THE ACIT, 3(1), V. M/S STAR DELTA TRANSFARMERS,

ITA 266/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7994 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-03-2010
• Assessment Year: misc
• Appeal Filed On: 16-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: ANIL KHAA
• Keywords: Cost of acquisition; Notional interest

Judgement Text

PAGE 1 OF 4 - I.T.A.NO. 266/IND/2008 STAR DELTA TRANSFORMERS, BHOPAL IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AACCS0399D I.T.A.NO. 266/IND/2008 A.Y. : 2005-06 ACIT, M/S. STAR DELTA TRANSFORMERS LIMITED, 3(1), VS BHOPAL. BHOPAL APPELLANT RESPONDENT APPELLANT BY : SMT.APARNA KARAN, SR. DR RESPONDENT BY : SHRI ANIL KHABYA, C. A. DATE OF HEARING : 17.03.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-II, BHOPAL, DATED 24-03-2008, FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . PAGE 2 OF 4 - I.T.A.NO. 266/IND/2008 STAR DELTA TRANSFORMERS, BHOPAL 27,45,288/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF COST OF PURCHASES CLAIMED BY THE ASSESSEE ON NOTION AL BASIS PARTICULARLY WHEN THE A.O. HAD ESTABLISHED THAT THE COST OF RS. 27,45,288/- WAS NOT A REAL COST INCURRED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION HENCE NO T ALLOWABLE. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN THE EXPORT BUSINESS AND BASED UPON EXPORTS MADE, IT IS ENTITLE D TO IMPORT GOODS DUTY FREE AND SUCH ENTITLEMENT IS TERMED AS IMPORT LICEN CE BENEFIT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. FOUND TH AT THE ASSESSEE HAD ADDED AN AMOUNT OF RS. 27,45,288/- TO THE PURCHASE COST ON ACCOUNT OF IMPORT LICNECE BENEFIT. THE LD. A.O. HELD THAT IT W AS A CASE OF NOTIONAL COST NOT A REAL COST, HENCE, HE MADE AN ADDITION OF RS. 27,45,288/- TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THA T IN THE FINANCIAL YEAR 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05, THE IM PUGNED AMOUNT HAD BEEN SHOWN AS INCOME ON THE BASIS OF ASSESSEES ENT ITLEMENT TO IMPORT ITEMS TO THIS EXTENT DUTY FREE AND WHEN THE ITEMS W ERE ACTUALLY IMPORTED IN THE YEAR UNDER CONSIDERATION , THE SAME WAS TREA TED AS A NOTIONAL COST FOR THE REASON THAT IT HAD BEEN TREATED AS NOTIONAL INCOME IN THE PAGE 3 OF 4 - I.T.A.NO. 266/IND/2008 STAR DELTA TRANSFORMERS, BHOPAL ASSESSMENT YEAR 2004-05. THE LD. CIT(A) AFTER CONSI DERING THESE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE LD. CIT(A) AR E AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE LD. AR AND REASONS GIVEN BY THE ASSESSING OFFICER IN MAKIN G THE ADDITION. I FIND FORCE IN THE ARGUMENTS OF THE LD. AR. THE APPELLANT IS A LIMITED COMPANY WHOSE ACCOUNTS HAVE BEEN AUDITED AND THE AUDITORS HAVE FOUND THE ACCOUNTING TREATMENT OF IMPORT LICENCE BENEFIT BY THE APPELLANT AS CORR ECT. IT IS NOT IN DISPUTE THAT THIS ACCRUED BENEFIT WAS CREDITED I N TRADING ACCOUNT OF PREVIOUS YEARS AND THE SAME WAS INCLUDED IN TAXABLE PROFIT OF FINANCIAL YEAR 2003-04. THE ACCOU NTING TREATMENT OF THIS BENEFIT IS SIMILAR TO THAT OF STO CK, ACCRUED INCOME AND PREPAID EXPENSES, WHICH IS A NORMAL FEAT URE OF ACCOUNTING PRINCIPLES. IN THE CIRCUMSTANCES, THIS A DDITION OF RS. 27,45,288/- BY TREATING IMPORT BENEFIT AS NOTIO NAL COST IS MIS-CONCEIVED AND IS HEREBY SET-ASIDE. 6. THE LD. SR. AR FOR THE DEPARTMENT PLACED STRONG RE LIANCE ON THE ORDER OF THE A.O., WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WRITTEN SUBMISSIONS MAINLY CENTERING AROUND THE CON TENTIONS MADE BEFORE THE LD. CIT(A) AND PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT IN THE ASSESSMENT YEAR 2004-05, TH E IMPUGNED AMOUNT HAS BEEN SHOWN AS AN INCOME OF THE TRADING A CCOUNT AND CORRESPONDINGLY AN ITEM HAS BEEN SHOWN IN THE ASSET S SIDE ALSO. IN THE IMPUGNED ASSESSMENT YEAR, THE ITEM APPEARING IN THE BALANCE SHEET HAS BEEN TREATED AS PART OF COST OF PURCHASES. HAVING R EGARD TO THE ACCOUNTING PAGE 4 OF 4 - I.T.A.NO. 266/IND/2008 STAR DELTA TRANSFORMERS, BHOPAL PRACTICE, BOTH THE ITEMS ARE OF NOTIONAL INTEREST. HENCE, IN OUR VIEW, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, PARTIC ULARLY WHEN THE DEPARTMENT HAS NOT DISPUTED THAT THE NOTIONAL INCOM E SHOWN IN THE TRADING ACCOUNT FOR ASSESSMENT YEAR 2004-05 WAS NOT TAKEN INTO CONSIDERATION IN SHOWING THE INCOME IN THE RETURN O F INCOME. ACCORDINGLY, WE DISMISS THIS GROUND OF THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH,2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND MARCH, 2010. CPU* 17183