Vadilal Dairy International Ltd., Ahmedabad V. The ACIT., Circle-8, Ahmedabad

ITA 1192/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8852 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 19-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Opportunity of being heard; Royalty expenses; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.1192/AHD/2007 A. Y.: 2003-04 VADILAL DAIRY INTERNATIONAL LTD., C/O. ANJUAN TRADING PVT. LTD., BASEMENT SHARAM SIDHI APARTMENTS, OPP. DARSHAN SOCIETY, NR. STADIUM FIVE ROADS, PA NO. AABCV 0523 A VS THE A. C. I. T., CIRCLE-8, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SMT. URVASHI SHODHAN, AR RESPONDENT BY SHRI C. K. MISHRA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XIV, AHMEDABAD DATE D 15-11-2006 FOR ASSESSMENT YEAR 2003-04. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, GONE THROUGH THE FINDINGS OF THE AUTHORITIES BELOW AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NOS. 1, 7 AND 8 ARE GENERAL AND DO NOT RE QUIRE ANY ADJUDICATION. SAME ARE ACCORDINGLY DISMISSED. 4. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF ROYALTY OF RS.14,38,194/-. IT IS STATED THAT ABOVE AMOUNT WAS PAID TO BELA INVESTMENT & FINANCE CO. LTD. THE AO DISALLOWE D THE ROYALTY EXPENSES FOR THE USE OF LOGO VADILAL. THE LEARNED CIT(A) NOTED THAT IN THE ASSESSMENT YEAR 2001-02 HE HAS CONFIRMED THE AD DITION ON THIS ISSUE. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT ITA NO.1192/AHD/2007 VADILAL DAIRY INTERNATIONAL LTD. 2 ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESS EE FOR PRECEDING ASSESSMENT YEAR 2001-02 IN ITA NO.1963/AHD/2005 VID E ORDER DATED 17-10-2008 ALLOWED THE CLAIM OF THE ASSESSEE ON THE IDENTICAL ISSUE. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T IN ASSESSMENT YEAR 2002-03 ALSO THE TRIBUNAL ALLOWED THIS ISSUE IN FAV OUR OF THE ASSESSEE IN ITA NO.827/AHD/2006 DATED 16-01-2009. COPIES OF THE ORDERS ARE FILED ON RECORD. THE LEARNED DR DID NOT DISPUTE THE ABOVE . CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDERS OF THE TRIBUNAL (SUPRA) IN WHICH ROYALTY PAYMENT TO BELA INVESTMENT & FINANCE CO. HAS ALLOWE D AS DEDUCTION. BY FOLLOWING THE SAME ORDERS WE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW AND DELETE THE ADDITIONAL. AS A RESULT, GROUND NI.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF INTEREST OF RS.27,04,869/-. ON GROUND NO.4, ASSESSE E RAISED ALTERNATE CLAIM ON GROUND NO.3 STATING THAT THE LEARNED CIT(A ) ERRED IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT WHILE WORKING OUT DISALLOWANCE OF INTEREST, INTEREST DISALLOWED U/S 4 3B OF THE IT ACT SHOULD BE CONSIDERED. THE ADDITION MADE BY THE AO IS OVER AND ABOVE THE DISALLOWANCE OF THE INTEREST U/S 43 B OF THE IT ACT . THE LEARNED CIT(A NOTED THAT IN THE EARLIER YEAR THIS ISSUE IS DECIDE D IN FAVOUR OF THE DEPTT. BY FOLLOWING THE ORDER FOR EARLIER YEAR THIS GROUND OF APPEAL WAS DISMISSED. THE ALTERNATIVE CLAIM OF THE ASSESSEE WA S ALSO REJECTED BECAUSE THE DISALLOWANCE WAS MADE FOR DIVERTING INT EREST FREE FUNDS FOR NON-BUSINESS PURPOSES. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT IN THE ASSESSMENT YEAR 2001-0 2 IN ITA NO.1963/AHD/2005 (SUPRA) AND IN ASSESSMENT YEAR 200 2-03 IN ITA NO.827/AHD/2006 (SUPRA), THE TRIBUNAL HAS SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORED THE ISSUE TO THE FILE O F THE AO FOR FRESH ADJUDICATION IN VIEW OF THE DECISION OF THE HONBL E SUPREME COURT IN THE ITA NO.1192/AHD/2007 VADILAL DAIRY INTERNATIONAL LTD. 3 CASE OF S. A. BUILDERS LTD. VS CIT(A). THE LEARNED DR DID NOT DISPUTE THIS FACT. BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEARS 2001-02 AND 2002-03 IN THE CASE OF THE ASSESS EE ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTO RE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE SAME BY G IVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD AS IS DIRECTE D BY THE TRIBUNAL IN THE EARLIER YEARS AS ABOVE. AS A RESULT, GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN VIEW OF THE ABOVE, THE ALTERNATE CLAIM OF THE ASSESSEE ON GROUND NO.4 IS ALSO RESTORES TO THE FILE OF THE AO WITH DI RECTION TO RE-DECIDE THE SAME AS IS DIRECTED ABOVE BY THE TRIBUNAL IN THE EA RLIER YEARS. 7. AS A RESULT, GROUND NO.3 AND 4 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. ON GROUND NO.5, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF RS.16,52,079/-. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS REDUCED THE VALUE OF OBSOLETE AND UNUSABLE STOCK OF RAW MATERIAL AND PACKING MATERIAL IN RESPECT OF DAIRY DIVISION IN TH E BOOKS OF ACCOUNT. DURING THE ASSESSMENT PROCEEDINGS, THE AO DID NOT A CCEPT THE CONTENTION OF THE ASSESSEE THAT THE VALUE OF OBSOLE TE AND UNREALIZABLE STOCK OF RAW MATERIAL AND PACKING MATERIAL HAS BEEN REDUCED FROM THE VALUATION OF THE CLOSING STOCK LOOKING TO THE CIRCU MSTANCES PREVAILING AT THAT TIME AND RECOMMENDATION FROM THE STATUTORY AUD ITOR AND THAT SUCH STOCK HAD NO REALIZABLE STOCK VALUE. SINCE THE ABOV E EXPLANATION WAS NOT SUPPORTED BY ANY DETAILS/EVIDENCE THE AO HAD DISALL OWED THIS REDUCTION OF THE VALUE OF STOCK. THE LEARNED CIT(A) ALSO NOTE D THAT AT THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS NOT BEEN ABLE TO SUBS TANTIATE ITS CLAIM BY FURNISHING ANY EVIDENCE/DETAILS. ACCORDINGLY THE AC TION OF THE AO WAS CONFIRMED AND THE APPEAL OF THE ASSESSEE ON THIS IS SUE WAS DISMISSED. ITA NO.1192/AHD/2007 VADILAL DAIRY INTERNATIONAL LTD. 4 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE DETAILS WERE FILED AND EXPLANATION ON THIS ISSUE WHICH WAS FILED BEFORE HIM. THE DETAILS OF PRODUCTION AND VALUE OF STOCK FOR THE AS SESSMENT YEAR UNDER APPEAL WAS ALSO FILED ALONG WITH THE DESCRIPTION OF ITEMS OF EACH AND EVERY ITEM AND EXPLAINED THAT SINCE COMPLETE DETAIL S WERE FILED BEFORE THE AO, THEREFORE, THE LEARNED CIT(A) SHOULD NOT HAVE C ONFIRMED THE DISALLOWANCE. ON THE OTHER HAND, THE LEARNED DR REL IED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. THE ASSESSEE EXPLAINED BEFORE THE AUTHOR ITIES BELOW THAT VALUE OF OBSOLETE AND UN-SALEABLE STOCK OF RAW MATERIAL A ND PACKING MATERIAL HAS BEEN REDUCED DURING THE VALUATION OF THE CLOSIN G STOCK LOOKING INTO THE CIRCUMSTANCES PREVAILING AT THAT TIME AND RECOM MENDATION FROM THE STATUTORY AUDITOR. IT WAS ALSO EXPLAINED THAT SUCH STOCK HAD NO REALIZABLE SCRAP VALUE. THE SAME EXPLANATION WAS SUPPORTED BY LIST OF THE ITEMS WHICH HAVE NOW BEEN FILED BY THE LEARNED COUNSEL FO R THE ASSESSEE BEFORE US TO SHOW THAT VALUATION OF THE CLOSING STOCK WAS ACCORDINGLY REDUCED BY RS.16,52,079/-. HOWEVER, THE FACT REMAINS THAT T HE QUERY OF THE AO WAS NOT SATISFIED BY THE ASSESSEE BECAUSE THE ASSES SEE WAS REQUESTED TO FURNISH THE DETAILS OF ITEMS AND QUANTITY THEREOF W HICH WERE FOUND TO BE OBSOLETE AND UNUSABLE. EVEN THE ASSESSEE WAS ASKED TO EXPLAIN WHETHER THESE ITEMS HAVE ANY SALEABLE VALUE AS SCRAP. THE A SSESSEE DID NOT FURNISH ANY SUBSTANTIVE EXPLANATION BEFORE THE AO A ND WHATEVER EXPLANATION WAS FILED WAS NOT SUPPORTED BY ANY MATE RIAL OR EVIDENCE. THE ASSESSEE CLAIMED THAT EVEN THE SCRAP HAS NO REALIZA BLE VALUE. THIS STATEMENT OF THE ASSESSEE CANNOT BE ACCEPTED BECAUS E THE SCRAP WOULD HAVE SOME VALUE AT LEAST. THEREFORE, THE ASSESSEE C OULD HAVE PRODUCED SOME EVIDENCE IN SUPPORT OF THE SAME BUT THE ASSESS EE DID NOT SUPPORT ITS STATEMENT THROUGH ANY EVIDENCE ON RECORD. SAME ARE THE POSITION BEFORE THE LEARNED CIT(A) AS WELL AS BEFORE THE TRI BUNAL WHEREIN THE ITA NO.1192/AHD/2007 VADILAL DAIRY INTERNATIONAL LTD. 5 ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO EXPLAIN THAT SCRAP WOULD HAVE SOME VALUE. IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL ON RECORD TO SUPPORT THE EXPLANATION OF THE ASSESSEE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BEL OW. WE CONFIRM THEIR FINDINGS AND DISMISS THIS GROUND OF APPEAL OF THE A SSESSEE. 11. ON GROUND NO.6 OF THE APPEAL, THE DISALLOWANCE OF RS.50,000/- OUT OF STAFF WELFARE EXPENSES AND MISC. EXPENSES IS CHA LLENGED. THE AO MADE THE DISALLOWANCE OF RS.2,00,000/- BECAUSE HE WAS OF THE VIEW THAT THERE ARE MANY AMOUNTS GIVEN AS DONATION AND OF CAPITAL N ATURE. THE LEARNED CIT(A) REDUCED THE ADDITION TO RS.50,000 AND ALLOWE D RELIEF OF RS.1,50,000/-. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS AD HOC ADDITION BECAUSE THE ASSESSEE FILED COMPLETE DETAILS BEFORE THE AO TO EXPLAIN THAT THE EXPENDITURE WAS INCURRED FOR TH E PURPOSE OF BUSINESS. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE ADDITION RESTRICTED BY THE LEARNED CIT(A) TO RS .50,000/- IS JUSTIFIED. THE AO HAS GIVEN SPECIFIC FINDING ON VERIFICATION O F THE DETAILS ON THE ABOVE EXPENSES THAT THERE ARE MANY AMOUNTS GIVEN AS DONATION WHICH ARE OF CAPITAL IN NATURE. THE FINDINGS OF THE AO HA VE NOT BEEN REBUTTED THROUGH ANY MATERIAL ON RECORD. WE ACCORDINGLY CONF IRM THE ADDITION OF RS.50,000/-. AS A RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 13. NO OTHER POINT IS ARGUED OR PRESSED. ITA NO.1192/AHD/2007 VADILAL DAIRY INTERNATIONAL LTD. 6 14. AS A RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED ON 05-03-2010 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 05-03-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD