INTERNATIONAL TOBACCO CO.LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 5186/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8031 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANISH V SHAH MS VIDHI DOSHI
• Keywords: Opportunity of being heard
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I , MUMBAI BEFORE SHRI RAJENDRA , HON'BLE ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO . 5186 /MUM/201 5 (A.Y : 2011 - 12 ) INTE R NATIONAL TOBACCO CO. LTD. C/O GODFREY PHILLIPS INDIA LTD., V K K MENON MARG ( SAHAR ROAD) CHAKALA, ANDHERI (E) MUMBAI 400 099 PAN NO: AAACI 3492 H V . DCIT 2(2) MA CROPOLO BUILDING GROUND FLOOR, NEXT TO KALA CHOWKY POST OFFICE, DR. BABASAHEB AMBEDKAR ROAD, LALBAUG, MUMBAI 400 033 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANISH V. SHAH MS. VIDHI DOSHI DEPARTMENT BY : SHRI SAURABH KUMAR RAI DATE OF HEARING : 15 .11.2017 DATE OF PRONOUNCEMENT : 20 .12 .2017 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 5, MUMBAI DATED 18.08.2015 FOR THE ASSESSMENT YEAR 2011 - 12. THE ASSESSEE IN ITS APPEAL RAISED THE FOLLOWING GROUNDS: - 2 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD GROUND NO.1 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) - 5 [ THE CIT(A)] ERRED IN CONFIRMING T HE ACTION OF THE DEPUTY COMMISSIONER OF INCOME - TAX 2(2) (THE AO) IN DISALLOWING THE PROVISION FOR WRITE DOWN OF NON - MOV ING MACHINE SPARES AMOUNT TO .27,02,562/ - . 2. THE APPELLANT PRAYS THAT IT BE HELD THAT EH PROVISION FOR WRITE DOWN OF NON - MOVING MACHINE SPARES IS AN ASCERTAINED LIABILITY AND THEREFORE BE ALLOWED AS A DEDUCTION . GROUND NO.2 : 1 . ON THE FACTS AND IN CIRC UMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN ADDING BACK THE PROVISION FOR WRITE DOWN OF NON - MOVING MACHINE SPARES AMOUNT TO .27,02,562/ - WHILE COMPUTING THE BOOK PROFITS U/S. 115JB OF THE ACT. 2. THE APPELLANT THEREFORE PRAYS THAT IT BE HELD THAT PROVISION FOR WRITE DOWN OF NON - MOVING MACHINE SPARES CANNOT BE ADDED BACK WHILE COMPUTING THE BOOK PROFITS U/S. 115JB OF THE ACT. 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETIN G THE ASSESSMENT NOTICED THAT ASSESSEE MADE A PROVISION FOR WRITING DOWN OF NON - MOVING MACHINERY SPARES. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE SAID PROVISION CREATED BY THE ASSESSEE OBSERVING THAT ANY EXPENDITURE WHICH HAS NOT BEEN CRYSTALIZED DUR ING THE YEAR CANNOT BE ALLOWED AS DEDUCTION AND THE LIABILIT IES WHICH ARE NOT ASCERTAINED AND CANNOT BE ASCERTAINED WITH REASONABLE ACCURACY , CANNOT BE ALLOWED AS DEDUCTION AND FINALLY HE H E LD THAT THE EXPENDITURE IS NOT FOR 3 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD ANY PRESENT LIABILITY BUT A LIABILITY THAT MAY ARISE IN THE FUTURE AND THEREFORE IT CANNOT BE ALLOWED AS DEDUCTION. TH US HE DISALLOWED THIS PROVISION FOR NON - MOVING MACHINERY SPARES WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS OF THE ACT AS WELL AS THE BOOK PROFITS U/S. 115JB OF THE ACT. 3. ON APPEAL BY THE ASSESSEE , THE LD.CIT(A) SUSTAINED THE DISALLOWANCE OBSERVING THAT THE ASSESSEE IN ITS SUBMISSIONS STATED THAT THESE SPARE PARTS ARE SHOWN IN C APITAL ACCOUNT IN THE EARLIER YEARS. THEREFORE, LD.CIT(A) HELD THAT THIS IS A CAPITAL LOSS. 4. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE NEVER STATED IN ITS SUBMISSIONS BEFORE THE LD.CIT(A) THAT THE WRITE OFF OF THE SPARES WAS TREATED AS CAPITAL IN THE EARLIER YEARS. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD.CIT(A) WRONGLY INFERRED THAT THESE SPARE PARTS WERE SHOWN IN THE CAPITAL ACCOUNT IN THE EARLIER YEARS , WHICH IS FACTUALLY NOT CORRECT. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT REFERRING TO THE WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT( A) PLACED IN THE PAPER BOOK SUBMITTED THAT THE MACHINERY SPARES WERE NON - MOVING AND LYING IDLE FOR MORE THAN FIVE YEARS WERE WRITTEN DO WN AS THEY ARE OBSOLE TE AND NON - MOVING AS PER THE POLICY OF THE ASSESSEE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT ON IDENTICAL CIRCUMSTANCES IN THE CASE OF NATIONAL ALUMINUM CO. LTD. V. DCIT [101 TTJ 948] THE CUTTACK 4 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD BENCH OF ITAT HELD THAT LOSS ON ACCOUNT OF VALUE OF NON - MOVING STORES AND SPARES SHOULD BE ALLOWED AS BUSINESS LOSS. LEARNED COUNSEL FOR THE ASSESSEE AL SO P LACED RELIANCE ON VARIOUS DECISIONS IN SUPPORT OF HIS SUBMISSIONS AS UNDER: - (I) CIT V. HOTLINE TELETUBE AND COMPONENTS LTD [175 TAXMAN.COM 286 (DEL) ] (II) CIT V. BECTON DICKINSON INDIA (P.) LTD [214 TAXMAN 636] (III) CIT V. IBM INDIA LTD., [230 TAXMAN 544] (IV) IAC V. CONSOLIDATED PNEUMATIC TOOL CO. (INDIA) LTD. [15 ITD 564 (MUM)] (V) ALTAS COPCO (INDIA) LTD. V. DCIT (ITA.NO. 448/PN/2010 (PUNE TRIB.) (VI) TUPPERWARE INDIA PVT. LTD. V. ACIT (ITA.NO. 5823/DEL/2010 (DEL TRIB.) (VII) NATIONAL ALUMINUM CO. LTD V. DCIT [101 TTJ CTK 948] (VIII) BHARAT HEAVY ELECTRICALS LTD. V. DCIT (ITA.NO. 6146 OF 1997 (DEL TRIB.) (IX) PEPPERI FUCHS ( INDIA ) LTD. V. DCIT [6 SOT 10 (DEL. TRIB.) 5. COMING TO THE ADJUSTMENT MADE WHILE COMPUTING THE BOOK PROFITS , LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT ADJUSTMENTS HAVE TO BE MADE STRICTLY AS PER THE EXPLANATION TO SECTION 115JB OF THE ACT AND NO ADJUSTMENT CAN BE MADE FOR THE ITEMS WHICH ARE NOT MENTIONED, SPECIFICALLY IN THE EXPLANATION TO SECTION 115JB OF THE ACT. HE P L ACED RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. V. CIT [255 ITR 273]. LEARNED COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. TAINWALA CHE MICALS & PLASTICS INDIA LTD. SUBMITS THAT THE HON'BLE JURISDICTIONAL HIGH COURT FOLLOWING VIJAY A BANK V. CIT [ 323 ITR 166] HELD THAT SINCE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT AND SIMULTANEOUSLY 5 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD OBLITERATED FROM THE DEBTORS ACCOUNTS ON THE ASSET SIDE OF BALANCE SHEET IS ALLOWABLE UNDER NORMAL COMPUTATION . THEREFORE HE SUBMITS THAT IN SUCH CIRCUMSTANCES THER E IS NO QUESTION OF ADDING BACK THE SAME TO THE BOOK PROFITS U/S. 115JB OF THE ACT. 6. LD.DR VEHEMENTLY SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER DISALLOWED PROVISION OF NON - MOVING MACHINE SPARES FOR THE REASON THA T ANY EXPENDITURE WHICH HAS NOT BEEN CRYSTALIZED DURING THE YEAR CANNOT BE ALLOWED AS DEDUCTION AND THE LIABILITIES WHICH ARE NOT ASCERTAINED AND CANNOT BE ASCERTAINED WITH REASONABLE ACCURACY, CANNOT BE ALLOWE D AS DEDUCTION AND FINALLY HE HE LD THAT THE EXPENDITURE IS NOT FOR ANY PRESENT LIAB ILITY BUT A LIABILITY THAT MAY ARISE IN THE FUTURE AND THEREFORE IT CANNOT BE ALLOWED AS DEDUCTION. TH US HE DISALLOWED THIS PROVISION WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS OF THE ACT AS WELL AS THE BO OK PROFITS U/S. 115JB OF THE ACT. THE LD. CIT(A) ON WRONG ASSUM PTION THAT T HE ASSESSEE STATED THAT THESE SPARE PARTS ARE SHOWN IN THE CAPITAL ACCOUNT IN THE EARLIER YEARS CONCLUDED THAT THIS LOSS AS A CAPITAL LOSS. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) BY THE ASSESSEE AND FIND THAT THERE IS NO SUCH SUBMISSION MADE BY THE ASSESSEE. FURTHER WE FIND THAT 6 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD THE ASSESSEE HAS MADE ELABORATE SUBMISSIONS BEFORE LD.CIT(A) RISING VARIOUS CONTENTIONS AND VARIOUS PROPORTIONS ON ITS CLAIM, WHICH HAVE NOT BEEN DEALT WITH BY THE LD.CIT (A) AND HE HAS CARRIED AWAY WITH HIS OBSERVATION THAT THE SPARES WERE TREATED AS CAPITAL ACCOUNT BY THE ASSESSEE IN EARLIER YEARS. WE ALSO OBSERVE THAT THE ORDER PASSED BY THE LD.CIT(A) IS VERY CRYPTIC AND VARIOUS CONTENTIONS OF THE ASSESSEE WERE NOT DEAL T WITH. IN THE LIGHT OF THE SUBMISSION MADE BEFORE US AND ON GOING THROUGH THE LD.CIT(A) ORDER , WE ARE OF THE CONSIDERED VIEW THA T TH IS MATTER HAS TO GO BACK TO THE FILE OF THE LD.CIT(A) TO EXAMINE ALL THE CONTENTIONS OF THE ASSESSEE AND TO PASS A SPEAKIN G ORDER ON THOSE CONTENTIONS. THUS, WE RESTORE THIS APPEAL TO THE FILE OF THE LD.CIT(A) WHO SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 TH DECEMBER , 2017. SD/ - SD/ - ( RAJENDRA ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20 / 12 / 2017 VSSGB , SPS 7 ITA NO.5186/MUM/2015 (A.Y: 2011 - 12) INTERNATIONAL TOBACCO CO. LTD COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM