DXN Herbal Manufacturing India Pvt. Ltd., Pondicherry V. DCIT, Pondicherry

ITA 1752/CHNY/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5770 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-01-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 10-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Section: 37; 15; 43B; 143(3); 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.1752/CHNY/2016 !' # / ASSESSMENT YEAR : 2012-2013. M/S. DXN HERBAL MANUFACTURING INDIA PVT. LTD, (FORMERLY KNOWN AS DXN HERBAL MANUFACTURING (INDIA) PVT LTD, RS NO.14/4 & 142/5, WHIRLPOOL ROAD, THIRUVANDAR KOIL, PONDICHERRY 605 102. [PAN AABCD 4141M] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, PONDICHERRY CIRCLE, PONDICHERRY 605 102. ( / APPELLANT) ( /RESPONDENT) $ % & / APPELLANT BY : SHRI. K. RAVI, ADVOCATE '( $ % & /RESPONDENT BY : SHRI. R. CLEMENT RAMESH KUMAR, ADDL. CIT. ) * % + /DATE OF HEARING : 22-07-2019 ,-#' % + /DATE OF PRONOUNCEMENT : 08-08-2019 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S), PUDUCHERRY ITA NO.1752/2016 :- 2 -: (CIT(A) FOR SHORT) DATED 29.03.2016 FOR THE ASSE SSMENT YEAR (AY) 2012-2013. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) AND THAT OF THE ASSESSING OFFICER IS CONT RARY TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND IN ANY CASE VIOLATIVE OF THE PRINCIPLES OF EQUITY AND NATURAL J USTICE. DEDUCTION U/S 43B OF THE ACT 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN REDUCING THE AMOUNT OF RS. 69,89,240/-RECE IVED AS SECURITY DEPOSIT FROM A CUSTOMER FROM THE DEDUCTION ELIGIBLE U/S 43B OF THE INCOME TAX ACT, 1961 FOR THE EXCISE DUTY PAID UNDER PROTEST. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DENYING THE BENEFIT OF DEDUCTION FOR THE R EASON THAT ANY AMOUNT RECEIVED FROM THE CUSTOMER AGAINST THE E XCISE DUTY PAID UNDER PROTEST WILL HAVE TO BE SET OFF AGAINST THE DEDUCTION ELIGIBLE U/S 43B. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SETTING OFF THE AMOUNT RECEIVED FROM THE CUSTOMER O F THE APPELLANT AGAINST THE EXCISE DUTY PAID UNDER PROTES T WHEN THE SAME WAS ONLY A SECURITY DEPOSIT AND SHOWN UNDER CU RRENT LIABILITIES. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE DECISION OF THE HONORABLE HIGH COURT IN THE APPELLANTS OWN CASE THAT THE DISPUTED EXCISE DUTY PAYABLE IS ALLOWABLE AS DEDUCTION U/S 43B AS WELL AS U/S 37 OF THE ACT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN MODIFYING THE ALLOWABILITY OF THE DISPUTED EXCISE D UTY PAYABLE U/S 43B OF THE ACT BY DENYING TO THE EXTENT RECEIVE D FROM THE CUSTOMER WHEN THE DISTRIBUTORSHIP OF THE COMPANY WA S IN PLACE FROM MARCH 2002 TO MARCH 2009 AND WAS DISCONTINUED AFTER THAT. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RESTRICTING THE CLAIM OF THE APPELLANT TO THE EXTEN T OF THE AMOUNT RECEIVED FROM THE CUSTOMER ON THE GROUND THA T THE ITA NO.1752/2016 :- 3 -: AMOUNT WAS KEPT AS CURRENT LIABILITY AND NOT MENTIO NED AS SECURITY DEPOSIT. OTHERS: 8. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE RAISE D DURING THE COURSE OF HEARING . 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. DXN HERBAL MANUFACTURING INDIA PVT. LTD. IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUF ACTURING AYURVEDIC DRUGS.THE RETURN OF INCOME FOR THE AY 2012-13 WAS FILED ON 28.09.2012 DISCLOSING TOTAL LOSS OF RS.42,41,829/- UNDER NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND BOOK PROFITS OF I1,22,56,032/- UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. AGAINST THE SAID RETURN OF INCOME, THE ASSESSM ENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, PONDICHERRY. (HEREINAFTER CALLED AO) VIDE ORDER DATED 30.01.20 15 PASSED U/S. 143(3) OF THE ACT AFTER MAKING DISALLOWANCE OF I 1,67,62,544/- UNDER THE PROVISIONS OF SECTION 43B OF THE ACT ON THE GRO UND THAT LIABILITY OF EXCISE DUTY HAS NOT BEEN CRYSTALLIZED. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR THE ABOVE DISALLOWANCE ARE T WOFOLD. (I) PAYMENT OF EXCISE DUTY WAS SHOWN AS ADVANCE IN THE BOOKS OF ACCOUNTS (II) NO ORDER OF EXCISE DUTY PROVING THE EXISTENCE OF LIABI LITY WAS FILED. ITA NO.1752/2016 :- 4 -: 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, ASSE SSEE PREFERRED AN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. CIT(A) CONSIDERING THE FACT THA T THE APPELLANT HAD RECEIVED A SUM OF I1,45,67,568/- FROM ONE M/S. ROSH AN COMMERCIAL PRIVATE LIMITED, WHO IS ERSTWHILE DISTRIBUTOR TOW ARDS REIMBURSEMENT OF EXCISE DUTY LIABILITY DIRECTED THE ASSESSING OFF ICER WITH THE FOLLOWING FINDINGS. 6.25 NOW, I DECIDE THE QUANTUM OF ADDITION TO BE MADE ON ACCOUNT OF REIMBURSEMENTS. THE ASSESSEE HAS BEEN PA YING THE DISPU1TED AMOUNT OF EXCISE DUTY AND ALSO BEEN. GETT ING DEDUCTION UNDER THE INCOME-TAX ACT EITHER U/S 37 OR U/S 43B OF THE ACT IN THE EARLIER YEARS. IN THE EAR1IR AY 2009 -10, THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.3,30,39,169/- IN THE STATEMENT OF INCOME WHICH WAS ALLOWED IN APPEAL BY CIT(A)/ITAT/HC. IN THIS YEAR, THE ASSESSEE HAS CLAI MED DEDUCTION OF RS. 1,67,62,546/- TOWARDS DISPUTED EXC ISE DUTY PAID WHICH IS ALLOWED IN THIS APPEAL U/S 37 R.W.S 4 3B OF THE ACT. THE ASSESSEE HAS SUBMITTED THAT THE DISPUTED EXCISE DUTY AMOUNT RELATED TO PREVIOUS YEARS IS RS.1,17,00,000/ - AND RELATED TO THIS ASSESSMENT YEAR IS RS.50,62,546/-. THEREFOR E, THE AMOUNT OF RS. 75,78,328/- RECEIVED FROM RCPTL TOWAR DS DISPUTED EXCISE DUTY LIABILITY IS RELATED TO THIS A MOUNT OF RS.L,17,00,000/-. THEREFORE, I ORDER THAT THE AMOUN T OF RS.75,78,328/- SHOULD BE ADDED AND BE SET OFF AGAIN ST THE DISPUTED EXCISE DUTY OF RS.1,67,62,546/- AS DETERMI NED AND ALLOWED U/S 37 R.W.S 43B OF THE ACT AS PER PARAGRAP H 6.21 AND ONLY THE NET AMOUNT OF RS. 9L,84,218/- SHALL BE ELI GIBLE FOR DEDUCTION IN ITS COMPUTATION OF TAXABLE INCOME. 6.26 EVEN ON THIS AMOUNT OF RS.91,42,218/-, IF THE ASSESSE HAS RECEIVED ANY AMOUNT WHICH IS RELATED TO DISPUTED EX CISE DUTY FROM ITS CUSTOMERS/DISTRIBUTORS THEN, ONLY THE NET OF THE AMOUNT AFTER SET OFF SHALL BE ELIGIBLE FOR DEDUCTION EITHE R U/S 37 OR U/S 43B OF THE ACT, A THE CASE MAY BE. IT IS ALSO HELD THAT AMOUNT OF RS.69,89,240/- RECEIVED FROM RCPL DURING THE ASSESS MENT YEAR ITA NO.1752/2016 :- 5 -: 2011-12 SHALL BE ASSESSABLE IN THAT ASSESSMENT YEAR FOR THE REASONS MENTIONED IN THIS ORDER. 6.27 IN THE RESULT, THE AMOUNT OF NET DELETION DECI DED IN THIS APPEAL IS RS.91,84,218/- FOR AY2012-13 COMPUTED AS UNDER: DISALLOWANCE OF DISPUTED EXCISE DUTY MADE U/S 43B DELETED U/S 37 R.W.S 43B OF THE ACT (-)1,67,62,546 ADD: REIMBURSEMENT RECEIVED FROM RCPL 69,89,240 NET AMOUNT OF DELETION (-)91,42,218 THE SUM AND SUBSTANCE OF THE LD. CIT(A) ORDER IS TH AT THE EXPENDITURE OF EXCISE DUTY IS ALLOWABLE ON PAYMENT BASIS U/S .43B OF THE ACT AND THE AMOUNT REIMBURSED FROM THE DISTRIBUTOR IS TAXA BLE. ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO ALLOW THE BALANCE AMOUNT. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), TH E APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS ARGUED THAT THE AMOUNT RECEIVED FROM THE DISTRIBUTOR M/S. ROSHAN CO MMERCIAL PRIVATE LIMITED WAS ONLY IN THE NATURE OF DEPOSIT AND IN S UPPORT OF THIS, HE FILED CONFIRMATION LETTER FROM THE SAID PARTY AND H ENCE THE AMOUNT CANNOT BE TAX AS INCOME IN THE HANDS OF THE ASSESSE E. 6. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES . ITA NO.1752/2016 :- 6 -: 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE SETTLED LEGAL POSITION OF LAW IS THAT LIABILITY TO PAY TAX ARISES BY VIRTUE OF THE CHARGING SECTION ALONE THOU GH QUANTIFICATION OF THE AMOUNT PAYABLE IS POSTPONED, AS HELD BY THE SUP REME COURT IN THE CASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. V. CWT [ 1966] 59 ITR 767 AND THEN AGAIN IN THE CASE OF SETU PARVATI BAYI V. CWT [1968] 69 ITR 864 . SIMILAR WAS THE VIEW OF THE FEDERAL COURT IN THE CASE OF CHATTURAM V. CIT [1947] 15 ITR 302 , WHICH RELIED UPON THE DECISION OF THE HOUSE OF LORDS IN WHITNEY V. IRC [1925] 10 TC 88 (HL) , THAT LIABILITY TO TAX DOES NOT DEPEND ON ASSESSMENT; THA T EX HYPOTHESIS HAS ALREADY BEEN FIXED : THE ASSESSMENT ORDER ONLY QUAN TIFIES THE LIABILITY WHICH IS ALREADY DEFINITELY AND FINALLY CREATED BY THE CHARGING SECTIONS [ ISHWARLAL PAREKH V. STATE OF MAHARASHTRA [1968] 70 ITR 95 (SC) ]. THEREFORE THE FACT THAT IN THE ABSENCE OF AN ASSESS MENT ORDER OR ABSENCES OF ENTRIES IN THE BOOKS OF ACCOUNTS IS NO BAR TO CLAIM AS DEDUCTION OF EXCISE DUTY OF TAX. THE EXCISE DUTY I S ATTRACTED THE MOVEMENT THE ACTIVITY OF MANUFACTURING IS COMPLETE . THEREFORE CRYSTALLIZATION OF LIABILITY IS ESTABLISHED IN THE YEAR OF MANUFACTURING. ADMITTEDLY, DURING THE YEAR UNDER CONSIDERATION, THE GOODS WERE NOT MANUFACTURED. HOWEVER, SINCE THE EXCISE DUTY IS AL LOWABLE AS DEDUCTION ON PAYMENT BASIS UNDER THE PROVISIONS OF SECTION 43B OF THE ACT, THOUGH THE LIABILITY IS PERTAINING TO EARLIER YEARS, THE EXCISE DUTY ITA NO.1752/2016 :- 7 -: PAID IS ALLOWABLE AS DEDUCTION UNDER THE PROVISION S OF SECTION 43B OF THE ACT. SIMILARLY, THE AMOUNT RECEIVED TOWARDS R EIMBURSEMENT OF EXCISE DUTY FROM ITS DISTRIBUTOR M/S. ROSHAN COMMER CIAL PRIVATE LIMITED IS A TRADING RECEIPT WHICH IS TAXABLE UNDER THE PROVISIONS OF SECTION 41 OF THE ACT IN THE LIGHT OF THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD VS. CIT, 8 7 ITR 542. IN THE LIGHT OF THE ABOVE LEGAL POSITIONS, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS DISMISSED. ORDER PRONOUNCED ON 8TH DAY OF AUGU ST, 2019, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER .* / CHENNAI / / DATED: 8TH AUGUST, 2019. KV 0 %' +12 32#+ / COPY TO: 1 . $ / APPELLANT 3. ) 4+5 6 / CIT(A) 5. 278 ' + 9! / DR 2. '( $ / RESPONDENT 4. ) 4+ / CIT 6. 8:;* / GF