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

ITA 1999/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0798 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.1999/AHD/2013 ( / ASSESSMENT YEAR : 2010-11 ) ASST.CIT CIRCLE-07 AHMEDABAD / VS. M/S.ASHISH CHEMICALS LANE NO.13, BLOCK NO.246 SATYAGRAH CHHAVANI SATELLITE, AHMEDABAD $ ./ ./ PAN/GIR NO. : ACFBP 1295 D ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI JAMES KURIAN, SR.DR '($& *) / RESPONDENT BY : SHRI PARIN SHAH, AR +* / DATE OF HEARING 29/07/2016 ,-./* / DATE OF PRONOUNCEMENT 11/08/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD DATED 24/05/2013, FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 2 - 2.1. ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE E NGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SYNTHETIC ORGANIC R EACTIVE DYES AND CHEMICALS. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 09/12/2012 DECLARING TOTAL INCOME OF RS. 42,74,64 0/- AFTER CLAIMING EXEMPTION OF RS.4,09,66,805/- U/S.10B OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 09/12/2012 AND THE TOTAL INCOME WAS DETERMIN ED AT RS.1,87,01,150/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT (A), WHO VIDE ORDER DATED 24/05/2013 (IN APPEAL NO.CIT(A)-XIV/ACIT.CI R.7/186/2012-13) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVE D BY THE ORDER OF THE LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND H AS RAISED FOLLOWING GROUNDS:- I) THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.1,42,46,454/- MADE ON ACCOUNT OF REALLOCATION OF EXPENSES INCURRED ON RAW MATERIALS, MANUFACTURING EXPENSES, ADMINISTR ATIVE EXPENSES, SELLING EXPENSES AND FINANCIAL EXPENSES AMONGST UNI T-I & UNIT-II IN PROPORTION TO THE SALES BY THESE UNITS. II) THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO PROPORT ION ONLY THE RELATIVELY MINOR EXPENSES OF CONSULTANCY CHARGES, LEGAL AND PR OFESSIONAL CHARGES AND PROFESSIONAL TAX. IN THE RATIO OF THE TURNOVER OF BOTH THE UNITS. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 3 - 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE WAS HAVING TWO UNITS (UNIT-I & UNIT-II). UNIT-I WAS NOT ENJOYING ANY TAX BENEFIT WHEREAS UNIT-II WAS 100% EOU WHICH WAS ENJOYING TAX EXEMPTION U/S.10B OF THE ACT AND THAT ASSESSEE HAD CLAIMED EXEMPTION U/S.10B OF RS.4,09,66,805/-. HE NOTICED THAT BOTH THE UNITS EXPORTED SIMILAR ITEMS AND THE NET PROFIT FROM EXEM PTED UNIT WAS MORE THAN THE PROFIT FROM NON-EXEMPTED UNIT EVENTHOUGH T HE MANUFACTURING PROCESS INVOLVED IN THE PRODUCTION IN BOTH THE UNIT S WERE SIMILAR. ON ANALYZING THE PRODUCTION, SALES AND OTHER EXPENSES HE NOTICED THAT THE PERCENTAGE OF RAW-MATERIAL CONSUMED TO PERCENTAGE O F SALES WERE LOWER IN UNIT-II THAN IN UNIT-I AND SOME OF THE EXPENSES WERE NOT SHOWN IN UNIT-II BUT WERE SHOWN IN UNIT-I. AO THEREFORE CON CLUDED THAT ASSESSEE WAS DIVERTING THE PROFIT GENERATED FROM UNIT-I TO U NIT-II WHICH WAS EXEMPT FROM TAX. HE ACCORDINGLY REALLOCATED THE EXP ENSES IN PROPORTION OF SALES AS PER HIS WORKING IN PARA-3.8 AND THEREAF TER REWORKED THE NET PROFITS (NPS) FOR BOTH THE UNITS. THE NP FOR UNIT- I WAS WORKED OUT AT RS.1,84,54,084/- AS AGAINST THE NP OF RS.42,07,630/ - SHOWN BY THE ASSESSEE AND SIMILARLY IN THE CASE OF UNIT-II HE WO RKED OUT THE NP AT RS.2,67,91,596/- AS AGAINST THE NP OF RS.4,10,38,05 0/- WORKED OUT BY THE ASSESSEE. HE ACCORDINGLY WORKED OUT THE EXEMPTION U/S.10B AT RS.2,67,91,596 AS AGAINST THE CLAIM OF ASSESSEE OF RS.4,09,66,805/- AND REWORKED THE TOTAL INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO FOLLOW ING THE ORDER PASSED ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 4 - FOR AY 2009-10 IN ASSESSEES OWN CASE GRANTED SUBST ANTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 2.3. DECISION : I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. IT IS NOTED TH AT THE FACTS OF THE CASE ARE IDENTICAL TO THE EARLIER A.Y. I.E. 2009-10 WHER EIN SIMILAR ADDITION WAS MADE BY THE A.O. BY ALLOCATING THE EXPENDITURE IN PROPORTION OF THE TURNOVER. WHILE DECIDING THE APPEAL FOR THAT YEAR, THE ALLOCATION IN PROPORTION TO THE TURNOVER MADE BY THE A.O. WAS DIR ECTED TO BE DELETED EXCEPT FOR THE EXPENSES NAMELY CONSULTANCY CHARGES, INCOME TAX FEE, MEMBERSHIP FEE AND PROFESSIONAL TAX. IT WAS HELD B Y MY PREDECESSOR THAT THESE EXPENSES SHOULD BE APPORTIONED ON THE BA SIS OF TURNOVER AS THE EXPENDITURE PERTAINED TO BOTH THE UNITS. THE F ACTS ARE IDENTICAL FOR THIS YEAR ALSO. THE APPELLANT HAS MAINTAINED SEPAR ATE RECORDS AND ACCOUNTS OF EXPENDITURE FOR BOTH THE UNITS AND THE EXPENDITURE HAVE ALSO BEEN ACCOUNTED FOR IN THE RESPECTIVE UNITS. CONSID ERING THESE FACTS AND FOLLOWING DECISION IN APPEAL FOR A.Y. 2009-10, THE ALLOCATION OF EXPENDITURE IN PROPORTION TO TURNOVER IS DIRECTED T O BE DELETED. HOWEVER, FOLLOWING EXPENDITURE ARE DIRECTED TO BE A LLOCATED IN PROPORTION TO THE TURNOVER AS THESE ARE NOT UNIT SP ECIFIC. (I) CONSULTATION FEE CHARGES RS. 6,775/- (II) LEGAL AND PROFESSIONAL CHARGES RS.1,82,048/- (III) PROFESSIONAL TAX RS. 3,400/- THE ACCOUNTING ADVANTAGEOUS TO THE DEPARTMENT HAS A LREADY BEEN DONE BY THE APPELLANT ITSELF FOR MEMBERSHIP FEE AND SERV ICE TAX EXPENSES IN A.Y. 2010-11. THE A.O. IS ACCORDINGLY DIRECTED TO WORK OUT THE DISALLOWANCE. THE GROUNDS OF APPEAL ARE ACCORDINGL Y PARTLY ALLOWED. 3.1. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 5 - 3.2. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT LD.CIT(A) HAD FOLLOWED T HE ORDER FOR AY 2009-10. IN AY 2009-10 AGAINST THE ORDER OF LD.CIT (A), REVENUE HAD CARRIED THE MATTER BEFORE THE TRIBUNAL (ITAT B BE NCH AHMEDABAD) AND THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENU E IN ITA NO.1898/AHD/2012 VIDE ORDER DATED 24/09/2015 BY FO LLOWING THE ORDER IN ASSESSEES OWN CASE FOR AY 2008-09. HE PLACED O N RECORD THE COPY OF THE AFORESAID ORDER. HE THEREFORE SUBMITTED THAT I N VIEW OF THE CONSISTENT STAND TAKEN BY THE TRIBUNAL, NO INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH REFERENCE TO COMPUTATION OF DEDUCTION U/S.10B OF THE ACT. WE FIND THAT IN THE PRESENT CASE THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASS ESSEE AFTER NOTING THAT THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF AY 2009-10 HAD RELIED ON THE ORDER OF HIS PREDECESSOR PASSED FOR AY 2009- 10. WE FIND THAT AGAINST THE ORDER OF CIT(A) FOR A Y 2009-10, REVENUE HAD CARRIED THE MATTER BEFORE THE TRIBUNAL. THE CO ORDINATE BENCH OF TRIBUNAL IN ITA NO.1898/AHD/2012, ORDER DATED 24/09 /2015, HAD DECIDED ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 6 - THE ISSUE IN FAVOUR OF ASSESSEE AND DISMISSED THE A PPEAL OF THE REVENUE BY HOLDING AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH 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 DEL ETE THE ADDITION OF RS.1,31,16,642/- MADE ON ACCOUNT OF REALLOCATION OF EXPENSES RELATING TO RAW MATERIALS, MANUFACTURING EXPENSES, ADMINISTRATIVE EXPENSES, SELLING EXPENSES AND FINAN CIAL EXPENSES AMONGST UNIT-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 APPO RTION ONLY THE EXPENSES RELATING TO CONSULTANCY CHARGES, INCOME TA X 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 THE 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 ASSESSING 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 PARTIAL RELIEF HAS NOTED THAT SIMILAR ADDITION MADE BY THE A.O IN THE PRECEDING YEAR WAS NOT APPROVED BY HIS PREDECES SOR IN 2007- ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 7 - 08 AND FURTHER A.O HAS NOT POINTED OUT ANY SPECIFI C DEFECT IN THE BOOKS OF ACCOUNTS WHICH HAVE BEEN AUDITED. HE HAS F URTHER GIVEN A FINDING THAT ASSESSEE HAS KEPT SEPARATE PRODUCTIO N RECORD FOR BOTH THE UNITS WHICH INDICATE THE QUANTITATIVE OF R AW MATERIAL CONSUMED AND PRODUCTION AS PER EXCISE LAW. HE THERE FORE HELD THAT A.O WAS NOT JUSTIFIED IN RE-ALLOCATING THE EXP ENSES IN PROPORTION TO THE SALE IN BOTH THE UNITS. HOWEVER, WITH RESPECT TO CERTAIN OTHER EXPENSES, HE HAS NOTED THAT THE PROCE DURE FOLLOWED BY ASSESSEE FOR ALLOCATING THE EXPENSES WERE NOT LO GICAL AND WITHOUT ANY DOCUMENTARY EVIDENCE AND WITH RESPECT T O THOSE EXPENSES HE HAD DIRECTED TO THE A.O TO APPORTION TH E EXPENSES IN THE RATIO OF TURNOVER. BEFORE US, REVENUE HAS NOT B ROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD . CIT(A). WE FURTHER FIND THAT WHILE DISMISSING THE APPEAL OF RE VENUE FOR A.Y. 2007-08 IN ASSESSEES OWN CASE IN ITA NO. 1044/A/20 11 THE CO- ORDINATE BENCH OF TRIBUNAL HELD AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE D ELETING THE ADDITION HAS NOTED THAT NO DEFECT OR THE DIFFER ENCES IN THE PRODUCT, PROCESS, RAW MATERIALS, END USERS ETC. HAVE BEEN POINTED BY REVENUE AND THE A.O HAS PROCEEDED T O CALCULATE THE INCOME OF THE 2 UNITS ON A WRONG ASSUMPTION. HE HAS FURTHER NOTED THAT THE ADDITION HAS BEEN MADE ON A HYPOTHETICAL FORMULA BY THE A.O. CI T(A) WHILE DELETING THE ADDITION HAS ALSO RELIED ON THE DECISIONS OF AHMEDABAD TRIBUNAL AND THE DECISION OF HONBLE GUJARAT HIGH COURT 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 THE DECISION OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE, WE FIND NO R EASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUNDS O F REVENUE ARE DISMISSED. ITA NO.1999/AHD /2013 ACIT VS. M/S.ASHISH CHEMICALS ASST.YEAR 2010-11 - 8 - 5. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY B INDING DECISION NOR COULD POINT OUT ANY DISTINCTIVE FEATURE IN THE CASE FOR THE YEAR UNDER CONSIDERATION AND THAT OF EARLIER YEARS. IN VIEW OF THE AFORESAID FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT (A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/08/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 11/ 08 /2016 3..,.../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-XIV, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 2.8.16 (DICTATION-PAD 7- P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 8.8.116 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.11.8.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.8.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER