Aseptic Fruit Products (INDIA) Pvt. Ltd., Krishnagiri V. ACIT, Salem

ITA 1136/CHNY/2015

• Counselvise Citation: 113621714 RSA 2015
• Duration Of Justice: 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 14-05-2015
• Court: TRIBUNAL
• Department Lawyers: ARUN C BHARATCIT D R
• Assessee Lawyers: S SRIDHAR ERODE
• Keywords: Cost of acquisition
• Section: 80IB; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1136 /MDS./2015 ( !' #' / ASSESSMENT YEAR :2011-12) M /S.ASEPTIC FRUIT PRODUCTS (INDIA) PVT. LTD., 322-A ,MAIN ROAD, BARGUE POST, KRISHNAGIRI TALUK AND DISTRICT. 635 104. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(1) SALEM PAN AAECA 3473 G ( / APPELLANT ) ( / RESPONDENT ) $% & ' / APPELLANT BY : MR.S.SRIDHAR, ERODE, ADVOCATE ()$% & ' / RESPONDENT BY : MR.ARUN C.BHARAT,CIT, D.R * + & ,- / DATE OF HEARING : 10.08.2015 .# & ,- /DATE OF PRONOUNCEMENT : 30.09.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, SALEM DATED 31.03.2015 IN C. NO.9544(05)/2014-2015/SLM PASSED UNDER SEC.26 3 READ WITH SECTION SEC. 250 OF THE ACT. ITA NO.1136 /MDS/2015 2 2. THE ASSESSEE HAS RAISED EIGHT ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT U/S.273 OF THE ACT FOR HAV ING DENIED THE CLAIM OF EXEMPTION U/S.80-IB(11A) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING OF FRUIT PULP, FILED ITS RETURN ELECTRONICALLY ON 30.09.2011 ADMITTING ITS I NCOME AS ` 39,82,830/- UNDER NORMAL COMPUTATION AND ` 96,47,565/- U/S.115JB OF THE ACT. SUBSEQUENTLY, THE RETURN WAS TAKEN FOR SCRUTINY AND ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 27.01.2014 WHEREIN THE LD. ASSESSING OFFICER GRANTED DEDUCTION U/S.80IB(11A) OF THE ACT OF ` 14,23,654/- & OF ` 73,99,257/- FOR UNIT-I & II RESPECTIVELY. SUBSEQUENTLY, THE LD.CIT HAD ISSUED SHOW-CAUSE NOTI CE U/S.263 OF THE ACT ON 10.02.2015, THE RELEVANT PORTION OF THE SAME IS EXTRACTED HEREIN BELOW FOR REFERENCE:- 2. ON GOING THROUGH THE RECORDS, I FIND THAT THE ASSESSMENT COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, SAL EM IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE FOR T HE FOLLOWING REASONS: - 2.1 A PERUSAL OF THE PROFIT AND LOSS A/C OF THE COM PANY REVEALED THAT THE SALES ITA NO.1136 /MDS/2015 3 OF THE COMPANY INCLUDED RS. 33,49,14,380/.- FOR FI NISHED GOODS ARID RS. 13,81,09,580/- OF OTHER ITEM SALES AND ALSO RS 2,90 ,00,571/- AS CONVERSION CHARGES AND A CLAIM OF DEDUCTION U/S 80IB(11A) TOWA RDS PROCESSING, PRESERVATION AND PACKAGING OF FRUITS AND VEGETABLES OF ABOUT RS 91,06,185/- HA BEEN MADE. BUT IT IS TO BE NOTED THAT THE OTHER ITEM SALES OF RS. 13,81,09,580/- ARE THE SALES OF MANGOES WHICH ARE SOLD WITHOUT PROCESSING AND TH E DEDUCTION U/S 80IB(11A) IS GIVEN TO AN UNDERTAKING WHICH DERIVES PROFIT FROM THE BUSINESS OF PROCESSING PRESERVATION AND PACKAGING OF FRUITS OR VEGETABLES OR MEAT AND MEAT PRODUCTS OR POULTRY OR MARINE OR DAIRY PRODUCTS OR FROM THE INT EGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. SINCE T HE SALE OF MANGOES OF RS. 13,81,09,580/- ARE DIRECT SALES WITHOUT ANY PROCESS , IT WILL NOT BE ELIGIBLE FOR DEDUCTION U / S 80IB(11A) OF THE IT ACT, 1961. 2.2 FURTHER, THE ASSESSEE COMPANY HAS RECEIVED CONV ERSION CHARGES OF RS.2,90,00,571/- RELATED TO JOB WORK OF PROCESSING THE FRUITS FROM OTHER PERSON. IN THIS JOB WORK OF PROCESSING, THE ASSESSE HAS ACTED AS CONTRACTOR ONLY, EVEN THOUGH ASSESSEE HAS CLAIMED, DEDUCTION U/S 801B(11A ) OF IT ACT, 1961. IN THIS CASE THE ASSESSEE WILL NOT BE ELIGIBLE FOR DEDUCTI ON U/S 801B,(11A) AS THE PERSON WHO AWARDED THE JOB WORK ONLY CAN, IF OTHERW ISE ELIGIBLE, CLAIM THE DEDUCTION U/S80IB(11A). (3). THEREFORE, I AM OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY, AND ALSO HAS COMPLE TED THE ASSESSMENT IN A MANNER CONTRARY TO THE PROVISIONS OF LAW. THUS, THE RE I-S UNDER ASSESSMENT OF INCOME DUE TO ERRORS COMMITTED BY THE ASSESSING OFF ICER AND THE ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. I, THEREFORE PROPOSE TO PASS APPROPRIATE ORDER THEREON U/S.263 AS THE CIRCUMSTAN CES OF THE CASE JUSTIFY. YOU ARE HEREBY GIVEN AN OPPORTUNITY TO REPRESENT YOUR C ASE AND STATE YOUR OBJECTIONS, IF ANY TO THE PROPOSED ACTION. THEREAFTER THE LD. CIT PASSED ORDER U/S.263 OF THE ACT DIRECTING THE LD. ASSESSING OFFICER TO REVISE THE ASSESSMENT, SIN CE THE ORDER OF THE LD. ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY STATING THAT THE LD. AUTHORIZED REPR ESENTATIVE HAD AGREED FOR THE PROPOSAL U/S. 263 AND HAS NO OBJECTI ON IN PASSING ITA NO.1136 /MDS/2015 4 SUCH ORDER. THE GIST OF THE ORDER IS REPRODUCED HER EIN BELOW FOR REFERENCE 3. IN RESPONSE TO THE ABOVE NOTICE, NOBODY APPEA RED FROM THE ASSESSEE SIDE ON THE SAID DATE. SO THE CASE WAS RE- POSTED FOR HEARING ON 16.03.2015. THE A.R OF THE ASSESSEE COMPANY SHRI K. KALAIARASAN FCA APPEARED AND CASE WAS DISCUSSED WITH HIM. THE AUTHO RIZED REPRESENTATIVE OF ASSESSEE ARGUED TO THE PROPOSAL U /S.263 AND HAS NO OBJECTION IN PASSING THE ORDER U/S.263. 4. IN VIEW OF THE ABOVE AND THE FACT THAT THE ASSE SSMENT ORDER FOR THE ASSESSMENT YEAR 2011-12 IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE, THE AO IS DIRECTED TO REVISE THE ASSESSMEN T ACCORDINGLY . 4. AT THE OUTSET, THE LD. A.R ARGUED BEFORE US BY STATING THAT HE HAD OBJECTED TO THE PROPOSAL OF THE LD.CIT AND HAD SUBMITTED A DETAILED LETTER TO SUPPORT HIS CASE. THE LD.D.R COU LD NOT CONTROVERT THE SUBMISSIONS OF THE LD. A.R. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. A.R. HAS PR ODUCED BEFORE US THE LETTERS SUBMITTED BY HIM BEFORE THE LD.CIT. THE SAME IS REPRODUCED HEREIN BELOW FOR REFERENCE. FROM M/S.ASEPTIC FRUIT PRODUCTS (INDIA) PVT LTD., NO.322-A, MAIN ROAD, BARGUR, KRISHNAGIRI 635 001. ITA NO.1136 /MDS/2015 5 TO, THE COMMISSIONER OF INCOME-TAX, OFFICE OF THE COMMISSIOHER OF INCOME TAX, NO: 3, GANDHI ROAD, SALEM 636 007. RESPECTED SIR, SUB: NOTICE U/S 263 OF THE INCOME TAX ACT 1961- R EG.. REF: C.NO:9544(05)12014-15/CIT/SLM NOTICE U/S 263 D ATE 10.02.15 WE HAVE RECEIVED THE NOTICE U/S 263 OF THE INCOME T AX ACT 1961 DT. 10.02.15 AND IN CONTINUATION OF THE ABOVE, WE HERE UNDER SUB MIT THE FOLLOWING FOR YOUR KIND CONSIDERATION. A. CLAIM OF EXEMPTION U/S 801B (11A) FOR CONVERSION C HARGES WE ARE THE PROCESSERS OF FRUIT PULP. THE PROCESS FL OW CHART IS ENCLOSED IN ANNEXURE A. WE ARE PROCESSING THE FRUITS FOR OUR OWN AND ON CONVERSION BASIS. IN BOTH THE SYSTEM OF PROCESS, THE PROCESSING SYSTE M IS THE SAME FROM RECEIPT OF RAW MATERIAL TO PACKING OF PROCESSED STOCK IN DRUMS . AS PER THE PROVISIONS OF THE INCOME TAX ACT 1961 U/ S 80IB (11A) AN UNDERTAKING IS ELIGIBLE FOR DEDUCTION IF. AN UNDERTAKING DERIVING PROFIT FROM THE BUSINESS O F PROCESSING PRESERVATION AND PACKING OF FRUITS OR VEGETABLES. THE BUSINESS INCLUDES PROCESSING, TRADING, PROCESSI NG ON CONTRACT BASIS. AS PER THE ACT IT IS SPECIFIED, BUT THAT THE ELIGIBLE BUSI NESS IS WHO HAS IN THE PROCESS PRESERVING, PROCESSING AND PACKING OF FRUITS. THE ABOVE CONDITION IS FULFILLED IN PROCESSING FOR OUR SALES AND PROCESSING ON CONTRACT BASIS. THE PROCESS INCLUDES PROCESSING ON JOB WORK BASIS. AS PER THE PROVISIONS OF THE SECTION 2(13) BUSINES S INCLUDES ANY TRADE COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE N ATURE OF TRADE COMMERCE OR MANUFACTURE SO THE BUSINESS INCLUDES ALL TYPE OF ACTIVITY IN PR OCESS. AS PER THE PROVISIONS OF THE CENTRAL EXCISE ACT THE BUSINESS INCLUDES MANUFA CTURE/ PROCESS FOR DIRECT SALES AND FOR CONTRACT MANUFACTURE. AS DISCUSSED ABOVE, OUR COMPANY IN ELIGIBLE FOR EXE MPTION U/S80IB(L11A) OF THE ACT FOR CONTRACTOR PROCESS ALSO. ITA NO.1136 /MDS/2015 6 B. INCOME FROM MANGO TRADE. OUR COMPANY IS PURCHASING MANGO FOR PROCESSING PURP OSE ON BEHALF OF THE CONTRACT CUSTOMERS AND THE PURCHASED STOCK IS CONSU MED FOR PROCESS OF FRUIT PULP IN OUR FACTORY AND NOT DELIVERED ACTUALLY, THE COMP ANY IS NOT INVOLVED IN DIRECT TRADE OF FRUITS WITHOUT PROCESS PRESERVE AND PACKIN G OF STOCKS. - IN CONTRACT PROCESS SYSTEM THE REVENUE IS SEGREGATE D IN TWO PARTS. ONE IS PROCUREMENT FOR RAW MATERIALS AND THE PART IS PROCE SS OF FRUITS. THERE IS NO OTHER DIFFERENCE IN THE OWN PROCESS FOR OWN STOCK AND CON TRACT PROCESS. IN CONTRACT PROCESS THE FRUITS ARE PURCHASED FOR PROCESS DUE TO THE FOLLOWING ADVANTAGES. 1. THE AGRO BASED RAW MATERIAL (FRUITS) PROCUREMENT RATE WILL VERY DAY BY DAY AND FLUCTUATE ON DAILY BASIS AND RATE CANT BE PRE DETE RMINED IN VOLATILE MARKET. IN THOSE CIRCUMSTANCES, WE WILL NOT INTERESTED IN FRUI T PROCESS. AT THE TIME, THE BUYER WILL INCURRE THE ENTIRE FRUIT COST AT MARKET RATE A ND PAY THE PROCESSING CHARGES SEPARATELY ON CONTRACT BASIS. IN THIS SYSTEM THE RI SK OF INCURRING ANY LOSS IN PRICE FLUCTUATIONS WILL BE MINIMIZED. 2. THE BUYERS WILL MONITER THE MARKET FLUCTUATIONS AND DECIDED THEIR RAW MATERIAL PURCHASE COST ON DAY TO DAY BASIS AND PLAN FOR THEI R MARKET REQUIREMENTS. - 3. IN THE OUTRIGHT PURCHASE OF PROCESSED FRUIT, THE PRICE HAS TO BE PRE-DECIDED PRIOR TO THE COMMENCEMENT OF RAW MATERIAL SEASON. W HICH WILL NOT BE RELATED TO THE MARKET RATE. IT WILL HAVE MARKET ADVANTAGE AND DISADVANTAGES. 4. THE HIGH QUALITY AND REQUIRED QUALITY STANDARD O F FRUITS CAN BE PURCHASED AT THE REQUIRED RATE (HIGHER LEVEL ALSO) BY THE BUYER DEPE NDS UPON THE QUALITY OF THE FINISHED GOODS. 5. ON DAILY BASIS, THE RAW MATERIAL PROCUREMENT WIL L BE MADE ON PRE DECIDED RATE BASED ON THE PREVAILING MARKET CONDITIONS 6; DURING THE YEAR, WE HAVE SOLD FRUITS FOR A VALUE OF RS.13, 81,09,580. ON BEHALF OF OUR BUYERS AND CONVERTED AND PACKED THE SAME AS FRUIT PULP. S.NO ITEM FOOD&NNS CAPRICORN JAININGALES TOTAL 1 FRUIT PURCHASED AND SOLD QTY IN MTS 3995MTS 1525MTS 2040.4MTS PURCHASE VALUE 7,12,05,575 2,78,87,065 3,73,11,452 13,64,04,032 SALES VALUE 7,21,90,250 2,81,64,000 3,77,55,300 13,81,09,580 2 FRUIT PULP PROCESSED 1456MTS 412MTS 104 1MTS ITA NO.1136 /MDS/2015 7 AS DETAILED ABOVE, SALE OF FRUITS IS NOT A SEPARATE ACTIVITY AND IT IS ONE AMONG, THE PROCESSING ACTIVITY ONLY, THE PURCHASED (RAW MATERI AL) SOCK IS NOT DELIVERED OUTSIDE THE FACTORY PREMISES AND THE ENTIRE SALE OF RAW MATERIAL IS CONSUMED WITH IN THE FACTORY, ONLY THE VALUE OF RAW MATERIAL AND PROCESSING CHARGES IS SPILITED AND CLAIMED BASED ON THE ACTIVITY, SO THE SALES IS PART OF THE PROCESSING ACTIVITY ONLY. PROFIT ON SALES A. QTY PURCHASED AND SOLD 7560MTS B. SALE PROCEEDS 13,81,09,580 C. COST OF PURCHASE 13,64,04,032 D. PROFIT MARGIN ON SALE 17,05,548 LESS: EXPENSES RELATED TO SALES A. INTEREST ON WORKING CAPITAL 26,83,070 B .ADMINISTRATIVE EXPENSES UNLOADING EXPENSES 6,80,400 BANK CHARGES 8,30,524 DIRECTOR SALARY 9,60,000 STAFF SALARY-20% 4,66,8 16 REFRESHMENT EXP 2,24,473 TELEPHONE TRAVELLING EXP 1,57,857 2,55,918 OTHER EXPENSES 1,07,500 VEHICLE MAINTENANCE 3,01,445 TOTAL EXPENSES 59,87,603 ALLOCATION OF EXP. = EXPENSES/TURNOVER* FRUIT SALES 59870603X13640 4032 502024501 16 26 879 ITA NO.1136 /MDS/2015 8 CLAIMABLE TOTAL EXPENSES 23,07,279 LOSS INCURRED ON SALES OF FRUITS -6,01,731 AND ALSO THE COMPANY IS INCURRING LOSS OF RS.6,01,7 31, IF WE SEPARATELY COMPUTE THE PROFIT ON SALES. CONSIDERING THE ABOVE, THE COMPANY IS ELIGIBLE FOR EXEMPTION U/S 801B(11A) OF THE IT ACT FOR THE PROFIT ON CONTRACT CONVERSION AN D PROFIT ON MANGO PURCHASED AND SOLD WITHOUT PHYSICAL DELIVERY TO CONTRACT CONV ERSION CUSTOMERS. THE ABOVE ACTIVITY IS INVOLVED PROCESSING, PRESERVATION AND P ACKING OF FRUITS. PLEASE COMMUNICATE TO US FOR YOUR FURTHER REQUIREME NTS AND GIVE A CHANCE TO HEAR BEFORE YOUR HONOUR. KINDLY CONSIDER THE ABOVE, AND DROP THE PROPOSAL TO REVISE THE ASSESSMENT U/S 263 OF I.T ACT. THANKING YOU, PLACE: BARGUR YOURS FAITHFULLY, DATE: FOR ASEPTIC PRODUCTS INDIA PVT LTD MANAGING DIR ECTOR ON PERUSING THE LETTER, WE FIND THAT IT IS NOT ACKN OWLEDGED BY THE REVENUE FOR HAVING RECEIVED THE LETTER AND AT THE S AME TIME THERE IS NO DATED MENTIONED IN THE LETTER. HOWEVER, SINCE T HE LD.CIT HAS PASSED A CRYPTIC ORDER WITHOUT ANY REASONING, WE AR E OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES TO BE REMI TTED BACK TO THE FILE OF THE LD.CIT IN ORDER TO PASS A REASONED ORDE R AFTER GIVING ITA NO.1136 /MDS/2015 9 OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. HE SHA LL ALSO LOOK INTO THE DETAILED LETTER FILED BY THE ASSESSEE BEFORE US WHICH IS SUPPOSED TO HAVE BEEN FILED BEFORE THE LD. CIT (A) ON THE EA RLIER OCCASION WHILE DECIDING THE ISSUE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH SEPTEMBER, 2015. K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. ' 7+ /GF