DCIT 10(1), MUMBAI V. CPS COLOUR INDIA P. LTD, MUMBAI

ITA 1943/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0577 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Wrong claim; Tax effect
• Section: 80IB; 32

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.5844/MUM/2012 ASSESSMENT YEAR: 2006-07 M/S CPS COLOR INDIA PRIVATE LIMITED, 158, DANI COMPOUND, VIDYANAGARI MARG, CST ROAD, KALINA, SANTACRUZ (E), MUMBAI-400098 / VS. ASST. COMMISSIONER OF INCOME TAX 10(1), ROOM NO. 455, 4 TH FLOOR, M.K. MARG, AAYAKAR BHAVAN, MUMBAI-400020 ( #$% & /ASSESSEE) ( ' / REVENUE) P.A. NO. AAA CC8387P ITA NO.5945/MUM/2012 ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF INCOME TAX 10(1), ROOM NO. 455, 4 TH FLOOR AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S CPS COLOR INDIA PRIVATE LIMITED, 158, DANI COMPOUND, VIDYANAGARI MARG, CST ROAD, KALINA, SANTACRUZ (E), MUMBAI-400098 ( ' / REVENUE) ( #$% & /ASSESSEE) P.A. NO. AAACC8387P M/S CPS COLOR INDIA PRIVATE LIMITED 2 ITA NO.1943/MUM/2013 ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF INCOME TAX 10(1), ROOM NO. 455, 4 TH FLOOR, M.K. MARG, AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S CPS COLOR INDIA PRIVATE LIMITED, 158, DANI COMPOUND, VIDYANAGARI MARG, CST ROAD, KALINA, SANTACRUZ (E), MUMBAI-400098 ( ' / REVENUE) ( #$% & /ASSESSEE) P.A. NO. AAACC8387P ITA NO.2058/MUM/2013 ASSESSMENT YEAR: 2007-08 M/S CPS COLOR INDIA PRIVATE LIMITED, 158, DANI COMPOUND, VIDYANAGARI MARG, CST ROAD, KALINA, SANTACRUZ (E), MUMBAI-400098 / VS. ASST. COMMISSIONER OF INCOME TAX 10(1), ROOM NO. 455, 4 TH FLOOR, M.K. MARG, AAYAKAR BHAVAN, MUMBAI-400020 ( #$% & /ASSESSEE) ( ' / REVENUE) P.A. NO.AAACC8387P #$% & / ASSESSEE BY SHRI MIHIR NANIWADEKAR ' / REVENUE BY SHRI NEIL PHILIP ( ') * & + / DATE OF HEARING : 19/05/2015 * & + / DATE OF ORDER: 19/05/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS THE REVENUE IS IN APPEALS AGAINST THE RESPECTIVE IMPUGNED ORDERS DATED 06/12/2012, 14/01/2013 AND 30/07/2012 OF THE LD. COMMISSIONER O F INCOME TAX, MUMBAI. M/S CPS COLOR INDIA PRIVATE LIMITED 3 2. FIRST, WE SHALL TAKE UP THE APPEAL IN ITA NO.1943/MUM/2013, FILED BY THE REVENUE, FOR ASSESSM ENT YEAR 2006-07, ON THE GROUND THAT THE LD. FIRST APPE LLATE AUTHORITY, WITHOUT APPRECIATING THE FACTS, ALLOWED THE CLAIMED DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 (HER EINAFTER THE ACT) TO THE EXTENT OF GOODS TRANSFERRED FROM UN IT-I TO UNIT II AS THE SAME IS THE TRADING ACTIVITY OF THE ASSES SEE COMPANY WITH RESPECT TO SALE BY UNIT NO. II IGNORING THAT T HE GOODS TRANSFERRED BY THE ASSESSEE COMPANY FROM ITS UNIT N O.I TO UNIT NO. II IS NOT A RAW MATERIAL FOR UNIT NO. II, THEREFORE, IT WAS MERELY A TRADING ACTIVITY. SHRI NEIL PHILIP, L D. DR, CONTENDED THAT BY TRANSFERRING THE GOODS FROM UNIT NO.I TO UNIT NO. II, THE PROFIT OF UNIT NO.I WERE TRANSFERR ED TO UNIT NO.II AS THE WHOLE PROFIT WAS REDUCED AS COST AND U LTIMATE PROFIT ON THE SALE AT THE ACTUAL PRICE BY UNIT NO. II WAS CLAIMED AS DEDUCTION U/S 80IB AT THE RATE OF 100% I N RESPECT OF UNIT NO.II, WHEREAS 30% OF THE PROFIT WAS CLAIME D AS DEDUCTION IN RESPECT OF UNIT NO. I, THUS, THE BALAN CE 70% OF THE PROFIT BECAME PART OF THE DEDUCTION IN RESPECT OF UNIT NO.II. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE, SHRI MIHIR NANIWADEKAR, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE OB SERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND AN ALYZED, WE M/S CPS COLOR INDIA PRIVATE LIMITED 4 NOTE THAT, UNDER THE FACTS AVAILABLE ON RECORD, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT DELIBE RATED UPON WHETHER THE GOODS TRANSFERRED FROM UNIT NO. I IS NOT THE RAW MATERIAL FOR UNIT NO.II. THE ISSUE OF 30% AND 100% NEEDS TO BE EXAMINED AFRESH, SO FAR AS, THE RELIANC E UPON THE DECISION IN THE CASE OF CIT VS TATA LOCOMOTIVE AND ENGINEERING COMPANY LTD. (1968) 68 ITR 325 (BOM.), THE FACTS AND THE ISSUE WERE DIFFERENT. THE LD. ASSESSI NG OFFICER IS ALSO TO EXAMINE THE FACTUAL ASPECT OF ELIGIBILITY O F DEDUCTION U/S 80IB OF THE ACT IN THE LIGHT WHETHER THE PROFIT DERIVED FROM UNIT NO. I WAS ACTUALLY DERIVED FROM UNIT NO.I I OR VICE VERSA. IT IS ALSO TO BE EXAMINED WHETHER THE PRODUC T TRANSFERRED FROM UNIT NO.I TO UNIT NO.II WAS USED A S RAW MATERIAL FOR UNIT NO.II OR IT WAS MERELY A DEVICE T O DEFRAUD THE REVENUE. IN VIEW OF THESE FACT, THIS APPEAL OF THE REVENUE NEEDS FRESH ADJUDICATION/EXAMINATION OF FACTS, BY T HE LD. ASSESSING OFFICER, AND THEN DECISION BE TAKEN IN A CCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEI NG HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, T O SUBSTANTIATE ITS CLAIM. THUS, THE APPEAL OF THE RE VENUE IS ALLOWED FOR STATISTICAL PURPOSES. 3. NOW WE SHALL TAKE UP THE CROSS APPEAL FOR ASSESSMENT YEAR 2006-07 PREFERRED BY ASSESSEE AS WE LL AS BY THE REVENUE IN ITA NO. 5844/MUM/2012 AND ITA NO.5945/MUM/2012 RESPECTIVELY. IN THE APPEAL OF THE ASSESSEE, THE PART CONFIRMATION OF LEVY OF PENALTY OF RS.42,38,131/- U/S 271(1)(C) OF THE ACT HAS BEEN CH ALLENGED. THE PENALTY HAS BEEN LEVIED ON TWO COUNTS FIRSTLY A LLEGED M/S CPS COLOR INDIA PRIVATE LIMITED 5 VARIOUS INTERNATIONAL TRANSACTION FOLLOWING TNMM ME THOD AND SECONDLY, TRANSFER OF MANUFACTURED GOODS BY UNI T NO.I TO UNIT NO.II SINCE, THE ISSUE OF TRANSFER OF MATERIA L FROM UNIT NO.I TO UNIT NO.II HAS BEEN REMANDED BACK TO THE FI LE OF THE LD. ASSESSING OFFICER FOR FRESH ADJUDICATION, THEREFORE , ON THIS POINT, GROUND NO.4 ON THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, IS ALSO REMANDED BACK, AS AGR EED FROM BOTH SIDES, TO THE FILE OF THE LD. ASSESSING OFFICE R FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. 3.1. GROUNDS NO. 5 & 6 (OF ITA NO.5844/MUM/2012) WERE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSE E, THEREFORE, BOTH THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 3.2. THE REMAINING GROUND REMAINED FOR ADJUDICATIO N IS WITH RESPECT TO LEVY OF PENALTY ON THE ISSUE CONTAI NED IN GROUND NO. 2 & 3. THE CRUX OF ARGUMENT ADVANCED BY SHRI MIHIR NANIWADEKAR, LD. COUNSEL FOR THE ASSESSEE IS THAT THE LD. COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT IT HAS A BENCHMARKED ITS INTERNATIONAL TRANSACTION FOLLOWING TNMM AT THE ENTRY LEVEL CONSIDERING ITS VARIOUS INTERNATION AL TRANSACTION TOGETHER AND THE SAME HAS NOT BEEN DISP UTED BY THE TPO IN ITS ORDER U/S 92CA(3) OF THE ACT. THUS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ALLOWED THE RELIEF OF RS.3,93,625/- AGAINST THE TOTAL ADDITION OF RS.10,88,947/- AND THE CONSEQUENT PENALTY, WITHOUT APPRECIATING THAT THE ASSESSEE DULY DISCLOSED THE F ACT THAT THE DEPRECIATION WAS NOT CONSIDERED WHILE COMPUTING M/S CPS COLOR INDIA PRIVATE LIMITED 6 DEDUCTION U/S 80IB OF THE ACT. ON A QUERY FORM THE BENCH WITH RESPECT TO QUANTUM ADDITION, IT WAS EXPLAINED THAT IT HAS BEEN DECIDED AGAINST THE ASSESSEE, BY FURTHER P LEADING THAT THE ASSESSEE DID NOT CLAIMED DEPRECIATION BY S PECIFICALLY MENTIONING/DISCLOSING THE FACT IN THE RETURN. IT W AS ALSO PLEADED THAT WHEN THE CLAIM WAS MADE, THERE WERE CO NFLICTING DECISIONS FROM THE HONBLE JURISDICTIONAL HIGH COUR T BUT FINALLY DECIDED AGAINST THE ASSESSEE VIDE ORDER IN PLASTIBLENDS INDIA LTD. VS ADDL. CIT & ORS. 318 ITR 352 (BOM.)(F B): (2009) 227 CTR (BOM) (FB) 1: (2009) 30 DTR 194. THE LD. C OUNSEL ALSO PLACE RELIANCE UPON THE DECISION OF THE TRIBUN AL IN THE CASE OF ALIDHARA TAXPRO ENGINEERS PVT. LTD. VS DCIT (ITA NO.2404/AHD/2009) ORDER DATED 22/07/2011 ON THE OTH ER HAND, SHRI NEIL PHILIP, LD. DR, DEFENDED THE IMPOSI TION OF PENALTY BY PLACING RELIANCE UPON THE AFORESAID FULL BENCH DECISION FROM HONBLE JURISDICTIONAL HIGH COURT. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFAC TURING AND TRADING OF TINTING AND DISPENSING MACHINES, SHAKER/MIXER MACHINES AND ITS COMPONENT. THE ASSESS EE DECLARED NIL INCOME IN ITS E-FILED RETURN ON 28/11/ 2006, VARIOUS ADDITIONS/DISALLOWANCE WERE MADE BY THE ASS ESSING OFFICER. OUT OF THE DISALLOWANCES, THE PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR CONCEAL ING INCOME/FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF AN ADDITION OF RS.16,25,140/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AND RESTRICTING THE DED UCTION U/S M/S CPS COLOR INDIA PRIVATE LIMITED 7 80IB TO THE TWO UNITS AT RS.14,26,150/- AND RS.1,79,47,862/- AS AGAINST THE RESPECTIVE CLAIM OF RS.18,61,079/- AND RS.2,90,14,986/- AN ORDER U/S 14 3(II) R.W.S 144C(13) OF THE ACT WAS PASSED ON 30/09/2010 AND PENALTY PROCEEDINGS WERE INITIATED BY ISSUING NOTIC E U/S 271 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICE R LEVIED PENALTY U/S 271(1)(C) OF THE ACT. WE FIND THAT DURI NG THE COURSE OF THE PROCEEDING BEFORE THE TPO, THE ASSESS EE WAS ASKED ABOUT THE CLAIM OF DEPRECIATION CHARGED BY AE . IN RESPONSE, THE ASSESSEE CLAIMED THAT THE NORMAL PRAC TICE OF AE IS CHARGED TO DEPRECIATION AT THE RATE OF 10% ON THE WRITTEN DOWN VALUE OF THE ASSET IN THE BOOKS OF ACC OUNTS, BY FURTHER CLAIMING THAT HOWEVER, NO DEPRECIATION WAS CHARGED ON THE CAPITAL GOODS WHICH WERE TRANSFERRED TO THE ASSESSEE COMPANY. IN SUPPORT OF ITS CLAIM, THE ASSESSEE SUB MITTED A CERTIFICATE FROM THE AUDITORS OF AE. THE TPO IGNOR ED THE CERTIFICATE AND WORKED OUT THE DEPRECIATION AT THE RATE OF 10% FOR THE PERIOD OF PURCHASE OF SAID CAPITAL GOODS BY AE TILL THE TIME THE SAME WERE SOLD TO THE ASSESSEE AND THEN PR OCEEDED TO COMPUTE A MARKUP OF RS.6,95,322/- EARNED BY THE AE AS A DIFFERENCE BETWEEN THE WDV IN THE BOOKS OF AE AND T HE PURCHASE PRICE OF THE ASSESSEE. NOW QUESTION ARISES , WHEN THESE FACTS WERE DULY DECLARED IN THE RETURN WHETHE R PENALTY CAN BE IMPOSED. IN SUCH A SITUATION, EVEN IF WRONG CLAIM IS MADE BY THE ASSESSEE, THE DECISION FROM HONBLE APE X COURT IN CIT VS RELIANCE PETRO PRODUCT LTD. 322 ITR 158 ( SC) COMES TO THE RESCUE OF THE ASSESSEE. THEIR LORDSHIP IN TH IS CASE HAS CLEARLY LAID DOWN THAT MERELY AN INCORRECT CLAIM WO ULD NOT M/S CPS COLOR INDIA PRIVATE LIMITED 8 TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO MAKE THE ASSESSEE LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION FROM HONBLE APEX COURT, ON THIS ISSUE, THE PENALTY IS DIRECTED TO BE DELETED. THUS, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. SO FAR AS, THE APPEAL OF THE REVENUE IN ITA NO.5945/MUM/2012 IS CONCERNED, AT THE OUTSET, THE L D. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE TAX E FFECT IN THE APPEAL OF THE REVENUE IS BELOW PRESCRIBED MONETARY LIMIT. THIS FACTUAL ASSERTION OF THE LD. COUNSEL WAS CONSE NTED TO BE CORRECT BY THE LD. DR. IN VIEW OF THIS ASSERTION/A DMISSION AND ALSO THE CBDT INSTRUCTION NO.3/2011 DATED 09/02/2011, FURTHER INSTRUCTION NO.5/2014 (F NO.279/MISC./142/2 007- IT(PT) DATED 10/07/2014, WE FIND MERIT IN THE SUBMI SSION OF THE ASSESSEE. THE CBDT REVISED THE MONETARY LIMIT FOR FILING THE APPEAL BEFORE VARIOUS AUTHORITIES/COURTS AND ADVISED/DIRECTED THE DEPARTMENT NOT TO FILE APPEAL IN THE CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE FOLL OWING MONETARY LIMITS, THE APPEALS OF THE REVENUE IS NOT MAINTAINABLE. THE REVISED MONETARY LIMIT IS AS UND ER:- SL. NO. APPEALS IN INCOME TAX MATTERS MONETARY LIMIT (IN RS.) 1. BEFORE APPELLATE TRIBUNAL 4,00,000/ - 2. U/S 260 A BEFORE HIGH COURT 10,00,000/ - 3. BEFORE SUPREME COURT 25,00,000/ - AS PER THE AFORESAID INSTRUCTION, THE DEPARTMENT IS NOT TO FILE APPEAL BEFORE THE TRIBUNAL, WHEREIN THE TAX EF FECT IS LESS M/S CPS COLOR INDIA PRIVATE LIMITED 9 THAN RS.4,00,000/-, CONSEQUENTLY, CONSIDERING THE D ECISION FROM THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF PITHWA ENGINEERING WORKS (276 ITR 519) (BOM ) , THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE. THEREFORE, IN VIE W OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED AS NO T MAINTAINABLE. 5. NOW, WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E (ITA NO.2058/MUM/2013) AGAINST CONFIRMATION OF PENA LTY IMPOSED U/S 271(1)(C) OF THE ACT, AMOUNTING TO RS.1 3,13,368/- WITH RESPECT TO CLAIM OF DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF DEPRECIATION ADJUSTMENT AND ADDITIONAL DEPRECIATION CLAIMED U/S 32 OF THE ACT. WITHOUT GOI NG INTO MUCH DELIBERATION, SINCE, WE HAVE DECIDED THIS ISSU E IN FAVOUR OF THE ASSESSEE WHILE DISPOSING OFF IDENTICAL ISSUE (GROUND NO.2 & 3 OF ITA NO.5844/MUM/2012) (SUPRA), THEREFORE, ON THE SAME REASONING, THIS GROUND OF THE ASSESSEE IS ALLO WED. FINALLY, 1. ITA NO.1943/MUM/2013 IS ALLOWED FOR STATISTICAL PUR POSES. 2. ITA NO.5844/MUM/2012 IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. 3. ITA NO.5945/MUM/2012 IS DISMISSED. 4. ITA NO.2058/MUM/2013 IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/05/2015. SD/- SD/- ( N.K. BILLAIYA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER M/S CPS COLOR INDIA PRIVATE LIMITED 10 ( ) MUMBAI; , DATED : 19/05/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. -./0 / THE APPELLANT 2. 12/0 / THE RESPONDENT. 3. 3 3 ( 4& ( -. ) / THE CIT, MUMBAI. P4. 3 3 ( 4& / CIT(A)- , MUMBAI 5. 6'7 1&# , 3 -.+ -# 8 , ( ) / DR, ITAT, MUMBAI 6. 9$ :) / GUARD FILE. / BY ORDER, 26.& 1& //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ( ) / ITAT, MUMBAI