Asst. Commissioner of Income Tax, Circle-1, Belgaum V. M/s Shri Prabhulingeshwar Sugars and Chemicals Ltd., Bijapur

ITA 182/PAN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3015 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAVEEN TARIKAR
• Keywords: Depreciation; Transfer pricing
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 107 & 157 /PNJ/201 4 (ASST. YEAR S : 200 9 - 1 0 & 2010 - 11 ) M/S. SRI PRABHULINGESHWAR SUGARS & CHEMICALS LTD., 1 ST FLOOR, SUKRUT BUILDING, OPP. K.C. PARK, MAIN GATE, DHARWAD. VS. 1. JCIT (OSD), CENTRAL CIRCLE - 2, BELGAUM. 2. ACIT, CENTRAL CIRCLE - 2, BELGAUM. PAN NO. AACCS 7864 B (APPELLANT) (RESPONDENT) ITA NO. 182 /PNJ/201 4 (ASST. YEAR : 2010 - 11 ) ACIT, CENTRAL CIRCLE - 1 , BELGAUM. VS. M/S. SRI PRABHULINGESHWAR SUGARS & CHEMICALS LTD., POST SIDDAPUR, TQ : JAMKHADI, DIST. BIJAPUR . PAN NO. AACCS 7864 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.V.SHESHACHALA SR. ADV. WITH SHRI GANGADHAR J.M., ADV. & SHRI PRAVEEN TARIKAR, ADV. DEPARTMENT BY : SHRI R.N. SIDDAPPAJI - D R DATE OF HEARING : 03 / 0 2 /201 6 . DATE OF PRONOUNCEMENT : 03 / 0 2 /201 6 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER ITA NOS. 107 & 157/PNJ/2014 ARE THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 AND ITA NO. 2 ITA NO S . 107 & 157 & 1 8 2 /PNJ/201 4 182/PNJ/2014 IS THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2010 - 11 . 2. IN ASSESSEES APPEAL , THE ONLY ISSUE IS IN RESPECT OF CLAIM OF HIGHER RATE OF DEPRECIATION IN RESPECT OF THE BOILER INSTALLED BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2009 - 10 . IN RESPECT OF THE APPEAL FILED B Y THE REVENUE, THE ONLY ISSUES BEFORE THE TRIBUNAL ARE IN RESPECT OF THE VALUATION OF CLOSING STOCK OF MOLASSES & BAGASSE AS ALSO THE ISSUE OF THE ADDITION REPRESENTING THE FALL IN YIELD OF MOLASSES. THESE APPEALS HAVE BEEN DISPOSED OF BY THE TRIBUNAL VIDE AN ORDER DATED 07/07/2015 WHEREIN THE TRIBUNAL HAD UPHELD THE FINDING OF THE LOWERS AUTHORITIES IN RESPECT OF DENIAL OF THE HIGHER RATE OF DEPRECIATION , AS THE ASSESSEE WAS UNABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT THE BOILER WHICH WAS COMMI SSIONED BY THE ASSESSEE AT ITS FACTORY WAS A H IGHER EFFICIENCY BOILER. IN RESPECT OF THE ISSUES IN THE REVENUES APPEAL BEING THE ADDITION REPRESENTING THE FALL IN YIELD OF MOLASSES AND THE VALUATION OF THE CLOSING STOCK , THE TRIBUNAL HAD REVERSED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS ) AND HAD ALLOWED THE APPEAL OF THE REVENUE. AGAINST THE SAID FINDING OF THE TRIBUNAL, THE ASSESSEE HAD FILED APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA AND THE HONBLE HIGH COURT HAD VIDE ITS ORDER DATED 07/10/2015 HAD RESTORED THE ISSUE TO THE FILE OF THE TRIBUNAL FOR RE - ADJUDICATION . IN RESPECT OF THE ISSUE OF HIGHER RATE OF DEPRECIATION , THE HONBLE HIGH COURT HAS DIRECTED THE TRIBUNAL TO RECONSIDER THE ISSUE ON THE BASIS OF MATERIAL THAT MAY BE PRODUCED BY THE ASSESSEE TO DEMONSTRATE THAT A BAGASSE FIRED BOILER IN QUESTION IS A HIGH EFFICIENCY BOILER WITH A THERMAL EFFICIEN C Y OF 75% OR MORE . IN RESPECT OF THE ISSUES IN REVENUES APPEAL , THE ISSUES WERE RESTORED TO THE FILE OF THE TRIBUNAL FOR FRESH CONSIDERATION AS THE TRIBUNAL HAD COMMITTED A PALPABLE ERROR IN OVERLOOK ING THE MATERIAL AVAILABLE ON RECORD. CONSEQUENTLY, THESE APPEALS WERE POSTED FOR HEARING. 3 ITA NO S . 107 & 157 & 1 8 2 /PNJ/201 4 3 . SHRI M.V.SHESHACHALA , SR. ADVOCATE WITH SHRI GANGADHAR J.M., ADV. & SHRI PRAVEEN TARIKAR, ADV. REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI R.N. SIDDAPPAJI, DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF THE REVENUE . 4 . IN RESPECT OF THE ASSESSEES APPEAL S IN ITA NOS. 107 & 157/PNJ/ 2014 , THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING SPECIFICATION OF THE BOILER ISSUED BY THE S.S. ENGINEERS PUNE . ON A SPECIFIC QUERY FROM THE BENCH AS TO WHEN THIS CERTIFICATE WAS OBTAINED, IT WAS SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE SAID CERTIFICATE WAS AVAILABLE WITH THE A SSESSEE RIGHT FROM THE BEGINNING. IT WAS THEN PUT TO THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AS TO WHY THIS WAS NOT PRODUCED BEFORE THE LOWER AUTHORITIES OR BEFORE THE TRIBUNAL TO WHICH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAD NO SUBMISSION. IT IS ALSO NOTED THAT THE SAID CERTIFICATE IS UNDATED . THE SAID CERTIFICATE , ADMITTEDLY , IS A FRESH EVIDENCE . IN THE SECOND PAGE OF THE CERTIFICATE IT STATES THAT THE EFFICIENCY OF 75% IN CASE OF COAL AND 80% IN CASE OF OIL & GAS , HOWEVER, I N PAGE 3 OF THE SAID CERTIFICATE UNDER THE HEADING EFFICIENCY AT MCR IT SAYS 70 + 1% ON GCV OF BAGASSE HAVING 52% MOISTURE, EFFICIENCY TO BE DETERMINED AS PER HEAT LOSS METHOD . 5. I N REPLY , DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SAID CERTIFICATE WAS NOT BEFORE THE ASSESSING OFFICER AND THE VERACITY OF CERTIFICATE ITSELF IS QUESTIONABLE AND THEREFORE, THE ISSUE SHOULD HAVE TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION. 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS . ADMITTEDLY, THE SAID EVIDENCE WHICH WAS IN THE FORM OF SPECIFICATION OF THE BOILER WAS NOT BEFORE THE LOWER AUTHORITIES, THOUGH , IT IS CLAIMED TO HAVE BEEN AVAILABLE WITH THE ASSESSEE RIGHT FROM THE BEGINNING . IN THESE CIRCUMSTANCES, IN THE INTEREST OF JUSTICE, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJU DI CATION AFTER GRANTING THE ASSESSEE 4 ITA NO S . 107 & 157 & 1 8 2 /PNJ/201 4 ADEQUATE OPPORTUNITY TO PRODUCE THE CERTIFICATE AND SUCH OTHER EVIDENCES AS ARE AVAILABLE FOR SUBSTANTIATING THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER SHALL BE AT LIBERTY TO HAVE VERIFIED THE VERACITY OF THE CERTIFICATE . 7. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NOS. 107 & 157/PNJ/ 2014 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8 . IN RESPECT OF THE ISSUE OF FALL IN YIELD OF MOLASSES, IT WAS SUBMITTED BY THE LEARNED S ENIOR C OUNSEL THAT TEN YEARS AVERAGE HAD BEEN PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER . IT WAS THE SUBMISSION THAT EXCISE OFFICER WAS PRESENT AT THE FACTOR PREMISES AND THE YIELD IS BEING VERIFIED BY HIM ON A DAY TO DAY BASIS . IT WAS THE SUBMISSION THAT WHEN SUCH VERIFICATION IS DONE AND WHEN THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED, NO ADDITION IS CALLED FOR. ON A SPECIFIC QUERY FROM THE BENCH AS TO ANY EVIDENCE TO SHOW THAT DAY TO DAY YIELD IS BEING VERIFIED, IT WAS THE SUBMISSION THAT HE DID NOT ANY EVIDENCE IMMEDIATELY AND THE ISSUE SHOULD BE SENT TO THE ASSESSING OFFICER FOR VERIFICATION . 9 . IN RESPECT OF VA LUE OF CLOSING STOCK OF MOLASSES & BAGASSE, IT WAS THE SUBMISSION THAT FOR THE PURPOSE OF VALUATION OF CLOSING STOCK WHAT WAS THE APPLICABLE RATE WAS COST OR MARKET PRICE WHICHEVER IS LOWER . IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD APPLIED MARKET VALUE . AT THIS POINT, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE WAS ASKED TO SPECIFY THE COST AND THE MARKET PRICE, SO THAT THE LOWER OF THE TWO COULD BE APPLIED . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD VALUED THE MOLASSES AT 3 , 315 /MT . IT WAS THEN POINTED OUT TO HIM THAT THE LAST SELLING PRICE BY THE ASSESSEE ITSELF WAS 3,500/MT , IT WAS THEN PUT TO HIM AS TO SHOW HOW THE FIGURE OF 3,315/MT HAD BEEN ARRIVED AT IN RESPECT OF MOLASSES. IT WAS THE SUBMISSION THAT THE FIGURE WAS TAKEN ON AD HOC BASIS. IT WAS, HOWEVER , THE SUBMISSION THAT HE HAD NO OBJECTION IF THE ISSUE OF VALUATION OF 5 ITA NO S . 107 & 157 & 1 8 2 /PNJ/201 4 CLOSING STOCK WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJU DI CATION. IT WAS THEN POINTED OUT TO THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT IF 3,315/MT WAS AN AD HOC ADOPTED BY THE ASSESSEE FOR THE PURPOSE OF VALUATION OF CLOSING STOCK, THEN THE METHODOLOGY ADOPTED FOR THE PURPOSE OF DETERMINING THE MARKET PRICE OR COST WOULD FAIL FOR THE PURPOSE OF COMPUTING THE VALUATION OF CLOSING STOCK. IT WAS ALSO INFORMED TO HIM THAT IN RESPECT OF SALE OF MOLASSES TO THE SISTER CONCERNS AND FIXING OF THE PRICE OF MOLASSES AFTER THE SALE TO THE SISTER CONCERNS WHICH IS THE PROCEDURE BEING FOLLOWED BY THE ASSESSEE COULD ALSO BE A SUBJECT MATTER OF VERIFICATION AND ADJUDICATION IN V IEW OF THE PROVISIONS OF SEC. 40A(2) OF THE ACT INSOFAR AS THE INTERNAL ARMS LENGTH PRICE BETWEEN THE ASSESSEE AND THE SISTER CONCERN IN RESPECT OF SALE OF MOLASSES WOULD HAVE TO BE REVISITED BY THE ASSESSING OFFICER . T O THIS, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DID NOT MAKE ANY SUBMISSION . 10 . IT WAS THE SUBMISSION BY THE DEPARTMENTAL REPRESENTATIVE THAT THE ISSUE OF THE VALUATION OF THE CLOSING STOCK OF BOTH MOLASSES & BAGASSE AS ALSO THE ISSUE OF APPLICABILITY OF SEC. 40A(2) SHOULD BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION . 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ASSESSEE IS UNABLE TO SPECIFICALLY POINT OUT THE METHOD OF VALUATION OF CLOSING STOCK OF BOTH MOLASSES & BAGASSE FOLLOWED BY THE ASSESSEE AND THE ASSESSEE ITS E L F HAS ADMITTED THAT BOTH MOLASSES & BAGASSE IS A BY - PRODUCT , THE ISSUE OF VALUATION OF THE CLOSING STOCK IN RESPECT OF BOTH MOLASSES & BAGASSE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION . THE ASSESSING OFFICER SHALL DETERMINE THE CORRECT VALUE BEING MARKET PRICE OR THE COST WHICHEVER IS LOWER . WHEN DETERMINING THE MARKET PRICE , THE ASSESSING OFFICER SHALL NOT CONSIDER THE PRICE AT WHICH MOLASSES IS SOLD TO THE SISTER CONCERN , BUT SHALL TAKE INTO CONSIDERATION THE AVERAGE MARKET PRICE , T HIS IS BECAUSE OF THE ASSESSEE 6 ITA NO S . 107 & 157 & 1 8 2 /PNJ/201 4 HAS BEEN SELLING MOLASSES TO THE SISTER CONCERNS , AND THEN DETERMINING THE PRICE AT A MUCH LATER DATE, AND IN RESPECT OF BAGASSE, THE SAME IS BEING USED AS FUEL. 12 . IN THE RESULT, THE SAID ISSUE IN THE REVENUES APPEAL IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION . THE ASSESSING OFFICER MAY ALSO CONSIDER THE APPLICABILITY OF THE PROVISIONS OF SEC.40A(2) IN RESPECT OF THE TRANSACTIONS WITH THE SISTER CONCERN AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE . 13 . IN THE RESULT, APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED FOR STATI S T I CAL PURPOSE . ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 03 RD DAY OF FEBRUARY , 201 6 AT GOA . S D / - S D / - (N.S.SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03 RD FEBRUARY , 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE 1) JCIT (OSD), CENTRAL CIRCLE - 2, BELGAUM. 2) ACIT, CENTRAL CIRCLE - 2, BELGAUM. 3) ACIT, CENTRAL CIRCLE - 1, BELGAUM. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI