DCIT, Ernakulam V. M/s.Kreem Drinks P.Ltd, Cochin

ITA 167/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65043 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2012
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 167/COCH/2012 ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. M/S. KREEM DRINKS (P) LTD., CHERUPARAMBATH ROAD, KADVANTHARA, KOCHI-20 [PAN: AAACK 8718L] (REVENUE-APPELLANT) (ASSESSEE -R ESPONDENT) REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR ASSESSEE BY SHRI A.S. NARAYANAMOORTHY, CA DATE OF HEARING 06/12/2012 DATE OF PRONOUNCEMENT 06/12/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26-03-2012 PASSED BY THE LD. CIT(A)-I, KOCHI AND IT RELATES TO THE ASSES SMENT YEAR 2008-09. 2. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER T HE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT THE FREEZER DEPOSIT RECEIVED FROM VARI OUS DEALERS SHOULD NOT BE ASSESSED AS INCOME OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUE A RE THAT THE ASSESSEE, BEING AN ICE- CREAM MANUFACTURER, HAS SUPPLIED FREEZER TO VARIOUS VENDORS ON RECEIPT OF SECURITY DEPOSIT. AS PER THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE VENDORS, THE ASSESSEE IS ENTITLED TO DEDUCT A PORTION OF SECURIT Y DEPOSIT ON TERMINATION OF THE AGREEMENT, I.E., IF THE AGREEMENT IS TERMINATED IN FIRST YEAR, THEN 25% OF THE DEPOSIT SHALL BE DEDUCTED AND IF THE AGREEMENT IS TERMINATE D IN THE SECOND YEAR, THEN 50% OF I.T.A. NO.167COCH/2012 2 THE DEPOSIT SHALL BE DEDUCTED AND SO ON. THE AO TO OK THE VIEW THAT THE LIABILITY OF THE ASSESSEE TO TERMINATE THE AGREEMENT WOULD END BY TH E END OF THE FOURTH YEAR AND HENCE THE SAID FREEZER DEPOSITS WOULD BECOME THE IN COME OF THE ASSESSEE. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE FREEZER DEPOSITS ARE LIABLE TO BE TAXED AND ACCORDINGLY ASSESSED THE SAME. THE ASSESSEE CHALLE NGED THE SAID ASSESSMENT BEFORE THE LD CIT(A), WHO DELETED THE ASSESSMENT BY FOLLOW ING THE TRIBUNALS ORDER. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE FURNISHED A COPY OF THE ORDER DATED 12.08.2011 PASSED BY THE CO-ORDINATE BE NCH IN THE CASE OF HIGH RANGE FOODS (P) LTD AND COMBINED FOODS (P) LTD IN ITA NO. 651/COCH/2010 AND ITA NO.652/COCH/2010 RESPECTIVELY AND SUBMITTED THAT TH E IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE FURTHER SUBM ITTED THE LD CIT(A) HAS FOLLOWED THE SAID DECISION OF THE TRIBUNAL. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS APPROPRIATED THE FREEZER DEPOSIT IN FOUR YEARS AND HENCE THE BY EFFL UX OF TIME, IT BECOMES THE INCOME OF THE ASSESSEE. IN THIS REGARD, THE LD D.R PLACED RE LIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T.V.SUNDARAM IYENGAR & SONS (222 ITR 344). THE LD D.R FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN CL AIMING DEPRECIATION ON THE FREEZERS AND HENCE NON-TAXING OF FREEZER DEPOSIT WOULD RESUL T IN DOUBLE DEDUCTION OF SAME AMOUNT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN ITS ORDER DATED 12.08.201 1, HAS CONSIDERED THE DECIDED THE IMPUGNED ISSUE AS UNDER:- THE ASSESSEE RECEIVED DEPOSIT FOR THE SUPPLY OF FR EEZER FROM THE CONCERNED VENDORS. THE FREEZERS ARE REQUIRED TO SAFE KEEP TH E EDIBLE ICE-CREAMS. THEY ARE REQUIRED FOR THE PURPOSE OF BUSINESS. THE SMA LL VENDORS MAY NOT BE INCLINED TO PURCHASE THE FREEZERS AS THEY ARE NOT AFFORDABLE TO THEM CONSIDERING THEIR STATUS. THIS MADE THE ASSESSEE COMPANY TO SUPPLY FREEZER ON THE RECEIPT OF FIXED DEPOSIT AND THE COMPENSATI ON OF THE SPREAD-OVER I.T.A. NO.167COCH/2012 3 PERIOD. THEY ARE ATTACHED WITH A LIABILITY. THE ACCRUAL COMES ONLY ON TERMINATION OF AGREEMENT. THE BUSINESS NECESSITY R EQUIRES CORDIAL RELATIONSHIP WITH VENDORS. THE ASSESSEE CANNOT TRE AT THESE TWO AMOUNTS AS RECEIPTS IN THE NATURE OF INCOME UNLESS THE SO-CAL LED AGREEMENT TERMINATED. IN OTHER WORDS IT IS NOT A DEBT OWNED BY THE ASSESSEE . HENCE, UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THIS ISSUE TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY SETTING ASIDE THE ORDERS OF THE AUTHOR ITIES. BESIDES THE ASSESSEE NEVER TREATED THIS AS INCOME IN THE BOOKS. THE ASSESSEE CONSISTENTLY HOLDING IT SO AS THE AMOUNT ATTACHED WITH A LIABILITY TO REFUND. THE ASSESSEE NEVER ADMITTED THIS AMOUNT AS INCOME IN THE BOOKS. ONLY ACCRUED INCOME AROSE TO THE ASSESSEE DURING THE RE LEVANT PREVIOUS YEAR ALSO CAN BE BROUGHT TO TAX UNDER THE INCOME-TAX PROVISI ONS WHICH IS A SETTLED LAW. IN OTHER WORDS, THERE MUST BE A DEBT OWNED TO THE ASSESSEE AND UNTIL THIS IS CREATED IN FAVOUR OF THE ASSESSEE AS A DEBT DUE TO THE ASSESSEE, IT CANNOT BE SAID AS INCOME ACCRUED. HENCE, THE DECISION RELIE D BY THE JR. D.R. IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS CITED SU PRA, IS CLEARLY DISTINGUISHABLE ON FACTS. IN THAT CASE, ASSESSEE ITSELF ADMITTED THIS AS INCOME AS PER THE BOOK ENTRIES. HENCE, IT IS DISTINGUISH ABLE. THE DECISION RELIED BY THE LD. COUNSEL FOR THE ASS ESSEE IN THE CASE OF CIT VS. REALEST BUILDERS AND SERVICES LTD. 307 ITR 202 ( SC) IN ADDITION TO THE FOLLOWING CASES (A) SIDDHESWAR SAHAKARI SAKHAR KARKHANA LTD. VS . CIT & OTHERS 270 ITR 1 (SC); (B) BHARAT PETROLEUM CORPORATION LTD. VS . CIT 202 ITR 492 (CAL). (C) SUGAULI SUGAR WORKS (IMPUGNED) LTD. 236 ITR 518 (SC); (D) STAR INDIA P. LTD. VS. ADDL. CIT 3 11 ITR (ST) 235 (MUMBAI). (E) GOVIND PRASAD PRABHU NATH 171 ITR 4 17 (ALL.); (F) HINDUSTAN HOUSING AND LAND DEVELOPME NT TRUST LTD. 161 ITR 524 (SC); (G) ACE BUILDERS PVT. LTD. VS. CIT 225 ITR 746 (SC); (H) MANTRA TANTA YANTRA VIGYAN VS. CIT 3 00 ITR 140 (RAJ.); AND (I) GUARDIAN INDUSTRIES CORPN. VS. ASSIS TANT DIRECTOR OF INCOME-TAX 7 DTR 594 (DEL.). I.T.A. NO.167COCH/2012 4 ARE ALSO SUPPORTS THE PLEA OF THE ASSESSEE. THE AC CRUAL HAS BEEN DEALT WITH IN THE RELIED JUDGEMENTS. HENCE, UNDER THE GIVEN SET O F FACTS AND CIRCUMSTANCES, WE BY RELYING ON THE ABOVE DECISIONS SET ASIDE THE ORDERS OF THE AUTHORITIES AND ALLOW THIS GROUND OF THE ASSESSEE AS IT CANNOT BE TREATED AS INCOME FOR THE YEAR RELEVANT UNDER APPEAL. THUS THE CO-ORDINATE BENCH HAS TAKEN THE VIEW THAT TH E DEPOSITS COLLECTED FROM VENDORS CANNOT BE CONSIDERED AS THE INCOME OF THE A SSESSEE SO LONG AS THE AGENCY AGREEMENT CONTINUES. THIS VIEW HAS BEEN TAKE N, AFTER TAKING INTO ACCOUNT THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF T.V.SUNDARAM IYENGAR AND SONS CASE. 7. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE ALSO HOLD THAT DEPOSITS COLLECTED FROM VENDORS CANNOT BE CONSIDERED AS INCOME OF THE ASSES SEE SO LONG AS THE AGENCY AGREEMENT CONTINUES. SINCE THE LD. CIT(A) HAS REND ERED HIS DECISION ON THIS ISSUE BY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED ACCORDINGLY O N 06-12-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 06TH DECEMBER, 2012 GJ COPY TO: 1. M/S. KREEM DRINKS (P) LTD., CHERUPARAMBATH ROAD, KADVANTHARA, KOCHI-20 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4.THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI I.T.A. NO.167COCH/2012 5 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN