The ACIT, Circle-8, Ahmedabad V. Vimlachal Print & Pack Pvt. Ltd., Ahmedabad

ITA 1871/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9370 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA SENIOR
• Assessee Lawyers: N C AMIN
• Keywords: Depreciation; Scheme of amalgamation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.1871/AHD/2009 WITH C O NO.125/AHD/2009 (ASSESSMENT YEAR: 2006-07) THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-8, AHMEDABAD V/S VIMALACHAL PRINT & PACK PVT. LTD., 5, SAKET INDUSTRIAL ESTATE, 437, MORAIYA, NR. CHANGODAR, TALUKA: SANAND, DISTRICT: AHMEDABAD [APPELLANT] [RESPONDENT] PAN NO.: AAACV 7000 Q APPELLANT BY :- SHRI P M SHUKLA, SENIOR DR RESPONDENT BY:- SHRI N C AMIN, ADVOCATE O R D E R PER P K BANSAL (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A ) DATED 13- 03-2009 BY TAKING THE FOLLOWING EFFECTIVE GROUND OF APPEAL:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION MADE ON ACCOUNT OF SUPPRESSION OF JOB WORK CHARGES OF RS.5,99,069/- . 2 THE BRIEF FACTS OF THE CASE ARE THAT AS A RESULT OF SURVEY CONDUCTED U/S 133A, IT WAS NOTICED THAT THE ASSESSEE- 2 COMPANY WAS PERFORMING JOB WORK FOR ITS SISTER CONC ERN VIZ. SUBHALACHAL PRINT & PACK FROM ITS UNIT AT DHOLKA AN D THAT THE RATE OF JOB WORK CHARGED TO THIS FIRM WAS RS.1.80 P ER KG. IT WAS ALSO NOTICED BY THE AO THAT THE JOB WORK CHARGED FR OM VFC INDUSTRIES PVT. LTD. WAS RS.2/- PER KG. AND THEREFO RE, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE RATE OF JOB WORK CHARGES FROM SUBHALACHAL PRINT & PACK WAS LOWER AS COMPARED TO T HAT FROM VFC INDUSTRIES. THE DIRECTOR OF ASSESSEE-COMPANY, I N RESPONSE TO QUESTION, REPLIED THAT THE JOB WORK CHARGES FROM SUBHALACHAL PRINT & PACK WAS LOWER BECAUSE THE VOLUME OF WORK W AS MORE AS COMPARED TO THAT OF VFC INDUSTRIES. THE AO AGAIN AS KED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO EXPLAIN THE DIFFERENCE IN RATES OF JOB WORK AND THE REPLY GIVEN BY THE ASSESS EE WAS NOT FOUND TENABLE BY THE AO, BECAUSE THE STAND TAKEN DU RING THE COURSE OF SURVEY WAS DIFFERENT THAN THE SECOND STAT EMENT. THE AO THEREFORE, WORKED OUT THE SUPPRESSION OF JOB WOR K CHARGES ON THE BASIS OF DIFFERENCE OF RS.0.20 PER KG. AND MADE ADDITION OF RS.5,99,069/- BY TREATING THE AMOUNT AS SUPPRESSED SALES OF JOB WORK CHARGES. WHEN THE MATTER WENT BEFORE THE CIT(A ), THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITION, BY O BSERVING AS UNDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS AS ADVANCED BY THE AR OF THE APPELLANT. IT IS SEEN THA T WHILE DISPOSING OFF THE APPEAL IN APPELLANTS OWN CASE FOR AY 2005-06, THE HON. ITAT OBSERVED VIDE ORDER DATED 16-1-09 THAT THE AUTHORIT IES BELOW HAVE NOT COMPARED THE MARKET RATE OF SUCH JOB WORK. FURTHER, LAW IS WELL SETTLED THAT THE TAXING AUTHORITY CANNOT SIT OVER T HE JUDGMENT OF THE ASSESSEE WHILE MANAGING ITS BUSINESS AND, THEREFORE , THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT ACCEPTING THE EXPLAN ATION OF THE APPELLANT. RESPECTFULLY FOLLOWING THE ORDER OF HON BLE TRIBUNAL, I DIRECT THE AO TO DELETE THE ADDITION MADE OF RS.5,9 9,069/-. 3 3 AT THE OUTSET, BOTH THE LEARNED DR AND THE LEARN ED DR AGREED THAT THE FACTS AND ISSUE INVOLVED IN THE PRE SENT CASE ARE EXACTLY SIMILAR TO THOSE AS IN THE CASE OF THE ASSE SSEE FOR AY 2005-06 IN ITA NO.3669/AHD/2008, IN WHICH VIDE ORDE R DATED 16-1-2009, THIS TRIBUNAL HAS DELETED THE SIMILAR AD DITION. 4 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE O RDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE OR DER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.3669/AHD/2008 [COPY FILED BEFORE US],WHEREIN THE TRIBUNAL HAS DELETED THE SIMILAR ADDITION BY OBSERVING AS UN DER:- 7. AS CULLED OUT FROM THE IMPUGNED ORDERS OF THE A UTHORITIES BELOW, THE FACTS, IN BRIEF, ARE THAT A SURVEY U/S.1 33A OF THE ACT WAS CONDUCTED ON 17.3.2005 AND IT WAS NOTICED THAT THE ASSESSEE WAS PERFORMING JOB WORK FOR ITS SISTER CONCERN, NAMELY SUBHALACHAL PRINT & PACK FROM ITS UNIT AT DHOLKA AND CHARGED RS.1.80 PER KG. FOR SUCH WORK, WHEREAS THE JOB WORK CHARGED FROM VFC INDUSTR IES PVT. LTD., WAS RS.2 PER KG. THE EXPLANATION OF THE ASSESSEE AS REGARDS THE LESS CHARGE OF JOB WORK BY RE.0.20 TO ITS SISTER CONCERN , IS THAT THE VOLUME OF JOB WORK OF ITS SISTER CONCERN WAS MORE AS COMPA RED TO THAT OF THE OTHER CONCERN AND THE JOB WORK DONE FOR VFC INDUSTR IES PVT. LTD., WAS DIFFERENT. THE ASSESSING OFFICER DID NOT ACCEPT SUC H EXPLANATION OF THE ASSESSEE AND HELD THE ASSESSEE TO HAVE SUPPRESSED T HE RECEIPT OF JOB WORK FROM SISTER CONCERN. HE, THEREFORE, WORKED OUT THE AMOUNT AT RS.6,10,131 AND MADE THE ADDITION TO THE TOTAL INCO ME OF THE ASSESSEE. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE I MPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIALS O N RECORD. THE LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT THE JOB WORK CHARGES TO SHUBHLACHAL PRINT AND PACK WAS AT LESSER RATE OF 20 PAISA PER KG., AS THE VOLUME OF JOB WORK DONE OF SHUBHLAC HAL PRINT AND PACK OF 33,64,690 KGS., WHEREAS THE JOB WORK OF VFC INDUSTRY PVT. 4 LTD., IS OF ONLY 21,397 KGS. THE LEARNED AR OF THE ASSESSEE PRODUCED COPIES OF JOB WORK ACCOUNT OF BOTH THE SISTER CONCE RN AND VFC INDUSTRIES PVT. LTD. GOING THROUGH THE MATERIALS P LACED IN THE PAPER BOOK, WE FIND THAT THE ASSESSEE HAS CHARGED RS.1.80 PER KG., FROM THE SISTER CONCERN. THERE IS NO MATERIAL ON RECORD TO H OLD THAT THE ASSESSEE HAS RECEIVED MORE THAN WHAT IT HAS SHOWN T O HAVE BEEN RECEIVED FROM THE SISTER CONCERN. MOREOVER, THE AUT HORITIES BELOW HAVE NOT COMPARED THE MARKET RATE OF SUCH JOB WORK AND IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CHARGED J OB WORK ON ITS SISTER CONCERN LESS THAN THE CHARGE IN THE MARKET. FURTHER, LAW IS WELL SETTLED THAT THE TAXING AUTHORITY CANNOT SIT OVER T HE JUDGEMENT OF THE ASSESSEE WHILE MANAGING ITS BUSINESS. THEREFORE, CO NSIDERING THE FACTS AND CIRCUMSTANCE OF THE CASE, WE ARE OF THE CONSIDE RED VIEW THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT ACCEPTIN G THE EXPLANATION OF THE ASSESSEE AND MAKING THE IMPUGNED ADDITION. WE, THEREFORE, DELETE THE SAID ADDITION AND ALLOW THE GROUND NO.4 OF THE ASSESSEE . RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THIS TRIBUNAL, WE UPHOLD THE ORDER OF THE CIT(A). THE GROUND TAKEN BY THE REVENUE IN ITS APPEAL STANDS DISMISSED. 5 THE CROSS OBJECTION FILED BY THE ASSESSEE IS MER ELY IN SUPPORT OF THE ORDER OF THE CIT(A). HOWEVER, THE AS SESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS IN THE CROS S OBJECTIONS: 1 THAT THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWA NCE OF DEPRECIATION ON GOODWILL U/S 32(1)(II) OF RS.2,50,2 82/- EVEN THOUGH IT IS ADMISSIBLE AS PER THE PROVISIONS OF SEC. 32(1 )(II) OF THE I.T. ACT, 1961. 2 THE FACTS OF THE CASE OF THE APPELLANT AND THE DECI SION APPLIED OF BHARATKUMAR J VYAS IS DISTINGUISHABLE AND THEREFORE THIS CROSS OBJECTION MAY PLEASE BE ADMITTED AND DECIDED ON MER ITS. 6 AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE INVOLVED IN THE ADDITIONAL GROUND RAISED BY THE ASS ESSEE IN THE 5 CROSS OBJECTION IS DULY COVERED BY THE AFORESAID DE CISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.3669/AHD/2008, WHEREIN VIDE PARAS 3, 4 AND 5 OF THE SAID ORDER, THE TRIBUNAL HAS HELD AS UNDER:- 3. GROUNDS 2 AND 3 RELATE TO DISALLOWANCE OF THE C LAIM OF DEPRECIATION ON GOODWILL AMOUNTING TO RS.3,33,710. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIM ED DEPRECIATION ON INTANGIBLE ASSETS I.E., GOODWILL PAID TO THE SHARE HOLDERS OF VIMAL LAMINATIN PVT LTD., ON AMALGAMATION OF THE COMPANY AS PER THE SCHEME OF AMALGAMATION AS APPROVED BY THE HONBLE H IGH COURT OF GUJARAT DURING THE ASSESSMENT YEAR 1999-2000. THE A SSESSING OFFICER WAS OF THE VIEW THAT THIS ITEM WAS NOT FORMING PART OF SEC.32 OF THE I.T.ACT,1961 AND THEREFORE, HE CONCLUDED THAT THE A SSESSEE IS NOT ENTITLED TO DERACINATION ON GOODWILL. IN APPEAL, IT WAS SUBMITTED BY THE ASSESSEE THAT THOUGH THE ITAT HAD DECIDED THE APPEA L AGAINST THE ASSESSEE, IT WAS MOVING THE MATTER BEFORE THE HONB LE GUJARAT HIGH COURT. THE LEARNED CIT(A) OBSERVED IN HIS ORDER THA T THE A.R. WAS NOT ABLE TO FURISH ANY SUCH EVIDENCE/DETAILS, WHICH WOU LD BE OF ANY HELP TO SUBSTANTIATE ITS CLAIM OF DEPRECIATION ON INTANGIBL E ASSETS EXCEPT MERELY STATING THAT THE MATTER IS PENDING BEFORE TH E HONBLE HIGH COURT. THE A.R. HAS ALSO NOT CITED OR GIVEN COPY OF THE DECISION. THEREFORE, IN ABSENCE OF DETAILS, THE LEARNED CIT(A ) CONFIRMED THE ACTION OF THE A.O. IN THIS REGARD. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE I MPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS R ELIED ON BY THE LEARNED AR OF THE ASSESSEE OF THE ASSESSEE. BEFORE US, THE LEARNED AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LEARNED CIT(A). AFTER GOING THROUGH THE MATERIALS O N RECORD, WE FIND THAT IN ASSESSEES OWN CASE, VIDE CONSOLIDATED ORDE R DT.28.12.2007 IN ITA NOS. 2010 TO 2013/AHD/2006 FILED BY THE REVENUE FOR THE AYS 1999-2000 TO 2001-02 AND 2003-04, ITAT, B-BENCH, AH MEDABAD HAS HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIAT ION ON INTANGIBLE ASSETS( BEING GOODWILL). THE LEARNED AR OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAS GONE IN APPEAL BEFORE THE HONBLE HIGH COURT AND THE MATTER IS PENDING. MERELY BECAUSE APPEAL HAS BE EN FILED BY THE 6 ASSESSEE, AS CLAIMED BY THE LEARNED AR, THE PRECEDE NTIARY VALUE OF THE DECISION OF THE TRIBUNAL ESPECIALLY IN CASE OF THE ASSESSEE ITSELF ON THE ISSUE DOES NOT CEASE TO EXIST AND THE SAID DECISION WILL GOVERN THE FIELD AND IT IS BINDING ON ALL SUBORDINATE COURTS UNTIL A ND UNLESS THE SAID DECISION OF THE ITAT IS REVERSED. THEREFORE, RESPEC TFULLY FOLLOWING AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS, WE UPHOLD TH E ORDER OF THE CIT(A) IN NOT ALLOWING DEPRECIATION ON INTANGIBLE A SSETS I.E., GOODWILL. IN VIEW OF THIS, THE DECISION OF THE ITAT, MUMBAI ( SMC) IN THE CASE OF SKYLINE CATERERS (P) LTD V. ITO [118 TTJ (MUMBAI) 3 44] IS OF NO HELP TO THE ASSESSEE. GROUNDS NO.2 AND 3 ARE REJECTED . RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH IS TRIBUNAL, WE DECIDE THE ISSUE IN FAVOUR OF THE REVENUE AND RE JECT THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IN THE CROS S OBJECTION. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE ASSESSEES CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 21-08-2 009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 21-08-2009 COPY OF THE ORDER FORWARDED TO : 1. VIMALACHAL PRINT & PACK PVT. LTD., 5, SAKET INDU STRIAL ESTATE, 437, MORAIYA, NR. CHANGODAR, TALUKA: SANAND , DISTRICT: AHMEDABAD 2. THE ACIT, CIRCLE-8, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE 7 BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA