Arun Plasto Moulders India Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1478/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8864 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 21-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2015
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAURCIT
• Keywords: Opportunity of being heard; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1478/MDS./2015 / ASSESSMENT YEAR : 2010-11 M/S.ARUN PLASTO MOULDERS INDIA PVT. LTD., NO.3C,PHASE III,SIDCO INDUSTRIAL ESTATE, EKKADUTHANGL, CHENNAI 600 032. VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-1(1), CHENNAI -34. [PAN AAECA 8066 H ] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.PHILIP GEORGE,ADVOCATE /RESPONDENT BY : SMT.PARMINDER KAUR,CIT DR / DATE OF HEARING : 21 - 06 - 201 6 !' / DATE OF PRONOUNCEMENT : 15 - 07 - 2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNAI DA TED 10.03.2015PERTAINING TO ASSESSMENT YEAR 2010-11. - - ITA 1478/15 2 2. THE FIRST GRIEVANCE OF THE ASSESSEE IS WITH RE GARD TO DIRECTION OF CIT(A) TO AO TO DECIDE WHETHER THE HARIDWAR UNIT WA S FORMED BY SPLITTING UP OF THE BUSINESS OF THE CHENNAI UNIT FOR THE PRES ENT ASSESSMENT YEAR 2010-11 APPLYING THE SAME FINDINGS FOR ASSESSMENT Y EAR 2009-10 AS DIRECTED BY THE TRIBUNAL. 2.1 FURTHER THE ASSESSEE HAS RAISED THE GROUND THA T THE CIT(A) GROSSLY ERRED IN DIRECTING THE AO TO ALLOW BENEFIT U/S.80-I C ON THE BASIS OF RATIO OF TURNOVER WORKED OUT BY HIM N THE ASSESSMENT YEAR, I N THE EVENT OF THE FINDING THAT THE HARIDWAR UNIT IS NOT FORMED BY SPL ITTING UP OF CHENNAI UNIT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PLASTIC INJ ECTION MOULDINGS AND PLASTIC TUBING AND FILED ITS RETURN OF INCOME FOR A SSESSMENT YEAR 2010-11 ON 05.10.2010 ADMITTING NIL INCOME AFTER CLAIMING DEDUCTION U/S.80-IC OF THE ACT AT ` 11,78,69,324/-. THE COMPANY HAS TWO UNITS, ONE AT C HENNAI AND ANOTHER AT HARIDWAR. THE RETURN WAS PROCESSED U /S.143(1) AND SELECTED FOR SCRUTINY AND THE ASSESSMENT U/S.143(3 ) WAS FRAMED ON 28.03.2013 BY MAKING FOLLOWING DISALLOWANCE OF DEDU CTION U/S.80-IC OF THE ACT. - - ITA 1478/15 3 UNIT & YEAR IN WHICH STARED TOTAL TURNOVER TOTAL TURNOVER IN % NET PROFIT NET PROFIT IN % MATERIAL CONSUMPT ION IN % CHENNAI 2004 15,48,62,317 28.49% 1,61,14,678 1.04% 60.75% HARIDWAR 2009 38,90,72,879 71,53% 13,07,47,066 33.60% 48.50% TO TAL 54,39,35,196 11,46,32,388 FURTHER THE AO COMPARED THE TURNOVER OF SALES OF B OTH THE UNITS IN A TABULAR FORM AND OBSERVED THAT CERTAIN EXPENSES ARE BOOKED IN CHENNAI UNIT ONLY WITHOUT APPORTIONING TO HARIDWAR UNIT. TH E DETAILS ARE SHOWN AS UNDER: CHENNAI HARIDWAR TOTAL TOTAL TURNOVER 15,48,62,317 38,90,72,879 54,39,35,196 PACKING MATERIAL 42,96,561 0 42,96,561 REMUNERATION TO DIRECTORS 6,00,000 0 6,00,000 BONUS TO DIRECTORS 4,00,000 0 4,00,000 INCENTIVE TO DIRECTOR 36,50,000 0 36,50,000 DONATION 1,12,000 0 1,12,000 EXCHANGE LOSS 13,38,555 0 13,38,555 GRATUITY 26,05,319 0 26,05,319 BUSINESS DEVELOPMENT 3,65,648 0 3,65,648 THE AO FURTHER OBSERVED THAT BEFORE ASSESSEE STARTE D CLAIMING DEDUCTION U/S.80-IC, THE NET PROFITS OF THE COMPANY WERE ONLY 3.62%, 6.27% AND 6.48% AND FROM THE YEAR 80-IC WAS STARTED CLAIMING, THE TOTAL NET PROFIT WAS INCREASED TO 13.29% AND 21.07%. COMPARING THE P RE AND POST 80-IC CLAIM, THE TOTAL NET PROFIT OF HARDIWAR UNIT WAS IN CREASED BY MAGICAL FIGURE OF 200% AND 300% IN POST 80-IC CLAIM IN F.YS.08-09 & 09-10 RESPECTIVELY. - - ITA 1478/15 4 THE NET PROFIT OF CHENNAI UNIT WAS AGAIN A MAGICAL DROP OF APPROXIMATELY 300% IN F.Y 2008-09 AND MORE THAN 700% IN F.Y 2009- 10. COMPARISON OF NET PROFIT AT 80-IC AND NON 80-IC UNIT, THE 80-IC U NITS NET PROFIT WAS 1200% MORE IN F.Y 2008-09 AND 3300% MORE IN F.Y 200 9-10. THE AO FURTHER OBSERVED THAT THE COMPARATIVE ANALYSIS OF P RE AND POST 80IC CLAIM PERIOD FINANCIALS AND THE FINANCIALS OF 80-IC AND N ON 80-IC UNIT OF THE ASSESSEE CLEARLY ESTABLISHES THE FACTS THAT THE ASS ESSEE COMPANY HAS SO ARRANGED ITS AFFAIRS AND ACCOUNTS IN SUCH A WAY TO SHOW ENORMOUSLY HUGE PROFIT AT HARIDWAR AND LOSS AT CHENNAI. BY ALLOWING HIGH PROFIT AT HARIDWAR, THE ASSESSEE CLAIMS DEDUCTION AND BY SHOWING LOSS A T CHENNAI, THE ASSESSEE AVOIDS PAYING TAX. BECAUSE OF THIS ARTIFIC IAL AND DELIBERATE MANIPULATION OF ITS BUSINESS AFFAIRS, THE AO REJECT ED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND DENIED THE 80-IC CLAIM TO HARID WAR UNIT. THE AO HAS ALSO NOTED THAT FOR ASSESSMENT YEAR 2009-10, THE AS SESSEE WAS DENIED 80- IC CLAIM FOR THAT YEAR ON THE GROUND THAT THE BUSIN ESS AT HARIDWAR UNIT WAS STARTED BY SPLITTING UP AND RECONSTRUCTION OF T HE BUSINESS AT CHENNAI AND THE PROFITS SHOWN AT HARIDWAR UNIT AT 26.41% OF THE TURNOVER WHICH IS RELATIVELY HIGHER THAN THE NET PROFIT OF CHENNAI UN IT AT 2.12% OF THE TURNOVER. THE DENIED THE 80-IC CLAIM FOR THE PRESE NT ASSESSMENT YEAR 2010-11 IN LINE WITH THE DECISION TAKEN FOR ASSESSM ENT YEAR 2009-10. AGAINST THIS, THE ASSESSEE CARRIED THE APPEAL BEFOR E THE LD.CIT(A). - - ITA 1478/15 5 4. ON APPEAL, THE CIT(A) OBSERVED THAT THIS ISSUE IS COVERED BY THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR 2009-10 IN IT A NO.1274/MDS./2013 VIDE ORDER DATED 25.02.2015 WHEREIN HELD AS FOLLOWS :- 6. WE ALSO FIND THAT THE ASSESSEE HAS NOT FILED ANY DETAILS WITH REGARD TO MACHINERIES, EQUIPMENTS AND ASSETS I N RESPECT OF NEWLY ESTABLISHED HARIDWAR UNIT BEFORE THE AO. THES E DETAILS WERE FILED BEFORE THE LD.CIT(A). UNDER THESE CIRCUMSTANC ES, WE ARE OF THE OPINION THAT ALL THE DETAILS SUCH AS MACHINERIES, EQUIPMENTS AND OTHER ASSETS PURCHASED/ACQUIRED BY THE ASSESSEE, IN CLUDING BILLS, IN RESPECT OF HARIDWAR UNIT ESTABLISHED BY THE ASSESSE E HAVE TO BE PRODUCED BEFORE THE AO. THE AO IS DIRECTED TO DECID E THE ISSUE DE NOVO . ACCORDINGLY, CIT(A) REMITTED THE ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATION. FURTHER, HE HAS GIVEN A FINDING THA T IN CASE, THE ASSESSEE HAS CLAIMED DEDUCTION FOR ASSESSMENT YEAR 2010-11, THE PROFITS AT HARIDWAR UNIT AND CHENNAI UNIT WORKED OUT ON THE BA SIS OF THE RESPECTIVE SALES TURNOVER. AGAINST THIS, THE ASSESSEE IS IN A PPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THIS ISSUE CAME FOR CONSIDERATI ON BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 1274/MDS./2013 VIDE ORDER DATED 25.02.2015 AND THE TRIBUNAL REMITTED THE ISSUE TO T HE FILE OF AO AT PARA-6 OF ITS ORDER AS REPRODUCED IN ABOVE PARA. IN THIS F INDINGS OF THE LD.CIT(A), - - ITA 1478/15 6 WE DO NOT FIND ANY INFIRMITY. HOWEVER, THE CIT(A) GIVEN A DIRECTION THAT THE PROFITS OF THESE TWO UNITS TO BE ASCERTAINED IN THE RATIO OF TURNOVERS OF THE RESPECTIVE UNITS. THE GRIEVANCE OF ASSESSEE IS THAT THE ASSESSEE MAINTAINED SEPARATE SET OF BOOKS OF ACCOUNTS FOR HA RIDWAR UNIT AND THE AO CAN ASCERTAIN THE PROFIT OF HARIDWAR UNIT FOR TH E PURPOSE OF GRANTING DEDUCTION U/S.80-IC OF THE ACT INDEPENDENTLY. CONSI DERING THE PLEA OF THE ASSESSEE, WE ARE REMITTING THE ISSUE TO THE FILE OF THE AO TO VERIFY THE BOOKS OF ACCOUNTS MAINTAINED SEPARATELY FOR HARIDWA R UNIT, WHICH IS ENTITLED FOR DEDUCTION U/S.80-IC OF THE ACT AND IF THE AO FINDS NO DISCREPANCY IN THE SAID BOOKS OF ACCOUNTS MAINTAINE D FOR HARIDWAR UNIT AND THE CLAIM OF DEDUCTION U/S.80-IC OF THE ACT BY ASSESSEE IS FOUND TO BE CORRECT, THEN AO IS AT LIBERTY TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. WITH THIS OBSERVATION, THIS GROUND OF ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE ISSUE IS REMITTED TO T HE FILE OF AO FOR FRESH CONSIDERATION. 6. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O DISALLOWANCE OF I44,77,467/- TOWARDS MOULD AMORTIZATION CHARGES CLA IMED BY THE ASSESSEE AS A REVENUE EXPENDITURE. ACCORDING TO LD.A.R, THI S IS NOT THE FIRST YEAR OF THE CLAIM OF ASSESSEE AND THE SAME WAS SUBJECT MATT ER OF ISSUE BEFORE THE - - ITA 1478/15 7 TRIBUNAL IN ITA NO.1274/MDS./2013 IN ASSESSEE'S OWN CASE (SUPRA) FOR ASSESSMENT YEAR 2009-10 AND THE ISSUE WAS CONSIDERE D BY THIS TRIBUNAL WHEREIN THE TRIBUNAL HELD AS FOLLOWS:- 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) WITHOUT DISCUSSING ANYTHING ON THE MATTER SIMPLY ALLOWED THE GROUND RAISED BY THE ASSESSEE. NECESSARY DOCUM ENT LIKE AGREEMENT BETWEEN THE ASSESSEE AND M/S.HUL AND THE LIFE TIME OF THE MOULDS PROVIDED BY M/S.HUL ARE REQUIRED TO BE E XAMINED TO DECIDE THE ISSUE. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE LD.CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO TO EXAMINE THE AGREEMENT BETWEEN THE ASSESSEE AND M/S.HUL AND OTHE R DETAILS. THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER GIV ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSIDERING THE ABOVE FINDINGS OF THE TRIBUNAL, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF AO ON SAME DIRECTION AND IF IT IS ALLOWED IN THE ASSESSMENT YEAR 2009-10 AS THE FIRST YEAR OF CLAIM, THE ASSESSEE CANNOT DISTURB ANY SUBSEQUENT ASSESSMENT YEAR I.E.2009-10. WITH THIS OBSERVATION, THIS GROUND IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. - - ITA 1478/15 8 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 15 TH JULY, 2016, AT CHENNAI. SD/- SD/- ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 15 TH JULY, 2016. K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1478/MDS./2015 / ASSESSMENT YEAR : 2010-11 M/S.ARUN PLASTO MOULDERS INDIA VS. DEPUTY COMMISSIONER OF - - ITA 1478/15 9 PVT. LTD., NO.3C,PHASE III,SIDCO INDUSTRIAL ESTATE, EKKADUTHANGL, CHENNAI 600 032. INCOME TAX, COMPANY CIRCLE-1(1), CHENNAI -34. [PAN AAECA 8066 H ] ( $% / APPELLANT) ( &'$% /RESPONDENT) CORRIGENDUM IN OUR ORDER DATED 15.07.2016 IN THE ABOVE APPEAL, 8 TH LINE APPEARING IN PAGE 7, THE WORD ASSESSEE TO BE READ AS ASSESSING OFFICER SD/- SD/- ( 4(( ) ( #5 6 ) ( ((((((( -74(89:9;(<=>9?.(((((((((((((((((-@A9;B?9(8CCD9?E.( (( $ (&F /JUDICIAL MEMBER (((((( &F GHIIC=;J9;J(KL>ML?(((((( #$ /CHENNAI, %& /DATED, THE 16 TH AUGUST, 2016. MPO* &'(()*( +* /COPY TO: ( 1. /APPELLANT (( 2. /RESPONDENT 3. ( ,(- . /CIT(A) 4. ( , /CIT 5. */0 (1 /DR 6. 02(3 /GF.