PARLE BISCUITS P.LTD, MUMBAI V. ASST CIT 10(3)(2)(OLD RD (2), MUMBAI

ITA 387/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2065 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 14A

Judgement Text

ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.387/MUM/2015 FOR A Y : 20100-11) PARLE BISCUIT PVT. LTD NORTH LEVEL CROSSING VILE PARLE (E) MUMBAI-400057 PAN : AAACP0485D VS. DCIT, 13(1) (2), ROOM NO. 218, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 (APPELLANT) (RESPONDENT) ITA NO.398/MUM/2015 FOR A Y : 20100-11 DCIT, 13(1) (2), ROOM NO. 218, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 VS. PARLE BISCUIT PVT LTD NORTH LEVEL CROSSING VILE PARLE (E) MUMBAI-400057 PAN : AAACP0485D (APPELLANT) (RESPONDENT) ASSESSEE BY SH. GIRISH DAVE SR ADVOCATE WITH SH ANAND KADAM ADVOCATE REVENUE BY SH. D.V. SINGH DR DATE OF HEARING 25.08.2016 DATE OF PRONOUNCEMENT 04.11.2016 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH JUDICIAL MEMBER : 1. THESE CROSS APPEALS BY ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS) 20, MUMBAI, DATED 22 OCTOBER 2014 FOR ASSESSMENT YEAR 2010-11. AS BOTH THE APPEALS ARE FILED AGAINST THE SAME ORDER THE PARTIES, THUS CLUBBED, HEARD TOGETHER AND ARE DECIDED BY CO MMON ORDER, TO AVOID THE CONFLICTING OPINION. THE ASSESSEE HAS BASICALLY RAI SED FOUR GROUNDS OF APPEAL: ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 2 (I) THE LD CIT(A) ERRED IN CONFIRMING THE ACTION OF AO AND REDUCING THE INCOME WHILE COMPUTING DEDUCTION UNDER SECTION 80IC WHICH IS NOT A FIRST-DEGREE OR APPROXIMATE PROFIT OF BUSINESS IN RESPECT OF INTERE ST INCOME, SCRAP SALES, TRANSPORT CLAIM OF DEPOT TRANSPORT. (II) THE LD CIT (A) ERRED IN UPHOLDING THE ADDITION OF R S. 3,19,03,450/- ON ACCOUNT OF EXCESS CONSUMPTION OF THE MATERIAL. (III) THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. (IV) THE LD CIT(A) ERRED IN NOT GRANTING CORRECT TDS CRE DIT OF RS. 40,98,401/- BASED ON THE ORIGINAL TDS CERTIFICATES AS PER RETU RN OF INCOME. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(A) WAS CORRECT IN HOLDING THAT THE INC OME OF RS.1,32,23,899/- RECEIVED ON WASTE GENERATED FROM MANUFACTURING PROC ESS IS TO BE INCLUDED IN BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOU RCES FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 IC? 3. WE HAVE HEARD LD AR OF THE ASSESSEE AND THE LD DR F OR REVENUE AND GONE THROUGH THE MATERIAL PLACED BEFORE US. THE LEARNED AR OF ASSESSEE FILED A CHART/ TABULATION OF GROUNDS DECIDED IN EARLIER YEARS AND WOULD SUBMIT THAT ALL THE GROUNDS RAISED BY ASSESSEE AS WELL AS BY REVENUE IN THE PRESENT APPEALS ARE COVERED EITHER IN FAVOUR OR AGAINST THE ASSESSEE BY VARIOUS DECISIONS IN ASSESSEES OWN CASE IN EARLIER YEARS. THE LEARNED A ND AR OF THE ASSESSEE HAS ALSO PLACED ON RECORD THE DECISIONS OF ITAT MUMBAI, IN A SSESSEES OWN CASE FOR VARIOUS ASSESSMENT YEARS. THE LD DEPARTMENTAL REPRE SENTATIVE NOT DISPUTED THE FACTUAL POSITION OF VARIOUS DECISIONS PLACED ON REC ORD BY LD AR OF ASSESSEE. ITA NO.387/MUM/ 2015 (ASSESSEES APPEAL) 4. GROUND NO.1 RELATES TO REDUCING THE OTHER INCOME WH ILE COMPUTING THE DEDUCTION UNDER SECTION 80 IC TO THE EXTENT OF RS. 52,21,889/- WHICH CONSIST OF INTEREST ON BANK DEPOSITS, GOVERNMENT SECURITIES, S ECURITY DEPOSITS AND LOANS TO EMPLOYEES OF RS. 530030/-, SALES OF PRESCRIPTION OF RS. 19,13,349/- AND TRANSPORT CLAIM OF DEPOT TRANSPORT OF RS. 27,78,510/-. ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 3 5. WE HAVE SEEN THAT SIMILAR ISSUES AROSE FOR ASSESSME NT 2008-09 AND ASSESSMENT YEAR 2009-10 AND THE SAME WITH CONSIDERED BY TRIBUN AL VIDE ITA NO.8199/M/2011, WHEREIN SIMILAR CLAIMS OF INTEREST INCOME ON BANK DEPOSITS AND TRANSPORT CLAIM WAS DECIDED AGAINST THE ASSES SEE AND CLAIM RELATED WITH SCRAPE SALE WAS DECIDED IN FAVOUR OF ASSESSEE HOLDI NG AS UNDER : 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. UNDOUBTEDLY THE ASSESSEE MAY HAV E SOME ARRANGEMENT WITH ITS BANK WHICH THE AMOUNT EXCEEDING A CERTAIN LIMIT WOULD AUTOMATICALLY BE CONVERTED INTO FLEXIBLE DEPOSIT RECEIPTS. BUT NE VERTHELESS THE NATURE OF INCOME IS INTEREST ON BANK DEPOSITS. THEREFORE WE D O NOT FIND ANY REASON TO TINKER WITH THE FINDING OF LD CIT(A). 9. THE SECOND ITEM RELATES TO S CRAP SALES OF DRUM, THE BAGS ETC. THE DETAILS OF WHICH WERE PROVIDED TO THE AO AND THE SAME HAVE B EEN EXHIBITED AT PAGE 77 OF THE PAPER BOOK. THE AO WAS OF THE OPINION THA T SUCH A SCRAP SALE HAS NO DIRECT LINK WITH THE PROFIT AND GAINS DERIVED FR OM AN INDUSTRIAL UNDERTAKING MAKING IT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IC OF THE ACT AND PROFITS FROM SUCH UNDERTAKING HAS TO BE DISTING UISHED AS TO WHETHER THEY BELONG TO THE CATEGORY OF FIRST-DEGREE PROFIT OR AUXILIARY PROFIT. THE AO CONCLUDED THAT IT CANNOT BE SAID THAT SCRAP THAT HA S BEEN GENERATED IS THE FIRST-DEGREE APPROXIMATE PROFIT OF BUSINESS OF THE ASSESSEE. THE BUSINESS OF THE ASSESSEE IS TO MAKE ITEM OF CONFECTIONERY ETC, AND DOES NOT EARN INCOME BY SALE OF SUCH A SCRAP AND ACCORDINGLY EXCLUDED TH E ENTIRE SALE OF A SCRAP TO THE TUNE OF RS. 74,08,714/-FROM THE ELIGIBLE PROFIT . 10. BEFORE THE LD CIT (A), THE ASSESSEE ONCE AGAIN FURNISHED THE DETAILS AND SUBMITTED THAT OUT OF THE TOTAL SCRAP SALES AMOUNTI NG TO RS. 74,08,714/-, RS.27,14,604/- BELONGED TO THE WASTE OCCURRED DURIN G BISCUIT MANUFACTURING PROCESS AND THEREFORE IT CANNOT BE SAID THAT SUCH A SCRAP SALE HAS NO DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY OF THE ASSESS EE. THE LD CIT(A) WAS CONVINCED TO THIS EXTENT THAT WASTE OCCURRED DURING BISCUIT MANUFACTURING PROCESS ARE PART OF THE MANUFACTURING PROCESS AND T HEREFORE ARE ELIGIBLE FOR INCLUDING DEDUCTION UNDER SECTION 80 IC. SO FAR AS THE BALANCE AMOUNT OF RS.46,94,110/- IS CONCERNED THE LD CIT(A) AGREED W ITH THE AO. 11. BEFORE US, THE LEARNED COUN SEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAY 77 OF THE PAPER BOOK AND SUBMITTED THAT AO AND THE LEARNED CIT(A) BOTH HAVE ERRED IN NOT CONSIDERING THE SALE OF A SCRAP S O FAR AS PART-B OF THE DETAILS IS CONCERNED. 12. WE HAVE CAREFULLY PERUSED TH E DETAILS AS EXHIBITED AT PAGE 77 OF THE PAPER BOOK . WE FIND THAT THERE ARE FEW ITEMS WHICH ARE PART OF PLANT AND MACHINERY IS USED IN THE MANUFACTURING PROCESS. THA T BEING SO, IN OUR HUMBLE OPINION, THESE ITEMS ARE PART OF CAPITAL ASS ET AND ANY SALE OF SCRAP WOULD GO TO REDUCE THE WRITTEN DOWN VALUE OF THE AS SET. TO THIS EXTENT WE HAVE NO HESITATION TO CONFIRM THE FINDING OF THE LO WER AUTHORITIES. WE FIND ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 4 THAT THE TOTAL OF THESE ITEMS COMES TO RS. 11,36,17 3/-. WE ACCORDINGLY DIRECT THE AO TO RESTRICT THE EXCLUSION FROM THE ELIGIBILI TY PROFIT UNDER SECTION 80 IC TO THE EXTENT OF RS. 1136173/-ONLY. THEREFORE ASSES SEE GETS ELIGIBILITY FOR DEDUCTION AT RS. 3557937/-UNDER SECTION 80 IC OF TH E ACT. 13. THE NEXT ITEM RELATES TO TRA NSPORT CLAIM OF DEPOT TRANSPORT TO THE TUNE OF RS. 15,34,970/-. IT APPEARS THAT THIS AMOUNT IS INC LUDED IN THE TOTAL MISCELLANEOUS RECEIPT OF RS. 15,67,986/-. DETAILS O F WHICH HAVE BEEN EXHIBITED FROM PAGES 78 TO 89 OF THE PAPER BOOK. AS THE AO HAS EXCLUDED THE ENTIRE MISCELLANEOUS RECEIPT FROM THE ELIGIBILITY O F THE DEDUCTION UNDER SECTION 80 IC OF THE ACT, HE HAS NOT DISCUSSED THE TRANSPORT CLAIM SEPARATELY. 14. BEFORE THE LD CIT(A), THE AS SESSEE RETREATED ITS SUBMISSION BUT WITHOUT ANY SUCCESS. 15. BEFORE US, THE LEARNED COUNS EL FOR THE ASSESSEE DRAWING OUR ATTENTION TO PAGES 78 TO 89 OF THE PAPER BOOK SUBMITTED THAT TH ESE CLAIMS ARE MADE FROM THE TRANSPORTERS FOR DELAY IN TRANSPORTATION OF GOO DS TO THE PARTIES. AS PER THE AGREEMENT, IF THE TRANSPORTERS FAILED TO TRANSPORT THE GOODS ON THE TIME, NOMINAL CHARGE WAS DEDUCTED FROM THE TRANSPORT PAYM ENT. THESE CHARGES BEING PART OF THE BUSINESS OF THE ASSESSEE THEREFOR E THESE SHOULD BE ALLOWED TO BE ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SEC TION 80 IC OF THE ACT. 16. PER CONTRA, THE LEARNED DE PARTMENT REPRESENTATIVE STRONGLY RELIED UPON THE ORDER OF LOWER AUTHORITIES.. 17. WE HAVE CAREFULLY PERSUED T HE DETAILS AS EXHIBITED FROM PAGES 78 TO 89 OF THE PAPER BOOK. WE FIND THAT THESE CLAIMS HAVE BEEN MADE BY THE ASSESSEE FOR DELAY IN SERVICES OF GOODS. HOWEVER, WE FIND THAT T HE TRANSPORTATION EXPENSES HAVE BEEN CHARGED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. THEREFORE, ANY RECOVERY FROM THE TRANSPORTER FOR IMPROPER SERVICE WOULD NOT, IPSO FACTO, MAKE IT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC O F THE ACT AS IT IS CLEAR FROM THE DETAILS, THE CLAIM OF RS. 15,34,970/- HIS INCOM E FROM OTHER SOURCES AND THE REVENUE AUTHORITIES HAVE RIGHTLY EXCLUDED THIS AMOUNT FROM THE ELIGIBILITY OF SECTION 80 IC OF THE ACT. 18. TO SUM UP THE ENTIRE GRIEVAN CES OF THE ASSESSEE RAISED AS PER GROUND NO.1, THE ASSESSEE GETS ELIGIBILITY FOR DEDUCTION UNDER S ECTION 80 IC TO THE EXTENT OF RS. 355797/-. GROUND NO1 IS PARTLY ALLOWED. 6. THUS RESPECTFULLY FOLLOWING THE DECISION OF COORDIN ATE BENCH FOR AY 2008-09 THE GROUND NO.1 RAISED IN THE PRESENT APPEAL IS DEC IDED WITH SIMILAR DIRECTIONS. 7. GROUND NO. 2 RELATES TO EXCESS CONSUMPTION OF RAW M ATERIAL. WE HAVE SEEN THAT SIMILAR DISALLOWANCE WAS MADE FOR ASSESSMENT YEAR 2 006-07 AND IN EARLIER YEARS AS WELL. THE ASSESSEE CARRIED THE MATTER BEFORE THI S TRIBUNAL AND THE ISSUE WAS RESTORED TO THE FILE OF AO FOR DECIDING THE SAME HO LDING AS UNDER : ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 5 5. AS HELD BY THE TRIBUNAL IN ASSESSEES OW N CASE FOR ASSESSMENT YEARS 2000- 01 TO 2003-04, IF FORMULA OF 108.190 IS TO BE APPLI ED FOR THE CMUS THEN IT IS NECESSARY THAT ADJUSTMENTS WHICH ARE ALLOWED IN CAS E OF OWN MANUFACTURING UNITS OF THE ASSESSEE SHOULD ALSO BE ALLOWED IN CAS E OF THE CMUS. THE ISSUE ACCORDINGLY WAS RESTORED BY THE TERMINAL TO THE FIL E OF AO TO ALLOW SUCH ADJUSTMENT AFTER MAKING NECESSARY VERIFICATION. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS THE MATERIAL FA CTS RELEVANT THERETO ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2000-01 TO 2003 -04, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR THE CIT AT AND RESTOR ED THIS ISSUE TO THE FILE OF AO FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECT ION AS GIVEN IN ASSESSMENT YEAR 2000-01 TO 2003-04. GROUND NO.1 OF THE ASSESSE ES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES . 8. THUS WE RESPECTFULLY FOLLOWING THE ORDER OF COORDIN ATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 9010/M/2010 DATED 11.04.2014, FOR ASSESSMENT YEAR 2006-07 RESTORED THIS ISSUE TO THE FILE OF AO FOR FRESH CON SIDERATION IN ACCORDANCE WITH THE SAME DIRECTION. ACCORDINGLY THIS GROUND IS ALLO WED FOR STATISTICAL PURPOSES. 9. GROUND NO.3 RELATES TO THE DISALLOWANCE MADE UNDER SECTION 14 A OF THE ACT. WE HAVE SEEN THAT SIMILAR GROUNDS OF APPEAL CAME UP CO NSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 AND IN 2009-10. THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 6661/M/2012 PASSED THE FOLLOWING ORDER : 7. THE THIRD GRIEVANCE RELATES TO THE DISALLOWANCE UNDER SECTION 14B AMOUNTING TO RS 38,12,000/-. THE SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN AY 2008-09 QUA GROUND NO2. IN ITA NO.8 199/M/11 AND AT PARA 24 THE TRIBUNAL HELD THAT DISALLOWANCE OF RS. 100,0 00/- WOULD MEET THE END OF JUSTICE CONSIDERING THE BALANCE-SHEET OF THE ASS ESSEE IN TOTALITY. IN OUR CONSIDERED OPINION AND RESPECTFULLY FOLLOWING THE D ECISION OF COORDINATE BENCH, A DISALLOWANCE OF RS. 1,00,000/- WOULD MEET THE END OF JUSTICE. WE, ACCORDINGLY DIRECT THE AO TO RESTRICT THE DISALLOWA NCE OF RS,100,000/-. GROUND NO.1 IS PARTLY ALLOWED. 10. THUS WE RESPECTFULLY FOLLOWING THE ORDER OF COORDIN ATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 6661/M/2012 DATED 20.05.2015 , FO R ASSESSMENT YEAR 2009-10 THE DISALLOWANCE UNDER SECTION 14 A IS RESTRICTED T O RS. 100,000/-. ACCORDINGLY THIS GROUND OF APPEAL IS PARTLY ALLOWED. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ITA NO. 387 & 3 98/MUM/2015 PARLE BISCUIT P LTD 6 ITA NO.398/MUM/2015 ( REVENUES APPEAL) 12. THE REVENUE HAS RAISED ONLY ONE GROUND OF APPEAL W HICH RELATES TO DEDUCTION UNDER SECTION 80IC. WE HAVE SEEN THAT SIMILAR GROUN DS OF APPEAL CAME UNDER CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OW N THIS FOR AY 2008-09 AND 2009-10. THE COORDINATE BENCH OF THIS TRIBUNAL IN I TA NO. 7962/M/2012 FOR AY 2008-09 MADE THE FOLLOWING ORDER. 27. WITH THIS APPEAL, THE REVENUE HAS CHALLE NGED THE CORRECTNESS OF THE ORDER OF LD CIT(A) BY RAISING TO SUBSTANTIVE GROUNDS OF A PPEAL. GROUND NUMBER ONE RELATES TO THE PART RELIEF GIVEN BY LD WOULD CI T(APPEALS) FROM THE INCOME RECEIVED ON SCRAP GENERATED FROM WASTAGE. 28. THIS ISSUE HAS BEEN DECIDED BY US IN GR OUND NO.1, ITEM NO 2 AND IN PARAS 9 TO 12 IN ITA NO. 8199/M/2011 AND ASSESSEES APPEA L. THIS GROUND IS ACCORDINGLY DECIDED PARTLY IN FAVOUR OF THE REVENUE . (AS QUOTED IN SUB PARA 9 TO12 IN PARA 5 AB OVE ) 13. WE HAVE SEEN THAT WHEN THE SIMILAR ISSUE WAS RAISED BY REVENUE IN AY 2009-10 IN ITA N O. 6661/M/2012 THE TRIBUNAL HAS FO LLOWED ITS ORDER FOR EARLIER YEAR. THUS WE RESPECTFULLY FOLLOWING THE OR DER OF COORDINATE BENCH HOLD THAT REVENUE IS ENTITLED FOR THE LIMITED RELIE F AS PER ORDER IN REVENUES APPEAL FOR AY 2008-09 AND 2009-10. WE ORDER ACCORDI NGLY. 14. IN THE RESULT BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH NOV, 2016. SD/- SD/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 04/11/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/