DCIT., Circle-1(2), Hyderabad, Hyderabad V. M/s Creamline Dairy Products Ltd, Hyderabad

ITA 1670/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87440 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: K C DEVDAS
• Keywords: Rectification of order
• Section: 154; 143(3)

Judgement Text

ITA NO.1670 OF 2014 CREAMLINE DAIRY PRODUCTS LTD HY DERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1670/HYD/2014 (ASSESSMENT YEAR: 2009-10) DY. COMMISSIONER OF INCOME TAX CIRCLE 1(2) HYDERABAD VS. M/S. CREAMLINE DAIRY PRODUCTS LTD, HYDERABAD PAN: AABCC 6780 D (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAMAKRISHNA BANDI, DR FOR ASSESSEE : SHRI K.C. DEVDAS DATE OF HEARING : 25.03.2015 DAT E OF PRONOUNCEMENT : 27 .03.2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS IS AN APPEAL PREFERRED BY THE REVENUE DIRECTE D AGAINST THE ORDER OF THE CIT(A) II HYDERABAD DATED 11.08.2014 PASSED FOR A.Y 2009-10. 2. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE B USINESS OF PROCURING, PROCESSING AND SELLING OF MILK AND MILK PRODUCTS. FOR A.Y 2009-10, ASSESSEE FILED RETURN OF INCOME OF RS.10,72,61,830 UNDER NORMAL PROVISIONS AND RS.11,33,34,732 U/S 115JB. THE ORDER U/S 143(3) WAS PASSED ON 19.12.2011 DETERMINING THE INCOME UNDER NORMAL PROVISIONS AT RS.10,81,22,976. ITA NO.1670 OF 2014 CREAMLINE DAIRY PRODUCTS LTD HY DERABAD PAGE 2 OF 5 3. THE AO IN HER RECTIFICATION ORDER U/S 154 DATED 20.11.2013 MADE AN ADDITION OF RS.22,06,098 TOWARDS THE EXCESS CLAIM OF UNAVAILED VAT BY GIVING THE FOLLOWI NG REASON: THE ASSESSMENT U/S 143(3) OF THE I.T. ACT, 1961 FO R THE A.Y 2009-10 WAS COMPLETED ON 19.12.2011. IT WAS OBSERVED IN THE MANUFACTURING EXPENSES THE ASSESSEE COMPANY CLAIMED RS.13,91,849 TOWARDS UNAVAILED VAT 12.5% AND RS.37,67,841 TOWARDS UNAVAOIED VAT 4% TOTALING TO RS.51,59,690. AS PER RECORD THE UNAVAILED INPUT 4% WAS RS.23,59,651 AND UNAVAILED INPUT 12.5% RS.5,93,941 TOTALING TO RS.29,53,592 DURING THE FINANCIAL YEAR 2008-09 WHICH THE RELEVAN T TO A.Y 2009-10. HENCE THE EXCESS CLAIM OF UNAVAILED VAT IS FOR RS.22,06,098 (RS.51,59,690 RS.29,53,592). AS THE MISTAKE IS APPARENT FROM THE RECORD THE SCRUTINY ORDER IS MODIFIED. 4. THE LD COUNSEL FOR THE ASSESSEE FILED ELABORATE SUBMISSIONS/CLARIFICATIONS BEFORE THE CIT (A) AS FO LLOWS: THE ASSESSEES PRODUCTS ARE SOLD UNDER THE BRAND NA ME JERSEY. TO UNDERSTAND THE ISSUE OF UNAVAILED VAT , IT IS ESSENTIAL TO UNDERSTAND THE MANUFACTURING PROCESS OF THE ASSESSE E AND THE RELEVANT DETAILS WHICH ARE DESCRIBED IN STEP-WISE M ANNER AS UNDER: (A) THE ASSESSEE PROCURES THE MAIN RAW MATERIAL I.E. MI LK FROM FARMERS AND MILK IS AN EXEMPTED GOOD UNDER ANDHRA P RADESH VALUE ADDED TAX ACT, 2005. (B) ASSESSEE ALSO PURCHASES VARIOUS PACKING MATERIAL (F OR PACKING MILK, CURD, GHEE ETC) AND CONSUMABLES LIKE SOAP, OI L, CAUSTIC SODA, SULPHURIC ACID AND SPARES OF PLANT AND MACHIN ERY. ALL THESE PURCHASES ARE LIABLE TO VAT. ITA NO.1670 OF 2014 CREAMLINE DAIRY PRODUCTS LTD HY DERABAD PAGE 3 OF 5 (C) THE PRODUCTS ARE SOLD BY THE ASSESSEE LIKE GHEE, BU TTER, CREAM, MILK POWER ARE LIABLE FOR VAT. (D) WHENEVER THE ASSESSEE PAYS VAT ON PURCHASES THAT IS CALLED INPUT TAX. (E) WHENEVER THE ASSESSEE PAYS TAX ON THE GOODS SOLD, I T IS CALLED OUTPUT TAX. (F) AS PER THE VAT ACT, 2005, IF THE ASSESSEE HAD PAID INPUT TAX ON RAW MATERIAL, HE DOES NOT HAVE TO PAY OUTPUT TAX ON GOODS SOLD. MEANING THEREBY THE ASSESSEE IS ENTITLED TO INPUT T AX CREDIT. (G) ASSESSEE ALSO SELLS THE FOLLOWING OUTPUT WHICH ARE LIABLE TO VAT: (I) GHEE (II) BUTTER (III) MILK POWDER 4. SINCE THE ASSESSEE HAS ALREADY PAID RS.4,00,000 OF INPUT TAX, TAKING CREDIT FOR THIS, HE WOULD ONLY PAY RS.1.00 L AKHS ON OUTPUT TAX ON SALES TURNOVER. NOW THE PROFIT & LOSS A/C APPEARS AS UNDER: PURCHASES = 10/- SALES - 12/- INPUT TAX = . OUTPUT TAX 1/- 10/- 13/- NET PROFIT = 13-10 = 3 IN THE INSTANT CASE, SINCE THE ENTIRE TURNOVER IS N OT LIABLE TO VAT THE FORMULA OF A X B/C WAS APPLIED AND SAY, FOR EXAMPLE THE ASSESSEE IS ELIGIBLE FOR INPUT TAX CREDIT OF RS.2.00 LAKHS THE PROFIT AND LOSS ACCOUNT READ AS UNDER: PURCHASES = 10 SALES = 12 UNAVAILED INPUT TAX= 2 OUTPUT TAX = 3 12/- 15/- ITA NO.1670 OF 2014 CREAMLINE DAIRY PRODUCTS LTD HY DERABAD PAGE 4 OF 5 5. HENCE IT WAS ARGUED THAT GIVING INPUT TAX CREDIT IS ONLY A MECHANISM DEVISED TO AVOID TAX COLLECTION TWICE, ON CE AT THE TIME OF PURCHASE AND THE OTHER AT THE TIME OF SALE. IT WOUL D NOT HAVE EFFECT ON PROFIT. 6. THE LD CIT (A) HELD AS FOLLOWS: 5. IN SUMMARY, THE NET OUTPUT TAX PAYABLE OF RS.1,71,76,712 WAS PAID AND THE APPELLANT SUBMITTED THE DETAILS OF DATE, AMOUNT, CHEQUE NO. IT IS TO BE CLEARLY UNDERSTOOD WHETHER THE CREDIT FOR INPUT TAX IS AVAILED OR NOT, THE INPUT TAX HAS TO BE ALLOWED AS THIS IS AN INCURRED EXPENDITURE, PROVIDED THE AMOUNT WAS PAID. 5.1 IT IS ALSO PERTINENT TO MENTION THAT THE ISSUE OF AVAILING INPUT TAX CREDIT WHICH CAN ONLY BE UNDERSTOOD BY THE LONG DRAWN PROCESS OF VERIFYING THE REGISTERS AND INPUT, OUTPUT VAT TAX PAYMENTS, CANNOT BE THE SUBJECT MATTER U/S 154, WHICH CAN BE APPLIED ONLY TO RECTIFY APPARENT MISTAKES. 7. AGGRIEVED, BY THE ORDER OF THE LD CIT (A), REVEN UE IS IN APPEAL RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD CIT (A) IS ERRONEOUS ON FACTS AND LAW. 2. THE LD CIT (A) ERRED IN STATING THAT THE UNAVAILED VAT AND UNAVAILED INPUT CANNOT BE RECTIFIED BY PASSING ORDER U/S 154. 3. THE CIT (A) OUGHT TO HAVE CALLED FOR THE REMAND REPORT AND THE CIT (A) FAILED TO GIVE OPPORTUNITY TO THE AO AS REQUIRED UNDER RULE 46A. ITA NO.1670 OF 2014 CREAMLINE DAIRY PRODUCTS LTD HY DERABAD PAGE 5 OF 5 8. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE AS TO WHETHER THE CREDIT FOR INPUT TAX IS AVAILED OR NOT AND ALSO WHETHER THE AMOUNT WAS PAID AND HENCE THE INPUT TAX HAS TO BE A LLOWED ON THE GROUND THAT IT IS AN EXPENDITURE WHICH HAS BEEN INCURRED, REQUIRES EXPLANATION, DELIBERATIONS AND APPLICATION OF MIND. IT IS NOT MISTAKE APPARENT FROM THE RECORD, FOR IT TO BE DECIDED U/S 154. FURTHER, WHEN TWO VIEWS ARE POSSIBLE, SECT ION 154 CANNOT BE INVOKED. HENCE, WE CONFIRM THE ORDER OF T HE LD CIT (A) WHEREIN HE HAS STATED, THE ISSUE OF AVAILING IN PUT TAX CREDIT CAN BE UNDERSTOOD ONLY BY A LONG DRAWN PROCESS OF V ERIFYING THE REGISTERS AND INPUT AND OUTPUT VAT TAX PAYMENTS . HENCE IT IS NOT AN APPARENT MISTAKE TO BE RECTIFIED U/S 1 54. 9. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2015. S D/ - S D/ - (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 27 TH MARCH, 2015. VNODAN/SPS COPY TO: 1. THE DY. CIT, CIRCLE 1(2) 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD 2. M/S CREAMNLINE DAIRY PRODUCTS LTD, 6-3-1235/B/21 AS IF AVENUE, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD 3. THE CIT(A)-II HYDERABAD 4. THE CIT-I HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER