The ACIT, Circle-7, Ahmedabad V. M/s. Ashish Chemicals, Ahmedabad

ITA 1898/AHD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1279 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3); 142(1); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1898/AHD/2012 ASST. YEAR:2009-10 ASSTT. CIT, CIRCLE-7, AHMEDABAD. VS M/S ASHISH CHEMICALS, LANE NO.13, BLOCK NO.246, SATYAGRAH CHHAVANI, SATELLITE ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PA NO.AABFA 6775F APPELLANT BY SHRI NARENDRA SINGH, DR RESPONDENT BY SHRI S. N. SOPARKAR, AR DATE OF HEARING: 16.9.2015 DATE OF PRONOUNCEMENT: 24/09/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) XIV, AHMEDABAD DATED 21/6/2012 . ASSESSMENT WAS FRAMED B Y ACIT, CIRCLE-7, AHMEDABAD U/S 143(3) OF THE I.T. ACT, 196 1( HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 23.12.2011 . REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1,44,72,989/- MADE ON ACCOUNT OF REALLOCATION OF EXPENSES INCURRED ON TO RAW MATERIA LS, AND TOWARDS MANUFACTURING EXPENSES, ADMINISTRATIVE EXPE NSES, ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 2 SELLING EXPENSES AND FINANCIAL EXPENSES AMONGST UNI T-I & UNIT- II IN PROPORTION TO THE SALES OF THESE UNITS. II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO APPORTION ONLY THE RELATIVELY MINOR EXPENSES OF CONSULTANCY CHARGES, LEGAL AND PROFESSIONAL CHARGES, PROFESSION AL TAX, MEMBERSHIP FEES AND SERVICE TAX EXPENSES IN THE RAT IO OF THE TURNOVER OF BOTH THE UNITS. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. IV) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. BRIEFLY STATED THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM INVOLVE D IN THE BUSINESS OF MANUFACTURING AND TRADING OF SYNTHETIC ORGANIC REAC TIVE DYES AND CHEMICALS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27/9/2009 DECLARING TOTAL INCOME OF RS.1,22,50,110/- AFTER CL AIMING EXEMPTION OF RS.4,29,33,848/- U/S 10B OF THE ACT. ASSESSEES CA SE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 142(1) AND 1 43(2) WERE ISSUED & SERVED ON THE ASSESSEE. THE ASSESSEE FIRM IS HAVI NG TWO UNITS WHEREIN PROFIT FROM UNIT NO.I IS NOT ELIGIBLE FOR A NY TAX EXEMPTION AND PROFIT FROM UNIT NO.II [EXPORT ORIENTED UNDERTAKING (EOU)] IS ELIGIBLE FOR CLAIMING EXEMPTION UNDER SECTION 10B. DURING THE YE AR UNDER APPEAL THE ASSESSEE HAS SHOWN PROFIT OF RS.86.16 LACS FROM UNIT NO. I AND PROFIT OF RS.4.3 CRORES FROM UNIT NO. II. UNIT NO.I IS ALSO ENGAGED IN EXPORT SALES AND ALMOST 80% OF THE REVENUE COMES FR OM THE EXPORT SALE. THE AO NOTICED THAT PROFIT RATIO OF UNIT NO.I IS 80% AND PROFIT RATIO OF UNIT NO.II (EOU) IS 100% WHICH ARE NOT COM PARABLE AND, THEREFORE, DURING ASSESSMENT PROCEEDINGS HE CALLED FOR VARIOUS ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 3 INFORMATION IN RELATION TO PRODUCTION CAPACITY, SAL ES TURNOVER, RAW MATERIAL SUPPLIERS, YIELD, CUSTOMERS RANGE AND COMP ARATIVE STATEMENT OF DIRECT AND INDIRECT EXPENSES OF UNIT NO. I & UNI T NO. II AND DREW A FINDING THAT ASSESSEE HAS DIVERTED THE PROFITS GENE RATED FROM UNIT NO. I TO UNIT NO. II BECAUSE UNIT NO. II WAS ELIGIBLE F OR EXEMPTION UNDER SECTION 10B AND REDUCED THE EXPENSES ON FEW HEADS U NDER UNIT NO. I BY AN AMOUNT OF RS.1,44,72,989/- AND ADDED THESE EX PENSES TO THE PROFIT AND LOSS ACCOUNT OF UNIT NO. II RESULTING IN TO REDUCTION OF CLAIM OF ASSESSEE U/S 10B BY RS. 1,44,72,989/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) , WHO AFTER GOING THROUGH THE SUBMISSIONS MADE BY ASSESSEE AS W ELL AS APPLYING HIS FINDING ON THE BASIS OF CIT(A)S APPELLATE ORDE R FOR AY 2008-09 WHEREIN IDENTICAL FACTS WERE THERE, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFOR E THE TRIBUNAL. 4. LD. DR RELIED HEAVILY ON THE ORDER OF A.O. ON TH E OTHER HAND, THE LD. AR OF THE ASSESSEE BROUGHT TO OUR NOTICE TH AT IN THE CASE OF ASSESSEE SAME GROUNDS OF APPEAL WERE RAISED THERE B Y THE REVENUE BEFORE THE CO-ORDINATE BENCH FOR AY 2008-09 AND, TH EREFORE, SUBMITTED THAT AS ASSESSEES CASE FOR AY 2009-10 WH ICH IS IN APPEAL BEFORE US, IS SQUARELY COVERED BY THE DECISION OF T HE TRIBUNAL IN ITA NO.50/AHD/2012 FOR AY 2008-09 VIDE ORDER DATED 4.9. 2015 (COPY OF ORDER PLACED ON RECORD) AND THE FINDINGS OF THE CO- ORDINATE BENCH MAY BE APPLIED TO THE PRESENT CASE. ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE SUBMISSIONS OF LD. REPRESENTATIVES AS WELL AS THE M ATERIAL ON RECORD. AS REFERRED TO BY THE LD. AR, WE HAVE GONE THROUGH THE GROUNDS OF APPEAL IN ITA NO.50/AHD/2012 FOR AY 2008-09, WHICH ARE AS UNDER :- 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DELETE THE AD DITION OF RS.1,31,16,642/- MADE ON ACCOUNT OF REALLOCATION OF EXPENSES RELATING TO RAW MATERIALS, MANUFACTURING EXPENSES, ADMINISTR ATIVE EXPENSES, SELLING EXPENSES AND FINANCIAL EXPENSES AMONGST UNI T-I & UNIT-II IN PROPORTION TO THE SALES IN THESE UNITS. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO APPORTION ONL Y THE EXPENSES RELATING TO CONSULTANCY CHARGES, INCOME TAX APPEAL FEE, MEMBERSHIP FEE & PROFESSIONAL TAX IN THE RATIO OF THE TURNOVER OF BOTH THE UNITS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. WHEREIN THE CO-ORDINATE BENCH DISMISSED THE APPEAL OF REVENUE BY OBSERVING AS UNDER :- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING PART IAL RELIEF HAS NOTED THAT SIMILAR ADDITION MADE BY THE A.O IN THE PRECED ING YEAR WAS NOT APPROVED BY HIS PREDECESSOR IN 2007-08 AND FURTHER A.O HAS NOT ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 5 POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACC OUNTS WHICH HAVE BEEN AUDITED. HE HAS FURTHER GIVEN A FINDING THAT A SSESSEE HAS KEPT SEPARATE PRODUCTION RECORD FOR BOTH THE UNITS WHICH INDICATE THE QUANTITATIVE OF RAW MATERIAL CONSUMED AND PRODUCTIO N AS PER EXCISE LAW. HE THEREFORE HELD THAT A.O WAS NOT JUSTIFIED I N RE-ALLOCATING THE EXPENSES IN PROPORTION TO THE SALE IN BOTH THE UNIT S. HOWEVER, WITH RESPECT TO CERTAIN OTHER EXPENSES, HE HAS NOTED THA T THE PROCEDURE FOLLOWED BY ASSESSEE FOR ALLOCATING THE EXPENSES WE RE NOT LOGICAL AND WITHOUT ANY DOCUMENTARY EVIDENCE AND WITH RESPECT T O THOSE EXPENSES HE HAD DIRECTED TO THE A.O TO APPORTION THE EXPENSE S IN THE RATIO OF TURNOVER. BEFORE US, REVENUE HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). WE FURTHE R FIND THAT WHILE DISMISSING THE APPEAL OF REVENUE FOR A.Y. 2007-08 IN ASSESSEES OWN CASE IN ITA NO. 1044/A/2011 THE CO-ORDINATE BEN CH OF TRIBUNAL HELD AS UNDER:- 7.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT NO DEFECT OR THE DIFFERENCES IN THE PRODUCT, P ROCESS, RAW MATERIALS, END USERS ETC. HAVE BEEN POINTED BY REVE NUE AND THE A.O HAS PROCEEDED TO CALCULATE THE INCOME OF THE 2 UNITS ON A WRONG ASSUMPTION. HE HAS FURTHER NOTED THAT THE ADD ITION HAS BEEN MADE ON A HYPOTHETICAL FORMULA BY THE A.O. CIT(A) W HILE DELETING THE ADDITION HAS ALSO RELIED ON THE DECISIONS OF AH MEDABAD TRIBUNAL AND THE DECISION OF HONBLE GUJARAT HIGH C OURT WHICH HAS NOT BEEN CONTROVERTED BY REVENUE BEFORE US. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED . 10. IN VIEW OF THE AFORESAID FACTS AND RELYING ON T HE DECISION OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 6 6. THEREFORE, FOLLOWING THE ABOVE ORDER OF THE TRIB UNAL, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 24/09/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.1898/AHD/2012 ASST. YEAR 2009-10 7 1. DATE OF DICTATION: 16/9/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 16/9/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 24/09/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: