Appeal details
Counselvise Citation
109924914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
20-09-2011
Assessment Year
2007-2008
Appeal Filed On
11-08-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA(JM) AND SHRI A. L. GEHLO T (AM ). ITA NO.1099/RJT/2010. (ASSESSMENT YEAR 2007-08) THE D.C.I.T., VS KANERIYA OIL INDUSRIES, CIRCLE-1, NEAR GOKUL DHAN, RAJKOT. GONDAL ROAD, RAJKOT. PAN:AACFK3239M.. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI C.J. MANIAR, D.R. ASSESSEE BY : SHRI R. D. LALCHANDANI. DATE OF HEARING : 22-11-2011. DATE OF PRONOUNCEMENT: 20-01-2012. O R D E R. PER A.L.GEHLOT (A.M.): THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, RAJKOT DATE D 21-05-2010 FOR ASSESSMENT YEAR 2007-08. 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE IN I TS APPEAL ARE REPRODUCED AS BELOW:- (1) THE LEARNED CIT(A)-I, RAJKOT HAS ERRED IN LAW A ND ON FACTS IN DELETING ADDITION OF RS.21,54,000/- MADE ON ACCOUNT OF SUBSIDY RECEIPTS. (2) THE LEARNED CIT(A)-I, RAJKOT HAS ERRED IN LAW A ND ON FACTS IN DELETING ADDITION OF RS.8,73,928/- MADE ON ACCOUNT OF YIELD OF GROUNDNUT CAKE PRODUCTION. 3. THE BRIEF FACTS OF THE FIRST GROUND ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND REPACKING OF EDIBLE O IL. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE RECEI VED SUBSIDY OF RS.21,54,000/- FROM GOVERNMENT OF INDIA, MINISTRY O F FOOD PROCESSING INDUSTRY. THE AO WAS OF THE VIEW THAT THE SUBSIDY WAS UTILIZE D IN PRODUCTION PROCESS AND NOT FOR ESTABLISHING OF NEW UNDERTAKING. THE AO AC CORDINGLY, TREATING THE REVENUE RECEIPT OF SAID SUBSIDY AND MADE THE ADDITI ON TO THE TOTAL INCOME. ITA 1099-RJT-2010 A.Y. 2007-08. 2 4. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSI ON DELETED THE SAID ADDITION OBSERVING AS UNDER:- 2.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE ASSESSEE AND I HAVE ALSO GONE THROUGH THE LETTER OF GOVERNME NT OF INDIA UNDER WHICH THIS SUBSIDY HAS BEEN GRANTED. I FIND THAT T HE ASSESSEE HAD APPLIED FOR GRANT OF SUBSIDY FROM THE GOVERNMENT OF INDIA. AS PER THE SCHEME, THIS SUBSIDY WAS FOR THE PURPOSE OF TECHNOLOGY UPGR ADTION /ESTABLISHMENT/MODERNIZATION OF FOOD PROCESSING IND USTRY, AND THE GRANT WAS TO BE 25 OF THE COST OF PLANT AND MACHINERY AND TECHNICAL CIVIL WORK, SUBJECT TO MAXIMUM OF RS.50 LAKH IN GENERAL AREAS, AND 33.33% OR UP TO RS.75 LAKH IN DIFFICULT AREAS. AS PER THIS SCHEME, THE ASSESSEE WAS GRANTED THE SUBSIDY. APPARENTLY, THE SUBSIDY IS NO T FOR THE PURPOSE OF CARRYING OUT THE BUSINESS OPERATIONS OF THE ASSESSE E, BUT AS PER THE SCHEME, THIS IS FOR THE PURPOSE OF UPGRADATION/ESTABLISHMENT/MODERNIZATION OF NEW UNIT AND EVEN THE SUBSIDY IS LINKED TO THE COST OF PLANT AND MACHINER Y. IT HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF CIT VS. PONNI SUGA RS & CHEMICALS LTD. (2008) 306 ITR 392, THAT THE CHARACTER OF THE RECEI PT OF A SUBSIDY HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GRANTED. SINCE THIS SUBSIDY HAS BEEN SPECIFICALLY LINKED TO ESTABLISHMENT OF A NEW UNIT, AND A RELATABLE TO THE COST OF PLANT AND MACHINERY, THIS HAS TO BE TAKEN AS A CAPITAL RECEIPT AND THE ASSESSEE H AS GIVEN SIMILAR TREATMENT TO THIS. THEREFORE, THE ACTION OF THE A. O. HOLDING THIS TO BE A REVENUE RECEIPT IS NOT AS PER LAW AND THE ADDITION OF RS.21,54,000/- IS DELETED. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND RECORD PERUSED. WE FIND THAT THE CIT(A) HAS RECORDED THE FACT THAT THE SUBSIDY WAS FOR THE PURPOSE OF TECHNOLOGY UPGRADATION/ESTABLISHMENT /MODERNIZATION OF FOOD PROCESSING INDUSTRY AND THE GRANT WAS TO BE 25% OF THE COST OF PLANT AND MACHINERY AND TECHNICAL CIVIL WORK. THE CIT(A) FOU ND THAT THE SUBSIDY WAS NOT FOR THE PURPOSE OF CARRYING OUT THE BUSINESS OPERAT IONS OF THE ASSESSEE BUT LINKED WITH THE COST OF PLANT AND MACHINERY. WHILE DELETING THE ADDITION, THE CIT(A) RELINED UPON A JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICALS LTD. 306 ITR 392(SC). THE REVEN UE FAILED TO POINT OUT ANY CONTRARY FACT NEITHER SAME ARE AVAILABLE ON RECORD. IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THE ORDER OF CIT(A) IS CONFIRMED. 6. THE BRIEF FACTS OF THE SECOND GROUND ARE THA T DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT YIELD OF GROUNDNUT OILCAKE PRODUCTION REDUCED ITA 1099-RJT-2010 A.Y. 2007-08. 3 FROM 51.77% TO 45.58% IN MORBI ROAD BRANCH. THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSION REJECTED THE ASSESSEES BOOKS OF ACCOUNTS IN ABSENCE OF NECESSARY JUSTIFICATION FOR FALL IN GROUNDNUT OILCA KE PRODUCTION. AFTER REJECTING BOOKS OF ACCOUNTS, THE AO NOTICED THAT THE ASSESSEE HAD TRIED TO OVERVALUE PRODUCTION OF HUSK WHICH IS HAVING LESS COST WHERE AS, SUPPRESSED THE PRODUCTION OF GROUNDNUT OILCAKE WHICH IS HAVING MUC H HIGHER. THE AO MADE THE ADDITION OF RS.8,73,928/- CALCULATED ON TH E GROUND THAT THE ASSESSEE HAS SHOWN LESS YIELD OF 143267 KGS. OF GROUNDNUT CA KE PRODUCTION FOR THE YEAR UNDER CONSIDERATION. THE RELEVANT DETAILED WORKING HAS BEEN RECORDED BY THE AO AT PAGE-6 OF HIS ORDER. THE CIT(A) AFTER CONSID ERING ASSESSEES SUBMISSION DELETED THE SAID ADDITION AS UNDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE ISSUE. THE ASSESSEE IS RUNNING AN OIL MILL AND BASIC PURPOSE IS TO GET AS MUCH OIL AS POSSIBLE. IT IS NOTICED THAT THE PRODUCTION OF OIL IS 31.43% AS AGAINST 29. 99% IN EARLIER YEAR. OIL IS A MUCH COSTLIER PRODUCT THAN GROUNDNUT CAKE. TH EREFORE, IF AT ALL ANY ADDITION WAS TO BE MADE, THEN THE SAME SHOULD HAVE BEEN REDUCED BY THE VALUE OF EXCESS OIL PRODUCED. SIMILARLY, FROM GROU NDNUT KAPCHI, GROUNDNUT OIL PRODUCTION THIS YEAR WAS 42% AS AGAINST 34% IN EARLIER YEAR. NATURALLY, IF THE PRODUCTION OF OIL IS MORE, THEN PRODUCTION O F GROUNDNUT CAKE HAS TO DECLINE. IF THE WORKING OF THE A.O. IS ACCEPTED, TH EN IT WOULD MEAN THAT FROM 100 KG. OF RAW-MATERIAL, THE TOTAL PRODUCTION WOULD BE MORE THAN 100, I.E. 105 OR 106, WHICH IS IMPOSSIBLE. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE PURCHASES AND SALES AR E DULY SUPPORTED BY BILLS. NO DEFECTS HAVE BEEN NOTICED IN THE ACCOUNT S OF THE ASSESSEE. IN SUCH A SITUATION, FOR MERE VARIATION IN YIELD OF GR OUNDNUT CAKE, THE BOOKS OF ACCOUNT COULD NOT BE REJECTED. AS DISCUSSED EARLIE R, THE PRODUCTION OF GROUNDNUT OIL, WHICH IS A COSTLIER PRODUCT, IS MUCH MORE AS COMPARED TO EARLIER YEARS, AND IF ADJUSTMENT OF THE GROUNDNUT O IL IS MADE, THEN THERE WOULD BE HARDL6Y ANY ADDITION. IN VIEW OF THESE FA CTORS, THE ADDITION OF RS.8,73,928/- IS DELETED. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. THE CIT(A) RECORDED THE FACT THAT THE PRODUCTION OF OIL IS 31.43% AS AGAINST 29.99% IN EARLIER YEAR. SIMILARLY, FROM GROUNDNUT KAPCHI, GROUNDNUT OIL PRODUCTION THIS YEAR WAS 42% AS AGAINST 34% IN EARL IER YEAR. THUS, THE PRODUCTION OF OIL IS MORE THAN PRODUCTION OF GROUND NUT OIL CAKE HAS BEEN DECLINED. THE CIT(A) HAS ALSO CONSIDERED THE VIEW POINT OF THE AO AND FOUND THAT THE VIEW OF THE AO WAS PRACTICALLY IMPOSSIBLE. APART FROM THIS FACT, THE CIT(A) HAS ALSO HELD THAT THE BOOKS OF ACCOUNT OF T HE ASSESSEE ARE AUDITED AND PURCHASES AND SALES ARE DULY SUPPORTED BY BILLS AND VOUCHERS. THE AO DID NOT ITA 1099-RJT-2010 A.Y. 2007-08. 4 POINT OUT ANY SPECIFIC DEFECTS IN MAINTAINING OF BO OKS OF ACCOUNTS AND METHOD OF ACCOUNTING FOLLOWED BY THE AO. THE CIT(A) WAS OF T HE VIEW THAT MERE VARIATION IN THE YIELD OF GROUNDNUT OIL CAKE, THE BOOKS OF AC COUNTS CANNOT BE REJECTED. WE FIND THAT THE FIND OF THE CIT(A) IS BASED ON FACTS. BEFORE US ALSO THE REVENUE FAILED TO POINT OUT ANY SPECIFIC DEFECTS IN THE MET HOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. IN THE LIGHT OF THESE FACTS AND THE FACTS RECORDED BY THE CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ). WE THEREFORE, CONFIRM THE ORDER OF CIT(A). 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-01-2012. SD/- SD/- ( T. K. SHARMA ), (A. L. GEHLOT) JUDICIAL MEMBER. ACCOUNTANT M EMBER. RAJKOT, DATED: 20-01-2012. NVA/ COPY TO: 1. THE D.C.I.T., CIRCLE-1, RAJKOT. 2. KANERIYA OIL INDUSTRIES, RAJKOT. 3.THE C.I.T.(A)-I, RAJKOT. 4.THE C.I.T., RAJKOT. 5.THE D.R., I.T.A.T, RAJKOT. TRUE COPY. BY ORDER ASSTT.REGISTRAR. ITAT, RAJKOT.
