Plastiblends India Ltd, Mumbai V. DCIT Rg - 8(2), Mumbai

ITA 5981/MUM/2003

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8828 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-01-2011
• Assessment Year: misc
• Appeal Filed On: 05-09-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT LAL
• Assessee Lawyers: NITESH S JOSH I
• Keywords: Depreciation
• Section: 32; 28

Judgement Text

1 ITA 5981/MUM/03, M/S PLASTIBLENDS INDIA LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI N.V. VASUDEV AN, JM ITA NO. 5981/MUM/2003 ASSESSMENT YEAR 1999-2000 M/S PLASTIBLENDS INDIA LTD. 31, SHAH INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 058. PAN AAACP 6287 B VS. D.C.I.T. RANGE 8(2), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI NITESH S. JOSH I RESPONDENT BY SHRI HEMANT LAL ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) VIII, MUMBAI DATED 17.07.2003. 2. THE ISSUE INVOLVED IN GROUND NO. 1 RELATES TO TH E ADDITION OF ` 67,02,503/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IN RESP ECT OF VALUATION OF STOCK ON ACCOUNT OF EXCISE DUTY IN VIEW OF THE PROVISIONS OF SECTION 145-A. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF HIGH GRADE PLASTOMER. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.12.99 DECLARING TOTAL INCOME OF ` 56,67,181/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICE D BY THE A.O. THAT THE ASSESSEE HAS MADE ADJUSTMENT OF ` 67,02,503/- TO THE VALUE OF OPENING STOCK OF RAW M ATERIAL AND WORK-IN-PROGRESS ON ACCOUNT OF EXCISE DUTY AND SALE S TAX SET-OFF WHILE IMPLEMENTING 2 ITA 5981/MUM/03, M/S PLASTIBLENDS INDIA LTD. THE PROVISIONS OF SECTION 145-A. IT WAS CLAIMED BY THE ASSESSEE THAT AS PER THE PROVISIONS OF SECTION 145-A, A VARIATION ON ACCOUNT OF EXCISE DUTY AND SALES TAX WAS TO BE MADE IN THE OPENING AND CLOSING STOCK AS WELL AS PURCHASES AND SALES. ACCORDING TO THE A.O., THE VALUE OF CLOSING STOCK OF THE IMMEDIATELY PRECEDING YEAR HAS TO BE TAKEN AS THE VALUE OF THE OPENING STOCK OF THE SUCCEEDING YEAR AND THERE WAS THUS NO ADJUSTMENT WHICH COULD BE MADE TO THE VALUE OF OPENING STOCK ON ACCOUNT OF EXCISE DUTY ETC. WHILE IMPLEMENTING PROVISIONS OF SECTION 145-A. HE, THEREFORE, DISALL OWED THE CLAIM OF THE ASSESSEE FOR ENHANCEMENT OF OPENING STOCK ON ACCOUNT OF EXCISE D UTY ETC. WHICH RESULTED IN THE ADDITION OF ` 67,02,503/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID ADDITION MAINLY FOR THE SAME REA SON AS GIVEN BY THE A.O. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS PER THE PROVISIONS OF SECTI ON 145-A, THE ADJUSTMENT TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION HAS TO BE MADE IN THE VALUATION OF PURCHASE AND SALE OF GOODS AS W ELL AS IN THE VALUATION OF INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME OF THE ASSES SEE CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MAHALAXMI GLASS WORKS PVT. LTD. 318 ITR 116, SUCH ADJUSTMENT HAS TO BE MADE IN THE VALUATION OF CLOSING AS WELL AS O PENING STOCK WHILE IMPLEMENTING THE PROVISIONS OF SECTION 145-A WHICH WERE MADE APPLICA BLE FOR THE FIRST TIME FOR A.Y. 1999- 2000. RESPECTFULLY FOLLOWING THE SAID DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS PVT. LTD. (SUP RA), WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE FOR ENHANCEMENT OF THE VALUE OF OPENING STOCK ON ACCOUN T OF EXCISE DUTY ETC. AFTER NECESSARY VERIFICATION. GROUND NO. 1 OF THE ASSESSEES APPEA L IS ACCORDINGLY ALLOWED. 3 ITA 5981/MUM/03, M/S PLASTIBLENDS INDIA LTD. 5. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT(A) IN UPHOLDING THE DECISION OF A.O. OF REDUCING THE DEPRECIATION A MOUNT FROM THE PROFITS OF ELIGIBLE UNITS WHILE COMPUTING DEDUCTION U/S 80IA. 6. IN ITS RETURN OF INCOME, THE ASSESSEE COMPANY HA D CLAIMED DEDUCTION U/S 80IA @ 100% IN RESPECT OF PROFITS OF ITS ELIGIBLE UNITS I. E. UNIT NO. I & II AGGREGATING TO ` 3,61,23,476/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IA HA VE BEEN WORKED OUT BY THE ASSESSEE WITHOUT DEDUCTING THE ALLOWABLE DEPRECIATION AS PER INCOME TAX RULES. ACCORDING TO HIM, DEDUCTION U/S 80IA WAS RELATABLE TO THE PROFIT S DERIVED FROM THE INDUSTRIAL UNDERTAKING WHICH HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 TO 43-D INCLUDING SECTION 32 RELATING TO THE DEPRECIAT ION ALLOWANCE. HE, THEREFORE, REDUCED THE DEPRECIATION AMOUNTS OF ` 1,18,47,204/- AND ` 1,04,56,219/- WHILE COMPUTING THE PROFITS OF UNIT NO. I AND UNIT NO. II RESPECTIVELY FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80IA THEREBY RESTRICTING THE CLAIM OF THE ASSESSEE FOR THE SAID DEDUCTION TO THAT EXTENT. ON APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. ON THIS ISSUE. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDGMENT OF FULL BENCH OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PLASTIBENDS (I) LTD. VS. ADDL. CIT 318 ITR 352 WHEREIN IT WAS HELD THAT THE QUANTUM OF DEDUCTION U/S 80IA WOULD N OT BE DEPENDENT UPON THE ASSESSEE CLAIMING OR NOT CLAIMING CURRENT DEPRECIATION, BECA USE THE QUANTUM OF DEDUCTION UNDER SECTION 80-IA HAS TO BE COMPUTED ON THE PROFITS DET ERMINED AFTER DEDUCTING ALL DEDUCTIONS ALLOWABLE UNDER THE ACT. EXPLAINING FURTHER, THE H ONBLE BOMBAY HIGH COURT OBSERVED THAT THE DEDUCTION UNDER CHAPTER VI-A IS A SPECIAL DEDUCTION AND THE QUANTUM OF DEDUCTION THEREUNDER HAS TO BE COMPUTED BY ASCERTAI NING THAT PART OF THE TOTAL INCOME WHICH REPRESENTS THE PROFITS AND GAINS DERIVED BY A N UNDERTAKING AFTER DEDUCTING ALL THE DEDUCTIONS ALLOWABLE UNDER SECTIONS 30 TO 43D OF TH E ACT. IT WAS THEREFORE HELD THAT EVEN 4 ITA 5981/MUM/03, M/S PLASTIBLENDS INDIA LTD. IF IN THE ASSESSMENT YEAR IN QUESTION, THE ASSESSEE HAD AN OPTION TO DISCLAIM DEPRECIATION, THAT WOULD NOT HAVE ANY BEARING ON THE COMPUTATION OF QUANTUM OF DEDUCTION UNDER SECTION 80-IA OF THE ACT. RESPECTFULLY FOLLOWING T HE SAID JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PLASTIBLEN DS INDIA LTD. (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS GROUND NO. 2 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21 ST JANUARY, 2011. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED 21 ST JANUARY , 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII - MUMBAI 4. THE CIT- MC VIII, MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 5 ITA 5981/MUM/03, M/S PLASTIBLENDS INDIA LTD. DATE INITIALS 1 DRAFT DICTATED ON 17.1.2011, 18.1.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 18.1.2011, 19.1.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER