The DCIT, Baroda Circle-4, Baroda V. Transpek Silox Industries Ltd., Baroda

ITA 2777/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8738 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 21-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K R MEGHWAL
• Assessee Lawyers: SUNIL H TALATIAR
• Keywords: Gift; Business expenditure; Revised return
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI D T GARASIA,JM AND A N PAHUJA,AM) ITA NO.2777/AHD/2007 (ASSESSMENT YEAR:-2002-03) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(1), 4 TH FLOOR, AAYAKAR BHAVAN,RACE COURSE CIRCLE,BARODA V/S M/S TRANSPEK SILOX INDUSTRIES LTD., KALALI ROAD, ATLADRA, BARODA [PAN:AAACT3739T] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K R MEGHWAL, DR ASSESSEE BY:- SHRI SUNIL H TALATI,AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATE D 14-03-2007 OF THE LD. CIT(APPEALS)-III, BARODA, RA ISES THE FOLLOWING GROUNDS :- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.5,39,2 17 BEING MISCELLANEOUS EXPENSES, SINCE IT HAS BEEN DELETED B Y THE ID. CIT (A) MERELY BY STATING THAT DISALLOWANCE IS ON HIGHER SI DE DESPITE THE FACT THAT SIMILAR DISALLOWANCE WAS CONFIRMED IN FAVOUR O F DEPARTMENT IN EARLIER YEARS. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW REVISED CLAI M OF DEDUCTION UNDER SECTION 80IB OF RS.6,56,88,925 MADE DURING THE ASSE SSMENT PROCEEDINGS DESPITE THE FACT THAT THE ORIGINAL CLAI M IN THE RETURN OF INCOME AMOUNTED TO RS.3,61,13,972 ONLY, SINCE ASSES SEE CAN NOT ENHANCE HIS CLAIM MERELY BY FILING A STATEMENT OF REVISED CLAIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS BOOKS OF A CCOUNTS ARE ALREADY CLOSED AT THE END OF THE FINANCIAL YEAR AN D THE MATTER ATTAINS FINALITY ON THAT DATE. IT IS ALSO HELD BY THE HONOU RABLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V/S. CIT (204 CTR 1 82): (284 ITR 323) AND (157 TAXMAN 1) WHEREIN IT WAS HELD THAT CLAIM F OR DEDUCTION NOT MADE IN THE RETURN CAN NOT BE ENTERTAINED BY ASSESS ING OFFICER OTHERWISE THAN BY FILING A REVISED RETURN. THE SAME VIEW WAS ALSO TAKEN BY THE HON. ITAT, AHMEDABAD BENCH 'B', AHMEDABAD IN THE CASE OF GUJARAT CO-OP. MILK MKTG. FEDERATION LTD. [ITA NO. 760/AHD/2001 & CO NO. 13/AHD/2006]. ITA NO.2777/AHD/2007 2 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND N LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF T HE ASSESSING OFFICER. 4 IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CI T() BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, FAC TS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOM E OF RS. 1,59,69,696/- UNDER THE NORMAL PROVISIONS AND BOOK PROFITS OF RS.8,06,64,581/- IN TERMS OF PROVISIONS OF SEC. 115 JB OF THE INCOME- TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] FILED ON 25.10.2002 BY THE ASSESSEE, MANUFACTURING ZINC DUST, ZINC OXID E, SODIUM HYDRO SULPHATE & SODIUM FORMALDEHYDE, AFTER BEING PROCESS ED ON 27.2.2003 U/S 143(1) OF THE ACT, WAS TAKEN UP FOR S CRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 20.3.2003. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [A O IN SHORT] NOTICED THAT THE ASSESSEE DEBITED MISCELLANEOUS EXP ENSES OF RS.63,92,172/- IN ITS P&L ACCOUNT . ACCORDINGLY, TH E AO CALLED FOR COMPLETE DETAILS OF THE EXPENDITURE. IN RESPONSE, T HE ASSESSEE COMPANY FURNISHED ONLY THE BREAK-UP OF THE SAID EXP ENDITURE AND ITS SUPPORTING MONTH-WISE ACCOUNTS. ON PERUSAL OF THESE DETAILS SUBMITTED BY THE ASSESSEE UNDER 22 DIFFERENT HEADS, THE AO FOUND THAT MOST OF THE EXPENSES WERE IN THE NATURE OF ENT ERTAINMENT AND INCURRED FOR NON-BUSINESS PURPOSE. BESIDES, THE EXP ENSES WERE ALSO INCURRED ON GIFT ARTICLES ETC. IN THE ABSENCE OF C OMPLETE LEDGER AND THE NATURE OF THESE EXPENSES AND THE ASSESSEE HAVI NG FAILED TO ESTABLISH THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE AO DISALLOWED 1/10 TH OF THE TOTAL EXPENSES, RESULTING IN ADDITION OF RS.6,39,217/-. 3 ON APPEAL , THE ASSESSEE CONTENDED THAT THE ACCOU NTS WERE AUDITED AND THE DISALLOWANCE WAS EXCESSIVE. IN THE LIGHT OF THESE ITA NO.2777/AHD/2007 3 SUBMISSIONS, THE LD. CIT(A) REDUCED THE DISALLOWAN CE TO RS. 1 LAC, HOLDING AS UNDER: 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND THE FACTS OF THE CASE. IN VIEW OF THE NATURE OF THE EXPENSES, SOME E LEMENT OF NON- BUSINESS EXPENSES CAN NOT BE RULED OUT. HOWEVER, TH E DISALLOWANCE OF 1/10 TH OF THE TOTAL CLAIM APPEARS TO BE ON THE HIGHER SID E. ACCORDINGLY, ON ESTIMATE AN AMOUNT OF RS.1 LAKH OUT OF TOTAL DISALL OWANCE OF RS.6,39,217/- IS CONFIRMED AND THE BALANCE OF RS.5,39,217/- IS DI RECTED TO BE DELETED. 4 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR CONTENDED THAT IN THE AY 1999-2000, DISALLOWANCE OF 10% OF THE EXPENDITURE W AS UPHELD BY THE LD. CIT(A) WHLE THE LD. CIT(A) ALLOWED EXCESSIV E RELIEF THIS YEAR. ON THE OTHER HAND, THE LD. AR ON BEHALF OF THE ASS ESSEE CONTENDED THAT IN THE AY 1999-2000, OUT OF TOTAL EXPENDITURE OF RS.18,97,184 DEBITED UNDER THE HEAD MISC.EXPENSES 10% OF THE E XPENDITURE INCURRED ON ACCOUNT OF POOJA EXPENSES, BUSINESS PRO MOTION EXPENSES AND SUNDRY EXPENSES WAS DISALLOWED AND ON APPEAL DISALLOWANCE WAS UPHELD. IN THE YEAR UNDER CONSIDER ATION, THE LD. CIT(A) FOUND THAT DISALLOWANCE OF RS.1 LAC WAS REAS ONABLE. THEREFORE, NO FURTHER DISALLOWANCE WAS CALLED FOR, THE LD. AR ARGUED. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE T HROUGH THE FACTS OF THE CASE. WE FIND THAT IN THE AY 1999-2000, THE AO HAD ANALYSED THE NATURE OF EXPENSES IN GREATER DETAIL AND ACCORD INGLY , THE LD. CIT(A) UPHELD THE DISALLOWANCE OF 1/10 TH OF THE SP ECIFIC EXPENSES INCURRED UNDER THE HEAD POOJA EXPENSES, BUSINESS PR OMOTION EXPENSES AND SUNDRY EXPENSES AND NOT 1/10 TH OF THE TOTAL EXPENDITURE. THERE IS NOTHING TO SUGGEST AS TO WHE THER OR NOT THE SAID ORDER OF THE LD. CIT(A)FOR THE AY 1999-2000 HA S BEEN FURTHER DISPUTED IN APPEAL. THUS, DISALLOWANCE IN THE AY 19 99-2000 WORKED OUT TO ABOUT 2.86% OF THE TOTAL EXPENDITURE. IN TH E YEAR UNDER CONSIDERATION, THE AO FOLLOWED THE ORDER OF THE LD. CIT(A) FOR THE AY ITA NO.2777/AHD/2007 4 1999-2000 ,BUT DISALLOWED 1/10 THE OF THE TOTAL EXP ENDITURE. THE LD. CIT(A) CONSIDERING THE FACTS OF THE CASE UPHELD DIS ALLOWANCE OF RS. 1 LAC WITHOUT EVEN REFERRING TO ORDER OF HIS PRED ECESSOR FOR THE AY 1999-2000. ACCORDING TO THE BASIS FOLLOWED IN AY 19 99-2000, DISALLOWANCE WORKS OUT TO ABOUT RS.1,82,816/- IN TH E YEAR UNDER CONSIDERATION. THE DISALLOWANCE WHETHER IN THE AY 1 999-2000 OR IN THE YEAR UNDER CONSIDERATION HAS BEEN MADE ON ESTIM ATES. CONSIDERING THE FACT THAT THE ASSESSEE HAS INCURRED GENERAL EXPENSES OF RS.21,43,425/-,POOJA EXPENSES OF RS.73 ,651/- ,ENTERTAINMENT EXPENSES OF RS.1,86,267/-BESIDES MAR RIAGE EXPENSES OF RS.3256/- AS ALSO SUNDRY EXPENSES OF RS.66456/- AND FURTHER BREAKUP AND NATURE OF SUCH EXPENSES IS NOT AVAILABL E BEFORE US, WE ARE OF THE OPINION THAT DISALLOWANCE OF EXPENSES O N THE BASIS FOLLOWED IN THE AY 1999-2000 WOULD BE REASONABLE. A CCORDINGLY, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE ISSUE TO THE FILE OF THE AO WITH THE DIRECTIONS TO RECOMPUTE THE DISA LLOWANCE IN ACCORDANCE WITH THE BASIS FOLLOWED BY THE LD. CIT( A) IN THE AY 1999-2000. WITH THESE OBSERVATIONS, GROUND NO. 1 IN THE APPEAL IS DISPOSED OF. 6 AS REGARDS ISSUE RAISED IN GROUND NO.2, THE AO N OTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.3,61,12,972/- U/S 80IB OF THE ACT ON THE PROFITS OF ITS SILVASSA UNIT. HOWEVER, T HE AO EXCLUDED OTHER INCOME OF RS.14,54,505/- WHILE DETERMINING DE DUCTION OF RS.2,55,50,555/- U/S 80IB OF THE ACT. ON APPEAL, TH E ASSESSEE CONTENDED THAT WHILE COMPUTING DEDUCTION OF RS.3,61 ,13,972/- U/S 80IB OF THE ACT , INITIALLY THEY CONSIDERED THE TRA NSFER OF GOODS TO ANOTHER UNIT AT COST PRICE. EVEN THOUGH THEY SUBMIT TED REVISED CLAIM FOR DEDUCTION OF RS.6,56,88,925 U/S 80IB OF THE ACT VIDE THEIR LETTER DATED 24.1.2004, THE AO DID NOT TAKE COGNIZANCE OF THE SAID REVISED CLAIM AND PROCEEDED TO FINALIZE THE ASSESSMENT ON THE BASIS OF ORIGINAL CLAIM OF DEDUCTION. ACCORDINGLY, THE LD. C IT(A) CALLED FOR A ITA NO.2777/AHD/2007 5 REMAND REPORT FROM THE AO. THE AO SUBMITTED HIS RE PORT DATED 08.02.2007, WHEREIN IT WAS CONTENDED THAT SINCE FOR M NO.10CCB WAS NOT FILED ALONG WITH THE RETURN OF INCOME, THE CLAI M OF DEDUCTION U/S.80 IB WAS INVALID, AND SECONDLY THE OBJECTIVE BEHIND THE PROVISIONS OF SUB-SECTION (8) OF SECTION 80 IB WAS TO CURB THE MALPRACTICE OF UNDER INVOICING OF GOODS AND SERVICE S BY THE ELIGIBLE UNIT WITH THE MOTIVE OF DIVERSION OF PROFIT. THUS, IT WAS SUBMITTED THAT THE REVISED CLAIM OF DEDUCTION U/S.80 IB OUGHT TO B E DISMISSED. IN THEIR REJOINDER,THE ASSESSEE SUBMITTED THAT FOR T HE AY 2002-03 THERE WAS NO SUCH REQUIREMENT UNDER LAW TO SUBMIT A REPORT IN FORM NO. 10CCB BY THE ASSESSEE .AS REGARDS DIFFERENCE IN ORIGINAL CLAIM AND REVISED CLAIM, THE ASSESSEE POINTED OUT THAT RE VISED CLAIM U/S. 80IB HAD BEEN WORKED OUT, TAKING SALE PRICE OF RS.7 7.68 PER KG, WHICH WAS 'MARKET RATE' OF GOODS SOLD BY ITS SILVAS SA UNIT .IT WAS STATED THAT SILVASSA UNIT MANUFACTURED ZINC DUST, W HICH WAS THE RAW MATERIAL FOR PRODUCT MANUFACTURED AT ATLADRA (BAROD A) UNIT, NAMELY SODIUM HYDRO SULPHITE (HYDRO), SODIUM FORMALDEHYDE SULPHOXYLATE (SAFOLITE) AND ZINC FORMALDEHYDE SULPHOXYLATE (SAFO LIN). BESIDES CAPTIVE CONSUMPTION , SILVASSA UNIT ALSO SOLD ZINC DUST IN THE DOMESTIC MARKET/EXPORT MARKET.ZINC DUST MANUFACTURE D AT SILVASSA UNIT WAS AN ENTIRELY DIFFERENT PRODUCT FROM THE PRO DUCT MANUFACTURED AT ATLADRA UNIT (BARODA). SILVASSA UNIT HAD EFFECTE D SALES OF RS.5,94,47,087/- AND THE VALUE OF INTER UNIT TRANSF ER WORKED OUT AT RS.32,69,02,919/- FOR ZINC DUST TRANSFERRED FROM IT S SILVASSA UNIT TO ANOTHER UNIT SITUATED AT ATLADRA (BARODA). APPLYING THE MARKET RATE OF RS.77.68 PER KG (WHICH WAS SALE PRICE OF SILVASS A UNIT) 'REVISED CLAIM WORKED OUT TO RS.6,56,88,925/- INSTEAD OF OR IGINAL CLAIM MADE AT RS.3,61,13,972/-. THE REVISED CLAIM BEING IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 80 IA (8) OF THE ACT, THE AO WAS NOT JUSTIFIED IN NOT ENTERTAINING THE SAME, IT WAS PLEADED.IN THE LI GHT OF THESE SUBMISSIONS, THE LD. CIT(A) CONCLUDED AS UNDER:- ITA NO.2777/AHD/2007 6 8.3 I HAVE CONSIDERED THE SUBMISSIONS OF LEARNED A O AND THE FACTS OF THE THINGS. ACCORDING TO SECTION 80 IB (13 ), THE PROVISIONS CONTAINED IN SUB-SECTION 5 AND SUB-SECTI ONS (7) TO (12) OF SECTION 80IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE BUSINESS UNDER THE SECTION. SUB-SECTION (7 ) OF SECTION 80IA PROVIDED UPTO ASSESSMENT YEAR 2002-03 THAT THE DEDUCTION UNDER SUB-SECTION (1) WOULD NOT BE ALLOWA BLE UNLESS THE RETURN OF INCOME WAS ACCOMPANIED BY AN AUDIT RE PORT IN FORM NO. 10CCB CERTIFYING THE CORRECTNESS OF THE CL AIM OF SUCH DEDUCTION. THIS REQUIREMENT WAS APPLICABLE IN THE C ASE OF ALL PERSONS OTHER THAN COMPANIES AND COOPERATIVE SOCIET IES. THUS, UPTO ASSESSMENT YEAR 2002-03, THE COMPANY CLA IMING DEDUCTION UNDER THIS SECTION WAS NOT REQUIRED TO SU PPORT ITS CLAIM BY FORM NO. 10CCB. BY FINANCE ACT, 2002 W.E.F . 01.04.2003, THE WORDS 'WHERE THE ASSESSEE IS A PERS ON OTHER THAN A COMPANY OR A CO-OPERATIVE SOCIETY' HAVE BEEN OMITTED. THIS HAS THE EFFECT OF MAKING THE REQUIREMENT OF FU RNISHING FORM NO. 10CCB MANDATORY IN THE CASE OF AN ASSESSEE BEING A COMPANY ALSO. IN THE INSTANT CASE, THE ASSESSMENT YEAR INVOLVED IS 2002-03. FOR THIS YEAR, THERE WAS NO MA NDATORY REQUIREMENT OF FURNISHING THE FORM NO.10CCB ALONG W ITH THE RETURN OF INCOME. HENCE, NO ADVERSE INFERENCE CAN B E DRAWN FROM THE FACT THAT THE ASSESSEE DID NOT ANNEX THE S AID FORM ALONG WITH ITS RETURN. 8.3.2 THE SECOND OBSERVATION OF THE AO IS THAT THIS PROVISION IS NOT INTENDED TO ALLOW VALUATIONS AT MARKET RATE JUST FOR AVAILING MORE CONCESSIONS UNDER SECTION 80 IB. IT H AS BEEN STATED THAT THE REVISED PROFIT & LOSS ACCOUNT SHOWS THAT THE ASSESSEE HAS APPLIED THE MARKET RATE AND CLAIMED HI GHER DEDUCTION DESPITE THE FACT THAT SALES SHOWN IN ORIG INAL PROFIT & LOSS ACCOUNT OF SILVASSA UNIT WERE ON THE BASIS OF SALES BILLS / INTER TRANSFER INVOICES PREPARED AT SALES RATE PREV AILING AT VARIOUS DATES DURING THE ACCOUNTING PERIOD. IT HAS BEEN STATED THAT THE AO WAS RIGHT IN IGNORING THE REVISED CLAIM , PARTICULARLY WHEN NEITHER THE PRESCRIBED FORM NO.10CCB WAS ORIGI NALLY FILED WITH THE RETURN NOR REVISED FORM NO.10CCB WAS FILED SUBSEQUENTLY AND ALSO THAT THE ORIGINAL SALES WERE NOT SHOWN TO BE FALSE. 8.3.3 SECTION 80 IA (8) PROVIDES AS UNDER:- WHERE ANY GOODS (OR SERVICE) HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSI NESS CARRIED ON BY THE ASSESSEE, OR WHERE ANY GOODS (OR SERVICE) HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY TH E ASSESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINESS AND, IN EI THER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDE D IN THE ITA NO.2777/AHD/2007 7 ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPO ND TO THE MARKET VALUE OF SUCH GOODS (OR SERVICE) AS ON THE D ATE OF THE TRANSFER, THEN FOR THE PURPOSE OF THE DEDUCTION UND ER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUS INESS SHALL BE COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAD BE EN MADE AT THE MARKET VALUE OF SUCH GOODS (OR SERVICE) AS ON T HAT DATE: PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSIN G OFFICER, THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELI GIBLE BUSINESS IN THE HEREINBEFORE SPECIFIED PRESENTS EXC EPTIONAL DIFFICULTIES, THE ASSESSING OFFICER MAY COMPUTE SUC H PROFITS AND GAINS ON SUCH REASONABLE BASIS AS HE MAY DEEM F IT. (EXPLANATION-FOR THE PURPOSE OF THIS SUBSECTION, M ARKET VALUE', IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET). FROM A PLAIN READING OF THE SECTION, IT IS APPARENT THAT THE CONSIDERATION FOR TRANSFER OF GOODS HELD FOR THE PU RPOSES OF THE ELIGIBLE BUSINESS IS TO BE VALUED AT THE MARKET VAL UE OF SUCH GOODS FOR THE PURPOSES OF DEDUCTION UNDER SECTION 8 0 IB. THIS IS A MANDATORY PROVISION AND THERE CAN BE NO SITUAT ION WHERE A VALUE OTHER THAN THE MARKET VALUE OF SUCH GOODS COU LD BE CONSIDERED. ONLY WHERE, IN THE OPINION OF THE AO, T HE ADOPTION OF MARKET VALUE AS AFORESAID PRESENTS EXCEPTIONAL D IFFICULTIES, THE AO MAY COMPUTE SUCH PROFITS ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. THE WORDS USED IN THE SECTION ARE 'FOR THE PURPOSES OF DEDUCTION UNDER SECTION, THE PROFITS AN D GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAVE BEEN MADE AT THE MARKET VALUE OF SUCH GOODS '. THE WORDS 'SHALL BE COMPUTED' INDICATE THA T ADOPTION OF MARKET VALUE IS COMPULSORY IN THE COMPUTATION. T HE ASSESSEE HAD ERRONEOUSLY COMPUTED THE PROFITS AND G AINS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB BY ADOPT ING THE VALUE OF GOODS AT COST INSTEAD OF MARKET RATE. THIS MISTAKE HAS BEEN SOUGHT TO BE CORRECTED BY REVISING THE CLAIM D URING THE PENDENCY OF THE ASSESSMENT PROCEEDING. THE AO HAS S TATED THAT THE ASSESSEE HAS NOT PROVED THAT THE SALES VAL UE COMPUTED IN REFERENCE TO THE COST OF GOODS WAS FALS E. IT IS NOTEWORTHY THAT THE ASSESSEE IS NOT REQUIRED TO PRO VE ANY SUCH THING, THE VALUE OF GOODS TRANSFERRED HAS TO BE TAK EN AT MARKET VALUE AS PER WORDING OF LAW. ONLY EXCEPTION IS WHER E THE AO HAS RECORDED THAT THIS WOULD PRESENT EXCEPTIONAL DI FFICULTY. IN THE INSTANT CASE, NO SUCH FINDINGS HAVE BEEN RECORD ED BY THE AO. IN THE ABSENCE OF SUCH FINDING, IT IS INCUMBENT FOR THE ASSESSEE TO ADOPT THE MARKET VALUE. THE ASSESSEE HA S ITA NO.2777/AHD/2007 8 TRANSFERRED ZINC DUST TO ITS ATLADARA UNIT AS WELL AS SOLD THE SAME TO OUTSIDE PARTY. THE SALES HAVE BEEN MADE TO OTHER PARTIES AT RATES RANGING FROM RS.77.68 PER KG TO RS .136 PER KG. THE VALUE ADOPTED IS THE LOWEST ONE. FURTHER, IT IS SEEN THAT IN THE SUBSEQUENT YEAR I.E. IN AY. 2003-04, THE ASSESS EES CLAIM OF DEDUCTION UNDER SECTION 80 IB, COMPUTED IN REFER ENCE TO MARKET RATE, HAS BEEN ACCEPTED. CONSIDERING ALL THE ABOVE, I AM OF THE OPINION THAT THERE WAS NO JUSTIFICATION F OR REJECTION OF THE ASSESSEES REVISED CLAIM. THE AO IS DIRECTED TO RE-COMPUTE THE DEDUCTION U/S. 80 IB BY ADOPTING THE MARKET VAL UE. 7 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR AP PEARING BEFORE US WHILE REFERRING TO PAGE 12 OF THE PAPER BOOK, VEHEM ENTLY ARGUED THAT WHILE CLAIMING DEDUCTION OF RS. 3,61,13,972/- U/S 8 0IB OF THE ACT IN THE RETURN OF INCOME, THE ASSESSEE DID NOT ENCLOSE ANY WORKING OF INTER UNIT TRANSFER-WHETHER AT COST PRICE OR MARKET PRICE. CONSIDERING THE PROFITABILITY OF THE SILVASSA UNIT AND THE SALE PRICE SHOWN IN THE SALE BILLS, THE LD. DR CONTENDED THAT EVEN WHILE CO MPUTING THE DEDUCTION ORIGINALLY, THE ASSESSEE ADOPTED MARKET R ATES AND NOT COST PRICE. ON THE OTHER HAND, THE LD. AR ON BEHALF OF T HE ASSESSEE WHILE SUPPORTING THE IMPUGNED ORDER OF THE LD. CIT(A) CO NTENDED THAT THE REVENUE IN THEIR GROUND NO.2 HAVE RAISED ONLY THE I SSUE OF ENHANCEMENT OF CLAIM FOR DEDUCTION U/S 80IB OF THE ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITHOUT FILING A REVISED RETURN AND RELIED UPON THE DECISION OF THE HONBLE APEX CO URT IN THE GOETZE INDIA LTD. VS. CIT,284 ITR 323(SC). THE ISSUE OF SU BSTITUTION OF MARKET PRICE INSTEAD OF COST PRICE IN TERMS OF PROV ISIONS OF SEC. 80IA(8) HAS NOWHERE BEEN RAISED IN THE SAID GROUND . WHILE REFERRING TO THE IMPUGNED ORDER , THE LD. AR ARGUED THAT TH E LD. CIT(A) MERELY FOLLOWED THE MANDATORY PROVISIONS IN ACCEPTI NG THEIR REVISED CLAIM. THE ASSESSEE HAD ALREADY MADE CLAIM FOR DEDU CTION U/S 80IB OF THE ACT IN THEIR RETURN AND THUS, NO NEW CLAIM W AS BEING MADE IN THEIR LETTER FILED BEFORE THE AO. THEREFORE, DECISI ON RELIED ON BY THE ITA NO.2777/AHD/2007 9 REVENUE IS NOT AT ALL APPLICABLE, NO NEW CLAIM HAVI NG BEEN MADE, THE LD. AR ARGUED. . 8 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, THE ASSESSEE TRANS FERRED THE GOODS TO ITS ATLADRA UNIT @ RS. 70.03 PER KG. WHILE SOLD TO OTHER PARTIES @ RS. 77.68 PER KG., AS IS EVIDENT FROM PAGE 12 OF TH E PAPER BOOK. THE AO IN THE ASSESSMENT ORDER DID NOT CONSIDER THE RE VISED CLAIM OF THE ASSESSEE FOR ADOPTING THE MARKET VALUE IN RES PECT OF INTER-UNIT TRANSFER OF ZINC DUST IN TERMS OF PROVISIONS OF SE. 80IA(8) OF THE ACT. THE LD. CIT(A) AFTER HAVING A REMAND REPORT FROM TH E AO OBSERVED THAT THE ASSESSEE TRANSFERRED ZINC DUST TO ITS ATLADARA UNIT AS ALSO SOLD THE SAME TO OUTSIDE PARTIES. THE SALE TO OTHER PARTIES WAS AT RATES RANGING FROM RS.77.68 PER KG TO RS.136 PER KG . IN THE REVISED CLAIM OF THE ASSESSEE, THE VALUE ADOPTED BY THE ASS ESSEE FOR TRANSFERRING ZINC DUST TO ITS ATLADARA UNIT WAS THE LOWEST ONE. MOREOVER,IN THE SUBSEQUENT YEAR I.E. IN AY. 2003-04 , THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80 IB, COMPUTED IN REFERENCE TO MARKET RATE, HAS BEEN ACCEPTED BY THE AO, THE LD. C IT(A) OBSERVED. IN THESE CIRCUMSTANCES, THE LD. CIT(A) DIRECTED TH E AO TO RE- COMPUTE THE DEDUCTION U/S. 80 IB BY ADOPTING THE MA RKET VALUE. THOUGH THE LD. DR VEHEMENTLY ARGUED THAT MARKET VAL UE HAS ALREADY BEEN ADOPTED BY THE ASSESSEE BUT THE FACTS ON RECOR D REVEAL OTHERWISE. SINCE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTRARY TO THE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE DIRECTIONS OF T HE LD. CIT(A) TO RECOMPUTE DEDUCTION U/S 80IB OF THE ACT BY ADOPTIN G MARKET VALUE IN TERMS OF STATUTORY PROVISIONS OF SEC. 80IA(8) OF THE ACT . MOREOVER, IT IS NOT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN THE RETURN OF INCOME. THE ONLY D EFICIENCY WAS THAT THE CLAIM HAD NOT BEEN MADE IN ACCORDANCE WITH THE STATUTORY PROVISIONS. THUS, RELIANCE BY THE REVENUE ON THE DE CISION OF THE ITA NO.2777/AHD/2007 10 HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD. (SUPRA) IS TOTALLY MISPLACED. IN VIEW THE FOREGOING, GROUND NO.2 IN TH E APPEAL IS DISMISSED. 11. GROUND NOS. 3 & 4 IN THE APPEAL, BEING GENERA L IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THER EFORE, DISMISSED. 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31-03- 2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-03-2010 COPY OF THE ORDER FORWARDED TO : 1. TRANSPEK SILOX INDUSTRIES LTD., KALALI ROAD, ATL ADRA, BARODA 2. THE DCIT, CIRCLE 4(1), BARODA 3. CIT CONCERNED 4. CIT(A)-III, BARODA 5. THE DR, ITAT,B BENCH AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD