Keesara Plastics Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2208/CHNY/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4680 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 01-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R BADHREENATH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , '.. % , * BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.2208 & 2209/MDS/2015 + + /ASSESSMENT YEARS: 2010-11 & 2011-12 M/S.KEESARA PLASTICS PVT. LTD., L3, SIDCO INDUSTRIAL ESTATE, KODUNGAIYUR, CHENNAI-600 118. VS. THE DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE- II(4), CHENNAI-600 034. [PAN: AAACK 4025 C ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.R.BADHREENATH, CA /0. 1 /RESPONDENT BY : MR.SUPRIYOPAL, JCIT 1 /DATE OF HEARING : 08.03.2017 1 /DATE OF PRONOUNCEMENT : 12.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAIN ST THE ORDERS DATED 25.09.2015 OF COMMISSIONER OF INCOME TAX (APP EALS)-8, CHENNAI, IN ITA NO.01/2013-14 FOR THE AY 2010-11 & ITA NO.11 /2014-15 FOR THE AY 2011-12. ITA NOS.2208 & 2209/MDS/2015 :- 2 -: 2.0 GROUNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS A RE COMMON AND THE ISSUES ARE ALSO COMMON ON THE SAME FACTS. THER EFORE, BOTH THE APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OFF IN C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 3.0 THE ONLY ISSUE IN THESE APPEALS IS WHETHER THE ASSESSEE IS CARRYING ON ANY MANUFACTURING ACTIVITY OR NOT AT DEHRADUN UN IT WHICH IS ELIGIBLE FOR DEDUCTION U/S.80IC . THE REVENUE HAS DISALLOWED THE DEDUCTION U/S.80I C FOR THE AY 2010-11 AMOUNTING TO RS.4,29,58,857/- AN D FOR THE AY 2011- 12 AMOUNTING TO RS.1,58,86,862/, ON THE GROUND THAT THE ASSESSEE IS NOT CARRYING MANUFACTURING ACTIVITY AT DEHRADUN UNIT AN D CLAIMING THE FALSE DEDUCTION U/S.80IC FROM THE DEHRADUN UNIT. THE ASS ESSEE IS HAVING TWO MANUFACTURING UNITS ONE IS AT CHENNAI AND OTHER ONE IS AT DEHRADUN AND MANUFACTURING PY SEALS FOR DRY BATTERIES AND TORC H LIGHTS FOR NIPPO BRAND. THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S .80IC IN CASE OF PROFITS DERIVED FROM THE DEHRADUN UNIT AND THE PROFITS OF T HE CHENNAI UNIT ARE TAXABLE AS NORMAL INCOME. THEREFORE, THE AO IS OF THE OPINION THAT THE ASSESSEE, IN ORDER TO CLAIM THE EXCESS BENEFIT U/S. 80IC OF THE ACT, INVOICING THE FINISHED GOODS MANUFACTURED AT CHENNA I FROM DEHRADUN UNIT OR THE EXPENSES RELATING TO DEHRADUN UNIT WERE CLA IMED IN CHENNAI UNIT. THE AO SUSPECTED THAT THE ASSESSEE IS MAKING CLAIM OF EXCESS DEDUCTION U/S.80IC FROM THE DEHRADUN UNIT AND SUPPRESSING THE TAXABLE INCOME OF THE CHENNAI UNIT. ACCORDINGLY, THE AO HELD THAT TH E ASSESSEE HAS TRANSFERRED THE STOCKS FROM CHENNAI UNIT TO DEHRADU N UNIT AND DEBITED THE ITA NOS.2208 & 2209/MDS/2015 :- 3 -: EXPENSES RELATING TO DEHRADUN UNIT IN THE ACCOUNT O F CHENNAI UNIT, AND CLAIMED THE EXCESS DEDUCTION U/S.80IC AND ACCORDING LY REJECTED THE DEDUCTION CLAIMED U/S.80IC AND MADE THE ADDITION. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) CONFIRMED TH E ORDER OF THE AO FOLLOWING THE ORDER OF THIS BEFORE THIS TRIBUNAL. IN THE ASSESSEES OWN CASE FOR THE AYS 2007-08 & 2008-09 IN ITA NOS.1326 & 132 7 DATED 17.07.2013. 5.0 AGGRIEVED BY THE LD.CIT(A)S ORDER, THE ASSESSEE IS ON APPEAL BEFORE THIS TRIBUNAL. APPEARING FOR THE ASSESSEE, THE LD.AR ARGUED THAT THE AO HAS DISALLOWED THE CLAIM U/S.80IC ON THE CONTENTION THA T THE ASSESSEE IS NOT CARRYING ON ANY MANUFACTURING ACTIVITY IN DEHRADUN UNIT, WHICH WAS FACTUALLY INCORRECT. HE SUBMITTED THAT THE ASSESSE E HAS CARRIED ON MANUFACTURING ACTIVITY AT DEHRADUN UNIT WHICH COULD BE SEEN FROM THE PROFIT & LOSS A/C WHEREIN THE ASSESSEE HAS TRANSFER RED LESS QUANTITY OF STOCKS, THE SEPARATE VAT IS PAID AND SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED. THEREFORE, THE LD.AR CONTENDED THAT FA CTS OF THE EARLIER ORDER IN THE ASSESSEES OWN CASE IS NOT APPLICABLE FOR TH E AY UNDER CONSIDERATION AND REQUESTED TO ALLOW THE APPEAL OF THE ASSESSEE. ON THE OTHER HAND, THE LD.DR TAKEN OUR ATTENTION TO THE DETAILS OF VAR IOUS EXPENSES DEBITED TO THE PROFIT & LOSS A/C AND ARGUED THAT IT IS EVIDENT FROM THE EXPENSES ITA NOS.2208 & 2209/MDS/2015 :- 4 -: DEBITED TO THE DEHRADUN UNIT AND CHENNAI UNIT THAT THE ASSESSEE HAS NOT CARRIED ON ANY MANUFACTURING ACTIVITY AT DEHRADUN E XCEPT INVOICING THE FINISHED GOODS FROM THE DEHRADUN UNIT AND NOT ELIG IBLE FOR DEDUCTION U/S.80IC OF INCOME TAX ACT AND ARGUED THAT THE ORDE RS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER AYS ARE SQU ARELY APPLICABLE FOR THE AY UNDER APPEAL. 6.0 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ONLY ISSUE WHICH ARISES FOR DETERMINATION IS W HETHER THE ASSESSEE IS CARRYING ON ANY SUBSTANTIAL MANUFACTURI NG ACTIVITY AT CHENNAI OR DEHRADUN UNIT. DURING THE APPEAL, THE LD.AR ARG UED THAT THE ASSESSEE IS CARRYING ON MANUFACTURING ACTIVITY BOTH AT CHENN AI AND DEHRADUN UNITS AND THE ORDER OF THIS TRIBUNAL IN THE EARLIER YEARS CITED SUPRA ARE NOT APPLICABLE FOR THE ASSESSMENT YEARS UNDER APPEAL. 7.0 WE HAVE GONE THROUGH THE ASSESSMENT ORDER IN PAGE NO.2, THE AO HAS FURNISHED THE BREAKUP OF THE VARIOUS EXPENSES D EBITED TO P&L A/C WHICH ARE REPRODUCED AS UNDER FOR THE AY 2010-11: THE BREAKUP OF CERTAIN EXPENSES INCURRED & SALES MA DE IN CHENNAI (NON 80IC DEDUCTION AND DEHRADUN UNIT (80IC UNIT) IS GIVEN BELOW: ITA NOS.2208 & 2209/MDS/2015 :- 5 -: 2010 CHENNAI UNIT (NON-80IC UNIT) DEHRADUN UNIT (80IC UNIT) SALES 1,25,91,156 22,27,60,542 EXPENSES COST OF PRODUCTION 48,44,596 15,11,06,996 SELLING & DISTRIBUTION OVERHEADS 22,60,550 2,62,97,540 ADMN. OVERHEAD 21,98,071 12,59,891 SALARIES & WAGES 79,63,574 67,64,229 REPAIRS & MAINTENANCE 33,27,731 55,950 POWER CONSUMPTION 28,04,127 46,245 FINANCE CHARGES 29,516 2,37,255 DIRECTORS REMUNERATION 6,00,000 9,00,000 FIXED ASSETS WDV ADDN DEL WDV ADDN. MADE DEL ASSETS ACQUIRED 60183187 11692904 4839904 1109817 363590 - OUT OF THE ABOVE MOULDS 32646054 6047918 - 249080 57590 - 7.1 FOR THE AY 2011-12 ALSO THE AO HAS FURNISHED THE D ETAILS OF VARIOUS EXPENSES WHICH ARE REPRODUCED AS UNDER: CHENNAI UNIT (NON-80IC UNIT) DEHRADUN UNIT (80IC UNIT) SALES 323,72,693 16,85,49,406 LABOUR RECEIPTS 53,50,893 - OTHER RECEIPTS 25,71,745 19,209 EXPENSES COST OF PRODUCTION 3,33,50,052 13,66,30,664 SELLING & DISTRIBUTION OVERHEADS 18,72,754 71,42,622 ADMN. OVERHEAD 27,18,984 14,01,011 SALARIES & WAGES 82,43,997 72,99,910 REPAIRS & MAINTENANCE 9,94,802 41,987 POWER CONSUMPTION 25,91,463 48,071 FINANCE CHARGES 3,02,849 2,35,437 DIRECTORS REMUNERATION 6,00,000 9,00,000 FIXED ASSETS WDV 6,70,36,187 ADDN 1,06,44,130 DEL 1,82,88.540 WDV 14,73,407 ADDN 1,03,671 DEL - ASSETS ACQUIRED - - - - - - OUT OF THE ABOVE MOULDS 3,84,44,892 35,82,328 1,34,18,375 3,06,670 45,000 - THE EXPENSES DEBITED IN THE PROFIT & LOSS A/C WHIC H ARE RE-PRODUCED FOR THE AY 2010-11 AND 2011-12 CLEARLY INDICATES TH AT NO SUBSTANTIAL MANUFACTURING ACTIVITY WAS CARRIED OUT BY THE ASSES SEE FROM THE DEHRADUN ITA NOS.2208 & 2209/MDS/2015 :- 6 -: UNIT. ON COMPARISON OF SALES ADMITTED BY THE ASSESS EE IN DEHRADUN UNIT AND CHENNAI UNIT, THE EXPENSES ARE HIGHLY DISPROPOR TIONATE TO THE SALES OF DEHRADUN UNIT THOUGH THE SALES ARE AT ASTRONOMICAL FIGURE IN DEHRADUN UNIT AND THE SALES ARE COMPARATIVELY LOW IN CHENNAI UNIT, THE EXPENSES ARE VERY HIGH. THIS FACT IS EVIDENT FROM THE EXPENSES DEBITED UNDER POWER CONSUMPTION REPAIRS AND MAINTENANCE, ADMINISTRATIVE OVERHEADS AND THE ASSETS DEPLOYED. OUT OF THE TOTAL EXPENSES INCURRE D ON POWER RS.28,50,372/- THE CHENNAI UNIT HAS ACCOUNTED FOR A SUM OF RS.28,04,127/- AND DEHRADUN UNIT IS RS.46,245/- WHI CH CLEARLY SHOWS NO MANUFACTURING ACTIVITY IS BEING DONE AT DEHRADUN UN IT. SIMILARLY OTHER PRODUCTION EXPENSES ACCOUNTED FOR IN DEHRADUN UNIT WERE MEAGER OR NOMINAL COMPARED TO CHENNAI UNIT, THOUGH THE ASSESS EE IS DECLARING HUGE SALES FROM THE DEHARDUN UNIT AND COMPARED TO CHENNA I UNIT. THEREFORE WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT CARRYING ON ANY MANUFACTURING ACTIVITY IN DEHRADUN UNIT AND THE HON BLE ITATS ORDER IN THE ASSESSEES OWN CASE FOR THE AYS 2007-08 & 2008- 09 IS SQUARELY APPLICABLE. WE REPRODUCE HERE UNDER THE RELEVANT P ARAGRAPHS OF THE ORDER OF THIS TRIBUNAL IN ITA NOS.1326 & 1327/MDS/2012 & ITA NO.917/MDS/2013 DATED 17.07.2013 FOR THE SAKE OF CO NVENIENCE AS UNDER: 8. THE FACTS AND CIRCUMSTANCES CLEARLY INDICATE THA T THE ASSESSEE IS MISUSING THE BENEVOLENT PROVISIONS OF LAW AT THE COST OF GOVERNM ENT EXCHEQUER. THE DEDUCTION U/S. 80IC IS BEING GRANTED TO THE UNITS SET UP IN CERTAIN SPE CIFIED AREAS WHICH ARE INDUSTRIALLY BACKWARD. THE SECTION WAS INSERTED IN THE ACT BY TH E FINANCE ACT, 2003 WITH EFFECT FROM 01-04-2004. THE UNION CABINET HAD ANNOUNCED A PACKA GE OF FISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARAKHAND, SIKKIM AND N.E. STATES IN ORDER TO GIVE BOOST TO THE ECONOMY O F THOSE STATES. THE BENEFITS GRANTED UNDER SUCH PROVISIONS SHOULD NOT BE ALLOWED TO BE E XPLOITED. THE ASSESSEE IN ORDER TO CLAIM DEDUCTION U/S. 80IC HAS SET UP AN UNIT IN DEHRADUN ( UTTARAKHAND) WHICH IS SPECIFIED IN THIRTEENTH SCHEDULE TO THE ACT. IT IS EVIDENT FROM THE DETAILS OF THE EXPENDITURE THAT THE ASSESSEE IS MANUFACTURING ONLY SMALL QUANTITY OF GO ODS AT DEHRADUN. THE FACTS AND ITA NOS.2208 & 2209/MDS/2015 :- 7 -: CIRCUMSTANCES SHOW THAT THE ASSESSEE IS INVOICING M AJORITY OF FINISHED GOODS FROM DEHRADUN WHEREAS THAT SUBSTANTIAL PRODUCTION IS CAR RIED OUT AT CHENNAI. THE ASSESSEE HAS ADOPTED COLOURABLE DEVISE TO TAKE UNDUE ADVANTAGE O F BENEVOLENT PROVISIONS OF THE ACT. WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S. 80IC OF THE ACT. SINCE WE DO NOT FIND ANY DIFFERENCE IN THE FACTS O F THE CASE WE HOLD THAT THE ASSESSEE IS NOT CARRYING ON SUBSTANTIAL MA NUFACTURING ACTIVITY IN DEHRADUN UNIT AND NOT ENTITLED FOR DEDUCTION U/S.80 IC AND UPHOLD THE ORDERS OF THE LD.CIT(A). 8.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . % ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 12 TH MAY, 2017. TLN 1 /%7 87 /COPY TO: 1. . /APPELLANT 4. 9 /CIT 2. /0. /RESPONDENT 5. 7 / /DR 3. 9 ( ) /CIT(A) 6. + /GF