Umedica Laboratories Pvt. Ltd., Vapi V. The ACIT.,Vapi Circle, Vapi

ITA 1456/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89642 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UKTI PARIKH
• Section: 143(3); 80HHC; 145; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 M/S UMEDICA LABORATORIES PVT. LTD., PLOT NO.221, GIDC, VAPI. APPELLANT VS. ASSTT. CIT, VAPI CIRCLE, VAPI. RESPONDENT PAN : AAACU 2966Q APPELLANT BY : MS. UKTI PARIKH, AR RESPONDENT BY : SHRI NIMESH YADAV, SR.DR DATE OF HEARING : 05/06/2015 DATE OF PRONOUNCEMENT : 29/06/2015 O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER. THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST TWO SEPARATE ORDERS DATED 17.02.2011 FOR THE ASST. YEARS 2003-04 & 2007-08. SINCE THESE APPEALS PERTAIN TO THE SAME ASSESSEE, THESE ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 2 WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.1455/AHD/2011 THE ASSESSEE HAS FILED T HE APPEAL ON FOLLOWING GROUNDS:- 1. THE LD. ASSTT. CIT ERRED IN DISALLOWING DEDUCTION U /S 80HHC ON SALE OF DEPB WITHOUT CONSIDERING THE FACTS. CONS IDERING IT DEDUCTION U/S 80HHC IS TO BE ALLOWED ON SALE OF DEP B. 2. THE APPELLANT CRAVES, LEAVE TO ADD, TO ALLOW OR SUB STITUTE ALL OR ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FORMU LATIONS AND MANUFACTURES TABLES AND SYRUP IN PHARMA. IN THIS C ASE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) DETERMINING TOT AL INCOME AT RS.1,73,19,981/-. WHILE FINALIZING THE ASSESSMENT D EPB LICENSE INCOME OF RS.1,10,45,628/- WAS EXCLUDED FROM THE PR OFITS ELIGIBLE FOR DEDUCTION U/S 80HHC AND DEDUCTION TO THE EXTENT OF 90% OF EXPORT INCENTIVE WAS DENIED. THE CIT(A) DISMISSED T HE APPEAL OF ASSESSEE AND THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF ASSESSI NG OFFICER ON THE BELIEF THAT THE ASSESSING OFFICER HAD NO OCCASION T O GO THROUGH THE AMENDMENT MADE OUT IN THE PROVISIONS OF SECTION 80H HC BY FINANCE ACT, 2005. IN THE RE-ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER RESTORED THE FINDINGS IN THE ORIGINAL ASSES SMENT AFTER ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 3 CONSIDERING THE SUBMISSIONS MADE BEFORE HIM. ON AP PEAL BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE ISSUE IS COV ERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATURU COLOURS & CHEMICALS 233 C TR (BOM) 313 BUT THE FIRST APPELLATE AUTHORITY DISMISSED THE APPEAL OF ASSESSEE. NOW THE ASSESSEE IS IN SECOND APPEAL BEFO RE US. 4. BEFORE US, THE LD. AR MS. UKTI PARIKH SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF HONBLE SUPREME COURT COURT IN THE CASE OF TOPMAN EXPORTS V S. CIT (2012) 342 ITR 49 (SC) WHEREIN REVERSING THE DECISI ON IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPRA) HA S BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER :- AS THE DEPB CREDIT HAS DIRECT NEXUS WITH THE COST OF IMPORTS FOR MANUFACTURING AN EXPORT PRODUCT, ANY AMOUNT REA LIZED BY THE ASSESSEE OVER AND ABOVE THE DEPB CREDIT ON TRAN SFER OF THE DEPB CREDIT WOULD REPRESENT PROFIT ON THE TRANSFER OF THE DEPB CREDIT. THUS, WHILE THE FACE VALUE OF THE DEPB CRED IT WILL FALL UNDER CLAUSE (IIIB) OF SECTION 28 OF THE ACT, THE D IFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALUE OF THE DE PB CREDIT WILL FALL UNDER CLAUSE (IIID) OF SECTION 28 OF THE ACT. THE COST OF ACQUIRING THE DEPB CREDIT IS NOT NIL BECAUSE THE PE RSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB CREDIT WHICH ACCRUES TO A PERS ON AGAINST EXPORTS HAS A COST ELEMENT IN IT. THE DEPB CREDIT R EPRESENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTURE OF THE EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB CREDIT IS NOT UTILIZED BY THE EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSO N, THE CREDIT CONTINUES TO REMAIN AS A COST TO THE EXPORTER. WHEN , THEREFORE, ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 4 THE DEPB CREDIT IS TRANSFERRED BY A PERSON, THE ENT IRE SUM RECEIVED BY HIM ON SUCH TRANSFER DOES NOT BECOME HI S PROFIT. IT IS ONLY THE AMOUNT THAT HE RECEIVES IN EXCESS OF TH E DEPB CREDIT WHICH REPRESENTS HIS PROFITS ON TRANSFER OF THE DEP B CREDIT. 5. FACTS BEING SIMILAR AND EVEN NOTHING CONTRARY WA S BROUGHT TO OUR NOTICE BY THE REVENUE, IN VIEW OF THE ABOVE DEC ISION OF THE HONBLE SUPREME COURT WE SET ASIDE THE ORDERS OF LO WER AUTHORITIES AND ASSESSING OFFICER IS DIRECTED TO GRANT RELIEF TO ASSESSEE IN LIGHT OF ABOVE LEGAL DISCUSSION. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6. IN ITA NO.1456/AHD/2011 FOR AY 2007-08 THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. ADDL. CIT ERRED IN DISALLOWING ADJUSTMENT U /S 145(A) OF RS.5,23,379/- WITHOUT CONSIDERING THE FACTS. HE HAS NOT CONSIDERED SAME PRINCIPLES SHOULD APPLY WHILE VALUI NG OPENING STOCK ALSO. THE ADDITION MADE ON THIS GROUN D IS REQUIRED TO BE DELETED. 2. THE LD. ADDL. CIT HAS FAILED TO UNDERSTAND THAT THE VALUATION OF CLOSING STOCK IS DONE ON SAME PRINCIPLE SINCE LA ST 10 YEARS. HE ADDED EXCISE DUTY U/S 145 (A) WHILE VALUING THE CLOSING STOCK. HE HAS NOT APPLIED SAME PRINCIPLES FOR THE V ALUATION OF OPENING STOCK. THERE CAN NOT BE TWO SET OF PRINCIPL E TO VALUE THE OPENING STOCK AS WELL AS CLOSING STOCK. IF ADDI TION IS NOT DELETED ON FIRST GROUND OF APPEAL, THE VALUATION OF OPENING STOCK SHALL BE DONE ON SAME PRINCIPLE AS THAT DONE FOR CLOSING STOCK. THE OPENING STOCK SHOULD ALSO BE VALUED INCL UDING EXCISE DUTY. ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 5 7. AT THE OUTSET OF HEARING, LD. AR MS UKTI PARIKH SUBMITTED THAT THE AO MADE ADDITION OF RS.5,23,379/- ON ACCOU NT OF CLOSING STOCK VALUATION BY INVOKING PROVISIONS U/S 145(A) O F THE ACT. SIMILAR GROUND WAS RAISED BY THE ASSESSEE IN AY 200 5-06. WHILE ADJUDICATING THE APPEAL FOR AY 2005-06 THE CIT(A) H ELD :- THE ISSUE RELATING TO WHETHER THE VALUE OF CLOSIN G STOCK OF THE INPUTS, WORK-IN-PROGRESS AND FINISHED GOODS MUS T NECESSARY INCLUDE THE ELEMENT FOR WHICH MODVAT CRED IT IS AVAILABLE WAS A HOTLY DEBATED TOPIC. SEC.145A WAS I NDUCTED TO CLARIFY THAT WHILE COMPUTING THE VALUE OF THE IN VENTORY AS PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE, THE SAME SHALL INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEES PAID OR LIABILITY INCURRED FOR THE SAM E UNDER ANY LAW IN FORCE, NOTWITHSTANDING ANYTHING TO THE CONTR ARY CONTAINED IN SECTION 145. THE EXPLANATION TO SECTIO N 145A PROVIDES THAT FOR THE PURPOSES OF THIS SECTION, ANY TAX, DUTY, CESS OR FEES (BY WHATEVER NAME CALLED) UNDER ANY LA W FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. IN THIS CIRCUMSTANCES THE APPELLANT HAS NO CHOICE BUT TO INCLUDE THE EXCISE DUTY LIABILITY FOR THE IN VENTORY. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 7.1 THE FACTS AND ISSUE INVOLVED IN THE ASST. YEAR 2005-06 WERE SIMILAR, THEREFORE, THE CIT(A) BY FOLLOWING HIS EAR LIER ORDER DISMISSED .THIS GROUND. THE ASSESSEE BEING AGGRIEVE D AND IS IN APPEAL BEFORE US. ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 6 7.2 BEFORE US THE LD. AR SUBMITTED THAT THE ISSUE O F ASST. YEAR 2005-06 TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUNA L VIDE ITS ORDER IN ITA NO.2316/AHD/2010 DATED 28/11/2013 DECIDED TH E ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER :- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE VIDE PARAGRAPH NO. 5.2 OF HIS ORDER BY OBSERVING AS UNDER:- 5.2. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE AO AND THE SUBMISSION MADE BY THE APPELLANT. THE ISSUE RELATING TO WHETHER TH E VALUE OF CLOSING STOCK OF THE INPUTS, WORK-IN-PROGRESS AND FINISHED GOODS MUST NE CESSARY INCLUDE THE ELEMENT FOR WHICH MODVAT CREDIT IS AVAILABLE WAS A HOTLY DE BATED TOPIC. SEC. 145A WAS INDUCTED TO CLARIFY THAT WHILE COMPUTING THE VALUE OF THE INVENTORY AS PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE, THE SAME SHALL INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEES PAID OR L IABILITY INCURRED FOR THE SAME UNDER ANY LAW IN FORCE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION1 45. THE EXPLANATION TO SECTION 145A PROVI DES THAT FOR THE PURPOSES OF THIS SECTION, ANY TAX, DUTY, CESS OR FEES (BY WHATE VER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. IN THIS CIRCUMSTANCES THE APPELLANT HAS NO CHOICE BUT TO INCLUDE THE EXCISE D UTY LIABILITY FOR THE INVENTORY. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 4.1. IN THE DECISION OF THE LD.CIT(A) THE CASE-LAW AS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE WAS NOT CONSIDERED. TH E HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LTD. REPOR TED AT (2008) 297 ITR 77 :: 168 TAXMAN 27 (DELHI) HAS HELD THAT WHENEVER ANY AD JUSTMENT IS MADE IN THE VALUATION OF STOCK, THIS WILL EFFECT BOTH; OPENING AS WELL AS CLOSING STOCK. IN THE PRESENT CASE ALSO, THE AO HAS NOT TAKEN INTO CONSID ERATION THE OPENING AS WELL AS CLOSING STOCK. THEREFORE, RESPECTFULLY FOLLOWING T HE AFORESAID DECISION, WE HEREBY DIRECT THE AO TO RESTRICT THE ADDITION TO RS.61,387 /- AND DELETE A SUM OF RS.4,03,662/-, THUS, THIS GROUND OF ASSESSEES APP EAL IS ALLOWED TO THAT EXTENT. 8. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE SO WE HOLD THAT CIT(A) ERRED IN DISALLOWING THE ADJUSTMENT UND ER SECTION 145A OF RS.5,23,379/-. THE ASSESSING OFFICER FAILED TO REFER TO HIS ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 7 ORDER FOR PREVIOUS YEAR. THE SAME PRACTICE WAS FOLL OWED FOR ALL PRECEDING ASSESSMENT YEARS. AS IN THE CLOSING STOCK OF CURRENT YEAR EXCISE DUTY OF RS.5,23,379/- WAS NOT INCLUDED ALSO EXCISE DUTY OF RS.5,22,238 WAS NOT INCLUDED IN OPENING STOCK OF CU RRENT ASSESSMENT YEAR. THE ASSESSING OFFICER HAS NOT CONS IDERED THE SAME CONSISTENT POLICY, BEING FOLLOWED FOR ALL PREC EDING ASSESSMENT YEARS. SO, HE HAS NOT FOLLOWED THE SAME PRINCIPLES WHILE CONSIDERING THE VALUE OF OPENING STOCK. IN T HIS BACKGROUND, ADDITION MADE ON THIS GROUND IS REQUIRED TO BE REST RICTED TO RS.1,141/- CONSIDERING THE VALUATION OF OPENING STO CK, WHICH IS ALSO EXCLUSIVE OF EXCISE DUTY. THE ASSESSING OFFICE R IS DIRECTED ACCORDINGLY. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE AS SESSEE IS DISPOSED OF AS INDICATED ABOVE. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF JUNE, 2015. SD/- SD/- (ANIL CHATURVEDI) ( SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED :_29/6/2015 MAHATA/- ITA NOS.1455 & 1456/AHD/2011 ASST. YEARS 2003-04 & 2007-08 8 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 DY.REGISTRAR,ITAT, AHMEDABAD 1. DATE OF DICTATION: 5/6/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17/6/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 29/6/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: