD NOT POINT OUT ANY DISTINGUISHING FEATURES IN THESE YEARS UNDE R APPEAL FROM THE FACTS AND ISSUE INVOLVED IN ASSESSMENT YEAR 2004 - 05. IN ABSENCE OF ANY GOOD REASONS SHOWN TO US FOR NOT FOLLOWING THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF THE VERY SAME ASSESSEE FOR ASSESSMENT YEAR 2004 - 05, WE RESPECTFULLY FOLLO WING THE SAID ORDER OF THE TRIBUNAL, RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION WITH THE SAME DIRECTIONS AND OBSERVATIONS AS STATED IN THE ABOVE QUOTED ORDER OF THE TRIBUNAL. THUS, GROUND NOS. 3 & 4 OF THE APPEAL F OR ALL THE YEARS UNDER CONSIDERATION ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 1059 TO 1061/11 : - 9 - : 14 . IN THE RESULT, A LL THE THREE APPEALS OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON TUESDAY, THE 28 TH OF AUGUST , 2012, AT CHENNAI. SD/ - SD/ - ( SATBEER SINGH GODARA ) JUDICIAL MEMBER ( N.S.SAINI ) ACCOUNTANT MEMBER DATED: 28 TH AUGUST , 2012 RD COPY TO: APPELLANT / RESPONDENT / CIT(A) /CIT/ DR