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

ITA 307/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5129 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 307/AHD/2016 (ASSESSMENT YEAR: 2005-06) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(3), AHMEDABAD V/S M/S. ASHISH CHEMICALS, LANE NO. 13, BLOCK NO. 246, SATYAGRAH CHHAVANI, SATELLITE ROAD, AHMEDABAD-380015 (APPELLANT) (RESPONDENT) PAN: AABFA 6775F APPELLANT BY : SHRI S.K. DEV, SR. D.R. RESPONDENT BY : SHRI BANDISH SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 27 -09-201 8 DATE OF PRONOUNCEMENT : 28 -09-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-13, AHMEDABAD DATED 16.11.2015 PERTAINING TO A.Y. 2011- 12 AND FOLLOWING GROUND HAVE BEEN TAKEN: ITA NO. 307/ AHD/2016 . A.Y. 2011-12 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,93,02,947/- MADE BY THE A.O. ON ACCOUNT OF REALLOCATION OF EXPEN SES FROM EOU UNIT TO NON-EOU UNIT AND CONSEQUENTIAL DENIAL OF EXEMPTION U/S 10B OF THE ACT TO THAT EXTENT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT THE CONSUMPTION OF RAW MATERIALS VIS-A-VIS PRODUCTION OF 2 UNITS WAS T OTALLY DISPROPORTIONATE AND GROSS PROFIT OF ELIGIBL E UNIT WAS SHOWN HIGHER SIDE IN COMPARISON TO ANOTHER UNIT TO CLAIM EXEMPTION U/S 10B. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE 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 TH E LD. COMMISSIONER OF INCOME TAX(A) MAY BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE FACTS OF THE CASE AS POINTED OUT BY THE A.O ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFAC TURING TRADING AND EXPORTING OF SYNTHETIC ORGANIC PIGMENT TILES AND CH EMICALS. THE APPELLANT HAS TWO MANUFACTURING UNITS UNIT-1 FOR NORMAL BUSINESS AND UNIT-2 WHICH IS AN EOU, INCOME OF WHICH IS EXEMPT U/S.L0B OF THE I.T. ACT. THE A.O INCONSISTENCY WITH THE DECISION TAKEN IN THE A.Y.20 07-08, 08-09 AND 09-10 HAS ALLOCATED CERTAIN EXPENDITURE FROM EOU UNIT TO A NO N-EOU UNIT. THE A.O HAS DONE SO BECAUSE, AS PER THE A.O, THE PRODUCT MANUFA CTURED IN UNIT-1 IS IDENTICAL TO THE PRODUCT MANUFACTURED IN EOU UNIT. THE A.O THUS AFTER DETAILED DISCUSSION HAS TREATED BOTH THE PRODUCTS A S IDENTICAL AND. HAS ALLOCATED RS. 19302947/- AS AMOUNT REQUIRED TO BE RE-ALLOCATE D TO NON-EXEMPT UNIT OF THE APPELLANT. 3. THE APPELLANT VIDE ITS DETAILED WRITTEN SUBMISSIONS CONTESTED THE ACTION OF THE A.O. THE APPELLANT PRIMARILY POINTED OUT THAT SUCH RE-ALLOCATION OF EXPENSES FROM EOU UNIT TO NON-EOU UNIT WAS PRE-DOMINANTLY DE LETED BY THE CIT(A) WHEN THE RESPECTIVE ORDERS FOR A.Y.2007-08 TO 2009- 10. SUBSEQUENTLY, THE APPELLANT POINTED OUT THAT THE ORDER OF CIT(A) FOR THE A.Y.2007-08 TO 2009-10 ITA NO. 307/ AHD/2016 . A.Y. 2011-12 3 WAS CONFIRMED BY THE HON'BLE IT AT BY THEIR RESPECT IVE ORDERS. THE DETAILS OF ITAT ORDERS IN THE APPELLANT'S OWN CASE ARE GIVEN B ELOW:- A.Y. ITA NO. DATE OF ITAT ORDER 2007-08 1044/AHD/2011 25/6/2015 2008-09 50/AHD/2012 4/9/2015 2009-10 1848/AHD/2012 24/9/2015 4. THE APPELLANT POINTED OUT THAT THE ACTION OF THE A. O WAS PRE-DOMINANTLY DISMISSED BY THE CIT(A) AND ONLY CERTAIN ADMINISTRA TIVE EXPENDITURE WERE REQUIRED TO BE ALLOCATED AS PER THE CIT(A). THE REL EVANT PORTION OF THE CIT(A)'S ORDER DATED 21-06-2013 FOR AY 2009-10, WHI CH IS SUBSEQUENTLY CONFIRMED BY THE HON'BLE ITAT IS REPRODUCED BELOW : - 'I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. IT IS NOTED THAT THE FACTS OF THE CASE ARE IDENTICAL TO THE EAR LIER AY I.E. 2008-09 WHERE IN SIMILAR ADDITION WAS MADE BY THE AO BY ALLOCATING THE EXPENDITURE IN PROP ORTION OF THE TURNOVER. WHILE DECIDING THE APPEAL FOR THAT YEAR, THE ALLOCATION IN PROPORTION TO THE TURNOVER MADE BY THE AO WAS DIRECTED TO BE DELETED EXCEPT FOR THE EXPENSES NAMELY CONSULTANCY CHARGES, INCOME TAX FEE, MEMBERSHIP FEE AND PROFESSIONAL TAX. IT WAS HELD BY ME THAT THESE EXPE NSES SHOULD BE APPORTIONED ON THE BASIS OF TURNOVER AS THE EXPENDITURE PERTAINED TO BOTH THE U NITS. THE FACTS ARE IDENTICAL FOR THIS YEAR ALSO. T HE APPELLANT HAS MAINTAINED SEPARATE RECORDS AND ACCOU NTS OF EXPENDITURE FOR BOTH THE UNITS AND THE EXPENDITURE HAVE ALSO BEEN ACCOUNTED FOR IN THE RES PECTIVE UNITS. CONSIDERING THESE FACTS AND FOLLOWIN G MY DECISION IN APPEAL FOR AY 2008-09, THE ALLOCATION OF EXPENDITURE IN PROPORTION TO TURNOVER IS DIRECTED TO BE DELETED. HOWEVER, FOLLOWING EXPENDITU RE ARE DIRECTED TO BE ALLOCATED IN PROPORTION TO TH E TURNOVER AS THESE ARE NOT UNIT SPECIFIC. (I) CONSULTATION FEE CHARGES RS. 53,000/- (II) LEGAL AND PROFESSIONAL CHARGES RS. 1,12,088/ - (III) PROFESSIONAL TAX RS. 2,400/- (IV) MEMBERSHIP FEE RS. 36,155/- ITA NO. 307/ AHD/2016 . A.Y. 2011-12 4 (V) SERVICE TAX EXPENSES RS. 27,510/- 6 A SIMILAR FINDING IS MADE BY THE CIT(A) IN THE AP PEAL ORDER FOR A.Y.2007-08 AND 2008-09. THE HON'BLE ITAT HAS CONFI RMED THE FINDING OF CIT(A) VIDE PARA-7 OF ITS ORDER FOR A.Y,2007-08, VI DE PARA NO.9 FOR ITS ORDER FOR A.Y.2008-09. RELEVANT PARA IS REPRODUCED BELOW: '7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ID. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT N O DEFECT OR THE DIFFERENCES IN THE PRODUCT, PROCESS , RAW MATERIALS, END USERS ETC. HAVE BEEN POINTED BY REVENUE AND THE A.O HAS PROCEEDED TO 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. CIT(A) WH ILE DELETING THE ADDITION HAS ALSO RELIED ON THE DECISIONS OF AHMEDABAD TRIBUNAL AND THE DECISION OF HON'BLE GUJARAT HIGH COURT WHICH HAS NOT BEEN CONTROVERTED BY REVENUE BEFORE US. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF ID. CIT(A) AND THUS THI S GROUND OF REVENUE IS DISMISSED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ID. 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 PREDECESSOR IN 2007-08 AND FURTHER A.O HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS WH ICH HAVE BEEN AUDITED. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAS KEPT SEPARATE PRODUCTION R ECORD FOR BOTH THE UNITS WHICH INDICATE THE QUANTITATIVE OF RAW MATERIAL CONSUMED AND PRODUCTIO N AS PER EXCISE LAW. HE THEREFORE HELD THAT A.O WAS NOT JUSTIFIED IN RE-ALLOCATING THE EXPENSES IN PROPORTION TO THE SALE IN BOTH THE UNITS. HOWEVER, WITH RESPECT TO CERTAIN OTHER EXPENSES, HE HAS NOTED THAT THE PROCEDURE FOLLOWED BY ASSESSEE FOR ALLOCATING THE EXPENSES WERE NOT LOGICAL AND WI THOUT ANY DOCUMENTARY EVIDENCE AND WITH RESPECT TO THOSE EXPENSES HE HAD DIRECTED TO THE A.O TO APPORTI ON THE EXPENSES IN THE RATIO OF TURNOVER. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF ID. CIT(A). WE FURTHER FIND THAT WHILE DISMISSING THE APPEAL OF RE VENUE FOR A.Y. 2007-08 IN ASSESSEE'S OWN CASE IN ITA NO. 1044/A/2011 THE CO-ORDINATE BENCH OF TRIBU NAL HELD AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ID. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT N O DEFECT OR THE DIFFERENCES IN THE PRODUCT, PROCESS , RAW MATERIALS, END USERS ETC. HAVE BEEN POINTED BY REVENUE AND THE A.O HAS PROCEEDED TO CALCULATE THE INCOME OF THE 2 UNITS ON A WRONG ASSUMPTION. HE HAS FURTHER NOTED THAT THE ADDITION HAS BEEN ITA NO. 307/ AHD/2016 . A.Y. 2011-12 5 MADE ON A HYPOTHETICAL FORMULA BY THE A.O. CIT(A) WH ILE DELETING THE ADDITION HAS ALSO RELIED ON THE DECISIONS OFAHMEDABAD TRIBUNAL AND THE DECISION OFHON'BLE GUJARAT HIGH COURT WHICH HAS NOT BEEN CONTROVERTED BY REVENUE BEFORE US. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF ID. CIT(A) AND THUS THI S GROUND OF REVENUE IS DISMISSED. 5. NOW DEPARTMENT IS BEFORE US. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. LD. A.R. CITED AN ORDER OF THE TRIBUNAL IN ITS OWN CASE AND STATED THAT THIS MATTER SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL WITH FOLLOWING OBSERVATION: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. 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 ASSESSEE 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 F OR AY 2009-10. WE FIND THAT AGAINST THE ORDER OF CIT(A) FOR AY 2009-10, REVENU E HAD CARRIED THE MATTER BEFORE THE TRIBUNAL. THE COORDINATE BENCH OF TRIBUNAL IN ITA NO.1898/AHD/2012, ORDER DATED 24/09/2015, HAD DECIDED THE ISSUE IN FAVOUR O F ASSESSEE AND DISMISSED THE APPEAL 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 MATERIAL ON RECORD. AS REFERRED TO BY THE LD. AR, WE HAVE GONE THROUGH THE GROUNDS OF APPEAL IN ITA NO.5 0/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 DELETE THE AD DITION OF RS.1,31,16,642/- MADE ON ACCOUNT OF REALLOCATION OF EXPENSES RELATIN G TO RAW MATERIALS, MANUFACTURING EXPENSES, ADMINISTRATIVE EXPENSES, SE LLING EXPENSES AND FINANCIAL EXPENSES AMONGST UNIT-I & UNIT-II IN PROP ORTION 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 APPORTION ONL Y THE EXPENSES RELATING ITA NO. 307/ AHD/2016 . A.Y. 2011-12 6 TO CONSULTANCY CHARGES, INCOME TAX APPEAL FEE, MEMB ERSHIP FEE & PROFESSIONAL TAX IN THE RATIO OF THE TURNOVER OF BO TH 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 TH E 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 ASS ESSING 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 PART IAL RELIEF HAS NOTED THAT SIMILAR ADDITION MADE BY THE A.O IN THE PRECEDING Y EAR WAS NOT APPROVED BY HIS PREDECESSOR IN 2007-08 AND FURTHER A.O HAS N OT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS WHICH HAVE BEEN AUDITED. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAS KEPT SEPA RATE PRODUCTION RECORD FOR BOTH THE UNITS WHICH INDICATE THE QUANTITATIVE OF RAW MATERIAL CONSUMED AND PRODUCTION AS PER EXCISE LAW. HE THERE FORE HELD THAT A.O WAS NOT JUSTIFIED IN RE-ALLOCATING THE EXPENSES IN PROPORTION TO THE SALE IN BOTH THE UNITS. HOWEVER, WITH RESPECT TO CERTAIN OT HER EXPENSES, HE HAS NOTED THAT THE PROCEDURE FOLLOWED BY ASSESSEE FOR A LLOCATING THE EXPENSES WERE NOT LOGICAL AND WITHOUT ANY DOCUMENTARY EVIDEN CE AND WITH RESPECT TO THOSE EXPENSES HE HAD DIRECTED TO THE A.O TO APP ORTION THE 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 REVENUE FOR A.Y. 2007-08 I N ASSESSEES OWN CASE IN ITA NO. 1044/A/2011 THE CO-ORDINATE BENCH OF TRI BUNAL HELD AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT NO DEFECT OR THE DIFFERENCES IN THE PRODUCT, PROCES S, RAW MATERIALS, END USERS ETC. HAVE BEEN POINTED BY REVENUE AND THE A.O HAS PROCEEDED TO CALCULATE THE INCOME OF THE 2 UNITS ON A WRONG ASSU MPTION. HE HAS FURTHER NOTED THAT THE ADDITION HAS BEEN MADE ON A HYPOTHE TICAL FORMULA BY THE A.O. CIT(A) WHILE DELETING THE ADDITION HAS ALSO RE LIED ON THE DECISIONS OF AHMEDABAD TRIBUNAL AND THE DECISION OF HONBLE GUJA RAT HIGH COURT WHICH HAS NOT BEEN CONTROVERTED BY REVENUE BEFORE U S. 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. ITA NO. 307/ AHD/2016 . A.Y. 2011-12 7 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 OF REV ENUE ARE DISMISSED. 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. 7. RESPECTFULLY FOLLOWING THE ORDER OF CO-ORDINATE BEN CH, WE DISMISSED THE APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 28 - 09- 2018 SD/- SD/- (PRAMOD KUMAR) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 28/09/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD