SUYASH LABORATORIES LTD ( MERGED WITGH AARTI DRUGS LTD), MUMBAI V. ITO 7(2)(4), MUMBAI

ITA 1245/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0333 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 13-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Rule of consistency

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MU MBAI BEFORE SHRI P.K.BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO 1245/MUM/2013 FOR ASSESSMENT YEAR 2006-07 ITA NO 1256/MUM/2013 FOR ASSESSMENT YEAR 2007-08 IN THE MATTER OF SUYASH LABORATORIES LIMITED, (MERGED WITH AARTI DRUGS LIMITED) 109-D, MAHENDRA INDUSTRIAL ESTATE, GROUND FLOOR, ROAD NO.29, SOIN, MUMBAI-400022 PAN: AAACA4410D --- -------- APPELLANT VERSU S INCOME TAX OFFICER- 7(2)(4) AAYAKAR BHAVAN MUMBAI-400020 ---------- RESPONDENT APPELLANT THROUGH : SH. VIJAY MEHTA - FC A (AR) RESPONDENT THROUGH : DR. A.K. NAYAK - DR RESERVE FOR ORDER: 15 JUNE 2017 DATE OF PRONOUNCEMENT: 16 JUNE 2 017 ORDER UNDER SECTION 254(1) OF INCOME-TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THESE TWO APPEALS BY ASSESSEE UNDER SECTION 253 OF INCOME-TAX ACT ARE DIRECTED AGAINST THE ORDERS OF COMMISSIONER (APPEAL S)-9 MUMBAI, BOTH DATED 27.11.2012 FOR ASSESSMENT YEAR 2006-07 AND 20 07-08 RESPECTIVELY.IN BOTH THE APPEALS THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL; THE FACTS OF BOTH THE ASSESSMENT YEAR ARE ALSO IDENTICA L. THUS, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER TO AVOID THE IT A NO.1245 &1256/M/2013 SU YASH LABORATORIES LTD 2 CONFLICTING DECISION. THOUGH THE ASSESSEE HAS RAISE D MULTIPLE ISSUES IN BOTH THE APPEALS, HOWEVER IN OUR VIEW THE SOLE GROUND OF APPEAL IS THAT WHETHER THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDI NG THE ADDITION UNDER SECTION 145A IN RESPECT OF CLOSING BALANCE OF MODVA T CREDIT OF RAW MATERIAL. FOR APPRECIATION OF FACTS, FIRST WE ARE DISCUSSING THE FACTS OF THE APPEAL FOR ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN MANUFACTURING OF BULK DRUGS AND CHEMICAL S AND JOB WORKS ACTIVITY FOR OTHERS, FILED RETURN OF INCOME FOR REL EVANT ASSESSMENT YEAR ON 20 TH NOVEMBER 2006 DECLARING TOTAL INCOME OF RS- NIL. S INCE, THERE WAS A DEPRECIATION LOSS IN THE YEAR THE ASSESSEE PAID TAX ON BOOK PROFITS OF RS.2,11,71,009/-. THE ASSESSMENT WAS COMPLETED UNDE R SECTION 143 (3) ON 26 TH DECEMBER 2008. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT ORDER MADE ADDITION OF RS. 6,38,803/- UNDER SECTION 145A. THE ASSESSING OFFICER MADE THE ADDITION HOLDING THAT THE ASSESSEE HAS NOT FURNISHED CORRECT PARTICULARS UNDER SECTION 145A IN RESPECT OF UNUTIL ISED MODVAT CREDIT. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ADDITIO N WAS SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF COMMISSIONER (AP PEALS) THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD LEARNED AUTHORISED REPRESENTATIVE (A R) OF THE ASSESSEE AND LEARNED DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED IT A NO.1245 &1256/M/2013 SU YASH LABORATORIES LTD 3 THE MATERIAL AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAS EMPLOYED EXCLUSIVE METHOD OF ACCOUNTING FOR MODVAT CREDIT AND THE ASSESSING OFFICER MADE THE AD DITION IN RESPECT OF CLOSING BALANCE OF MODVAT CREDIT NEW MATERIAL STOC K AS WELL AS IN RESPECT OF CAPITAL GOODS. IT WAS FURTHER ARGUED THA T THE ASSESSING OFFICER COMMITTED ILLEGALITY AND THE LEARNED COMMISSIONER ( APPEALS) SUSTAINED THE ADDITION WITHOUT APPRECIATING THE FACTS THAT THE PR OVISIONS OF SECTION 145A ARE TAX NEUTRAL. IT WAS PRAYED THAT THE ADDITION I S LIABLE TO BE DELETED. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE PERUSA L OF ORDERS OF THE AUTHORITIES BELOW SHOWS EXCLUSIVE METHOD OF ACCOUNT ING IS NOT IN DISPUTE. AS PER NEW PROVISION OF SECTION 145A, THE UNUTILISE D MODVAT CREDIT HAD TO BE INCLUDED IN THE CLOSING STOCK OF NEW MATERIAL AND WORK IN PROGRESS, WHEREAS THE EXCISE DUTY PAID ON UNSOLD FINISHED GOO D HAD TO BE INCLUDED IN THE INVENTORY OF FINISHED GOODS. EVEN OTHERWISE, TH E UNUTILISED MODVAT CREDIT NOT TO BE REGARDED AS THE SAME IS TAX NEUTRA L. THE HONBLE BOMBAY HIGH COURT IN CIT VS PARLE BISCUITS LTD [2006] 282 ITR547, WHILE FOLLOWING THE DECISION OF HONBLE APEX COURT IN CIT VS NIPPON CHEMICALS CO. LTD (261 ITR 275) HELD THAT MODVAT CR EDIT IS NOT INCOME IT A NO.1245 &1256/M/2013 SU YASH LABORATORIES LTD 4 LIABLE TO TAX AND UPHELD THE DELETION OF SIMILAR A DDITIONS MADE ON THE BASIS OF STOCK ON THAT ACCOUNT. THUS, CONSIDERING THE AB OVE LEGAL POSITION, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF MODVAT CREDIT. HENCE THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN APPEAL FOR ASSESSMENT YEAR 2007-08 THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL, THE FACTS OF THE ASSESSMENT YEAR ARE ALSO IDENTICAL. THUS KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY THE AP PEAL FOR ASSESSMENT YEAR 2007-08 ARE ALSO ALLOWED WITH SIMILAR OBSERVATIONS. 7. IN THE RESULT BOTH THE APPEAL OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JUNE, 2017. - SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE PRESIDENT JUDI CIAL MEMBER MUMBAI; DATED 16/06/2017 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. ! / GUARD FILE. '