DCIT, Alappuzha V. Kreem Foods Private Ltd, Aroor,Cherthala

ITA 334/COCH/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8267 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 13-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: P M VEERAMANI

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM I .T . A. NO S . 333 & 334 / COCH / 201 8 ASSESSMENT YEARS : 2012 - 13 & 2013 - 14 THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1, ALAPPUZHA. VS. M/S. KREEM FOODS (P) LTD., CHEMICAL INDL. ESTATE, AROOR, CHERTHALA, ALAPPUZHA-688 534. [PAN:AAACK 8728L] (REVENUE - APPELLANT ) ( ASSESSEE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, DR ASSESSEE BY SHRI P.M. VEERAMANI, CA D ATE OF HEARING 26 / 09 /2018 DATE OF PRONOUNCEMENT 03 / 1 0 /2018 O R D E R PER CHANDRA POOJARI, AM: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CIT(A), KOTTAYAM, DATED 18/04/2018 AND PERTAINS TO THE ASSESSMENT YEARS 2012-13 AND 2013-14. 1.1 THERE WAS A DELAY OF 26 DAYS IN FILING THE APPEALS BEFORE THE TRIBUNAL. THE REVENUE HAS FILED A CONDONATION PETITION ACCOMPANIED BY AFFIDAVIT STATING THAT THERE WAS DELAY IN RECEIVING THE DIRECTION OF THE PR. CIT, KOTTAYAM IN C.NO. 408/JUDL/CIT(A)-2424/2018-19 DATED 07/06/2018 DUE TO POSTAL STRIKE AS WELL AS THE ANNUAL GENERAL TRANSFER IN THE DEPARTMENT, HENCE THE SAME WAS RECEIVED BY I.T.A. NO. 333 & 334/COCH/2018 2 THIS OFFICE ONLY ON 06/07/2018 AND CAUSED 21 DAYS DELAY IN FILING THE APPEALS BEFORE THE TRIBUNAL. IN THE CIRCUMSTANCES, IT WAS PRAYED THAT THE DELAY MAY BE CONDONED AND THE APPEALS BE ADMITTED. 1.2 AFTER HEARING BOTH THE PARTIES, WE FIND THERE IS GOOD AND SUFFICIENT CAUSE FOR CONDONING THE DELAY IN FILING THE APPEALS. ACCORDINGLY, WE CONDONE THE DELAY OF 26 DAYS AND IT IS NOT 21 DAYS AS PLEADED BY THE REVENUE AND ADMIT THE APPEALS FOR ADJUDICATION. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1) THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.40,52,472/- MADE ON ACCOUNT OF LAPSED LIABILITY IN RESPECT OF FREEZER DEPOSITS RECEIVED BY THE ASSESSEE NAMED AS DEPOSITS AND ADVANCES FROM CUSTOMERS. 2) THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. SUNDARAM IYENGAR AND SONS (1996) (222 ITR 344) WHICH HELD THAT THE AMOUNT CHANGES ITS CHARACTER WHEN IT BECOMES THE ASSESSEES OWN MONEY BECAUSE OF LIMITATION OR BY ANY STATUTORY OR CONTRACTUAL RIGHT. 3) THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE COMPLETION OF THE TIME IN AGREEMENT OF 4 YEARS OVER, THE ASSESSEE WAS NOT LIABLE TO PAY THE DEPOSIT AMOUNT TO THE DISTRIBUTOR AND HENCE IT BECOMES THE INCOME. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE ADDITIONS FOR BOTH THE ASSESSMENT YEARS BY TREATING THE DEALER DEPOSITS RECEIVED FOR SUPPLY OF FREEZER DURING THE PREVIOUS YEARS AS TAXABLE. THE ASSESSING OFFICER REJECTED THE ARGUMENT OF THE ASSESSEE THAT IT RECOGNIZES INCOME ON ACCOUNT OF FREEZER WHEN THE AGENCY IS TERMINATED AND THEREFORE, NO ADDITION SHOULD BE MADE WHEN THE DEPOSIT IS RECEIVED. I.T.A. NO. 333 & 334/COCH/2018 3 5. ON APPEAL, THE CIT(A) BY RELYING ON THE DECISION OF THE ITAT, COCHIN BENCH IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO. 597/COCH/2010 DATED 08/08/2012 AND DELETED THE ADDITIONS FOR BOTH THE ASSESSMENT YEARS. 6. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. THE LD. AR RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE FIND THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12 IN ITA 229/COCH/2016 DATED 16/11/2016 WHEREIN IN BY FOLLOWING ITS ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO. 597/COCH/2010, THE TRIBUNAL VIDE ORDER DATED 08/08/2012 HELD AS UNDER: 3.4 WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL ON RECORD. IN ASSESSEE'S OWN CASE, THE DIVISION BENCH OF THE TRIBUNAL HAVE DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE, BY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL. THE RELEVANT FINDINGS OF THE TRIBUNAL IN ASSESSEE'S OWN CASE READ AS FOLLOWS: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND RELEVANT MATERIAL ON RECORD. THE ISSUE ARISES IS WHETHER THE DEPOSITS IN RESPECT OF THE FREEZER HAS TO BE CONSIDERED AS INCOME OF THE ASSESSEE OR NOT. AS RIGHTLY SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ONE OF THE ASSESSEES FOR THE EARLIER ASSESSMENT YEAR AND FOUND THAT SUCH DEPOSITS CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE. FOR THE SAKE OF I.T.A. NO. 333 & 334/COCH/2018 4 CONVENIENCE, WE EXTRACT BELOW THE ORDER DATED 08.08.2012 PASSED BY THE TRIBUNAL IN THE CASE OF M/S. KREEM FOODS (P) LTD. IN ITA NO. 597/COCH/2010 RELATING TO ASSESSMENT YEAR 2007-08:- '3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A COPY OF THE ORDER DATED 25-05-2012 PASSED BY THIS BENCH IN THE CASE OF JOJO FROZEN FOOD (P) LTD. AND CREAM PACKS (P) LTD. IN I. T.A. NOS. 655 & 654/COCH/2010 WHEREIN THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE SAID ORDER IN RESPECT OF THE ABOVE SAID ISSUE. '6, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE COPY OF THE ORDER PASSED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HIGH RANGE FOODS (P) L TD, REFERRED SUPRA. IN RESPECT OF THE FIRST ISSUE, I.E.. WHETHER THE DEPOSITS RECEIVED FROM THE DEALERS CAN BE CONSIDERED AS INCOME OF THE ASSESSEE, THE TRIBUNAL HAS OBSERVED AS UNDER. 'THE ASSESSEE RECEIVED DEPOSIT FOR THE SUPPLY OF FREEZER FROM THE CONCERNED VENDORS. THE FREEZERS ARE REQUIRED TO SAFE KEEP THE EDIBLE ICE-CREAMS. THEY ARE REQUIRED FOR THE PURPOSE OF BUSINESS. THE SMALL VENDORS MAY NOT BE INCLINED TO PURCHASE THE FREEZERS AS THEY ARE NOT AFFORDABLE TO THEM CONSIDERING THEIR STATUS. THIS MADE THE ASSESSEE COMPANY TO SUPPLY FREEZER ON THE RECEIPT OF FIXED DEPOSIT AND THE COMPENSATION OF THE SPREAD-OVER PERIOD. THEY ARE ATTACHED WITH A LIABILITY. THE ACCRUAL COMES ONLY ON TERMINATION OF AGREEMENT. -THE BUSINESS NECESSITY .REQUIRES CORDIAL RELATIONSHIP WITH VENDORS. THE ASSESSEE CANNOT TREAT THESE TWO AMOUNTS AS RECEIPTS IN THE NATURE OF INCOME UNLESS THE SO-CALLED AGREEMENT TERMINATED. IN OTHER WORDS IT IS NOT A DEBT OWNED BY THE ASSESSEE. HENCE, UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THIS ISSUE TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY SETTING ASIDE THE ORDERS OF THE AUTHORITIES. BESIDES THE ASSESSEE NEVER TREATED THIS AS INCOME IN THE BOOKS. THE ASSESSEE CONSISTENTLY HOLDING IT SO AS THE AMOUNT I.T.A. NO. 333 & 334/COCH/2018 5 ATTACHED WITH A LIABILITY TO REFUND. THE ASSESSEE NEVER ADMITTED THIS AMOUNT AS INCOME IN THE BOOKS. ONLY ACCRUED INCOME AROSE TO THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR ALSO CAN BE BROUGHT TO TAX UNDER THE INCOME-TAX PROVISIONS WHICH IS A SETTLED LAW. IN OTHER WORDS, THERE MUST BE A DEBT OWNED TO THE ASSESSEE AND UNTIL THIS IS CREATED IN FAVOUR OF THE ASSESSEE AS A DEBT DUE TO THE ASSESSEE, IT CANNOT BE SAID AS INCOME ACCRUED. HENCE, THE DECISION RELIED BY THE JR. D. R. IN THE CASE OF CIT VS. T. V. SUNDARAM LYENGAR AND SONS CITED SUPRA, IS CLEARLY DISTINGUISHABLE ON FACTS. IN THAT CASE, ASSESSEE ITSELF ADMITTED THIS AS INCOME AS PER THE BOOK ENTRIES. HENCE, IT IS DISTINGUISHABLE. THE DECISION RELIED BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. REALEST BUILDERS AND S ERVICES LTD. 307 ITR 202 (SC) IN ADDITION TO THE FOLLOWING CASES - (A) SIDDHESWAR SAHAKARI SAKHAR KARKHANA LTD. VS. CIT & OTHERS - 270 ITR 1 (SC); (B) BHARAT PETROLEUM CORPORATION LTD. VS. CIT - 202 ITR 492 (CAT). (C) SUGAULI SUGAR WORKS (IMPUGNED) LTD. - 236 ITR 518 (SC);5 I.T.A. NOS. 73-79/COCH/2014 (D) STAR INDIA P. LTD. VS. ADD/. CIT - 311 ITR (ST) 235 (MUMBAI). (E) GOVIND PRASAD PRABHU NATH - 171 ITR 417 (ALL.); (F) HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD. -161 ITR 524 (SC); (G) ACE BUILDERS PVT. LTD. VS. CIT - 225 ITR 746 (SC); (H) MANTRA TANTA YANTRA VIGYAN VS. CIT 300 ITR 140 (RAJ,); AND (I) GUARDIAN INDUSTRIES CORPN. VS.ASSISTANT DIRECTOR OF INCOME-TAX - 7 DTK 594 (DEL.). ARE ALSO SUPPORTS THE PLEA OF THE ASSESSEE. THE ACCRUAL HAS BEEN DEALT WITH'IN THE RELIED JUDGMENTS. HENCE, UNDER THE GIVEN SET OF FACTS AND CIRCUMSTANCES, WE BY RELYING ON THE ABOVE I.T.A. NO. 333 & 334/COCH/2018 6 DECISIONS SET ASIDE THE ORDERS OF THE AUTHORITIES AND ALLOW THIS GROUND OF THE ASSESSES AS IT CANNOT BE TREATED AS INCOME FOR THE YEAR RELEVANT UNDER APPEAL.' 7. SINCE THE CO-ORDINATE BENCH HAS ALREADY TAKEN A VIEW ON IDENTICAL ISSUE, BY FOLLOWING THE SAID DECISION, WE HOLD THAT THE DEPOSITS COLLECTED FROM VENDORS CANNOT BE CONSIDERED AS THE INCOME OF THE ASSESSEE SO LONG AS THE AGENCY AGREEMENT CONTINUES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE IN THE HANDS OF BOTH THE ASSESSEES AND DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS ISSUE IN THE HANDS OF BOTH THE ASSESSEES HEREIN'. 5. THE ONLY OBJECTION OF THE LD, DR IS THAT THE APPEAL WAS FILED AGAINST THE ORDER OF THE TRIBUNAL AND THE SAME IS PENDING BEFORE THE HIGH COURT. BUT ON A QUERY FROM THE BENCH, THE LD. DR SUBMITTED THAT HE DOES NOT HAVE KNOWLEDGE OF ANY STAY GRANTED BY THE HON TILE HIGH COURT ON THE OPERATION OF THE EARLIER ORDER OF THE TRIBUNAL. SINCE THE LD. CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL, WE 6 I. T.A. NOS. 73-79/COCH/2014 ARE OF THE CONSIDERED OPINION THAT MERE PENDING OF THE APPEAL BEFORE THE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL CANNOT BE A REASON TO TAKE A DIFFERENT VIEW. THEREFORE, BY FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEAR, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DEPOSITS COLLECTED BY THE ASSESSEE FOR FREEZER CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE, 6. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE STAND DISMISSED.' 3.5 ADMITTEDLY, THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE DIVISION BENCH OF THE TRIBUNAL, CITED SUPRA. BOTH THE PARTIES HAVE SUBMITTED THAT THE ISSUE IS PENDING FOR ADJUDICATION BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. NO CONTRARY HIGH COURT JUDGMENT HAS BEEN CITED. HENCE, RESPECTFULLY FOLLOWING THE ORDER OF THE DIVISION BENCH OF THE TRIBUNAL, IN ASSESSEE'S OWN CASE (SUPRA), WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. I.T.A. NO. 333 & 334/COCH/2018 7 7.1 IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED FOR BOTH THE ASSESSMENT YEARS. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD OCTOBER, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 3 RD OCTOBER, 2018 GJ COPY TO: 1. M/S. KREEM FOODS (P) LTD., CHEMICAL INDL. ESTATE, AROOR, CHERTHALA, ALAPPUZHA-688 534. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALAPPUZHA. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYAM 4. THE PR. COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN