ACIT, New Delhi V. M/s Satya Pal Shiv Kumar, New Delhi

ITA 2763/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81518 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 14-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: K SAMPATH SHRI V RAJKUMAR
• Section: 80IB

Judgement Text

ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.2763/DEL/2011 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, VS SATYA PA L SHIV KUMAR, CIRCLE-28(1), ROOM NO. 107, 7/355, NAYA BANS, DRUM SHAPE BUILDING, NEW DELHI-110006 I.P. ESTATE, NEW DELHI-110002 (PAN: AABFS3785K) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATPAL SINGH, SR.DR RESPONDENT BY : SHRI K. SAMPATH, SHRI V . RAJKUMAR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF THE CIT(A)-XXV, NEW DELHI DATED 29.3.2011 IN APPEAL NO. 70/2009-10 FOR AY 2007-08. 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO APPROPRIATE THE BILTY EXPENSES OF RS. 9,50,914/- TO DELHI UNIT IGNO RING THE FACT THAT THE AO AFTER EXAMINATION OF BOOKS OF ACCOUNTS AND DOCUMENTS HAS ASSESSED THAT THESE BILT Y EXPENSES WERE RELATED TO AGARTALA UNIT AGAINST WHIC H DEDUCTION U/S 80IC WAS CLAIMED BY THE ASSESSEE. ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 2 3. BRIEFLY STATED, THE FACTS GIVING RISE TO THIS AP PEAL ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SELLING OF CHEWING TOBACCO/ZARDA IN THE BRAND NAME OF RASHMI. THE ASSESSEE HAS TWO U NITS, THE ONE AT DELHI AND THE OTHER AT AGARTALA IN TRIPURA (NER). IT IS ALSO PERTINENT TO NOTE THAT THE INCOME OF THE DELHI UNIT IS TAXABLE BUT THE UNI T AT AGARTALA ENJOYS THE BENEFIT OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT , 1961 (FOR SHORT THE ACT) FOR BEING IN THE BACKWARD STATE IN THE NORTH E AST REGION. THE AO MADE AN ADDITION OF RS. 9,50,914 BY OBSERVING AS UN DER:- 2. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THERE WAS SUDDEN INCREASE IN BILTY EXP ENSES OF DELHI UNIT FROM RS. 1.40 LACS IN THE AY. 2006-07 TO RS. 11.28 LACS IN THE AY 2007-08. ALSO THERE WAS A SHAR P DECLINE IN BILTY EXPENSES OF AGARTALA UNIT FROM RS. 10.07 LACS IN AY 2006-07 TO RS. 3.15 LACS IN AY 2007-08. ON VERIFICATION OF BOOKS OF ACCOUNTS AND BILTY EXPENSE S, IT WAS NOTICED THAT RS. 9,50,914/ - WORTH OF BILTY EXP ENSES RELATED TO AGARTALA UNIT, THE PROFITS OF WHICH ARE EXEMPT U/ S 80LE. ALTHOUGH THE NET EFFECT ON PROFITABILITY OF THE FIRM WILL BE NONE BUT THE NET PROFIT OF AGARTALA UN IT WILL REDUCE BY RS. 9,50,914/- WHICH IN TURN WILL REDUCE THE DEDUCTION U/ S 80LC WITH THE SAME AMOUNT. THIS WILL INCREASE THE TAXABLE INCOME OF THE ASSESSEE BY THE SAME AMOUNT. THE AR AGREED TO THE ABOVE SAID ADDITION AS PER ORDER SHEET ENTRY DATED: 07.12.2009. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED WITH FOLLOWING CONCLUSION:- 4.4. I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDER ABLE ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 3 MERIT IN THE SUBMISSION OF THE ASSESSEE. IT IS NOT DISPUTED THAT THERE IS REGULAR LOCAL SALE AT AGARTALA AND TH ERE IS ALSO TRANSFER AND TRANSPORT OF MATERIALS FROM AGART ALA UNIT TO DELHI UNIT AND THE INCOME OF THE ASSESSEE I S DULY ACCOUNTED FOR IN DELHI UNIT EXCEPT THE EXEMPTION WH ICH THE ASSESSEE IS LEGALLY ELIGIBLE FOR THE AGARTALA U NIT. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSIO N OF THE ASSESSEE THAT THE AO IS NOT JUSTIFIED TO MAKE THE A DDITION WITHOUT ANY PROPER REASONING OR WITHOUT ANY SOUND B ASIS AND ACCORDINGLY, THE ADDITION MADE BY THE AO IS DELETED. 5. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUN AL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 6. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. LD. DR SUBMITT ED THAT THE AO NOTED THAT THERE WAS A SHARP DECLINE IN THE BILTY EXPENSES OF AGARTALA UNIT IN COMPARISON TO PREVIOUS YEAR AND THERE WAS ALSO A SU DDEN INCREASE IN BILTY EXPENSES OF DELHI UNIT IN COMPARISON TO EARLIER YEA R AND ON VERIFICATION OF BOOKS OF ACCOUNTS AND BILTY EXPENSES, IT WAS NOTICE D THAT RS.9,50,914 OF BILTY EXPENSES RELATED TO AGARTALA UNIT, THE PROFIT S OF WHICH ARE EXEMPT U/S 80IC OF THE ACT AND HAVE BEEN DEBITED TO THE DELHI UNIT. THE AO OBSERVED THAT THIS TREATMENT OF BILTY EXPENSES WAS NOT PROPE R AND HE MADE AN ADDITION OF SAME AMOUNT TO THE INCOME OF THE ASSESSEE. THE DR FURTHER POINTED OUT THAT THE TREATMENT GIVEN BY THE ASS ESSEE TO BILTY EXPENSES ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 4 IN AFORESAID MANNER INCREASED EXPENSES OF DELHI UNI T WHICH REDUCED TAXABLE INCOME OF THE ASSESSEE AND ON THE OTHER HAND, NET P ROFIT OF THE AGARTALA UNIT WAS INCREASED AND AT THE SAME TIME AMOUNT OF DEDUCT ION U/S 80IC WAS ALSO INCREASED AND IF PROPER TREATMENT OF BILTY EXPENSES WAS GIVEN AS PER FACTS, THEN THE AMOUNT OF DEDUCTION U/S 80IC IN AGARTALA U NIT WILL REDUCE AND IN TURN, THIS WILL INCREASE THE TAXABLE INCOME OF THE ASSESSEE IN DELHI UNIT BY THE SAME AMOUNT. THE DR ALSO SUBMITTED THAT THE AR OF THE ASSESSEE AGREED TO THE ABOVE AS PER ORDER SHEET DATED 12.7.2009 AND CI T(A) GRANTED RELIEF IGNORING THESE MATERIAL FACTS. THE DR SUPPORTED TH E ASSESSMENT ORDER AND SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 7. REPLYING TO THE ABOVE, LD. COUNSEL OF THE ASSESS EE HAS DRAWN OUR ATTENTION TOWARDS PARA NO. 4.3 AND 4.4 OF THE IMPUG NED ORDER AND SUBMITTED THAT IT IS A MATTER OF FACT THAT THERE WAS A LOCAL SALE OF AGARTALA UNIT AND THE MAJORITY OF THE MATERIAL WAS TRANSFERRED TO DELHI U NIT FOR MAKING SALES WHICH ARE ACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE DELHI UNIT. LD. COUNSEL FURTHER SUBMITTED THAT NORMALLY THE INCOME AND EXPE NSES ARE BOOKED AT DELHI AND AGARTALA UNIT AS PER PAST PRACTICE AND THE EXPE NSES INCURRED FOR TRANSPORTATION OF GOODS FROM AGARTALA TO DELHI UNIT WERE RIGHTLY BOOKED IN ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 5 P&L ACCOUNT OF DELHI UNIT AS THE DELHI UNIT WAS REC EIVING GOODS FROM AGARTALA UNIT AND DELHI UNIT HAS TO BEAR TRANSPORT EXPENSES WHICH WAS FURTHER SOLD IN THE DELHI MARKET. LD. COUNSEL OF T HE ASSESSEE SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT BASELESS ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE CIT(A). 8. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E OBSERVE THAT THE AO HAS NOT DISPUTED THE FACT THAT THERE WAS A REGUL AR LOCAL SALE AT AGARTALA AND THERE WAS ALSO TRANSFER AND TRANSPORT OF MATERI ALS AND GOODS FROM AGARTALA UNIT TO DELHI UNIT AND THE INCOME OF THE A SSESSEE IS DULY ACCOUNTED IN DELHI UNIT EXCEPT THE EXEMPTION FOR WHICH THE AS SESSEE WAS LEGALLY ELIGIBLE FOR THE AGARTALA UNIT. FROM THE MODUS OPER ANDI OF OPERATIONS BETWEEN AGARTALA AND DELHI UNIT, WE OBSERVE THAT TH E AGARTALA UNIT SENT MATERIAL/GOODS TO DELHI UNIT FOR FURTHER SALE AND T HE TRANSPORTATION CHARGES FROM AGARTALA TO DELHI WERE DEBITED TO THE P&L ACCO UNT OF THE DELHI UNIT WHICH IS QUITE REASONABLE AND JUSTIFIED. 9. WE ARE UNABLE TO SEE ANY INFIRMITY OR PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER AND WE UPHOLD THE SAME. ACCORDINGLY, SOLE GROUND OF THE REVENUE BEING DEVOI D OF MERITS IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO.2763/DEL/2011 ASSTT.YEAR: 2007-08 6 ORDER PRONOUNCED IN THE OPEN COURT ON 7.8.2014. SD/- SD/- (S. V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 7TH AUGUST, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR