N.C.John & Sons P.Ltd, Alappuzha V. DCIT, Alappuzha

ITA 440/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61496 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2010
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S MAHADEVAN
• Keywords: Opportunity of being heard
• Section: 244A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NO. 440/COCH/2010 ASSESSMENT YEAR : 2007-08 M/S. N.C.JOHN & SONS (P) LTD., VAZHICHERRY, ALLEPPEY-688 001. [PAN:AABCN 0264H] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI S. MAHADEVAN, CA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 19/04/2012 DATE OF PRONOUNCEMENT 01/06/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19-05-2010 PASSED BY LD CIT(A)-IV AND IT RELATES TO THE ASSESS MENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE RELATE TO T HE FOLLOWING ISSUES:- (A) WHETHER THE LD CIT(A) IS JUSTIFIED IN HOLDING THAT THE COMMON EXPENSES HAVE TO APPORTIONED BETWEEN EOU AND NON-EOU UNITS IN THE RATIO OF THEIR RESPECTIVE TURNOVER. (B) WHETHER THE LD CIT(A) IS RIGHT IN HOLDING THA T THE AMOUNT CREDITED AS IN- HOUSE CHARGES REPRESENT DOMESTIC SALES BY EOU AND T HE PROVISIONS OF SEC. 10B(4) SHOULD BE APPLIED ON IT. (C) WHETHER THE WITHDRAWAL OF INTEREST U/S 244A I S JUSTIFIED. (D) WHETHER THE LEVY OF INTEREST U/S 234D IS JUST IFIED. I.T.A. NO.440 /COCH/2010 2 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE A ND SALE OF COIR PRODUCTS, COTTON GARMENTS, RUBBER MATS ETC. IT HAS GOT EOU UNIT AND NON-EOU UNITS. IN RESPECT OF EOU UNITS THE ASSESSEE CLAIMED DEDUCTION U/S 10B OF THE ACT. THE ASSESSEE MAINTAINED COMMON SET OF BOOKS FOR BOTH THE UNITS. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO WAS NOT SATISFIED WITH THE METHOD ADOPTED BY THE ASSSSEE FOR ALLOCATION OF EXPENSES BETWEEN THE UNITS REFERRED ABOVE. HENCE T HE AO PROCEEDED TO ALLOCATE ALL THE EXPENSES IN THE RATIO OF TURNOVER OF BOTH THE UNITS . WHILE COMPUTING THE TAX, THE AO LEVIED INTEREST U/S 234D AND ALSO WITHDREW INTEREST U/S 244A OF THE ACT. 4. THE ASSESSEE PREFERRED APPEAL BEFORE LD CIT(A ) CHALLENGING THE ASSESSMENT ORDER. WITH REGARD TO THE APPORTIONMENT OF EXPENSES, THE L D CIT(A) FOLLOWED THE DECISION RENDERED IN THE ASSESSEES OWN CASE FOR EARLIER YEA RS BY HIS PREDECESSOR. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: ... I FIND THAT THE ISSUE REGARDING APPORTIONMENT OF EXPENSES BETWEEN THE EOU AND THE NON-EOU UNITS WAS SUBJECT MATTER OF APPEAL I N ASST. YRS. 2003-04 TO 2006-07 AS WELL. AS THE FACTS OF THE CASE HAVE REM AINED THE SAME AS IN THE EARLIER ASST. YEARS, I DIRECT THE AO TO FOLLOW THE DIRECTIONS OF MY PREDECESSOR CIT(A) AS CONTAINED IN HER ORDER DATED 24.01.2008 F OR ASST. YR 2003-04 AND DATED 10.03.2008 AND 27.08.2008 FOR ASST. YEARS 200 4-05 AND 2005-06 RESPECTIVELY. AS DECIDED IN EARLIER ASST. YEARS, T HE DIRECT EXPENSES SHALL BE ALLOCATED TO THE EOU UNIT AS PER THE DETAILS MAINTAI NED BY THE APPELLANT UNDER SEPARATE CODES OF EXPENDITURE FOR EOU AND NON EOU UNI TS. THE COMMON OVERHEAD EXPENSES SHALL BE ALLOCATED PROPORTIONATE TO THE TURNOVER OF THE EOU AND NON EOU UNITS. AGGRIEVED BY THE SAID DECISION OF LD CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US ON THIS ISSUE. 5. THE ORDERS PASSED BY LD CIT(A) IN THE HANDS O F THE ASSESSEE ON THE ABOVE SAID ISSUE FOR ASSESSMENT YEARS 2005-06 AND 2006-07 WERE CHALLENGED BEFORE THE ITAT. THE ASSESSEE HAS FILED COPIES OF THE ORDERS PASSED BY THE TRIBUNAL AND ON A PERUSAL OF I.T.A. NO.440 /COCH/2010 3 THOSE ORDERS, WE NOTICE THAT THE TRIBUNAL HAS UPHEL D THE VIEWS EXPRESSED BY LD CIT(A). SINCE THE TRIBUNAL HAS ALREADY TAKEN A PARTICULAR V IEW, IN ORDER TO MAINTAIN CONSISTENCY, WE ARE INCLINED TO FOLLOW THE SAME IN THIS YEAR ALS O. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 6. THE NEXT ISSUE RELATES TO THE DENIAL OF DEDU CTION ON IN-HOUSE CHARGES CREDITED IN THE EOU ACCOUNT. THIS ASPECT WAS INITIALLY NOTICED BY LD CIT(A) DURING THE COURSE OF APPELLATE PROCEEDING AND HE TOOK THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 10B ON THIS CREDIT. ACCORDINGLY HE SOUGHT A REPORT FROM THE AO. THE AO, IT APPEARS, DID NOT APPRECIATE THE QUERY OF THE LD CIT(A) AND HENCE THE LD CIT(A) PROCEEDED TO DECIDE THE ISSUE ON HIS OWN. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE IN-HOUSE CHARGES REPRESENTS CHARGES INCURRED BY ONE DEPARTMENT IN RE SPECT OF THE WORK DONE BY OTHER DEPARTMENT AND ALSO THE VALUE OF GOODS TRANSFERRED FROM ONE DEPARTMENT TO THE OTHER DEPARTMENT. ACCORDINGLY HE DISPUTED THE DECISION O F LD CIT(A) IN TREATING THE INCOME CREDITED AS IN HOUSE CHARGES AS DOMESTIC TURNOVER . THE LD A.R ALSO SUBMITTED THAT THE IN HOUSE CHARGES CANNOT BE TREATED AS TURNOVE R, AS THE RELEVANT TRANSACTIONS HAVE BEEN CARRIED OUT BETWEEN TWO DIFFERENT DEPARTMENTS OF THE SAME PARTY. 8. ADMITTEDLY, THE ISSUE RELATING TO IN HOUSE C HARGES HAS NOT BEEN EXAMINED BY THE AO. THOUGH THE LD CIT(A) HAD CALLED FOR A REPORT F ROM THE AO ON THIS ISSUE, YET THE AO GAVE A VAGUE REPLY SINCE HE DID NOT UNDERSTAND THE INTRICACIES OF THE ISSUE. IT IS A WELL ESTABLISHED CANNON OF LAW THAT ONE CANNOT MAKE PROF IT OUT OF HIMSELF. ACCORDING TO THE LD A.R THE IN-HOUSE CHARGES REPRESENT INTER DEPAR TMENTAL CHARGES/RECOVERIES. UNDER ACCOUNTING PRINCIPLES, THE INTER-DEPARTMENTAL CHARG ES/RECOVERIES SHOULD BE NETTED OFF WHILE PREPARING THE FINAL ACCOUNTS. IT WAS NOT EXP LAINED TO US AS TO WHY THE ASSESSEE ALLOWED THE INTER-DEPARTMENTAL CHARGES/RECOVERIES T O REMAIN IN THE FINAL ACCOUNTS. SINCE THE FACTS SURROUNDING THE IN HOUSE CHARGES ARE NOT CLEAR, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS TO BE EXAMINED AFRESH AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REST ORE THE SAME TO THE FILE OF THE AO WITH I.T.A. NO.440 /COCH/2010 4 THE DIRECTION TO EXAMINE THIS ISSUE AFRESH IN ACCOR DANCE WITH LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. 9. THE ASSESSEE HAS ALSO RAISED GROUNDS RELATIN G TO CHARGING OF INTEREST U/S 234D AND WITHDRAWAL OF INTEREST U/S 244A. WE NOTICE THA T THE LD CIT(A) DID NOT ADJUDICATE BOTH THESE ISSUES, THOUGH THE ASSESSEE HAD RAISED G ROUNDS ON THEM. WE NOTICE THAT THE TRIBUNAL, IN THE ASSESSEES OWN CASE RELATING T O THE ASSESSMENT YEAR 2005-06 IN ITA NO.950/COCH/2008 HAD SET ASIDE THE ISSUE RELATING T O THE CHARGING OF INTEREST U/S 234D TO THE FILE OF THE AO. THE TRIBUNAL HAS ALSO TAKEN NOTE OF THE DECISION OF THE HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF CIT VS. KERALA CHEMICALS & PROTEINS LTD (2010)(323 ITR 584). THE ISSUE RELATING TO THE WIT HDRAWAL OF INTEREST U/S 244A ALSO REQUIRES VERIFICATION OF RECORD. ACCORDINGLY, WE S ET ASIDE BOTH THE ISSUES TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE CLAIM OF T HE ASSESSEE IN ACCORDANCE WITH LAW. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 01 -06-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 1ST JUNE,2012 GJ COPY TO: 1. M/S. N.C.JOHN & SONS (P) LTD., VAZHICHERRY, ALLE PPEY-688 001. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT COCHIN I.T.A. NO.440 /COCH/2010 5