ACIT, UDAIPUR V. M/s. Grace Exports, UDAIPUR

ITA 436/JODH/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7894 (ITAT-JODHPUR)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 10-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Section: 194C; 10B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.K. SAINI ) ITA NO. 436/JU/2009 ASSTT. YEAR : 2005-06 PAN: AAAFG 8111 C. THE ACIT VS. M/S. GRACE EXPORTS CIRCLE- 2 N.H. 8, AMBERI, SUKHER UDAIPUR UDAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI G.R. KOKANI ASSESSEE BY : SHRI AMIT KOTHARI DATE OF HEARING : 20.07.2012. DATE OF PRONOUNCEMENT : 22.08.2012 ORDER DATED : 22/08/2012. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE LD.CIT(A), UDAIPUR DATED 09-04-2009 FOR THE ASSESSMENT YEAR 2005-06. 2.1 THE GROUND NOS. 1 AND 5 ARE AGAINST DELETION OF ADDITIONS OF RS. 21,638/- AND RS. 31,458/- DISALLOWED BY THE AO ON ACCOUNT OF SHORT AGE/WASTAGE IN GRANITE SLABS IN HO ACCOUNT AND IN RESPECT OF 100% EOU RESPECTIVELY. 2.2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN EXPORT OF MARBLE SLAB AND TILES. THE ASSESSEE HAS TWO UNITS NAMELY M/S. G RACE EXPORTS HO AND M/S. GRACE EXPORTS BRANCH 100% EOU. THE ASSESSEE CLAIMED SHO RTAGE OF 22.09 SQ. MTR GRANITE SLABS IN M/S. GRACE EXPORTS (HO) AND THE SAME SHORT AGE IN EOU. THE AO MADE ADDITION OF RS. 21,638/- ON ACCOUNT OF SHORTAGE/ WASTAGE IN HO A/C AND RS. 31,458/- ON ACCOUNT 2 OF SHORTAGE/ WASTAGE IN EOU A/C. BEFORE MAKING THE ADDITIONS, THE ASSESSEE WAS ALLOWED AN OPPORTUNITY TO EXPLAIN THE SHORTAGES. DETAILED R EPLY WAS FILED BY THE ASSESSEE. HOWEVER, THE SAME WAS NOT FOUND SATISFACTORY TO THE SATISFACTION OF THE AO. 2.3 IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE SHORTAGE IS VERY MINUTE AND IN THIS TRADE SOME SHORTAGE HAS TO BE THERE AS MARBLE HAS TO BE CUT AND SOME MATERIAL IS LEFT WHICH HAS NO SALEABLE VALUE AND THE SAME IS LIKE A SCRAP. THE OBSERVATIONS OF THE AO ARE THAT THE ASSESSEE HAS SOLD THE GRANITE SLAB ON LOT TO LOT BASIS AFTER IT PURCHASED. IT WAS EXPLAINED THAT THIS FACT HAS BEEN WRONGLY NOTED BY THE AO AS THE ASSESSEE HAS PURCHASED THE LOT BUT HAS SOLD THE SAME IN QUANTITYWISE AND T HEREFORE, CERTAIN SHORTAGE WAS THERE. IT WAS EXPLAINED THAT THE STONE AS SOON AS EXCAVATED F ROM EARTH IT GRADUALLY LOOSES, BY PASSING OF TIME, ITS GLORY, COLOUR AND HARDNESS ALS O. THE SAME IS STORED IN THE OPEN SPACE AND DUE TO SUNLIGHT AND RAINFALL, THE CRACKS ARE DE VELOPED THEREIN BEING ITS NATURE. RELIANCE WAS PLACED ON THE VARIOUS CASE LAWS. 2.4 THE EXPLANATION OF THE ASSESSEE IS THAT IT MAIN TAINED THE DAY TODAY STOCK REGISTER WHICH WAS PRODUCED BEFORE THE AO ALONGWITH BOOKS OF ACCOUNTS AND THE AO DID NOT POINT OUT ANY DEFECTS THEREIN. THE LD. CIT(A) FURTH ER OBSERVED THAT ON GOING THROUGH THE DETAILS FURNISHED BY THE LD. AR, IT IS NOTICED THAT THE ASSESSEE IS PURCHASING GRANITE SLABS FROM BHUWANESHWAR (ORISSA) WHICH IS MUCH FAR FROM U DAIPUR AND DURING TRANSPORTATION AS WELL AS LOADING AND UNLOADING, BREAKAGE/ WASTAGE OF MATERIAL IS POSSIBLE. THE COMPLETE STOCK REGISTER HAS BEEN MAINTAINED AND THE AO HAS N OT POINTED OUT ANY DEFECT IN THE STOCK REGISTER. THE LD. CIT(A) WAS SATISFIED WITH THE EXP LANATION OF THE ASSESSEE. THEREFORE, THE LD. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN DE NYING THE CLAIM OF SHORTAGE/WASTAGE OF THE ASSESSEE. THEREFORE, BOTH THE ADDITIONS WERE DE LETED BY THE LD. CIT(A). 3 2.5 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE DO NOT FIND ANY SCOPE OF INTERFERENCE IN THE ORDER OF THE LD. CIT(A) AS THE LD. CIT(A) HAS PASSED THE ORDER BY GIVING FACTUAL FINDINGS AND WE CONFIRM THE ORDER OF THE LD. CIT(A) IN RESPECT OF BOTH THE DELETION OF ADDITIONS. 3.1 THE GROUND NO. 2 IS AGAINST HOLDING THAT THE AO WAS NOT FAIR IN APPORTIONMENT OF THE EXPENDITURE ON TRADE FAIR BETWEEN TWO UNITS I.E . HO AND BRANCH (100% EOU). 3.2 THE AO MADE THE APPORTIONMENT OF TRADE EXHIBITI ON EXPENSES AND REDUCED THE SAME TO RS. 1,78,303/- FROM EXEMPTION U/S 10B OF TH E ACT AND INCREASING THE INCOME OF HO BY THE SAME AMOUNT. THE ASSESSEE WAS CLAIMING EX EMPTION U/S 10B IN RESPECT OF EOU. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF B OTH THE UNITS, IT WAS SEEN THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS. 5,17,490/- F OR INTERNATIONAL EXHIBITION HELD IN ITALY. SIMILARLY, THE ASSESSEE HAS SENT 59.536 SQ. MTR OF TILES AS SAMPLE FOR EXHIBITION. BOTH THESE EXPENSES HAVE BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT OF M/S. GRACE EXPORTS HO. THE AO OBSERVED THAT BOTH THESE UNITS W ERE ENGAGED IN EXPORT OF MARBLE ,GRANITE SLABS AND TILES AND THEY WERE RUN BY THE S AME MANAGEMENT. IN THESE CIRCUMSTANCES, THE ASSESSEE WAS REQUIRED TO JUSTIFY AS TO WHY THE EXPENSES SHOULD NOT BE APPORTIONED AMONG BOTH THE UNITS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO MADE APPORTIONMENT BETWEEN THE HO AND BRANCH OFF ICE BY TREATING RS., 1,78,303/- INCURRED FOR 100% EOU UNIT. 3.3 DETAILED SUBMISSIONS WERE FILED BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT(A) FOUND THAT IN EARLIER Y EAR AS WELL AS IN THE SUBSEQUENT YEARS, NO DISALLOWANCE HAS BEEN MADE BY THE AO AS SIMILAR EXPENSES WERE MADE IN EARLIER YEARS ALSO. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE IS FOLLOWING CONSISTENTLY THE SAME 4 ACCOUNTING POLICY AND THE AO WAS NOT JUSTIFIED IN M AKING THE APPORTIONMENT IN THIS YEAR. THEREFORE, THE LD. CIT(A) DELETED THIS DISALLOWANCE . 3.4 THE LD. DR PLACED RELIANCE ON THE ORDER OF THE AO. 3.5 ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A) AND FURTHER PLACED RELIANCE IN TH E CASE OF ACIT VS. P.I. INDUSTRIES, 144 TTJ 353 (JODHPUR.) AND THE COPY OF THE JUDGEMENT IS PLACED AT PAGES 74 TO 77 OF THE WRITTEN SUBMISSIONS. 3.6 AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, WE FOUND THAT THE LD. CIT(A) HAS FOLLOWED THE CONSISTENT MET HOD ADOPTED BY THE ASSESSEE YEAR AFTER YEAR. NO DISALLOWANCE WAS MADE IN EARLIER YEAR AS W ELL AS SUBSEQUENT YEARS. THEREFORE, IN OUR CONSIDERED VIEW, THE LD. CIT(A) WAS JUSTIFIED I N DELETING THE ADDITION OF RS. 1,78,303/-. ACCORDINGLY, WE CONFIRM THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. 4.1 THE GROUND NO. 3 IS AGAINST DELETING THE ADDITI ON OF RS. 25,56,460/- MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 4.2 THE AO OBSERVED THAT THE ASSESSEE HAS DEBITED C ERTAIN EXPENSES UNDER THE HEAD TRANSPORTATION, AGENCY CHARGES AND TRANSPORTATION OUTWARD IN THE PROFIT AND LOSS ACCOUNT. THE TOTAL OF THESE AMOUNTS WERE TO THE TUNE OF RS. 25,56,460/-. THE AO NOTED THAT THESE PAYMENTS HAVE BEEN MADE FOR EXPORT OF GOODS TO CLEA RING AND FORWARDING AGENTS. THE SERVICES PROVIDED BY THEM WERE IN THE NATURE OF CON TRACT FOR CARRIAGE OF GOODS AND HENCE THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S 194C OF THE ACT. THE ASSESSEE HAS NOT DEDUCTED ANY TDS. THEREFORE, THE ASSESSEE WAS REQUI RED TO EXPLAIN AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U/S 40(A)(IA) OF TH E ACT. DETAILED SUBMISSIONS WERE FILED BEFORE THE AO AND IT WAS EXPLAINED THAT THESE EXPEN SE ARE ON ACCOUNT OF REIMBURSEMENT 5 OF THE EXPENSES. THEREFORE, THE PROVISIONS OF SECTI ON 194C ARE NOT ATTRACTED. HOWEVER THE AO WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE AS SESSEE. THEREFORE, HE DISALLOWED A SUM OF RS. 25,56,460/- IN VIEW OF SECTION 40(A)(IA) OF THE ACT. THE BOARDS CIRCULAR NO. 723 RELIED UPON BY THE ASSESSEE WAS ALSO NOT FOUND APPLICABLE IN THE PRESENT FACTS OF THE CASE. 4.3 DETAILED SUBMISSIONS WERE FILED BEFORE THE LD. CIT(A) WHICH HAS BEEN INCORPORATED IN PARA 16 AT PAGES 11 TO 21 OF HIS O RDER. IN THE SUBMISSIONS, THE ASSESSEE HAS EXPLAINED EVERY EXPENDITURE ITEMWISE. THE NATUR E OF THE EXPENSES WAS EXPLAINED. IT WAS ALSO STATED THAT IN VIEW OF BOARDS CIRCULAR NO . 723 DATED 19-09-1995, THE PROVISION OF SECTION 194C ARE NOT APPLICABLE AS ACCORDING TO THIS CIRCULAR, THE PAYMENT MADE FOR OCEAN FREIGHT AND INCIDENTAL EXPENSES ARE NOT LIAB LE FOR TDS U/S 194C OF THE ACT. THE TOTAL OF SUCH EXPENSES WERE TO THE EXTENT OF RS. 18 ,06,715/-. REGARDING OTHER EXPENSES, IT WAS ALSO EXPLAINED THAT THEY ARE REIMBURSEMENT OF T HE EXPENSES. THEREFORE, THEY ARE NOT COVERED U/S 194C OF THE ACT. RELIANCE WAS PLACES ON VARIOUS CASE LAWS REPORTED IN 103 TTJ 103 (DEL.) AND 163 TAXMAN 479 (DEL.). 4.4 AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT( A) FOUND THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE AS MAJOR PORTION OF THE EXPENSES ARE COVERED BY THE BOARDS CIRCULAR NO. 715 DATED 08-08-1995 AND MANY EXPENSES ARE ON ACCOUNT OF REIMBURSEMENT OF THE EXPENSES. THEREFORE, ON ACCOUN T OF REIMBURSEMENT OF THE EXPENSES, THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE A S THESE PAYMENTS WERE MADE TO THE AGENTS ON ACCOUNT OF REIMBURSEMENT. 4.5 THE LD. DR HAS PLACED RELIANCE ON THE ORDER OF THE AO. 6 4.6 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE HAS PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). IT WAS FURTHER SUBMITTED T HAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF JODHPUR BENCH IN THE CASE OF CIT VS. MI NPRO INDUSTRIES, 143 TTJ 331 AND THE COPY OF THE SAME IS PLACED AT PAGES 78 AND 79 OF TH E PAPER BOOK. RELIANCE IS ALSO PLACED OF ITAT SPECIAL BENCH, VISAKHAPATNAM DECISION IN TH E CASE OF M/S. MARLIYN SHIPPING & TRANSPORTS VS. ACIT (REPORTED AT BOMBAY CHARTERED A CCOUNTANT JOURNAL, MAY 2012) AND THE COPY OF THE SAME IS PLACED AT PAGES 80 AND 81 O F THE PAPER BOOK. 4.7 AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AS THE LD. CIT(A) HAS EXAMINED THE BOARDS CIRCULAR NO.723 AND FOUND THAT AS PER BOARDS CIRCULAR, THE PAYMENTS MADE TO THE AGENTS IN VIEW OF THE PROVISIO N OF SECTION 172 OF THE ACT ARE NOT COVERED BY THE PROVISION OF SECTION 194C AND 195 OF THE ACT. THE LD. CIT(A) HAS ALSO EXAMINED THAT ON REIMBURSEMENT OF THE EXPENSES, NO TDS IS REQUIRED TO BE DEDUCTED. THE IDENTICAL ISSUE WAS INVOLVED IN THE CASE OF ACIT VS . MINPRO INDUSTRIES (SUPRA) AND AFTER DISCUSSING THE ISSUE IN DETAIL, THE TRIBUNAL HAS HE LD THAT IT HAS BEEN CLARIFIED BY THE BOARD VIDE CIRCULAR NO. 723 DATED 19-09-1995 THAT ON THE SPECIFIED PAYMENTS PROVISION OF SECTION 194C AND 195 ARE NOT APPLICABLE AS THE PROV ISION OF SECTION 172 WILL BE APPLICABLE. THE LD. CIT(A) HAS CONCEDED THIS ASPECT AND THEN DELETED THE ADDITION. IT HAS BEEN FURTHER HELD BY THE TRIBUNAL IN THE SAME CASE I.E. MINPRO INDUSTRIES THAT ON REIMBURSEMENT OF PAYMENT TOWARDS SEA FREIGHT TRANSP ORT, CCI CHARGES, STEAMER FREIGHT CHARGES AND REPO CONTAINER CHARGES MADE BY THE ASSE SSEE TO C&F AGENTS WHO HAVE ALREADY MADE THE PAYMENT ON BEHALF OF THE ASSESSEE IS COVERED BY THE PROVISION OF SECTION 172 AND NOT BY SECTION 194C OR SECTION 195. THEREFORE, THE ORDER OF THE LD. 7 CIT(A) WHO DELETED THE DISALLOWANCE, WAS CONFIRMED. THE FACTS IN THE PRESENT CASE ARE SIMILAR. THE LD. CIT(A) HAS CONCEDED THE BOARDS CI RCULAR AND FOUND THAT THE ASSESSEE IS COVERED BY THE PROVISION OF SECTION 172 AND NOT B Y SECTION 194C AND 195 OF THE ACT \. THEREFORE, WE SEE NO REASON TO INTERFERE IN THE ORD ER OF THE LD. CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 5.1 THE GROUND NO. 4 IS AGAINST ALLOWING CLAIM OF D EDUCTION U/S 10B OF THE ACT. 5.2 THE FACTS OF THE CASE ARE THAT THE AO DISALLOWE D THE CLAIM OF DEDUCTION U/S 10B OF THE ACT FOR THE REASON THAT THE ASSESSEE IS NOT MAK ING ANY MANUFACTURING ACTIVITY BUT ONLY MAKING TRADING ACTIVITY. THE ASSESSEE PURCHASED THE MARBLE BLOCKS AND SELLS THE SAME. THEREFORE, THE AO DENIED THE DEDUCTION. 5.3 THE LD. CIT(A) DELETED THE ADDITION BY OBSERVIN G THAT FOR THE ASSESSMENT YEAR 2001-02 AND 2004-05, THE SIMILAR DISALLOWANCE WAS M ADE IN APPEAL NO. 416/IT/UDR/2003-04 DATED 17-11-2006 AND IN APPEAL NO. 436/IT/UDR/2006-07 DATED 13-03-2008 WHERE THE ADDITIONS MADE BY THE AO HAVE BEEN DELETED BY THE LD. CIT(A) BY HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT . THE FACTS WERE SIMILAR IN THE PRESENT YEAR AND THEREFORE, ON THE S AME REASONING THE LD. CIT(A) ALLOWED THE DEDUCTION U/S 10B OF THE ACT. 5.4 THE LD. DR PLACED RELIANCE ON THE ORDER OF THE AO. 5.5 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. ARIH ANT TILES & MARBLES, 320 ITR 79 BY WHICH THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES AND MARBLES (P) LTD. VS. ITO , 295 ITR 148 HAS BEEN AFF IRMED. 8 5.6 AFTER CONSIDERING THE ORDERS OF THE LOWER AUTHO RITIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FOUND THAT THE LD. CIT(A) H AS ALLOWED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE ORDERS FOR THE ASSESSMENT YE AR 2001-02 AND 2004-05. NOTHING HAS BEEN BROUGHT ON RECORD THAT THE DECISIONS FOR THE A SSESSMENT YEAR 2001-02 AND 2004-05 HAVE BEEN REVERSED BY THE HIGHER APPELLATE AUTHORIT Y. IT IS FURTHER SEEN THAT IN CASE OF ARIHANT TILES AND MARBLES (P) LTD. WHERE SIMILAR FA CTS WERE INVOLVED AND THE DECISION OF THE TRIBUNAL WAS CONFIRMED BY THE HON'BLE RAJASTHA N HIGH COURT IN 295 ITR 148 (SUPRA) AND THE DECISION HAS BEEN AFFIRMED BY THE HON'BLE APEX COURT IN 320 ITR 79 (SUPRA). THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR THE YEAR UNDER CONSIDE RATION. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THE ORDER IS PRONOUNCED ON 22-08-2012. . SD/- SD/- ( N.K. SAINI ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 2, UDAIPUR . 2. M/S. GRACE EXPORTS, UDAIPUR. 3. THE LD CIT (A) 4. THE LD. CIT 5. THE D/R 6. GUARD FILE (ITA NO.436/JU/2009) BY ORDER, AR ITAT JODHPUR. 9