ACIT, CHENNAI V. M/s. Sicgil India Ltd., CHENNAI

ITA 1302/CHNY/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8798 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 13-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2011
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1302/MDS/2011 & 1622/MDS/2015 / ASSESSMENT YEARS : 2005-06 & 2010-11 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE VI(3)/ DY.COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 6(2) CHENNAI VS. M/S SICGIL INDIA LTD NO.84, ANNA SALAI DHUN BUILDING 6 TH FLOOR CHENNAI 600 002 [PAN AAACS 3767 M ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE / DATE OF HEARING : 13 - 0 6 - 2016 ! / DATE OF PRONOUNCEMENT : 15 - 0 7 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TA X (APPEALS), CHENNAI FOR ASSESSMENT YEARS 2005-06 AND 2010-11. THEREFORE, WE HEARD THEM TOGETHER AND DISPOSING OF THE SAME BY TH IS COMMON ORDER. ITA NO.1302/11 & 1622/15 :- 2 -: 2. FIRST WE TAKE UP I.T.A.NO.1302/MDS/2011 FOR ASSESSM ENT YEAR 2005-06. THE FIRST ISSUE ARISES FOR CONSIDERA TION IS APPORTIONMENT OF SALES TAX AND EXCISE DUTY TO THE EXTENT OF ` 2,68,90,135/-. 3. SHRI A.V. SREEKANTH, LD. DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ASSESSEE-COMPANY DEBITED A SUM O F ` 3,89,15,000/- TOWARDS SALES TAX AND CENTRAL EXCISE DUTY IN THE PR OFIT & LOSS ACCOUNT. HOWEVER, THE SAME WAS NOT DEBITED IN THE PROFIT & L OSS ACCOUNT OF GOA UNIT. THE LD. DR FURTHER POINTED OUT THAT THE ASSESSEE HAS NOT SHOWN THE PRODUCTS OF GOA UNIT AS INTER-BRANCH TRAN SFER. THE ASSESSEE HAS NOT PAID ANY SALES TAX IN GOA. THE A SSESSEE HAS ALSO PAID CENTRAL EXCISE DUTY FOR PRODUCTS RELATING TO G OA UNIT. PROPORTIONATE EXPENDITURE FOR SALES TAX AND CENTRAL EXCISE DUTY HAS TO BE REDUCED FROM GOA UNIT FOR THE PURPOSE OF COMPUTI NG ELIGIBLE DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFI CER, AFTER ADJUSTING THE PROPORTIONATE EXPENDITURE OF SALES TAX AND CENT RAL EXCISE DUTY AND OTHER EXPENSES WHICH DO NOT QUALIFY FOR THE PURPOSE OF DEDUCTION, DETERMINED THE LOSS AT ` 92,90,104/-. ACCORDING TO THE LD. DR, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IS NOT E LIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. HOWEVER, THE CIT(A) FOUND THAT THE PROPORTIONATE EXCISE DUTY HAS TO BE DEBITED IN THE PROFIT & LOSS ACCOUNT OF THE GOA UNIT. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION MADE BY THE ITA NO.1302/11 & 1622/15 :- 3 -: ASSESSING OFFICER. ACCORDING TO THE LD. DR, EXCIS E DUTY AND SALES TAX DO NOT HAVE ELEMENT OF PROFIT, THEREFORE, THE SAME CAN NOT FORM PART OF THE TOTAL TURNOVER, THEREFORE, THERE CANNOT BE A NY DEBIT OF EXCISE DUTY AND SALES TAX PAYMENT IN THE PROFIT & LOSS ACC OUNT. 4. ON THE CONTRARY, SHRI S. SRIDHAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF MANUFACTURE AND SALE OF CARBON DIOXIDE GAS AND DRY ICE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEDU CTION U/S 80IB OF THE ACT. THE ASSESSING OFFICER WHILE COMPUTING THE ELIGIBLE PROFIT FOR DEDUCTION U/S 80IB, FOUND THAT THERE WAS A LOSS OF ` 92,90,104/-. ACCORDINGLY, HE REJECTED THE CLAIM OF DEDUCTION U/ S 80IB. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSING OFFICER WAS ERR ED IN DEBITING THE PROFIT & LOSS ACCOUNT OF THE GOA UNIT WITH A PROPOR TIONATE EXCISE DUTY WITHOUT CORRESPONDINGLY INCLUDING THE EXCISE DUTY C OLLECTION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT EXCISE DUTY AND SALES TAX DO NOT HAVE ANY ELEMENT OF PROFIT. WHAT IS TO BE INCLUDED IN THE T OTAL TURNOVER IS ONLY THE RECEIPT WHICH HAS THE ELEMENT OF PROFIT IN IT. SINCE THE EXCISE DUTY AND SALES TAX DO NOT HAVE THE ELEMENT OF PROFIT, TH E SAME CANNOT FORM PART OF THE TOTAL TURNOVER. ONCE EXCISE DUTY AND S ALES TAX CANNOT FORM ITA NO.1302/11 & 1622/15 :- 4 -: PART OF THE TOTAL TURNOVER, THERE CANNOT BE ANY DEB IT IN THE PROFIT & LOSS ACCOUNT TOWARDS EXCISE DUTY AND SALES WITHOUT CORRESPONDINGLY INCLUDING THE SAME. THEREFORE, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY R EASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAM E IS CONFIRMED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE EXP ENDITURE APPORTIONED UNDER THE HEAD OTHER EXPENDITURE. 7. SHRI A.V.SREEKANTH, LD. DR SUBMITTED THAT THE ASSES SING OFFICER FOUND THAT THE ASSESSEE-COMPANY PROPORTIONA TELY DEBITED TO GOA UNIT SOME OF THE EXPENDITURE INCURRED IN THE HE AD OFFICE IN PROPOSITION TO THE CARBON DIOXIDE PRODUCED IN GOA U NIT. SINCE THE EXPENDITURE WAS NOT PROPERLY APPORTIONED, THE ASSES SING OFFICER FOUND THAT THE PROPORTIONATE EXPENDITURE TOWARDS SALES TA X AND CENTRAL EXCISE DUTY HAS TO BE REDUCED FROM THE GOA UNIT. HOWEVER, ON APPEAL, THE CIT(A) FOUND THAT THE ASSESSEE HAS APPORTIONED THE HEAD OFFICE EXPENSES ON ALL THE UNITS INCLUDING THE GOA UNIT. THE CIT(A), ACCORDINGLY, DELETED THE ADDITION MADE BY THE ASSES SING OFFICER TO THE EXTENT OF ` 67,96,405/-. ACCORDING TO THE LD. DR, THE ASSESS EE DID NOT APPORTION THE OTHER EXPENDITURE AS PER THE RATIO OF CARBON DIOXIDE PRODUCTION, HENCE, THE CIT(A) IS NOT JUSTIFIED IN D ELETING THE ADDITION. ITA NO.1302/11 & 1622/15 :- 5 -: 8. ON THE CONTRARY, SHRI S.SRIDHAR, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE SCHEDULE FORMING PART OF THE CON SOLIDATED ACCOUNTS, CLEARLY STATES THAT CERTAIN EXPENSES DO NOT RELATE TO HEAD OFFICE AND IT RELATES TO ONLY GOA UNIT. THE SCHEDULE FORMING PAR T OF THE CONSOLIDATED ACCOUNTS CLEARLY DISCLOSES THE EXPENDI TURE INCURRED BY THE ASSESSEE IN RESPECT OF GOA, BANGALORE, COIMBATORE, HYDERABAD, AND MADURAI UNITS. THE ASSESSEE-COMPANY APPORTIONED TH E HEAD OFFICE EXPENDITURE ON ALL THE UNITS INCLUDING THE GOA UNIT . THE ASSESSING OFFICER MADE AN ATTEMPT TO BIFURCATE THE HEAD OFFIC E EXPENDITURE ON ALL THE OTHER UNITS INCLUDING GOA UNIT. THE ATTEMP T MADE BY THE ASSESSING OFFICER WOULD REDUCE THE PROFIT OF GOA UN IT. THE ASSESSING OFFICER HAS NOT CONSIDERED THIS ASPECT WHILE APPORT IONING THE EXPENDITURE. THE CHARTERED ACCOUNTANT WHO AUDITED THE BOOKS OF ACCOUNT OF THE GOA UNIT CERTIFIED THAT THE EXPENSES WERE INCURRED FOR GOA UNIT. AFTER EXAMINING THE AUDITED ACCOUNTS AS CERTIFIED BY THE AUDITORS, THE CIT(A) FOUND THAT THERE IS NO NEED FO R ANY APPORTIONMENT AS DONE BY THE ASSESSING OFFICER. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER APPORTIONED THE OTHER EXPENDITURE TO THE EXTENT OF ` 67,96,405/- OUT ITA NO.1302/11 & 1622/15 :- 6 -: OF THE TOTAL EXPENDITURE OF ` 1,06,32,000/- ON THE BASIS OF CARBON DIOXIDE PRODUCTION. THE CIT(A) FOUND THAT THE SCHE DULE FORMING PART OF THE CONSOLIDATED ACCOUNTS CLEARLY DISCLOSES THAT IT DOES NOT RELATE TO HEAD OFFICE AND GOA UNIT AND ONLY IT RELATES TO OTH ER UNITS OF THE ASSESSEE-COMPANY. THE ASSESSEE HAS ALREADY APPORT IONED THE HEAD OFFICE EXPENSES AMONG ALL OTHER UNITS INCLUDING THE GOA UNIT. THEREFORE, THE ATTEMPT OF THE ASSESSING OFFICER TO APPORTION THE EXPENDITURE TO THE GOA UNIT IN PROPORTION OF CARBON DIOXIDE PRODUCTION WOULD DEFINITELY REDUCE THE PROFIT OF THE GOA UNIT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT (A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DEPRECI ATION ON MOTOR LORRIES @ 40%. 11. SHRI A.V.SREEKANTH, LD. DR SUBMITTED THAT THE ASSE SSEE CLAIMED DEPRECIATION @ 40% ON LORRIES. THE ASSESS ING OFFICER FOUND THAT THE ASSESSEE IS NOT IN THE BUSINESS OF RUNNIN G THE LORRIES ON HIRE. THE ASSESSEE USES THE LORRIES IN ITS OWN BUSINESS, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 20%. THE C IT(A), HOWEVER, FOUND THAT THE ASSESSEE IS LETTING OUT THE VEHICLE ON HIRE. ACCORDING ITA NO.1302/11 & 1622/15 :- 7 -: TO THE LD. DR, THE ASSESSEE IS NOT LETTING OUT THE VEHICLES ON HIRE BUT THE ASSESSEE IS USING THE VEHICLE FOR TRANSPORTING CARBON DIOXIDE PRODUCED BY IT. TRANSPORTATION OF ITS OWN MATERIAL , ACCORDING TO THE LD. DR, CANNOT BE CONSTRUED TO BE LETTING OUT THE VEHIC LE ON HIRE, THEREFORE, THE ASSESSEE IS NOT LIABLE FOR HIGHER R ATE OF DEPRECIATION. 12. ON THE CONTRARY, SHRI S. SRIDHAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE, IN FACT, LET OUT THE VEHICLES AND ALSO RETURNED HIRE CHARGES. ACCORDING TO THE LD. COUNSE L, MERELY BECAUSE THE ASSESSEE USED THE VEHICLE FOR TRANSPORT OF CAR BON DIOXIDE PRODUCED BY IT, THAT CANNOT BE SAID THAT THE ASSES SEE IS NOT LETTING OUT THE VEHICLE. TRANSPORTATION OF ITS OWN GOODS TO TH E SUPPLIERS ALSO AMOUNTS TO LETTING OUT THE VEHICLE ON HIRE, THEREFO RE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. UND ER THE SCHEME OF THE INCOME-TAX ACT, 1961, HIGHER DEPRECIATION WAS P ROVIDED IN RESPECT OF THE VEHICLE WHICH WAS LET OUT ON HIRE. IN THE PR ESENT CASE THE ASSESSEE IS NOT ENGAGED IN LETTING OUT OF THE VEHIC LE ON HIRE. THE ASSESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS OF M ANUFACTURING CARBON DIOXIDE GAS AND DRY ICE. THE ASSESSEE IS USING TH E VEHICLE FOR TRANSPORTATION OF ITS OWN MANUFACTURED GOODS TO THE SUPPLIERS. TH EREFORE, THIS TRIBUNAL IS ITA NO.1302/11 & 1622/15 :- 8 -: OF THE CONSIDERED OPINION THAT THE SO CALLED HIRE C HARGES SAID TO BE COLLECTED BY THE ASSESSEE IN TRANSPORTING THE GOOD S TO THE CONCERNED SUPPLIERS CANNOT BE CONSTRUED TO BE LETTING OUT OF VEHICLE ON HIRE. THE VEHICLE CONTINUES IN THE CUSTODY OF THE ASSESSEE A ND THE SAME WAS USED FOR THE BUSINESS OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT EL IGIBLE FOR HIGHER RATE OF DEPRECIATION ON THE VEHICLE WHICH WAS USED FOR T HE ASSESSEES BUSINESS FOR TRANSPORTING ITS OWN MANUFACTURED GOOD S. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF TH E ASSESSING OFFICER IS RESTORED. 14. NOW COMING TO I.T.A.NO.1622/MDS/2015, THE ONLY GRO UND OF APPEAL IS WITH REGARD TO INCLUSION OF CYLINDER TRAN SPORT CHARGES FOR COMPUTATION OF DEDUCTION U/S 80IB OF THE ACT. 15. WE HEARD THE LD. DR AND THE LD. COUNSEL FOR THE ASS ESSEE. 16. THIS TRIBUNAL FINDS THAT IN THE ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 2010-11, THE CENTRAL EXCISE DEPARTM ENT INCLUDED THE CYLINDER TRANSPORTATION CHARGES AS A PART OF SALE C ONSIDERATION OF THE SALE OF LIQUID CARBON DIOXIDE. WHEN ONE WING OF THE CENTRAL GOVERNMENT CONSIDERS THE CYLINDER TRANSPORTATION CH ARGES AS PART OF THE SALE CONSIDERATION, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE SAME HAS TO BE TREATED AS PART OF THE SALE CONS IDERATION UNDER THE ITA NO.1302/11 & 1622/15 :- 9 -: INCOME-TAX ACT, 1961 ALSO. IN VIEW OF THE ORDER OF THIS TRIBUNAL IN I.T.A.NO.1174/MDS/2015 IN ASSESSEES OWN CASE, THE CYLINDER TRANSPORTATION CHARGES IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 17. TO SUMMARIZE, I.T.A.NO.1302/MDS/2011 IS PARTLY ALL OWED WHEREAS I.T.A.NO.1622/MDS/2015 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 15 TH JULY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF