DCIT, New Delhi V. M/s. Wrigley India Pvt. Ltd., New Delhi

ITA 1203/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4481 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Fair market value
• Section: 80IB; 143(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1203/DEL/2016 ASSESSMENT YEAR: 2005-06 DCIT, CIRCLE 27(1), ROOM NO. 193, C.R. BUILDING, NEW DELHI VS. WRIGLEY INDIA PVT. LTD. (EARLIER KNOWN AS JOYCO INDIA PVT. LTD.) 206, SECOND FLOOR, OKHLA INDUSTRIAL ESTATE, PHASE- III, NEW DELHI 20 (PAN: AAACW1789P) (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 01.12.2015 PASSED BY THE LD. CIT(A)-22, NEW DELHI R ELATING TO ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE ACES AND IN LAW THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS AND THE LD. CIT(A) HAS ERRED IN DELETING ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION FROM RS.8,96,12,593/- TO RS. 4,97,57,537/- CLAIMED BY THE ASSESSEE U/S. 80IB DEPARTMENT BY MS. RINKU SINGH, SR. DR ASSESSEE BY SH. RAVI SHARMA, ADV. & MS. POONAM AHUJA, CA 2 OF THE I.T. ACT, 1961 WITH REFERENCE TO THE SPECIFI C AND DETAILED FINDINGS IN THE ASSESSMENT ORDER. II. THE APPELLANT CRAVES, LEAVE OR RESERVING THE RIGHT TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE F ILED ITS RETURN OF INCOME ON 31.10.2015 AT AN INCOME OF RS. 1,14,21,2 20/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 19 61 (IN SHORT ACT) ON 1.3.2006 AT THE RETURNED INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED IN THIS CASE ON 8.9.2006. IN RESPONSE TO THE NOTICE U/S. 14 3(2), THE AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE REQUISITE DETAILS AS CALLED FOR. THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CONFECTIONERY PRODUCTS LIKE BUBBLE GUM, CHEWING GUM, CANDIES ETC. BESIDES THIS, THE AS SESSEE HAS ALSO CARRIED OUT CERTAIN TRADING ACTIVITIES. AO NOTED TH AT NO ONE TRADE WITH ITSELF AND THE ASSESSEE HAS SHOWN ARTIFICIAL PROFIT S IN GUM BASE UNIT. THEREFORE, HE HELD THAT THERE CANNOT BE ANY PROFIT OR LOSS IN GUMBASED UNIT AND ALLOCATED ITS PROFIT TO THREE UNITS TO WHO M THE GUMBASED UNIT HAD TRANSFERRED ITS PRODUCTS FOR CAPTIVE CONSUMPTIO N. THE AO FIRST WORKED OUT ALLOCATION OF THE PROFITS, PRODUCT WISE IN THE RATIO OF QUANTITY OF THAT PRODUCT AND THE TOTAL QUANTITY OF ALL PRODUCTS PROD UCED. HE THEN ALLOCATED THE PROFIT OF EACH PRODUCT, THUS DETERMINED TO THE THREE UNITS TO WHOM 3 THE PRODUCT OF GUMBASED UNIT WERE TRANSFERRED IN TH E RATIO OF QUANTITY OF THAT PRODUCT TRANSFERRED TO A PARTICULAR UNIT AND T HE TOTAL QUANTITY OF THAT PRODUCT. ON THIS BASIS, THE AO REWORKED THE DEDUCTI ON U/S. 80IB. THE REDUCTION IN CLAIM WAS MAINLY DUE TO THE FACT THAT THE ONE UNIT TO WHOM THE GUMBASED UNIT TRANSFERRED ITS PRODUCT, WERE ELI GIBLE FOR DEDUCTION U/S. 80IB AT 30%, BEING THE BUBBLE GUM UNIT. THE OT HER TWO UNITS I.E THE TREX UNIT AND THE LOLLIPOP UNIT, THOUGH ELIGIBLE FO R DEDUCTION U/S. 80IB AT 100&, HAD LOSSES. THEREFORE, THE AO HELD THAT DEDUC TION U/S. 80IB SHALL BE ALLOWED AT AN AMOUNT OF RS. 4,97,57,537/- AS AGA INST THE CLAIM OF RS. 8,96,12,593/- AND ASSESSED THE INCOME OF THE ASSESS EE AT RS. 3,55,12,610, AFTER TAKING INTO EFFECT THE DISALLOWA NCE IN DEDUCTION U/S. 80IB VIDE HIS ORDER DATED 31.12.2007 PASSED U/S. 14 3(3) OF THE ACT. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEF ORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 01.12.2015 HAS ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STATED THAT AO HAS RIGHTLY ALLOWED THE DEDUCTIO N U/S. 80IB OF THE ACT AMOUNTING TO RS. 4,97,57,537/-, WHICH DOES NOT NEED ANY INTERFERENCE. 4. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE LD. CIT(A). HE FURTHER STATED THAT ASSESSEES CLAIM OF DEDUCTIO N U/S. 80IB IN RESPECT OF GUMBASED UNIT WAS NOT ALLOWED IN THE ASSESSMENT YEAR 2003-04 AND THE MATTER WAS TRAVELLED TO THE ITAT, WHO VIDE ITS ORDER DATED 19.12.2008 4 HAS RESTORED THE MATTER TO THE FILE OF THE AO AND PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL, THE AO PASSED THE ORDER AGAINST WHICH THE ASSESSEE MOVED BEFORE THE LD. CIT(A) IN THE SECOND ROUND OF APPEAL, WHO VIDE HIS IMPUGNED ORDER DATED 18.6.2012 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE SAME, THE REVENUE F ILED THE APPEAL BEFORE THE TRIBUNAL, WHO DISMISSED THE REVENUES A PPEAL VIDE ITS ORDER DATED 9.10.2015 FOR THE ASSESSMENT YEAR 2003-04. THEREFORE, BY RESPECTFULLY THE TRIBUNALS ORDER DATED 9.10.2015, THE PRESENT LD. CIT(A) VIDE HIS ORDER DATED 1.12.2015 HAS HELD THAT DISALL OWANCE MADE BY THE AO, CANNOT BE CONFIRMED EVEN ON THE ALTERNATIVE REA SONING WHICH THE AO HAD TAKEN IN THE AY 2003-04. THEREFORE, LD. COUNSE L FOR THE ASSESSEE REQUESTED TO RESPECTFULLY FOLLOW THE TRIBUNALS ORD ER, AS AFORESAID AND DISMISS THE APPEAL OF THE REVENUE BY UPHOLDING THE ACTION OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER. WE NOTE THAT ASSESSEES CLAI M OF DEDUCTION U/S. 80IB IN RESPECT OF GUMBASED UNIT WAS NOT ALLOWED IN THE ASSESSMENT YEAR 2003-04 BY THE LOWER AUTHORITIES AND THE MATTER W AS TRAVELLED TO THE ITAT AND THE TRIBUNAL VIDE ITS ORDER DATED 19.12.2 008 PASSED IN ITA NO. 1562/D/2007 HAS RESTORED THE MATTER TO THE FILE OF THE AO AND PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL, THE AO PASSED TH E ORDER AGAINST THE ASSESSEE, AGAINST WHICH THE ASSESSEE FILED THE AP PEAL BEFORE THE LD. CIT(A) IN THE SECOND ROUND OF APPEAL, WHO VIDE HIS IMPUGNED ORDER DATED 18.6.2012 HAS DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE AND AGAINST 5 WHICH THE REVENUE FILED ITS APPEAL BEFORE THE TRIB UNAL WHICH WAS DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 9.10.201 5 IN ITA NO. 4794/DEL/2012 FOR THE ASSESSMENT YEAR 2003-04 BY HO LDING THAT THE TRANSFER PRICE ADOPTED BY THE ASSESSEE, IS THE FAIR MARKET VALUE OF THE GOODS TRANSFERRED AND, THEREFORE, LD. CIT(A) CORREC TLY ALLOWED THE CLAIM OF THE ASSESSEE. IN VIEW OF ABOVE, IN OUR CONSIDERED OPINION, THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE AFORESAID ORDER OF THE TRIBUNAL DATED 09.10.2015. IN THE ASS ESSMENT ORDER UNDER APPEAL, THE AO DID NOT MAKE ANY ANALYSIS OF THE TRA NSFER PRICE AND HAS SIMPLY HELD THAT ARTIFICIAL PROFITS IN THE CASE OF BUDDI UNIT, HAVE BEEN CREATED. SINCE IT IS A SETTLED ISSUE THAT THE DEDU CTION 80IB IS TO BE ALLOWED, EVEN IF THE GOODS PRODUCED BY ANY ELIGIBLE UNIT ARE CAPITIVELY CONSUMED, THE AO OBSERVATION THAT BUDDI UNIT IS NO T ELIGIBLE FOR DEDUCTION U/S. 80IB WAS NOT UPHELD BY THE LD. CIT(A ). AS REGARDS, SECTION 80IA(8) AND THE TRANSFER PRICE OF THE GOODS, THE FA CTS IN THE YEAR, UNDER APPEAL, ARE SAME AS IN AY 2003-04. THEREFORE, THE L D. CIT(A) HAS BY FOLLOWING THE ORDER OF THE TRIBUNAL AS WELL AS THE EARLIER ORDER OF THE LD. CIT(A) IN RESPECT OF ASSESSMENT YEAR 2003-04, AS AFORESAID HAS RIGHTLY HELD THAT DISALLOWANCE MADE BY THE AO WAS NOT CONFI RMED EVEN ON THE ALTERNATIVE REASONING WHICH THE AO HAD TAKEN IN AY 2003-04 AND ALLOWED THE APPEAL OF THE ASSESSEE, WHICH DOES NOT NEED ANY INTERFERENCE. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT T HERE IS NO ILLEGALITY OR INFIRMITY IN THE FINDING OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE, HENCE, 6 WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUND RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 14-02-2019. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:14/02/2019 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES