M/s. Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd., JODHPUR V. DCIT, BHILWARA

ITA 336/JODH/2013

• Counselvise Citation: 33623314 RSA 2013
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 336/JODH/2013 (A.Y. 2009-10) M/S. BHAILWARA ZILA DUGDH, VS. DCIT, CIRCLE, UTPADAK SAHAKARI SANGH LTD., BHILWARA. C/O SHRI U.C. JAIN, ADVOCATE, SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN NO. AAAAB 0214 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 22/04/2014. DATE OF PRONOUNCEMENT : 24/04/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 18/03/2013 OF LD. CIT(A), AJMER. THE FOLLOWING GRO UNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 80,0 0,000/- MADE BY 2 THE LD. AO FOR THE PREMIUM PAID TO THE LIC FOR THE POLICY OF GRATUITY FUND. 2. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE LD . AO FOR RS. 1,17,300/- BEING THE ENHANCED VALUATION OF THE CLOS ING STOCK BY THE LD. AO. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE LEVY OF INTEREST CHARGED BY A.O. U/S 234A, 234B & 234C. 4. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL AND/OR ALTERNATIVE GROUND AT OR BEFORE THE HEARING OF APPEAL. 5. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 2 GROUND NOS. 4 & 5 ARE GENERAL IN NATURE, SO DO NOT REQUIRE COMMENTS ON OUR PART. VIDE GROUND NO. 1, THE GRIEV ANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 80 LAC MADE BY THE ASSESSING OFFICER FOR THE PREMIUM PAID TO THE LIC F OR THE POLICY OF GRATUITY FUND. 3 . DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE VIDE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE C ASE OF CIT VS. TEXTOOL CO. LTD. REPORTED AT (2013) 216 TAXMAN 327. 4 . LEARNED D.R. IN HIS RIVAL SUBMISSIONS, ALTHOUGH, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW, BUT COULD NOT CONT ROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 3 5 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE VIDE AFORESAID REFERRED TO JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER:- FROM A BARE READING OF SECTION 36(L)(V) OF THE ACT, IT IS MANIFEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMP LOYER SHOULD NOT HAVE ANY CONTROL OVER THE FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEES. IN THE INSTANT CASE, IT IS EVIDENT FROM THE FINDINGS RECORDED BY THE COMMISSIONER AND AFFIRMED BY THE TRIBUNAL THAT THE ASSESSEE HAD ABSOLUTELY NO CONTROL OVER TH E FUND CREATED BY THE LIC FOR THE BENEFIT OF THE EMPLOYEES OF THE ASSESSE E AND FURTHER ALL THE CONTRIBUTION MADE BY THE ASSESSEE IN THE SAID FUND ULTIMATELY CAME BACK TO THE TEXTOOL EMPLOYEES GRATUITY FUND, APPROVED BY THE COMMISSIONER WITH EFFECT FROM THE FOLLOWING PREVIOUS YEAR. THUS, THE CONDITIONS STIPULATED IN SECTION 36(L)(V) OF THE ACT WERE SATISFIED. HAVING REGARD TO THE FACTS FOUND BY THE COMMISSIONER AND AFFIRMED BY THE TRIBUNAL, NO FAULT CAN BE FOUND WITH THE OPINION EXPRESSED BY TH E HIGH COURT, WARRANTING INTERFERENCE OF THIS COURT. 6 . WE, THEREFORE, KEEPING IN VIEW THE RATIO LAID DOW N BY THE HON'BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA), DELETE THE ADDITION MADE BY THE ASSES SING OFFICER AND SUSTAINED BY THE LD. CIT(A). 4 7. GROUND NO. 2 RELATES TO THE SUSTENANCE OF ADDITION OF RS. 1,17,300/- BEING THE ENHANCED VALUATION OF THE CLOSING STOCK B Y THE ASSESSING OFFICER. 8. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD VALUED 2550 KG OF COW GHEE @ RS. 140 PER KG IN THE END OF THE YEAR. HOWEVER, COW GHEE WAS P URCHASED @ RS. 186/- PER KG FROM BIKANER DAIRY. ACCORDING TO THE ASSESS ING OFFICER, THE ASSESSEE HAD NOT GIVEN ANY REASON FOR VALUING THE G HEE AT LOWER RATE, HE THEREFORE, ENHANCED THE CLOSING STOCK BY AN AMOUNT OF RS. 1,17,300/- BY ADDING RS. 46 PER KG. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED AS UNDER:- THE A.O. MADE TRADING ADDITION OF RS. 1,17,300/- F OR TAKING LOWER VALUE OF COW GHEE IN CLOSING STOCK. DURING THE COURSE OF ASSESSMENT VIDE LETTER DATED 0 5/09/2011 THE ASSESSEE SUBMITTED THE COSTING OF GHEE AS UNDER: COST OF ONE KG. FAT FROM MILK-FAT RATE 125.75X100 RECOVERY FROM MILK =RS. 128.97 97.5 CONVERSION CHARGES RS. 11.00 RS. 139.97 TAKEN RS. 140/- PER KG. THEREFORE THE A.O'S SAYING THAT ASSESSEE COULD NOT EXPLAIN THE REASON IS NOT CORRECT. THE METHOD OF VALUATION IS CONSISTENTL Y FOLLOWED BY THE 5 ASSESSEE OF CLOSING STOCK IS 'AT COST OR MARKET PRI CE WHICHEVER IS LESS', HENCE THE COST TAKEN @ 140/- PER KG. DESERVE TO BE ACCEPTED. CIT VS. DYNAVISION LTD., (2012) 26 TAXMANN.COM 40( SC). MOREOVER HON'BLE IT AT JAIPUR BENCH IN THE CASE OF ACIT V/S KALSAN ENGG. INDIA PVT.LTD., AS REPORT IN XXXVII TW PAGE 1 52 HAS HELD THAT AS MUCH AS CLOSING STOCK OF THIS YEAR WILL HAVE TO BE TAKEN AS OPENING STOCK OF THE FOLLOWING NEXT YEAR AND THIS PROCESS WILL GO ON WITH NO BENEFIT TO THE REVENUE, THEREFORE THE EXERCISE OF THE A.O. IN TINKERING WITH THE VALUE OF CLOSING STOCK IS FUTILE. IN VIEW OF THE ABOVE THE TRADING ADDITIONS DESERVE TO BE DELETED. 10 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, CONFIRMED THE ADDITION MADE BY THE ASSESS ING OFFICER BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER, IT IS SEEN THAT FOR VALUING THE CLOSING STOC K OF GHEE, ASSESSEE HAS ADOPTED THE RATE OF RS. 140 PER KG STATING THAT THI S IS THE COST OF 1KG OF GHEE AS PER ASSESSEE'S OWN PRODUCTION UNIT AND ASSESSEE IS VALUING THE CLOSING STOCK AT COST OR MARKET PRICE WHICHEVER IS LESS. FR OM THE ASSESSEE'S OWN CONTENTIONS, IT IS APPARENT THAT ASSESSEE HAS NOT V ALUED THE COW GHEE AT THE COST THAT WAS OBVIOUSLY RS. 186 PER KG AS THE GHEE WAS PURCHASED FROM BIKANER DIARY AT THIS RATE. ALSO, IT HAS NOT BEEN S HOWN THAT MARKET PRICE WAS LOWER THAN ABOVE RATE FOR THE SAME QUALITY OF GHEE. ASSESSEE IS NOT ENTITLED TO APPLY ITS OWN COST PRICE FOR THE COMMODITY WHICH HA S BEEN PURCHASED WHILE VALUING THE CLOSING STOCK. IN THIS CONTEXT, IT IS S UFFICIENT TO MENTION THAT IT HAS BEEN HELD IN THE CASE OF CIT VS BRITISH PAINTS INDI A LTD. (54 TAXMAN 499) BY HON'BLE SUPREME COURT THAT ANY SYSTEM OF ACCOUNTING WHICH DOES NOT INCLUDE ALL THE COST IS LIKELY TO RESULT IN A DISTO RTED PICTURE OF TRUE STATE OF BUSINESS FOR THE PURPOSE OF COMPUTING CHARGEABLE IN COME. THE PROFIT OF ONE YEAR IS LIKELY TO BE SHIFTED IN ANOTHER YEAR WHICH IS A INCORRECT METHOD OF COMPUTING PROFIT FOR THE PURPOSE OF ASSESSMENT. IN VIEW OF ABOVE DISCUSSION, THE ABOVE ADDITION OF RS. 1,17,300/- IS CONFORMED. NOW THE ASSESSEE IS IN APPEAL. 6 11 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT W HEN THE OPENING STOCK WAS ACCEPTED IN THE SUBSEQUENT YEAR, THERE WA S NO REASON TO DISTURB THE CLOSING STOCK FOR THE YEAR UNDER CONSID ERATION. ALTERNATIVELY, IT WAS SUBMITTED THAT THE BENEFIT OF THIS ENHANCEME NT SHOULD BE GIVEN IN THE SUBSEQUENT YEAR. 12. IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUBMITTED TH AT THE ASSESSING OFFICER MADE THE ADDITION AFTER TAKING THE ACTUAL V ALUE OF THE PURCHASES. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMI NG THE ADDITION MADE BY THE ASSESSING OFFICER. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY VALUING THE CLOSING STOCK AFTER TAKING I NTO CONSIDERATION THE PURCHASE PRICE. WE, THEREFORE, ARE OF THE VIEW THA T THE ADDITION SO MADE WAS JUSTIFIED, HOWEVER, THE ALTERNATIVE PLEA TAKEN BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE BENEFIT OF THIS A DDITION MADE IN THE CLOSING STOCK TO BE GIVEN IN THE SUCCEEDING YEAR IN THE VALUATION OF THE OPENING STOCK DESERVES TO BE ACCEPTED. WE, THEREFO RE, DIRECT THE ASSESSING OFFICER TO GIVE THE BENEFIT AS PER LAW TO THE ASSESSEE. 7 14. THE NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE CH ARGING OF INTEREST UNDER SECTION 234A, 234B & 234C OF THE I.T. ACT, 19 61. AS REGARDS TO THIS ISSUE, IT WAS COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORDINGLY. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. (ORDER PRONOUNCED IN THE COURT ON 24 TH APRIL, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH APRIL, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.