M/s.United Distilleries, Calicut V. The ACIT, Calicut

ITA 115/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81367 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 21-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-03-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: K GOPI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 115/COCH/2014 ASSESSMENT YEAR : 2009-10 M/S. UNITED DISTILLERIES, VENGALIPARA, ERANHIKKAL P.O., CALICUT-673 303. [PAN: AAAFU 7992D] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-2(1), KOZHIKODE. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI K. GOPI, CA REVENUE BY SHRI K.K.JOHN, SR. DR DATE OF HEARING 21/10/2014 DATE OF PRONOUNCEMENT 14/11/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 05-12-2013 PASSED BY THE CIT(A), KOZHIKODE FOR THE ASSESSMENT YEAR 2009- 10 . 2. THE FIRST GROUND FOR OUR CONSIDERATION IS AGAINS T THE DISALLOWANCE OF RS.19,48,488/- CLAIMED BY THE ASSESSEE UNDER THE HE AD DISTRIBUTABLE SURPLUS WHICH WAS INCLUDED IN THE ADMINISTRATIVE E XPENSES DEBITED TO THE P&L ACCOUNT. I.T.A. NO.115/COCH/2014 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER DISALLOWED THE ABOVE AMOUNT ON THE GROUND THAT THE ASSESSEE HA S NOT PRODUCED THE INVOICES, BILLS AND VOUCHERS IN CONNECTION WITH DET ERMINATION OF THE SAID SURPLUS. 4. IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER AND IN THE REMAND REPORT THE ASSESSING OFFICER STATED THAT OUT OF TOTAL DISTRIBU TABLE SURPLUS OF RS.6,71,92,129/- CLAIMED, THE SARAYA DISTILLERIES H AS ACKNOWLEDGED RECEIPT OF RS.1,71,85,645/- WHILE M/S. RADICO KHAITAN LTD. HAS ACKNOWLEDGED THE RECEIPT OF RS.4,80,57,997.27 WHEREAS THE DISTRIBUTA BLE SURPLUS AS PER UNITED DISTILLERIES BOOKS FOR THE FINANCIAL YEAR 2008-09 W AS RS.5,000,06,486/- . THOUGH THE AMOUNT OF SURPLUS RECEIVED BY SARAYA DIS TILLERIES TALLIED WITH THE BOOKS OF THE ASSESSEE FIRM, THERE WAS A DIFFERENCE OF RS.19,48,488/- IN THE CASE OF M/S. RADICO KHAITAN LTD. AND THEREFORE, THE ASSESSING OFFICER OBSERVED THAT THE DISTRIBUTABLE SURPLUS CAN BE ALLO WED ONLY TO THE EXTENT OF RS.6,52,43,642/- AS AGAINST RS.6,71,92,129/- CLAIME D BY THE ASSESSEE. IN THE REMAND REPORT, THE ASSESSING OFFICER STATED THA T EVEN IF THE ASSESSEES CLAIM FOR DISTRIBUTABLE SURPLUS IS ALLOWED, SINCE T HE AGREEMENT BETWEEN RADICO KHAITAN LTD. AND UNITED DISTILLERIES DATED 0 1-04-2004 ENTAILS THAT EXPENSES TOWARDS FREIGHT ARE TO BE MET DIRECTLY FRO M THE SALES AND BORNE BY RADICO, THE ASSESSEE FIRM WILL BE ENTITLED TO A CLA IM OF DISTRIBUTABLE SURPLUS I.T.A. NO.115/COCH/2014 3 TO THE EXTENT OF RS. 6,52,43,642 ONLY AS AGAINST RS .6,71,92,129/-. IN REPLY TO THE REMAND REPORT, THE LD. AR SUBMITTED BEFORE T HE CIT(A) THAT THE AMOUNT SHOWN IN THE RECONCILIATION STATEMENT, I.E., RS.19,48,488/- WAS SUBSEQUENTLY RECEIVED TOWARDS DISTRIBUTABLE SURPLUS AND CONFIRMED BY RADICO KHAITAN LTD. IN THE SUBSEQUENT YEAR AND THE ASSESSMENT FOR THE SUBSEQUENT YEAR WAS ACCEPTED ALSO. IN THE LIGHT OF THE ABOVE SUBMISSIONS OF THE LD. AR, THE CIT(A) DIRECTED THE ASSESSING OF FICER TO LIMIT THE ADDITION TO RS.19,48,488/- AS AGAINST RS.6,71,92,129/-. AGA INST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT M/S. UNITED DISTILLERI ES IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BOTTLING OF INDIAN MADE FOREIGN LIQUOR (IMFL) FOR TWO PARTIES VIZ. M/S. SARAYA DISTILLERIE S LIMITED AND M/S. RADICO KHAITAN LIMITED AND THE INCOME ACCRUED TO THE ASSES SEE WAS BOTTLING FEE AT AN AGREED RATE FROM THE ABOVE PARTIES. ACCORDING TO THE LD. AR, THE PROCUREMENT OF RAW MATERIALS, PACKING MATERIALS ETC . ARE DONE AT THE COST OF THE ABOVE PARTIES AND THE ACTIVITY OF UNITED DISTIL LERIES IS CONFINED TO MANAGING THE OPERATIONS OF PROCUREMENT AND SALE AS WELL AS BLENDING ENA WITH OTHER ESSENCE, FLAVOURS ETC. AND CARRYING OUT BOTTLING FOR WHICH THE AGREED BOTTLING FEE IS RECEIVED. I.T.A. NO.115/COCH/2014 4 5.1 THE LD. AR SUBMITTED THAT AS SALES EFFECTED USI NG THE SALES TAX REGISTRATION OF UNITED DISTILLERIES, THE PURCHASES AND SALE OF IMFL NEED TO BE ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT OF UNITE D DISTILLERIES. ACCORDING TO THE LD. CIT(A), THE PROFIT AND LOSS ACCOUNT THER EFORE WOULD REFLECT THE NET PROFIT FROM SALE WHICH IN FACT IS THE COMBINED PROF IT ACCRUING TO M/S. SARAYA AND M/S. RADICO AND NOT THE PROFIT ACCRUING TO UNIT ED DISTILLERIES AND SUCH PROFIT THEREFORE NEEDS TO BE ELIMINATED FROM P&L AC COUNT. ACCORDING TO THE LD. AR, THE DISTRIBUTABLE SURPLUS IS CALCULATED AFT ER DEDUCTING THE AMOUNT PAYABLE BY M/S. SARAYA AND M/S. RADICO TO UNITED DI STILLERIES AS BOTTLING FEE AND THE REMAINING PROFIT CHARGING THE SAID DISTRIBU TABLE SURPLUS TO P&L ACCOUNT WOULD BE THE PROFIT OF UNITED DISTILLERIES BY WAY OF BOTTLING FEE. 5.2 THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.6,71,92,129/- STATING THAT NO EVIDEN CES LIKE INVOICE, COPY OF BILLS AND VOUCHERS WERE PRODUCED BY THE ASSESSEE FO R THE DISTRIBUTABLE SURPLUS DEBITED TO THE PROFIT AND LOSS ACCOUNT. TH E LD. AR SUBMITTED THAT THE AMOUNT OF RS.6,71,92,130/- WAS THE DISTRIBUTABL E SURPLUS DUE TO THE FOLLOWING PARTIES: I) RADICO KHAITAN LIMITED - RS.5,00, 06,485 II)SARAYA - R S.1,71,85,644 RS.6,71,92,129 I.T.A. NO.115/COCH/2014 5 5.3 THE LD. AR SUBMITTED THAT THE DISCREPANCY OF R S.19,48,4988/- WAS ON ACCOUNT OF FREIGHT INWARD/OUTWARD BOOKED BY RADICO KHAITAN LTD. THE LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED IN DISALLOWI NG THE AMOUNT OF RS. 19,48,488/- AS DISTRIBUTABLE SURPLUS PAID TO RADICO KHAITAN LIMITED AND IT WAS FURTHER SUBMITTED THAT THE AMOUNT OF RS.19,48,4 88/- REPRESENTED THE AMOUNT DUE TO RADICO KHAITAN LIMITED WHICH WAS SHOW N IN THE RECONCILIATION STATEMENT. THE LD. AR SUBMITTED THA T SINCE THE ASSESSEE WAS FOLLOWING THE ACCRUAL BASIS OF ACCOUNTING, THE AMOU NT OUGHT TO HAVE BEEN ALLOWED. 6. ON HE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. IN THIS CASE, AN AMOUNT OF RS.19,48,488/- WAS DISALLOWED AS DISTRIBUTABLE SURPLUS PAID TO RADICO KHAITAN LTD. SINCE THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE DISCREPANCIES. IN THE ABSENCE OF REQUISITE EXPLANA TION FROM THE ASSESSEE, THE CIT(A) CONFIRMED THE ADDITION TO THIS EXTENT. BEFORE US, THE ASSESSEE SUBMITTED THAT THE AMOUNT OF DIFFERENCE SHOWN IN TH E RECONCILIATION STATEMENT, I.E., RS.19,48,488/- WAS SUBSEQUENTLY RE CEIVED TOWARDS DISTRIBUTABLE SURPLUS AND CONFIRMED BY RADICO KHAIT AN LTD. IN THE SUBSEQUENT YEAR AND ALSO THE ASSESSMENT FOR THE SUB SEQUENT YEAR WAS ACCEPTED BY THE ASSESSING OFFICER. IN VIEW OF THIS, IT IS PROPER TO EXAMINE I.T.A. NO.115/COCH/2014 6 THIS ISSUE AFRESH. ACCORDINGLY, THIS ISSUE IS REMIT TED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AND DECID E THE ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPPORTUNITY OF HE ARING TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 14-11-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 14 TH NOVEMBER, 2014 GJ COPY TO: 1. M/S. UNITED DISTILLERIES, VENGALIPARA, ERANHIKKAL P.O., CALICUT-673 303. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(1), KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX(APEALS), KOZHIKOD E. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN