Creamline Dairy Products Ltd., Hyderabad V. Addl.CIT, Range-1, Hyderabad

ITA 1828/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66313 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K GNANAPRAKASH
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Reopening of assessment; Depreciation; Additional depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 20/HYD/2012 ASSESSMENT YEAR 2005-06 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD PAN: AABCC6780D V. THE DEPUTY CIT CIRCLE-1(2) HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 1828/HYD/2011 ASSESSMENT YEAR 2008-09 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD PAN: AABCC6780D V. THE ADDL. CIT RANGE-1 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI K.A. SAI PRASAD RESPONDENT BY: SRI K. GNANA PRAKASH DATE OF HEARING: 12 .0 9 .2012 DATE OF PRONOUNCEMENT: 05.10.2012 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST DIFFERENT ORDERS OF THE CIT(A)-II, HYDERABAD DATED 2.12.2011 AND 23.9.2011 FOR ASSESSMENT YEARS 2005-06 AND 2008-09, RESPECTIVELY. 2. FIRST WE WILL TAKE UP ITA NO. 20/HYD/2012 FOR ASSES SMENT YEAR 2005-06. THE FIRST GROUND IN THIS APPEAL IS WITH R EGARD TO REOPENING OF ASSESSMENT. BRIEF FACTS OF THE ISSUE ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 26.12.2007. LA TER A NOTICE U/S. 148 DATED 24.3.2009 WAS ISSUED AND DULY SERVED ON THE A SSESSEE. THE REASON FOR REOPENING OF ASSESSMENT WAS THAT THE ADD ITIONAL DEPRECIATION ON MACHINERY INSTALLED AT MILK CHILLIN G PLANT/PROCESSING CENTRE, SALES OUTLET, ETC., CLAIMED BY THE ASSESSEE COMPANY IS NOT ALLOWABLE AS THE ASSESSEE COMPANY IS NOT ENGAGED IN MANUFACTURING OF 2 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== ANY ARTICLE OR THING. IN RESPONSE TO THE NOTICE IS SUED U/S. 148 OF THE ACT, THE ASSESSEE REPLIED THAT 'THE RETURN ALREADY FILED MAY PLEASE BE TREATED AS HAVING BEEN FILED IN RESPONSE TO THE NOTICE ISSU ED U/S. 148 OF THE IT ACT'. THE ASSESSING OFFICER BEING NOT CONVINCED WI TH THE REPLY OF THE ASSESSEE DISALLOWED THE ADDITIONAL DEPRECIATION I.E ., SUM EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY/PLANT AS ENUME RATED U/S. 32(1)(IIIA) OF THE ACT WORKED OUT AT RS. 83,53,108 AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) CONFIRMED REOPENING OF ASSESSMENT AS WELL AS THE ADDITION MAD E BY THE ASSESSING OFFICER. 3. REGARDING REOPENING OF ASSESSMENT THE LEARNED AR SU BMITTED THAT AT THE TIME OF COMPLETING ASSESSMENT ALL THE I NFORMATION WAS AVAILABLE TO THE ASSESSING OFFICER AND HE HAS DULY CONSIDERED ALL THE MATERIAL FACTS FOR THE PURPOSE OF ASSESSMENT AND AL LOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO ADDITIONAL DEPRECIATION AND THE SAME CANNOT BE CONSIDERED NOW BY ISSUING NOTICE U/S. 148 OF THE ACT AS THERE IS NO FRESH TANGIBLE MATERIAL WHICH CAME TO THE KNO WLEDGE OF THE ASSESSING OFFICER FOR THE PURPOSE OF REOPENING OF A SSESSMENT. ACCORDING TO THE AR IT IS ONLY CHANGE OF OPINION AN D MAKING ROVING ENQUIRY. HE RELIED ON THE ORDER OF THE TRIBUNAL PU NE SPECIAL BENCH IN THE CASE OF B.G. CHITALE V. DCIT (115 ITD 97) (SB) (PUNE) WHEREIN IT WAS HELD THAT IF THE ASSESSEE MAKES CURD, GHEE OR OTHER PRODUCTS AFTER PROCESS, THAT AMOUNTS TO MANUFACTURE OR PRODUCTION OF ARTICLE OR THING AND THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80I /80HHA OF THE ACT. THUS, HE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN PRODUCTION OF CURD AND GHEE AND OTHER MILK PRODUCTS AND THIS IS MANUFA CTURED AFTER PASTEURISATION AND STANDARDISATION OF MILK. THE SA ME MACHINERY INSTALLED FOR PASTEURISATION AND STANDARDISATION WA S ACTIVELY USED FOR THE PURPOSE OF PRODUCTION OF CURD AND GHEE. ACCORD ING TO HIM, THE ASSESSING OFFICER IS NOT CORRECT IN OBSERVING THAT MACHINERY INSTALLED AT MILK CHILLING/PROCESSING CENTRE, SALES OUTLET ARE N OTHING TO DO WITH THE 3 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== MANUFACTURE OF CURD OR GHEE, ETC. HE SUBMITTED THA T CURD AND GHEE COULD BE MANUFACTURED ONLY AFTER PASTEURISATION AND STANDARDISATION OF MILK. THUS THE MACHINERY OR PLANT INSTALLED AT M ILK CHILLING PLANT/ PROCESSING CENTRE HAVE DIRECT NEXUS WITH THE MANUFA CTURING OF CURD AND GHEE, ETC. FURTHER HE RELIED ON THE ORDER OF THE T RIBUNAL IN THE CASE OF G.S. PRABHAKAR VS. ACIT DATED 30 TH NOVEMBER, 2010 IN ITA NO. 1154/ HYD/2010 FOR ASSESSMENT YEAR 2005-06 WHEREIN THE TR IBUNAL HELD THAT REOPENING OF ASSESSMENT IS BAD IN LAW. FOR SIMILAR PROPOSITION HE ALSO RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF LEE PHARMA PVT. LTD. DATED 8 TH JUNE, 2012 IN ITA NO. 1236/HYD/2010 WHEREIN THE TR IBUNAL HELD THAT REOPENING OF ASSESSMENT IS BAD IN LAW BY RELYING ON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS . KELVINATOR OF INDIA (256 ITR 1) AND ALSO ON THE JUDGEMENT OF SUPREME CO URT IN THE SAME CASE REPORTED IN 320 ITR 551. 4. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSING OFFICER HAS CALLED FOR ROUTINE DETAILS AND AFTER VE RIFICATION OF THE SAME, THE ASSESSMENT WAS COMPLETED WITHOUT MAKING ANY DIS ALLOWANCES. BUT, HOWEVER, SUBSEQUENTLY IT HAS COME TO HIS NOTICE THA T THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION ON MACHINERY INSTAL LED AT MILK CHILLING/PROCESSING CENTRES, SALES OUTLETS AND ALSO ON PLANT AND MACHINERY INSTALLED AT MILK POWDER FACTORY WHICH AC CORDING TO HIM DO NOT AMOUNT TO THE PLANT & MACHINERY USED FOR THE MAN UFACTURE OF AN ARTICLE OR THING AS PER THE PROVISIONS OF SEC. 32(L )(IIA). OMITTED TO DO SO, RESULTED IN UNDER ASSESSMENT AND ACCORDINGLY RE-OPE NED THE ASSESSMENT U/S. 147 OF THE IT ACT. THE ASSESSEE'S C ONTENTION THAT THE RE- OPENING PROCEEDINGS AMOUNT TO THE CHANGE OF OPINION AND THEREFORE THE PROCEEDINGS U/S. 147 SHOULD BE ANNULLED IS NOT ACCE PTABLE, IN VIEW OF THE FOLLOWING JUDICIAL AUTHORITIES: 1) PRAFUL CHUNILAL PATEL VS. ACIT (1999) 236 ITR 832 : RE- ASSESSMENT WHEREIN HELD THAT ON A PROPER INTERPRETA TION OF SECTION 47 OF THE ACT, IT WOULD APPEAR THAT THE POW ER TO MAKE 4 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== ASSESSMENT OR RE-ASSESSMENT WITHIN FOUR YEARS OF TH E END OF THE RELEVANT ASSESSMENT YEAR WOULD BE ATTRACTED EVEN IN CASES WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL R ELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT MIGHT HAVE BEEN BAS ED IN THE FIRST INSTANCE, AND WHETHER IT IS AN ERROR OF FACT OR RAW THAT HAS BEEN DISCOVERED OR FOUND OUT JUSTIFYING THE BELIEF REQUIRED TO INITIATE ME PROCEEDINGS. THE WORDS, 'ESCAPED ASSESS MENT' WHERE THE RETURN IS FILED ARE APT TO COVER THE CASE OF A DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON-C ONSIDERATION. OR, CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH T RANSFER OR TRANSACTION EVEN WHERE THERE HAS BEEN A COMPLETE DI SCLOSURE OF ALL RELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT COULD HAVE BEEN BASED. IN CASES WHERE THE ASSESSING OFFICER HA D OVER- LOOKED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY CHANGE OF OPINION WHEN THE INCOME W HICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE LAW BUT WAS NOT, DUE TO AN ERROR COMMITTE D AT THE FIRST ASSESSMENT. 2) JAWAND & SONS VS. CIT (APPEALS) 326 ITR 0039 :(P&H) : REASSESSMENT- REASON TO BELIEVE- DEDUCTION WRONGLY ALLOWED TO ASSESSEE WHERE DUTY DRAWBACK AND DEPB INCENTIVES WERE TREATED AS 'PROFITS DERIVED FROM INDUSTRIAL UNDERTA KING' AND ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 80-IB, IN ORIGINAL ASSESSMENT, THUS, TO CORRECT THE WRONG DED UCTION ALLOWED TO ASSESSEE UNDER SECTION 80-IB, RE-OPENING OF ASSESSMENT WAS JUSTIFIED. IT HAS BEEN HELD THAT UND ER SECTION 147 OF THE ACT, AFTER ITS AMENDMENT W.E.F. 1.4.1989 , WIDE POWER HAS BEEN GIVEN TO THE ASSESSING OFFICER EVEN TO COV ER THE CASES WHERE THE ASSESSEE HAD FULLY DISCLOSED THE MATERIAL FACTS. THE ONLY CONDITION FOR ACTION IS THAT THE ASSESSING OFF ICER SHOULD HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE T O TAX HAD ESCAPED ASSESSMENT. SUCH BELIEF CAN BE REACHED IN A NY MANNER AND IS NOT QUALIFIED BY A PRECONDITION OF FULL AND TRUE DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEE AS CON TEMPLATED IN THE PRE-AMENDED SECTION 147(A) OF THE ACT. 5. THE DR ALSO RELIED ON THE JUDGEMENT OF SUPREME COUR T IN THE CASE OF INDIAN HOTELS CO. LTD. & ORS. V. ITO & ORS. (245 ITR 538) WHEREIN IT WAS HELD AS UNDER: 'IN ORDER TO GET SPECIAL DEDUCTION UNDER SECTION 80 J OF THE INCOME-TAX ACT, 1961 OR INVESTMENT ALLOWANCE UND ER SECTION 32A THE REQUIREMENT IS: THE ASSESSEE-COMPANY 5 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IN THE CASE OF PREPARING FOOD PACKAGES OR SELLING THE SAME OR PREPARING FOODSTUFFS FOR SERVING IN THE HOTEL THERE IS NO QUESTION OF MANUFACTURE OR PRODUCTION. THE RAW MATERIAL IS AT THE MOST PROCESSED SO AS TO MAKE IT EATABLE. THE WORD 'MANUFACTURE' HAS VARIOUS SHADES OF MEANING BUT UNLESS DEFINED UNDER THE ACT, IT IS TO BE INTERPRETED IN THE CONTEXT OF THE OBJECT AND THE LA NGUAGE USED IN THE SECTIONS. IN THE CONTEXT OF THE PROVISIONS WHICH DEAL WITH GRANT OF INVESTMENT ALLOWANCE OR DEDUCTION UNDER SECTION 80J IT IS APPA RENT THAT IT IS USED TO MEAN PRODUCTION OF A NEW ARTICLE OR BRINGING INTO EXISTENCE SOME NEW COMMODITY BY AN INDUSTRIAL UNDERTAKING. IT WOULD NOT BE APPLICABLE IN CASES WHERE ONLY PROCESSING ACTIVITY IS CARRIED OUT . FURTHER, SUCH PRODUCTION ACTIVITY MUST BE BY AN INDUSTRIAL UNDERTAKING AND NOT BY THE ASSESSEE HAVI NG MAINLY TRADING ACTIVITY. A STATUTE CANNOT ALWAYS BE CONSTRUED WITH THE DICTIONARY IN ONE HAND AND THE STATUTE IN THE OTHER ; REGARD MUST ALSO BE HAD TO THE SCHEME, CONTEXT AND TO THE LEGISLATIVE HISTORY OF THE PROVISION. THE FOODSTUFF PREPARED BY COOKING OR BY ANY OTHER PROCESS FROM RAW MATERIALS SUCH AS CEREALS, PULSES, VEGETABLES, MEAT OR THE LIKE CANNOT BE REGARDED AS A COMMERCIALLY DISTINCT COMMODITY AND IT CANNOT BE HE LD THAT SUCH FOODSTUFF IS MANUFACTURED OR PRODUCED. FURTHER, THE LEGISLATURE HAS DIFFERENTIATED BETWEEN AN INDUSTRIAL UNDERTAKING AND TRADING ACTIVITY OF THE ASSESSEE WHO DEALS IN BUSINESS OF HOTEL, BY MAKING DIFFERENT PROVISIONS. THE BUSINESS OF HOTEL AND THA T OF INDUSTRIAL UNDERTAKING ARE CONSIDERED TO BE DISTINC T AND SEPARATE FOR THE PURPOSE OF GRANT OF INVESTMENT ALLOWANCE UNDER SECTION 32A OR FOR GRANT OF DEDUCTIO N UNDER SECTION 80J. UNDER PROVISO (C) TO SECTION 32A DEDUCTION OF INVESTMENT ALLOWANCE IS NOT TO BE MADE IN RESPECT OF ANY SHIP, MACHINERY OR PLANT TO WHICH TH E 6 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== DEDUCTION OF DEVELOPMENT REBATE IS ALLOWABLE UNDER SECTION 33. FOR THE MACHINERY AND PLANT INSTALLED B Y AN ASSESSEE BEING AN INDIAN COMPANY IN PREMISES USED B Y IT AS A HOTEL, SPECIFIC PROVISION FOR GRANT OF DEDUCTI ON OF DEVELOPMENT REBATE IS MADE UNDER SECTION 33(1)(B) (B)(II). SIMILARLY, UNDER SECTION 80J FOR THE BUSINE SS OF HOTEL AND FOR INDUSTRIAL UNDERTAKING SEPARATE PROVI SIONS ARE PRESCRIBED, MAINLY, SUB-SECTIONS (4) AND (6). T HE CONDITIONS WHICH ARE REQUIRED TO BE SATISFIED BY SU CH ASSESSEES ARE DIFFERENT. THEREFORE, AN ASSESSEE WHO IS CARRYING ON A TRADING ACTIVITY OF BUSINESS OF A HOT EL CANNOT CLAIM THE BENEFIT GRANTED TO AN INDUSTRIAL UNDERTAKING BY CONTENDING THAT IT ALSO PRODUCES FOODSTUFF OR FOOD PACKETS. 6. REGARDING THE MERIT OF ALLOWABILITY OF DEPRECIATION , THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS ENTITLED FOR ADDI TIONAL DEPRECIATION AS THE TRIBUNAL HELD THAT THE MANUFACTURE OF BUTTER MI LK AND CREAM AMOUNTS TO MANUFACTURING ACTIVITY AND, THEREFORE, T HE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80I OF THE ACT. FURTHE R IT WAS SUBMITTED THAT IN THE PROCESS OF PRODUCTION OF THESE ITEMS FROM RA W MILK THE ENTIRE PLANT AND MACHINERY WERE EXPLOITED AND, THEREFORE, ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) ON PLANT AND MACHINERY INSTALLED BY THE ASSESSEE IS ENTITLED FOR DEPRECIATION. 7. THE DR OPPOSED THE ARGUMENT OF THE AR. 8. WE HAVE HEARD BOTH THE PARTIES ON BOTH THE ISSUES. REOPENING OF ASSESSMENT FOR THE PURPOSE OF RECONSIDERATION OF AD DITIONAL DEPRECIATION GRANTED ON MACHINERY INSTALLED AT MILK CHILLING PLANT/ PROCESSING CENTRE/SALES OUTLET ON THE REASON THAT A DDITIONAL DEPRECIATION IS NOT ALLOWABLE AS THE ASSESSEE IS NO T ENGAGED IN MANUFACTURE OF ARTICLE OR THING. THE ASSESSING OFF ICER CAME TO THE CONCLUSION ON THE BASIS OF THE ORDER OF THE TRIBUNA L PUNE SPECIAL BENCH IN THE CASE OF B.G. CHITALE (SUPRA) WHEREIN IT WAS HELD THAT PASTEURISATION AND STANDARDISATION OF MILK DOES NOT AMOUNT TO 7 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== PRODUCTION AND THE ASSESSEE IS NOT ENTITLED FOR DED UCTION U/S. 80I. IN VIEW OF THIS, THE ASSESSEE IS NOT ENTITLED FOR ADDI TIONAL DEPRECIATION IN TERMS OF PROVISIONS OF SECTION 32(1)(IIA) AS THE MA CHINERY INSTALLED AT MILK CHILLING/PROCESSING CENTRE, SALES OUTLET AND P LANT AND MACHINERY INSTALLED AT MILK POWDER CENTRE ARE DIRECTLY RELATA BLE TO THE MILK PROCESSING WHICH DOES NOT AMOUNT TO MANUFACTURE. T HEREFORE, AS PER THE PROVISIONS OF SECTION 32(1)(IIA) THE ADDITIONAL DEPRECIATION CANNOT BE GRANTED. IN OUR OPINION, THE REASON RECORDED BY THE ASSESSING OFFICER IS A VALID BASIS FOR RE-ASSESSMENT PROCEEDI NGS BY ISSUING NOTICE U/S. 148 OF THE ACT. IN OUR OPINION, ADDITIONAL DE PRECIATION IS NOT AVAILABLE TO THAT PART OF THE MACHINERY INSTALLED F OR THE PURPOSE OF STANDARDISATION AND PASTEURISATION OF MILK. THE AC TIVITIES OF STANDARDISATION AND PASTEURISATION OF MILK ARE DIFF ERENT FROM MANUFACTURING OF CURD, GHEE AND OTHER PRODUCTS. ST ANDARDISATION AND PASTEURISATION OF MILK CANNOT BE EQUATED WITH MANUF ACTURING OF CURD AND GHEE OR OTHER MILK PRODUCTS. THE NEW MACHINERY WHICH WAS INSTALLED FOR THE PURPOSE OF MANUFACTURING OF PRODU CTION OF ANY ARTICLE OR THING IS ENTITLED FOR ADDITIONAL DEPRECIATION NO T OTHERWISE AND NOT ON THE MACHINERY INSTALLED IN ANY OTHER WAY BY THE ASS ESSEE. AS IT WAS ALREADY DECIDED BY THE TRIBUNAL PUNE SPECIAL BENCH IN THE CASE OF B.G. CHITALE (SUPRA), STANDARDISATION AND PASTEURISATION CANNOT BE CONSIDERED AS A MANUFACTURE OR PRODUCTION ACTIVITY. THE PLANT AND MACHINERY INSTALLED FOR THE PURPOSE OF STANDARDISAT ION AND PASTEURISATION OF MILK CANNOT BE CONSIDERED FOR ADD ITIONAL DEPRECIATION. BEING SO, REOPENING OF ASSESSMENT IS VALID. CONSEQ UENTLY, THE ASSESSEE NOT ENTITLED FOR ADDITIONAL DEPRECIATION ON MERIT A LSO. THE ASSESSEE MIGHT HAVE USED THE STANDARDISED OR PASTEURISED MIL K FOR THE PURPOSE OF PRODUCTION OF CURD AND GHEE AND THERE IS NO NECE SSITY OF USING STANDARDISED OR PASTEURISED MILK FOR THE PURPOSE OF PRODUCTION OF CURD AND GHEE OR OTHER MILK PRODUCTS. BECAUSE THE ASSES SEE USED STANDARDISED OR PASTEURISED MILK, WE CANNOT BE IN A POSITION TO HOLD THAT THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPREC IATION U/S. 32(1)(IIA) OF 8 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== THE ACT. THE PLANT AND MACHINERY USED IN THE PRODU CTION AND MANUFACTURE OF CURD AND GHEE MUST HAVE A DIRECT AND IMMEDIATE NEXUS WITH THE ASSESSEE'S BUSINESS. ALTHOUGH MILK IS REQ UIRED FOR THE PURPOSE OF MANUFACTURING OF CURD AND GHEE, STANDARDISED AND PASTEURISED MILK FOR THE PURPOSE OF PRODUCTION OF CURD AND GHEE IS A STEP REMOVED FROM THE BUSINESS OF PRODUCTION OF CURD AND GHEE. THE C URD AND GHEE COULD HAVE BEEN PRODUCED BY THE ASSESSEE FROM THE MILK WI THOUT STANDARDISATION AND PASTEURISATION. USAGE OF PASTE URISED CONDENSED MILK IS NOT NECESSARY FOR THE PURPOSE OF PRODUCTION OF GHEE AND CURD. BECAUSE THE ASSESSEE USED THE STANDARDISED AND PAST EURISED MILK, WE CANNOT GRANT THE ADDITIONAL DEPRECIATION ON THE PLA NT AND MACHINERY WHICH ARE USED FOR THE PURPOSE OF STANDARDISATION A ND PASTEURISATION OF MILK. ACCORDINGLY, EVEN ON MERIT WE DECIDE THE ISS UE AGAINST THE ASSESSEE. THE VARIOUS CASE-LAW RELIED ON BY THE AS SESSEE-COMPANY ARE DELIVERED ON THEIR OWN CONTEXT AND CANNOT BE APPLIE D TO THE FACTS OF THE PRESENT CASE. 9. THE OTHER GROUND IS RELATING TO LEVY OF INTEREST U/ S. 234B AND 234C OF THE ACT WHICH IS CONSEQUENTIAL AND MANDATOR Y IN THE NATURE. ACCORDINGLY THIS GROUND IS DISMISSED. APPEAL OF THE ASSESSEE IN ITA NO. 20/HYD/2012 IS DISMISSED. 10. NOW COMING TO ITA NO. 1820/HYD/2011. THE MAIN ISSU E IS WITH REGARD TO ALLOWABILITY OF FOREIGN TRAVEL EXPENDITUR E. THE ASSESSEE CLAIMED FOREIGN TRAVEL EXPENDITURE AT RS. 20,35,971 . AS THE ASSESSEE NOT FURNISHED DETAILS OF EXPENDITURE RELATING TO BUSINE SS AND PLEASURE TRIPS, THE ASSESSING OFFICER DISALLOWED 80% OF FOREIGN TRA VEL EXPENSES AT RS. 16,28,777. ON APPEAL, THE CIT(A) DIRECTED THE ASSE SSING OFFICER TO ALLOW 1/3 RD OF THE EXPENDITURE INSTEAD OF 1/5 TH OF THE EXPENDITURE. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. BEFORE THE LOWER AUTHORITIES, THE ASSESSEE NOT FURNISHED 9 ITA NO. 20/HYD/2012 ITA NO. 1828/HYD/2011 M/S. CREAMLINE DAIRY PRODUCTS LTD. ========================== BIFURCATION OF EXPENDITURE AS RELATED TO BUSINESS A ND PLEASURE TRIPS. BEING SO, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW 2/3 OF EXPENDITURE. BEFORE US ALSO NOTHING HAS BEEN FURNI SHED. HOWEVER, THE AR MADE AS PLEA THAT THE ASSESSEE COULD FURNISH DET AILS OF FOREIGN TRAVEL AS RELATING TO BUSINESS TRIPS AS WELL AS PLEASURE T RIPS. CONSIDERING THE REQUEST OF THE ASSESSEE'S COUNSEL, WE REMIT THE ENT IRE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GET BIFUR CATION OF EXPENDITURE AS ATTRIBUTABLE TO BUSINESS TRIPS AND PLEASURE TRIP S. ON OBTAINING THE INFORMATION, THE ASSESSING OFFICER IS DIRECTED TO D ISALLOW THE EXPENDITURE RELATING TO PLEASURE TRIPS. IF THE ASS ESSEE FAILS TO FURNISH THE SAME THE ASSESSING OFFICER SHALL PASS CONSEQUEN TIAL ORDER IN TERMS OF THE CIT(A) ORDER. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, ITA NO. 20/HYD/2012 IS DISMISSED AND ITA NO. 1828/HYD/2011 IS PARTLY ALLOWED FOR STATISTICAL PUR POSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 5 TH OCTOBER, 2012 TPRAO COPY FORWARDED TO: 1. M/S. CREAMLINE DAIRY PRODUCTS LTD., C/O. M/S. B. NA RSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS, HYDERABAD-500 096. 2. THE DEPUTY CIT, CIRCLE - 1(2), HYDERABAD. 3. THE ADDL. CIT, RANGE - 1, HYDERABAD. 4. THE CIT(A) - II, HYDERABAD. 5. THE CIT - I, HYDERABAD. 6 . THE DR B BENCH, ITAT, HYDERABAD