Asstt. Commissioner of Income Tax-4, Kanpur V. M/s Suri Shoes Ltd., Kanpur

ITA 322/LKW/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92160 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.322/LKW/2013 ASSESSMENT YEAR:2008 - 09 M/S SURI SHOES LTD., 117/Q/67, SHARDA NAGAR, KANPUR. PAN:AADCS1582P VS A.C.I.T. - 4, KANPUR. (RESPONDENT) (APPELLANT) SHRI O. N. PATHAK, D. R. APPELLANT BY SHRI ABHINAV MEHROTRA, ADVOCATE RESPONDENT BY 24/03/2015 DATE OF HEARING 05 /06/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, KANPUR DATED 03/01/2013 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO RESTRICT THE DISALLOWANCE TO 7.5% ON CONSUMPTION OF PLASTIC MOULDS AND PLASTIC SHOE LASTS WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.45,89,948/ - CLAIMED AS DEDUCTION ON UTILIZATION OF DUTY CREDIT ENTITLEMENT SCHEME MADE BY THE AO WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 2 3. THE ORDER OF THE CIT(A), KANPUR B EING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THE COPY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO.492 & 503/LKW/2010 DATED 16/10/2014. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING GROUND NO. 1, WE FIND THAT IT IS OBSERVED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT ORDER THAT IN ASSESSMENT YEAR 2006 - 07 , THE CIT(A) HAS ACCEPTED THE DISALLOWANCE TO THE EXTENT OF 7.5% AS AGAINST 15% MADE BY THE ASSESSING OFFICER IN THAT YEAR. ACCORDINGLY IN THE PRESENT YEAR, THE ASSESSING OFFICER HAS HIMSELF MADE DIS ALLOWANCE TO THE EXTENT OF 7.5% ONLY. IN THE ASSESSMENT ORDER FOR AY 2006 - 07, THE DISALLOWANCE WAS UPHELD BY CIT(A) TO THE EXTENT OF 7.5% AND IT WAS APPROVED BY THE TRIBUNAL AND THE ORDER OF CIT(A) IN THAT YEAR WAS CONFIRMED AS PER PARA 14 OF THE TRIBUNAL ORDER. IN THE PRESENT YEAR, THE CIT(A) HAS HELD THAT HE IS DECIDING THE ISSUE IN THE PRESENT YEAR IN LINE WITH THE APPELLATE ORDER FOR ASSESSMENT YEAR 2006 - 07 AS PER WHICH IT WAS HELD THAT THE DISALLOWANCE BE RESTRICTED TO 7.5% ON CON SUMPTION OF PLASTIC MOULDS AND PLASTIC SHOE LASTS. SINCE THE ASSESSING OFFICER HIMSELF HAS RESTRICTED THE DISALLOWANCE IN THE PRESENT YEAR TO THE EXTENT OF 7.5%, THE ASSESSEE DOES NOT DESERVE ANY RELIEF IN THE PRESENT YEAR BUT GROUND NO. 1 OF THE REVENUE IS MISPLACED BECAUSE WHEN THE ASSESSING OFFICER HIMSELF HAS MADE DISALLOWANCE TO THE EXTENT OF 7.5% ON CONSUMPTION OF PLASTIC MOULDS AND PLASTIC SHOE LASTS AND THE SAME HAS BEEN CONFIRMED BY CIT(A) IN THE PRESENT YEAR AND ALSO BY THE TRIBUNAL IN ASSESSMENT YEAR 2006 - 07, IN FACT NO RELIEF HAS BEEN ALLOWED BY CIT(A) ON 3 THIS ISSUE AND THEREFORE, THE GROUND RAISED BY REVENUE IS NOT ARISING OUT OF THE ORDER OF CIT(A). GROUND NO. 1 IS REJECTED. 5. REGARDING GROUND NO. 2, WE FIND THAT THE RELIEF WAS ALLOWED BY CIT(A) BY MAKING FOLLOWING OBSERVATIONS IN PARA 5.3 & 5.3.1 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 5.3 DISCUSSION & DECISION: THE APPELLANT IS ENGAGED IN BUSINESS OF EXPORTS OF LEATHER GOODS. AS STATED IN THE WRITTEN SUBMISSIONS AND SUBSTANTIATED BY THE DOCUMENTS SUBMITTED, THE APPELLANT, DURING F.Y. 2005 - 06, HAD EARNED EXPORT INCENTIVES IN THE FORM OF DUTY CREDIT ENTITLEMENT, UN DER WHICH IT WAS ENTITLED TO IMPORT MATERIAL WITHOUT PAYMENT OF CUSTOMS DUTY TO THE TUNE OF RS.74.83 LACS (AS ESTIMATED BY THE ASSESSEE). THIS SCHEME WAS CALLED TARGET PLUS SCHEME. THIS AMOUNT OF RS. 74.83 LACS WAS TAKEN AS PART OF THE INCOME IN THE AUDITE D FINANCIAL STATEMENTS FOR F.Y.20 0 5 - 06 AND OFFERED TO TAX. THE APPELLANT DID NOT UTILIZE THE SAID ENTITLEMENT IN THAT YEAR BUT THE SAME WAS UTILIZED DURING THE YEAR UNDER APPEAL AND ADJUSTED AGAINST CUSTOMS DUTY PAYABLE FOR IMPORTS OF RAW MATERIAL. THE DCEB USED DURING THIS FINANCIAL YEAR AMOUNTED TO RS.4 5,89,948/ - . FOR ACCOUNTING PURPOSES, SUCH IMPORT OF GOODS (WITHOUT PAYMENT OF CUSTOM DUTY AGAINST DEPB LICENSES) COULD BE TREATED IN ONE OF THE TWO WAYS: ( I ) NOT RECOGNIZING THE MONETARY BENEFIT OF THE DEPB WHEN IT ACCRUES/RECEIVED. ON USING SUCH DEPB LICENSE S TO IMPORT GOODS WITHOUT PAYING CUSTOM DUTY, THE PURCHASES ARE RECORDED ONLY AT THE PURCHASE VALUE WITHOUT INCLUDING CUSTOM DUTY PAYABLE. ( II ) RECOGNIZING THE MONETARY BENEFIT OF THE DEPB WHEN IT ACCRUES/RECEIVED. ON USING SUCH DEPB LICENSES TO IMPORT GOODS WI THOUT PAYING CUSTOM DUTY, THE PURCHASES ARE RECORDED AT THE PURCHASE VALUE & ALSO THE CUSTOM DUTY PAYABLE ON SUCH IMPORTS. 5.3.1 THE APPELLANT HAS ADOPTED THE SECOND METHOD OF ACCOUNTING; IN ACCORDANCE WITH WHICH IT HAS RECOGNIZED THE 4 INCOME ACCRUING ON A CCOUNT OF THE DEPB LICENCES (TOTALING TO RS. 74.83 LAKHS ) IN THE F.Y. 2005 - 06. THE ASSESSEE COMPANY HAS IMPORTED GOODS IN F.Y. 2007 - 08 (CORRESPONDING TO THE A.Y. 2008 - 09, WHICH IS THE YEAR UNDER REFERENCE) WHEREIN THE ASSESSEE WAS REQUIRED TO PAY CUSTOM D UTY TOTALING TO RS.45,89,94S/ - WHICH WAS NOT PAID IN VIEW OF THE THESE DEPB LICENCES. THE ASSESSEE HAS ADOPTED THE COST OF SUCH IMPORTS OF RAW MATERIAL AS ACTUAL COST + CUSTOM DUTY PAYABLE OF RS.45,89,948/ - . SINCE THE IMPUGNED METHOD ADOPTED BY THE APPELLA NT IS AN ACCEPTABLE METHOD IN ACCOUNTING PARLANCE, THE ADDITION MADE BY THE A. O. IN THIS REGARD IS NOT SUSTAINABLE AND IS, THEREFORE, DELETED. BEFORE PARTING WITH THE ISSUE, I MAY MENTION HERE THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA AS RELIED UPON BY THE A.O. IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE, SINCE THE ISSUE BEFORE THE HON'BLE SUPREME COURT IN THAT CASE WAS 'THE ISSUE FOR CONSIDERATION IS: WHETHER PROFIT FROM DUTY ENTITLEMENT PASSBOOK SCHEME (DEPB) AND DUTY DRAWBACK SCHEME COULD BE SAID TO BE PROFIT DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION BO - IB OF THE INCOME - TAX ACT, 1961 (1961 ACT)' 5.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIND THAT IT IS HELD BY CIT(A) THAT THE DUTY DRAW BACK WAS INCOME EARLIER ACCOUNTED FOR BY THE ASSESSEE AS INCOME FOR FINANCIAL YEAR 2005 - 06 AND THE SAME WAS USED IN THE PRESENT YEAR FOR M AKING IMPORT WITHOUT PAYING CUSTOMS DUTY. AS PER SCHEDULE - K OF OTHER INCOME OF THE PRESENT YEAR , AVAILABLE ON PAGE NO. 19 OF THE PAPER BOOK, WE FIND THAT THE ASSESSEE IS SHOWING INCOME ON ACCOUNT OF DDB TO THE EXTENT OF RS.592.82 LAC IN THE PRESENT YEAR A ND RS.506.20 LAC IN THE PRECEDING YEAR. AS PER SCHEDULE - G, AVAILABLE ON PAGE NO. 18 OF THE PAPER BOOK, WE FIND THAT THE AMOUNT OF DDB RECEIVABLE HAS GONE DOWN FROM RS.75,61,374/ - TO RS.29,71,427/ - AS ON 31/03/2007. THE DIFFERENCE OF THESE TWO FIGURES IS THE AMOUNT IN DISPUTE I.E. RS.45,89,948/ - . 6. LEARNED D.R. OF THE REVENUE COULD NOT CONTROVERT THIS FINDING OF CIT(A) THAT THE AMOUNT IN DISPUTE WAS ACCOUNTED FOR AS INCOME BY THE ASSESSEE AND THE SAME WAS USED IN THE PRESENT YEAR TO MAKE IMPORT 5 WITHOUT PAYING CUSTOMS DUTY. AS PER THE AUDITED ACCOUNTS, AVAILABLE FOR THE PRESENT YEAR, WHICH CONTAINS THE FIGURES OF PREVIOUS YEAR, WE FIND THAT IN BOTH THE YEARS, THE ASSESSEE IS INCLUDING DDB RECEIVED IN RESPECTIVE YEARS IN OTHER INCOME AND IN THE PRESENT Y EAR , SUCH DDB RECEIVABLE AMOUNT HAS GONE DOWN BECAUSE OF ITS UTILIZATION IN THE PRESENT YEAR. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE . GROUND NO. 2 IS REJE CTED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05 /06/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR