South Shore Ice Creams P. Ltd, Cochin V. DCIT, Ernakulam

ITA 599/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61514 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 03-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2010
• Court: TRIBUNAL
• Department Lawyers: PRADUMNA KUMAR SINGH
• Assessee Lawyers: A S NARAYANAMOORTHY

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. 599/COCH/2010 ASSESSMENT YEAR : 2007-08 SOUTH SHORE ICE CREAMS PRIVATE LIMITED, D.NO.XXVIII/3030, CHERUPARAMPATHU ROAD, KADAVANTHRA, KOCHI. [PAN: AAGSC 6807A] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI A.S.NARAYANAMOORTHY, CA REVENUE BY SHRI PRADUMNA KUMAR SINGH, JR. DR DATE OF HEARING 03/05/2012 DATE OF PRONOUNCEMENT 25/05/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-I, KOCHI AND IT RELATES TO THE ASSESSMENT YEAR 2007-08 . 2. THE GROUNDS RAISED BY THE ASSESSEES GIVE RISE TO A SINGLE ISSUE VIZ., WHETHER THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THAT THE FREE ZER DEPOSIT RECEIVED FROM THE VARIOUS DEALERS SHOULD BE ASSESSED AS INCOME OF THE ASSESSE E. 3. THE FACTS NECESSARY FOR THE DISPOSAL OF THE ISSU ES ARE STATED IN BRIEF. THE ASSESSEE HEREIN IS CARRYING ON THE BUSINESS OF MANU FACTURE AND SALE OF ICE CREAMS. IT SELLS ITS PRODUCTS THROUGH VARIOUS TYPES OF AGENTS, VIZ., VENDORS, DISTRIBUTORS ETC. BY DULY ENTERING INTO AN AGREEMENT WITH THEM. IT IS IN THE COMMON KNOWLEDGE OF EVERYBODY THAT ICE CREAM PRODUCTS HAVE TO KEPT IN DEFREEZE CO NDITION IN ORDER TO AVOID MELTING OF I.T.A. NO. 599/COCH/2010 2 THE SAME. ACCORDING TO THE AGREEMENT ENTERED WITH THE VENDORS, THE ASSESSEE HAD TO SUPPLY DEEP FREEZER, FREEZERS AND FRIDGES OF REQUIR ED SIZES TO THE VENDORS, SUBJECT TO THE PAYMENT OF A DEPOSIT. THE SAID DEPOSIT AMOUNT WAS EQUIVALENT TO THE COST OF FREEZER SUPPLIED TO THE VENDORS. THE SAID DEPOSIT WOULD BE RETURNED TO THE VENDOR ON TERMINATION OF THE AGENCY AGREEMENT AND ON RETURNIN G THE FREEZERS. HOWEVER, AS PER CLAUSE 7 OF THE AGREEMENT, THE ASSESSEE, UPON RETUR NING OF THE FREEZERS TO IT, SHALL DEDUCT THE COST OF WEAR AND TEAR OF THE FREEZER MAC HINE AGAINST THE DEPOSIT AMOUNT AND THE BALANCE ONLY WOULD BE RETURNED TO THE VENDO RS. THE COST OF WEAR AND TEAR WAS CALCULATED @ 25% OF THE VALUE PER ANNUM OR PART THE REOF. IN VIEW OF THE ABOVE SAID CLAUSE, THE AO TOOK THE VIEW THAT THE DEPOSITS COL LECTED FROM THE VENDORS IN RESPECT OF FREEZERS HAS TO CONSIDERED AS THE INCOME OF THE ASS ESSEE CALCULATED AT THE RATE OF 25% OF THE VALUE OF THE MACHINES ON PASSAGE OF EVERY YE AR. ACCORDINGLY, THE AO COMPUTED THE AMOUNT THAT SHOULD BE TREATED AS THE INCOME OF THE ASSESSEE AT RS.35,80,769/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE SAID ADDITION WAS CONFIRMED BY THE LD. CIT(A) IN THEIR RESPECTIVE HANDS. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEES SUBMITTED THAT THE CO- ORDINATE BENCH OF THE TRIBUNAL HAD CONSIDERED IDENT ICAL ISSUES IN THE CASE OF HIGH RANGE FOODS (P) LTD. IN I.T.A. NO. 652/COCH/2010 AND THE TRIBUNAL, VIDE ITS ORDER DATED 12 TH AUGUST, 2011, HAS HELD THAT THE DEPOSITS RECEIVED F ROM THE DEALERS CANNOT BE CONSIDERED AS INCOME. 5. ON THE OTHER HAND, THE LD D.R STRONGLY SUPPO RTED THE ORDERS OF LD CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE COPY OF THE ORDER PASSED BY THE CO -ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HIGH RANGE FOODS (P) LTD, REFERRED SUPR A. IN RESPECT OF THE ISSUE UNDER CONSIDERATION, I.E., WHETHER THE DEPOSITS RECEIVED FROM THE DEALERS CAN BE CONSIDERED AS INCOME OF THE ASSESSEE, THE TRIBUNAL HAS OBSERV ED AS UNDER. THE ASSESSEE RECEIVED DEPOSIT FOR THE SUPPLY OF FR EEZER FROM THE CONCERNED VENDORS. THE FREEZERS ARE REQUIRED TO SA FE KEEP THE EDIBLE ICE-CREAMS. THEY ARE REQUIRED FOR THE PURPOSE OF B USINESS. THE SMALL VENDORS MAY NOT BE INCLINED TO PURCHASE THE FREEZER S AS THEY ARE NOT I.T.A. NO. 599/COCH/2010 3 AFFORDABLE TO THEM CONSIDERING THEIR STATUS. THIS MADE THE ASSESSEE COMPANY TO SUPPLY FREEZER ON THE RECEIPT OF FIXED D EPOSIT AND THE COMPENSATION OF THE SPREAD-OVER PERIOD. THEY ARE A TTACHED WITH A LIABILITY. THE ACCRUAL COMES ONLY ON TERMINATION O F AGREEMENT. THE BUSINESS NECESSITY REQUIRES CORDIAL RELATIONSHIP W ITH VENDORS. THE ASSESSEE CANNOT TREAT THESE TWO AMOUNTS AS RECEIPTS IN THE NATURE OF INCOME UNLESS THE SO-CALLED AGREEMENT TERMINATED. I N OTHER WORDS IT IS NOT A DEBT OWNED BY THE ASSESSEE. HENCE, UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THIS ISSUE TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY SETTING ASIDE THE ORDERS OF THE AUTHORI TIES. BESIDES THE ASSESSEE NEVER TREATED THIS AS INCOME I N THE BOOKS. THE ASSESSEE CONSISTENTLY HOLDING IT SO AS THE AMOUNT ATTACHED WITH A LIABILITY TO REFUND. THE ASSESSEE NEVER ADMITTED T HIS AMOUNT AS INCOME IN THE BOOKS. ONLY ACCRUED INCOME AROSE TO THE ASS ESSEE DURING THE RELEVANT PREVIOUS YEAR ALSO CAN BE BROUGHT TO TAX UNDER THE INCOME- TAX PROVISIONS WHICH IS A SETTLED LAW. IN OTHER WO RDS, THERE MUST BE A DEBT OWNED TO THE ASSESSEE AND UNTIL THIS IS CREATE D IN FAVOUR OF THE ASSESSEE AS A DEBT DUE TO THE ASSESSEE, IT CANNOT B E SAID AS INCOME ACCRUED. HENCE, THE DECISION RELIED BY THE JR. D .R. IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS CITED SUPRA, IS CLEARLY DISTINGUISHABLE ON FACTS. IN THAT CASE, ASSESSEE I TSELF ADMITTED THIS AS INCOME AS PER THE BOOK ENTRIES. HENCE, IT IS DISTI NGUISHABLE. THE DECISION RELIED BY THE LD. COUNSEL FOR THE ASSE SSEE IN THE CASE OF CIT VS. REALEST BUILDERS AND SERVICES LTD. 307 ITR 2 02 (SC) IN ADDITION TO THE FOLLOWING CASES (A) SIDDHESWAR SAHAKARI SAKHAR KARKHANA LTD. VS. CI T & OTHERS 270 ITR 1 (SC); (B) BHARAT PETROLEUM CORPORATION LTD. VS . CIT 202 ITR 492 (CAL). (C) SUGAULI SUGAR WORKS (IMPUGNED) LTD. 236 ITR 518 (SC); (D) STAR INDIA P. LTD. VS. ADDL. CIT 3 11 ITR (ST) 235 (MUMBAI). (E) GOVIND PRASAD PRABHU NATH 171 ITR 417 (ALL.); (F) HINDUSTAN HOUSING AND LAND DEVELOPM ENT TRUST LTD. 161 ITR 524 (SC); (G) ACE BUILDERS PVT. LTD. VS. CIT 225 ITR 746 (SC); (H) MANTRA TANTA YANTRA VIGYAN VS. CIT 3 00 ITR 140 (RAJ.); AND I.T.A. NO. 599/COCH/2010 4 (I) GUARDIAN INDUSTRIES CORPN. VS. ASSISTANT DIRE CTOR OF INCOME-TAX 7 DTR 594 (DEL.). ARE ALSO SUPPORTS THE PLEA OF THE ASSESSEE. THE AC CRUAL HAS BEEN DEALT WITH IN THE RELIED JUDGEMENTS. HENCE, UNDER THE GIV EN SET OF FACTS AND CIRCUMSTANCES, WE BY RELYING ON THE ABOVE DECISIONS SET ASIDE THE ORDERS OF THE AUTHORITIES AND ALLOW THIS GROUND OF THE ASSESSEE AS IT CANNOT BE TREATED AS INCOME FOR THE YEAR RELEVANT U NDER APPEAL. 6. SINCE THE CO-ORDINATE BENCH HAS ALREADY T AKEN A VIEW ON IDENTICAL ISSUE, BY FOLLOWING THE SAID DECISION, WE HOLD THAT THE DEPOS ITS COLLECTED FROM VENDORS CANNOT BE CONSIDERED AS THE INCOME OF THE ASSESSEE SO LONG AS THE AGENCY AGREEMENT CONTINUES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE IN THE HANDS OF BOTH THE ASSESSEES AND DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS ISSUE IN THE HANDS OF BOTH THE ASSESSEES HEREIN. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 25-05-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 25TH MAY, 2012 GJ COPY TO: 1. . SOUTH SHORE ICE CREAMS PRIVATE LIMITED, D.NO.X XVIII/3030, CHERUPARAMPATHU ROAD, KADAVANTHRA, KOCHI. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, KOCHI. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN