The ACIT, Circle-4, Surat V. M/s. Rashmi Yarns Ltd., Surat

ITA 3380/AHD/2010

• Counselvise Citation: 338020514 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S B VAIDHYA
• Keywords: Opportunity of being heard; Cost of acquisition
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R.MEENA, ACCOUNTANT MEMB ER THE ACIT, CIRCLE-4, ROOM NO. 223, AAYAKAR BHAVAN, SURAT (APPELLANT) VS M/S RASHMI YARNS LTD, 104, NAVKAR VILLA, DEEPA COMPLEX, ADAJAN ROAD, SURAT PAN: AABCR1498P (RESPONDENT) REVENUE BY: SRI P.L. KUREEL, SR.D.R. ASSESSEE BY: SRI S.B. VAIDHYA, A.R. DATE OF HEARING : 18-11-2013 DATE OF PRONOUNCEMENT : 24-01-20 14 / ORDER PER : T.R.MEENA, AC COUNTANT MEMBER:- THIS APPEAL IS EMANATING FROM THE ORDER OF LD. CIT (A)-IV, SURAT DATED 29-09-2010 FOR A.Y. 2006-07. ITA NO. 3380/AHD/2010 ASSESSMENT YEAR 2006-07 I.T.A NO.3380/AHD/2010 A.Y. 2006-07 PAGE NO ACIT VS. M/S RASHMI YARNS LTD 2 2. THE SOLE GROUND OF APPEAL IS AGAINST DELETING TH E ADDITION OF RS. 72,28,142/- MADE ON ACCOUNT OF UNUTILIZED MODVAT CR EDIT. 3. THE AO OBSERVED THAT ASSESSEE HAD UNUTILIZED MOD VAT CREDIT OF RS. 72,28,142/-. THE AO GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. AFTER CONSIDERING THE ASSESSEES REPLY, HE GAVE DETAILED FINDING ON PAGE NO. 4-18. HE ANALYZED SECTION 43-B RULE 57A O NWARD OF CENTRAL EXCISE RULES 1944, UNION OF INDIA VS. DELHI CLOTH A ND GENERAL MILK LTD AIR (1963) S C 791, S.H. KELKAR & CO. LTD VS. DY C IT (1993) 44 ITD 170 (BOM), EICHER MOTOR LTD VS. UNION OF INDIA 106 ELT (S.C), GRASIM INDUSTRY LTD VS. COLLECTOR OF CUSTOM (2002) 128 STC 349 (S.C.), MARUTI UDYOG LTD VS. DCIT [2005] 92 ITD 119 (DELHI), DCIT VS. GLAXO SMITHCLINE CONSUMER HEALTHCARE LTD. [2007] 107 ITD 343 (CHANDI GARH) & HONDA SEIL POWER PRODUCTS LTD DCIT [2008] 1 DTR (DELHI) (TRIB) 177. AO THUS MADE ADDITION OF RS. 72,28,142/- IN THE ASSESSEES INCOM E. 4. BEING AGGRIEVED BY THE ORDER OF AO ASSESSEE CARR IED THE MATTER BEFORE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS U NDER:- 2.2. I HAVE GONE THROUGH THE FACTS OF THE CASE, TH E ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. IN THE CASE OF TH E APPELLANT THE EXCISE DUTY ON RAW MATERIAL WAS AT A HIGHER RATE TH AN SALES. FOLLOWING INCLUSIVE METHOD, WHICH IS MANDATORY FOR COMPUTATION OF INCOME UNDER THE I.T. ACT WOULD RESULT IN REDUCTION OF PROFITS BY THE AMOUNT OF EXCESS EXCISE DULY PAID ON RAW MATERIAL, THAN WHAT WAS COLLECTED ON SALE OF FINISHED GOODS. THIS IS SO BEC AUSE PURCHASE COST OF THE APPELLANT WOULD RISE BY A HIGHER AMOUNT. AS FAR AS THE APPELLANT IS CONCERNED HIS INCOME FOR THE YEAR (AS PER INCOME TAX ACT) IS OVER STATED WHEN FOLLOWING THE EXCLUSIVE ME THOD. THEREFORE, IN MY OPINION, THE APPELLANT WAS ENTITLED TO CLAIM UNA VAILED DUTY AS IT WAS A COST TO IT. THE CLAIM OF THE APPELLANT THERE FORE HAS TO BE UPHELD. I.T.A NO.3380/AHD/2010 A.Y. 2006-07 PAGE NO ACIT VS. M/S RASHMI YARNS LTD 3 OPERATION OR OTHERWISE OF SECTION 43B IN SUCH SITUA TION IS NOT MATERIAL. THE A.O. WILL ALLOW DEDUCTION TO THE APPE LLANT. THE APPEAL IS ALLOWED. 3. BEFORE WE PART, IT WOULD BE FAIR TO MENTION THAT THE METHOD FOLLOWED BY THE APPELLANT FOR THE YEAR IS IN ORDER; THE SAME WILL HAVE EFFECT ON ITS INCOME IN SUBSEQUENT YEARS WHICH THE A.O. OUGHT TO CONSIDER. AN ANALYSIS OF THE SUBSEQUENT YEARS EXCIS E ACCOUNT AND PAYMENTS WERE MADE BY THE UNDERSIGNED. THE A.R. EXP LAINED THAT THE EXCISE RATES ON BOTH PURCHASES AND SALES WERE 8.16% AND THERE WAS NO EFFECT IN THE P. & L. ACCOUNT. IT WAS ALSO EXPL AINED THAT THE DEMANDS RAISED IN EXCISE ASSESSMENT, WHICH WERE PAI D THROUGH THE ACCUMULATED BALANCE, WAS NOT CLAIMED AS DEDUCTION I N P, & L. ACCOUNT AND THEREFORE THIS WOULD HAVE NO EFFECT ON INCOME IN SUBSEQUENT YEARS. IT WAS EXPLAINED THAT THE ACCUMUL ATION OF EXCISE ON CREDIT ACCOUNT OF HIGHER RATES ON RAW MATERIAL DURI NG THE YEAR WOULD EXHAUST IN DUE TIME OVER SEVERAL YEARS. ON A QUERY, IT WAS ACCEPTED THAT EXCISE DULY ON VALUE ADDITION IN SALES WAS ALS O PAID OUT OF ACCUMULATED MODVAT BALANCE AND NOT IN CASH AND TO T HAT EXTENT IT WAS AGREED BY THE A.R. THAT PROFITS OF SUBSEQUENT Y EARS WERE UNDERSTATED. THIS IS SO BECAUSE THE AMOUNTS OF ACCU MULATED MODVAT BALANCES WOULD HAVE BEEN CLAIMED AS DEDUCTION AND A LLOWED TO THE APPELLANT IN THIS YEAR. THE AO SHOULD LOOK INTO TH IS UNDERSTATEMENT OF INCOME IN SUBSEQUENT YEARS AND TAKE MEASURES TO DET ERMINE THE CORRECT INCOME. 5. REVENUE IS NOW IN APPEAL BEFORE US. 6. LD. DR RELIED UPON THE ORDER OF AO WHEREAS LEARN ED COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). FURTHER AS SESSEE REITERATED ALL THE ARGUMENT MADE BEFORE THE CIT(A). BEFORE US, HE ALS O RELIED ON DELHI HIGH COURT DECISION IN CASE OF CIT VS. SHANTEL INDIA LTD ORDER DATED 26 TH SEPTEMBER, 2013, DECISION OF ITAT AHMEDABAD BENCHES IN ITA NO. 2860/AHD/2007 A.Y. 2003-04 IN THE CASE OF DCIT VS. JAY LAMINART PVT LTD DATED 30-06-2010 & DECISION OF ITAT CHANDIGARH BENC H (SPEICAL BENCH) IN I.T.A NO.3380/AHD/2010 A.Y. 2006-07 PAGE NO ACIT VS. M/S RASHMI YARNS LTD 4 THE CASE OF DCIT VS. GLAXO SMITHKLINE CONSUMER HEAL THCARE LTD DATED 20 TH JULY, 2007 IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL ON RECORD. THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD OF MODVAT /CENVAT. THERE IS NO EFFECT ON THE PROFIT BY ADDING IT. THE HONBLE HIGH COURTS AS WELL AS SUPREME COURT HAS CONFIRMED THIS VIEW, THEREFORE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A). AC CORDINGLY, WE DISMISS THE REVENUES APPEAL. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (MUKUL KR. SHRAWAT) ( T.R. MEENA) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD : DATED 24/01/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,