The ACIT, Circle-8, Ahmedabad V. Vikram Seeds Limited, Ahmedabad

ITA 1874/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6753 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: S N SOPARKAR SRAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI D.K.TYAGI, HONBLE JUDICIAL MEMBER, AND SHRI A.N.PAHUJA, HONBLE ACCOUNTANT MEMBER ITA NO.1874/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:4.4.11 DRAFTED:4.5.11 ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-8, AHMEDABAD V/S . VIKRAM SEEDS LTD., 209, ASHWAMEGH AVENUE, MAYAUR COLONY, MITHAKHALI SIX ROADS, NAVRANGPURA, AHMEDABAD PAN NO.AAACV6462A (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SHELLEY JINDAL, CIT-DR RESPONDENT BY:- SHRI S.N.SOPARKAR, SR-AR O R D E R PER D.K.TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME- TAX(APPEALS)-XIV, AHMEDABAD IN APPEAL NO. CIT(A) XI V/C.8/254/2008-09 DATED 04- 03-2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND :- 1. THE LD. CIT (A), HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,54,73,623/- BEING DISPOSAL OF OLD SEED STOCK A T MARKET RATE WITHOUT CONSIDERING THE EVIDENCES. 3. THE BRIEF FACTS OF THE CASE IN RESPECT OF THE GR OUND IS THAT DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER FOUND THAT ASSESSEE HAS DISPOSED OFF 3,40,346 NON-GERMINATED PACKETS OF RESEARCH COTTON SEEDS SELLING IT FOR RS.8,84,764/- THEREBY INCURRING LOSS OF RS.2,26,79, 316/-. THE ASSESSEE WAS ASKED ITA NO.1874/AHD/2009 A.Y. 2006-07 ACIT CIR-8, ABD V VIKRAM SEEDS LTD. PAGE 2 BY ASSESSING OFFICER TO SHOW CAUSE AS TO WHY DISALL OWANCE ON ACCOUNT OF DISPOSAL OF SEEDS SHOULD NOT BE MADE IN ITS CASE. IN RESPONS E THERETO THE ASSESSEE REPLIED THAT TOTAL AMOUNT OF LOSS ON ACCOUNT OF DISPOSAL OF STOCK WAS AT RS.2,54,73,623/-. THE ASSESSEE ALSO FURNISHED PHOTO COPIES OF LABORAT ORY REPORTS AND LETTER WRITTEN BY IT TO THE LABORATORY IN SUPPORT OF ITS CLAIM OF WRI TE OFF. THE ASSESSING OFFICER MADE THE DISALLOWANCE ON THE GROUND THAT IT WAS NOT POSSIBLE TO CORRELATE THAT THE SEEDS WHICH WERE TESTED WERE THE SAME THAT HAVE BEEN WRITTEN OF F. ALTHOUGH THE ASSESSEE HAD PRODUCED LABORATORY REPORT ON SAMPLE BASIS AND SAME WAS CONSIDERED AS NOT SUFFICIENT BY THE AO AND IN THE ABSENCE OF EXACT CO RRELATION OF STOCK DISPOSED OF WITH LABORATORY TESTS DONE THE AO REJECTED THE ASSESSEE S CLAIM OF WRITE OFF OF LOSS OF STOCK TO HE TUNE OF RS.2,54,73,623/-. 4. BEFORE LD. CIT(A) IT WAS SUBMITTED ON BEHALF OF ASSESSEE THAT DETAILS OF STOCK DISPOSED OFF TOGETHER WITH AGE OF STOCK YEAR-WISE A S PER ANNEXURE-C FOR ALL VARIETY, WHICH SHOWED THE OLD AGE OF THE STOCK AND TALLIED T HE SAME WITH YEAR-WISE STOCK STATEMENTS. THE ASSESSEE RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SHAKTI TRADING CO. V. CIT 250 ITR 871 (SC) AND THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. KARUR VYASYA BANK LTD. 273 ITR 510 (MAD), FURTHER SUBMITTED THAT WHEN THERE WAS NO CESSATION OF BUSIN ESS, THE CLOSING STOCK HAD TO BE VALUED AT COST OR MARKET PRICE, WHICHEVER WAS LOWER AND A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE TO VALUE STOCK-IN-TRADE EITHER AT C OST OR MARKET PRICE. IT WAS ALSO HELD BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. VIJAY SHANTHI FINANCE LTD. 296 ITR 302 (MAD) THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE CLOSING STOCK CAN BE VALUED EITHER AT MARKET PRICE OR COST PRICE WHICHEVER IS LOWER. THERE WAS NO NEED OF LABORATORY TEST REPORT AS THER E WAS NO NEED TO GET LABORATORY TEST REPORT TO DISPOSE OF OR REVALUE THE STOCK AND IT WAS NECESSARY AS PER SEEDS ACT, 1966 (CENTRAL) ONLY FOR SELLING THE PURE/GERMINATED SEEDS TO FARMERS. THE RELEVANT PROVISIONS OF SEEDS ACT, 1966 (CENTRAL) WERE EXPLAI NED IN HIS SUBMISSION. IT WAS FURTHER STATED THAT THE MINIMUM LIMIT OF GERMINATIO N FOR HYBRID COTTON SEEDS HAS BEEN AMENDED BY GOVT. OF INDIA, VIDE OFFICE MEMORANDUM N O.18-6/2004 SDIV DATED 28 TH SEPTEMBER, 2004 FROM 65 TO 75% WITH EFFECT FROM 1 ST JANUARY, 2005. THE AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT ASSESSEE HAS OBTAINED LABORATORY TEST REPORT ON SAMPLE BASIS ONLY FOR SELLING OF SEEDS BUT THERE WAS NO NEED TO DISPOSAL OF SEEDS OR FOR REVALUATION PURPOSE. HOWEVER, THE ASSESSEE H AS OBTAINED THE SAME AS PER ITA NO.1874/AHD/2009 A.Y. 2006-07 ACIT CIR-8, ABD V VIKRAM SEEDS LTD. PAGE 3 ANNEXURE-B TO WRITTEN SUBMISSION FILED BEFORE LD. C IT(A) TO PROVE THE LOWER GERMINATION AND PURITY OF SEEDS WHICH WAS NOT AT AL L SALEABLE UNDER THE SEEDS ACT, 1966. IT WAS ALSO ARGUED BEFORE LD. CIT(A) THAT ASS ESSING OFFICER HAS NOT MADE ANY INQUIRY ON TECHNICAL ASPECT OF SEED BUSINESS AND TH AT THE ASSESSEE HAS INCURRED HEAVY LOSS AND THERE WAS NO QUESTION OF TAX EVASION . 5. AFTER TAKING INTO CONSIDERATION THE SUBMISSION O F ASSESSEE LD. CIT(A) ALLOWED THE ASSESSEES APPEAL BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS AS ADVANCED BY THE A.R OF THE APPELLANT CAREFULLY. SIMILAR ISSUE A ROSE IN APPELLANTS OWN CASE FOR A.Y 2005-06, WHEREIN THE ISSUE HAS BEEN DISCUSS ED IN DETAIL. IT WAS OBSERVED BY THE UNDERSIGNED IN THE APPELLATE ORDER FOR A.Y. 2005-06 THAT THE APPELLANTS RESEARCH VARIETIES I.E VCH-9 & VCH-5 BE CAME OUT OF DATE AFTER 3 YEARS AND THE APPELLANT HAD TO DISPOSE OFF AT A LOW ER RATE AND THE SEEDS WERE SOLD NOT FOR AGRICULTURAL HARVESTING, BUT WERE SOLD FOR PREPARING ANIMAL FEEDS. THE A.R HAD ALSO GIVEN A COPY OF THE SEEDS ACT, 196 6 AND REFERRED TO SECTIONS 6, 7 & 19 WHICH SPECIFY MINIMUM LIMIT OF G ERMINATION AND PURITY FOR HYBRID COTTON SEEDS AT 65%, WHICH HAS BEEN SUBSEQUE NTLY AMENDED TO 75% WITH EFFECT FROM 1-1-2005 AND PRESCRIBED THAT THE C ONTAINER OF SUCH SEED SHOULD BEAR IN THE PRESCRIBED MANNER, THE MARK OR L ABEL CONTAINING THE CORRECT PARTICULARS THEREOF, SPECIFIED UNDER CLAUSE (B) OF SECTION 6 AND IF ANY PROVISION IS CONTRAVENED, THE PERSON WOULD BE IS LIABLE TO PE NALTY & IMPRISONMENT. THE A.R HAS ALSO CONTENDED THAT IT IS NECESSARY TO9 OBT AIN THE LAB TEST REPORT ONLY FOR SELLING OF SEEDS, BUT THERE WAS NO NEED TO OBTAIN THE SAME FOR DISPOSING OR SEEDS OR VALUING THE CLOSING STOCK. TH E LOSS SON SALE OF STOCK OF SEEDS AND LOSS DUE TO REVALUATION OF STOCK OF SEEDS WAS ALLOWED IN THAT YEAR VIDE MY ORDER DATED 21-08-2008. 3.4 IN THIS YEAR ALSO THE APPELLANT HAS OBTAINED LA B TEST REPORT AS SUBMITTED IN ANNEXURE-F AND ACCORDING TO THE TEST REPORT, IT IS FOUND THAT THE PHYSICAL PURITY AND GERMINATION CAPACITY IS LESS THAN 75% IN THE SEEDS WHICH HAVE BEEN DISPOSED OFF. AS REGARDS THE CONTENTION OF THE A.O THAT THERE WAS NO EXACT CO-RELATION BETWEEN THE SEEDS DISPOSED OFF OR REVALUED VIS.A.VIS THE LAB TEST REPORT, AS STATED BY THE A.R IT WAS NOT NECESS ARY TO OBTAIN LAB TEST REPORT FOR SEEDS DISPOSED OFF AT LOWER RATE FOR NON AGRICULTURAL USE AND EVEN FOR NORMAL SALE OF SEEDS, THE APPELLANT HAS TO TEST ONLY ON SAMPLE BASIS AND IT IS NOT NECESSARY TO TEST THE ENTIRE SEEDS SOLD PHYS ICALLY. AS THE SEEDS HAVE BECOME OLD AND NOT CAPABLE OF GERMINATION AND THE V ARIETIES HAVE BECOME OUT OF DATE, BECAUSE OF THE ARRIVAL OF NEW VARIETY OF HYBRID COTTON SEED, I.E B.T. COTTON, THE APPELLANT WAS NOT ALE TO REALIZE THE SA LE PRICE. THEREFORE, NET REALIZABLE VALUE HAS COME DOWN AND IT RANGED FROM R S.1.35 PER PACKET TO RS.4.24 PER PACKET FOR VICH 9 VARIETY AND FOR VICH 5 VARIETY OF SEEDS IN STEAD OF RS.106.25 PER PACKET AND ACCORDINGLY THE APPELLA NT HAS INCURRED LOSS ON DISPOSAL OF SEEDS. AS ON SIMILAR FACTS THE LOSS WAS ALLOWED IN A.Y 20005-06. FOLLOWING THE SAID ORDER, THE LOSS INCURRED IN DISP OSING OFF THE PACKETS OF SEEDS AT LOWER PRICE ARE HELD TO BE ALLOWABLE IN TH E FACTS OF THE CASE AND ITA NO.1874/AHD/2009 A.Y. 2006-07 ACIT CIR-8, ABD V VIKRAM SEEDS LTD. PAGE 4 RELYING ON CASE LAWS RELIED UPON BY THE A.R. HENCE THE A.O IS DIRECTED TO ALLOW THE LOSS INCURRED ON SALE OF COTTON SEEDS. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING LD. DR RELIED ON THE ORDE R OF ASSESSING OFFICER WHILE LD. AR RELIED ON THE ORDER OF LD. CIT(A) AND THE DO CUMENTS FILED IN THE PAPER BOOK IN SUPPORT OF ORDER OF LD. CIT(A). 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT LD. CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE HAS PLACED RELI ANCE ON THE PURITY TEST REPORT OF LABORATORY IN RESPECT OF NON-GERMINATED / SUB-STAND ARD SEEDS. WE FURTHER FIND THAT HIS ORDER IS IN CONFORMITY WITH THE SECTION 6 & 7 O F THE SEEDS ACT, 1966 (CENTRAL) AND WE HAVE ALREADY CONFIRMED THE ORDER OF LD. CIT(A) I N ASSESSEES OWN CASE IN ITA NO.3623/AHD/2008 FOR ASSESSMENT YEAR 2005-06 ORDER DATED 21-04-2011. THEREFORE WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND SAME IS THEREBY UPHELD. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06/05/2011 SD/- SD/- (A.N.PAHUJA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 06/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD