M/s. Masqati Dairy Products, Hyderabad V. ACIT, Circle-9(1), Hyderabad

ITA 1769/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66377 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M H NAIK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1769/HYD/2011 ASSESSMENT YEAR: 2008-09 M/S. MASQATI DAIRY PRODUCTS, CHARMINAR, HYDERABAD. .... APPELLANT PAN: AACFM 8332PB VS. ACIT, CIR-9(1), HYDERABAD. RESPONDENT APPELLANT BY : MOHD. AFZAL RESPONDENT BY : SRI M.H. NAIK DATE OF HEARING : 21-08-2012 DATE OF PRONOUNCEMENT : 19-10-20 12 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 29-8-2011 OF CIT (A)-VI, HYDERABAD PASS ED IN APPEAL NO.0531/10-11/CIT (A)-VI AND IT PERTAINS TO THE ASS ESSMENT YEAR 2008-09. 2. GROUNDS 2 AND 3 ARE EFFECTIVE GROUNDS WHICH READ AS UNDER:- 1. THE CIT (A) ERRED IN NOT ALLOWING AN AMOUNT OF RS.1,15,000/- OF LOSS, WHICH WAS INCURRED ON ACCOU NT OF SALE OF USELESS BUFFALOES. 2 ITA NO.1769 OF 2011 M/S. MASQATI DIARY PRODUCTS, HYD.. 2. THE CIT (A) ERRED IN NOT ALLOWING THE DEDUCT ION U/S 80JJA OF THE I T ACT IN SPITE OF ASSESSEE BEING ELI GIBLE FOR THE DEDUCTION CLAIMED. 3. GROUND NO.2 RELATES TO THE CLAIM OF LOSS OF AN A MOUNT OF RS.1,15,000 ON ACCOUNT OF SALE OF BUFFALOES. BRIE FLY, THE FACTS ARE THE ASSESSEE FIRM IS ENGAGED IN THE MANUFACTURING AND S ALE OF MILK PRODUCTS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YE AR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.2,57,12,285/-. IN C OURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS CLA IMED LOSS ON ACCOUNT OF BUFFALOES AT RS.1,75,000 AND LOSS INCURRED ON A CCOUNT OF SALE OF BUFFALOES AMOUNTING TO RS.1,15,000/-. THE AO DISAL LOWED THE CLAIM BY OBSERVING THAT IT IS IN THE NATURE OF CAPITAL LOSS. THE ASSESSEE CHALLENGED THE DISALLOWANCE BY FILING AN APPEAL BEFORE THE CIT (A). IN COURSE OF HEARING BEFORE THE CIT (A) THE ASSESSEE CONTENDED T HAT SINCE THE BUFFALOES WERE USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION, OTHERWISE THAN STOCK IN TRADE, THE LOSS CLAIMED OF AN AMOUNT OF RS.2,90,000 HAS TO BE ALLOWED IN VIEW OF THE PRO VISIONS CONTAINED U/S 36(1)(VII) OF THE ACT. THE CIT (A) ACCEPTED THE A SSESSEES CONTENTION THAT THE BUFFALOES OWNED BY THE ASSESSEE ARE USED F OR THE PURPOSE OF BUSINESS AND NOT HELD AS STOCK IN TRADE, THEREFORE THE LOSS CLAIMED HAS TO BE ALLOWED U/S 36(1)(VI) OF THE ACT. THE CIT (A) HO WEVER RESTRICTED THE CLAIM TO RS.1,75,000/-AND DISALLOWED AN AMOUNT OF R S.1,50,000/- RELATING TO LOSS SUFFERED ON SALE OF USELESS BUFFALOES ON TH E GROUND THAT THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE BUFFALOES SOLD BY IT HAS BECOME PERMANENTLY USELESS. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. UNDISPUTEDLY, THE CIT (A) HAS ACCEPTED THE FACT THAT THE BUFFALOES ARE USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S AND NOT AS STOCK IN TRADE. HOWEVER, THE CIT (A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF LOSS BY SIMPLY OBSERVING THAT THE ASSESSEE HAS NOT PROVED THAT THE 3 ITA NO.1769 OF 2011 M/S. MASQATI DIARY PRODUCTS, HYD.. BUFFALOES HAVE BECOME PERMANENTLY USELESS. WHEN TH E ASSESSEE IS ENGAGED IN MANUFACTURING OF MILK PRODUCTS, THERE IS NO JUSTIFICATION ON HIS PART TO SELL THE BUFFALOES IF THEY ARE PRODUCTIVE. THE SALE OF BUFFALOES BY THE ASSESSEE IS CERTAINLY INDICATIVE OF THE FACT TH AT THE BUFFALOES HAVE BECOME PERMANENTLY USELESS, THEREFORE THE ASSESSEE HAD TO SELL THEM. IN THE AFORESAID CIRCUMSTANCES, THE CLAIM OF THE ASSES SEE CANNOT BE DISBELIEVED AND LOSS OF RS.1,50,000 HAS TO BE ALLOW ED. WE THEREFORE DELETE THE SAME. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS THEREFORE ALLOWED. 5. GROUND NO.3 RELATES TO CLAIM OF DEDUCTION U/S 80 JJA. BRIEFLY THE FACTS ARE IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED LETTER DATED 18-11-2001 STATING THAT IT HAS SOLD BIO-DEGRA DABLE WASTE AMOUNTING TO RS.20,02,498/-, THEREFORE, IT IS ENTIT LED FOR DEDUCTION U/S 80JJA OF THE ACT. THE AO DISALLOWED THE CLAIM OF DE DUCTION SINCE NO SUCH CLAIM WAS MADE IN THE RETURN OF INCOME FILED FOR TH E ASSESSMENT YEAR UNDER DISPUTE. THE AO FURTHER HELD THAT SINCE THE ASSESSEE FIRM WAS DOING THIS BUSINESS FOR THE PAST 14 YEARS AND THE D EDUCTION IS TO BE ALLOWED FOR FIVE CONSECUTIVE ASSESSMENT YEARS FROM THE DATE OF COMMENCEMENT OF BUSINESS, THE ASSESSEE IS NOT ENTIT LED FOR DEDUCTION U/S 80JJA. THE ASSESSEE BEING AGGRIEVED OF THE REJECTI ON OF CLAIM OF DEDUCTION OF 80JJA FILED AN APPEAL BEFORE THE CIT ( A). THE CIT (A) RELYING UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE C ASE OF GOETZE (INDIA) LTD. VS. CIT (284 ITR 323) HELD THAT THE A SSESSEES CLAIM OF DEDUCTION U/S 80JJA CANNOT BE ENTERTAINED. 6. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE M ATERIAL ON RECORD. A READING OF DECISION OF HONBLE SUPREME COURT IN T HE CASE OF GOETZE (INDIA) LTD.S CASE (SUPRA) MAKES IT CLEAR THAT THE RESTRICTION IMPOSED WITH REGARD TO CONSIDERATION OF CLAIM WHICH IS NOT MADE IN THE RETURN OF INCOME IS IN RESPECT TO THE AO ONLY. THEREFORE, THE ITAT IN EXERCISE OF POWERS CONFERRED U/S 254 OF THE ACT CAN DIRECT FOR CONSIDE RATION OF THE CLAIM 4 ITA NO.1769 OF 2011 M/S. MASQATI DIARY PRODUCTS, HYD.. MADE FOR THE FIRST TIME. THIS FACT HAS BEEN FURTHER ENUNCIATED BY THE HONBLE P &H HIGH COURT IN THE CASE OF CIT RAMCO IN TERNATIONAL (332 ITR 306). IN VIEW OF THE AFORESAID PRINCIPLES OF LAW, W E RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ASSESSEES CLAIM FOR DEDUCTION U/S 80JJA. IF THE AO FINDS THE CLAIM TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THEN THE CLAIM FOR DEDUC TION CAN BE ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN PART AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 19-10-2012. SD/- SD /- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE19TH OCTOBER, 2012. COPY TO:- 1) MOHD. AFZAL, ADVOCATE, 11-5-465, FLAT NO. 402, SHER SONS RESIDENCY CRIMINAL COURT ROAD, RED HILLS HYDERABAD. 2) ACIT, CIR-9(1), IT TOWERS, HYDERABAD. 2)CIT (A)-VI, HYDERABAD. 3) THE CIT (A), VIJAYAWADA. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR*