ACIT, BARMER V. M/s. Malani Impex INC., BARMER

ITA 66/JODH/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54433 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Keywords: Depreciation
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALRA ) ITA NO.66/JODH/2011 ASSESSMENT YEAR : 2007-08 PAN: AAFFM 6980 L THE ACIT VS. M/S. MALANI IMPEX INC CIRCLE- BARMER MAIN MARKET, CHOHTAN DISTT. BARMER (APPELLANT) (RESPONDENT) C.O. NO.24/JODH/2011 (ARISING OUT OF ITA NO.66/JODH/2011) ASSESSMENT YEAR : 2007-08 PAN: AAFFM 6980 L M/S. MALANI IMPEX INC VS. THE ADDL. CIT MAIN MARKET, CHOHTAN RANGE DISTT. BARMER BARMER (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI R.H. GOHEL ASSESSEE BY : SHRI RAJENDRA JAIN DATE OF HEARING: 08-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A)-, JODHPUR DATED 27-12-2010 FOR THE ASSESSMENT YEAR 2007-08. T HE ASSESSEE HAS FILED THE CROSS OBJECTION. 2.1 THE FIRST GROUND OF REVENUE IS THAT THE LD. CIT (A) HAS ERRED IN DIRECTING TO APPLY THE GROSS PROFIT RATE AS 17.30% INSTEAD OF 17.75% A PPLIED BY THE AO . 2 2.2 THE ASSESSEE FIRM DEALS IN TRADING AS WELL AS M ANUFACTURING OF EMBROIDERY TEXTILES AND APPLIQU PATCH WORK OF TEXTILES ITEMS. THE AO N OTICED THAT THE ASSESSEE HAS DECLARED THE TURNOVER OF RS. 25.53 CRORES AND DECLARED THE G ROSS PROFIT RATE AT 17.21% AS AGAINST 17.16% OF LAST YEAR. THE ASSESSEE HAS NOT MAINTAINE D ANY STOCK REGISTER. THE AO INVOKED THE PROVISIONS OF SECTION 145(3) BECAUSE THE BOOKS OF ACCOUNT WERE HAVING SOME DEFECTS AS WERE POINTED OUT IN EARLIER YEAR ASSESSMENT PROC EEDINGS. IN THE IMMEDIATELY PRECEDING YEAR, THE AO APPLIED THE GROSS PROFIT RATE OF 18% A ND THE SAME WAS REDUCED TO 17.30% BY THE LD.CIT(A). THE DECISION OF THE LD.CIT(A) WAS NO T ACCEPTED BY THE DEPARTMENT AND THEREFORE, THE AO APPLIED THE GROSS PROFIT RATE OF 17.75% AND THUS HE MADE THE ADDITION OF RS. 13,58,510/-. 2.3 THE LD.CIT(A) HAS OBSERVED THAT THE REJECTION O F BOOKS OF ACCOUNT WAS UPHELD IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 05-06 AND 2006-07. THE GROSS PROFIT RATE WAS ORDERED TO BE APPLIED AT 19% AND 17.30% FO R THE ASSESSMENT YEAR 2005-06 AND 2006-07. THE LD.CIT(A) DIRECTED THE AO TO APPLY THE GROSS PROFIT RATE OF 17.30% AS HELD BY HIM FOR THE EARLIER ASSESSMENT YEAR. 2.4 WE HAVE HEARD BOTH THE PARTIES. THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 UPHELD THE FIND INGS OF THE LD.CIT(A) ON THE ISSUE OF GROSS PROFIT ADDITION VIDE ORDER DATED 26-08-201 1. IN THE IMMEDIATELY PRECEDING YEAR, THE TRIBUNAL HAS UPHELD THE GROSS PROFIT RATE OF 17 .30%. FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE EARL IER ASSESSMENT YEAR , WE HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO APPL Y THE GROSS PROFIT RATE OF 17.30% 3 3.1 THE SECOND GROUND OF REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80IB OF RS. 7,59,298/- WHICH WAS REJE CTED BY THE AO AFTER EXAMINING THE CONDITION OF SECTION 80IB. 3.2 THE LD.CIT(A) HAS DECIDED THE ISSUE OF DEDUCTIO N U/S 80IB IN FAVOUR OF THE ASSESSEE VIDE PARA 6.3 AND 6.4 OF HIS ORDER WHICH A RE REPRODUCED AS UNDER:- 6.3 I HAVE GONE THROUGH THE FACTS OF THE CASE AND %CIRCUMSTANCES OF THE CASE AND IT IS OBSERVED THAT SAME ISSUE HAD BEEN DECIDED BY THE HON'BLE ITAT VIDE ORDER DATED 18-09-2008 FOR THE ASSESSMENT YEAR 200405 AND THE CIT (A) IN A PPELLATE ORDERS FOR THE ASSESSMENT YEAR 2005-06 IN APPEAL NO. 257/ 07-08 DATED 7- 10-2008 AND FOR ASSESSMENT YEAR 2006-07 IN APPEAL N O.296/08-09 DATED 24-04-2009. SINCE, THERE IS NO NEW FACTS IN T HE YEAR UNDER CONSIDERATION , THEREFORE, I AGREE ON THE FINDING G IVEN BY MY PREDECESSOR IN APPELLATE ORDERS FOR ASSESSMENT YEAR 2005-06 AND200607 AND FOLLOWING THE DECISION OF JURISDICTI ON ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2004-05, I HOLD THAT APPELLANT IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80 IB 6.4 IN THE YEAR UNDER CONSIDERATION , THE AO HAS AL SO MENTIONED THAT OTHER INCOME SUCH AS INTEREST, DUTY DRAW BACK AND DEPB AMOUNTING TO RS. 80,50,533/-, IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB AS THIS CANNOT BE SAID TO BE DERIVED FROM ACTIVITY OF INDUSTRIAL UNDERTAKING. I AGREE WITH THE FINDING OF THE AO IN THIS REGARD AND I RELY UPON DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. VS CIT, REPORTED IN 317 ITR 218 HELD THAT DEPB AND DDB BENEFITS DO NOT ELIGIBLE FOR DEDU CTION U/S 80I. I THEREFORE, DIRECT THE AO TO DETERMINE CORRECT ALL OWABILITY OF DEDUCTION U/S 80IB IN VIEW OF THE ABOVE FINDINGS AN D DECIDE ACCORDINGLY. THE GROUND OF APPEAL IS PARTLY ALLOWED . 3.3 WE HAVE HEARD BOTH THE PARTIES. THE LD.CIT(A) H AS ALLOWED DEDUCTION U/S 80IB ON THE BASIS OF THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS. FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE , WE HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ALLO W DEDUCTION U/S 80IB OF THE ACT AMOUNTING TO RS. 7,59,298/- 4 4.1 THE THIRD GROUND OF REVENUE IS THAT THE LD. CI T(A) HAS ERRED IN DELETING THE DEPRECIATION ON TDP TRANSFORMER AMOUNTING TO RS. 2. 73 LACS. 4.2 WE HAVE HEARD BOTH THE PARTIES. THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS. THE TRIBUNAL VIDE ITS ORDER DATED 26-08-2011IN PARA 16 HELD THAT THE TRANSFORMER WHIC H IS CONNECTED WITH THE WINDMILL HAS TO BE TAKEN AS PART OF THE WINDMILL AND HIGHER RATE OF DEPRECIATION WILL BE ALLOWABLE. MOREOVER, THE DEPRECIATION IS TO BE ALLOWED ON THE BASIS OF THE WINDMILL AT WHICH DEPRECIATION WAS ALLOWED IN EARLIER YEAR. HENCE, TH IS DOES NOT ARISE FROM THE ASSESSMENT YEAR UNDER CONSIDERATION, IN CASE THE DEPRECIATION AT TDP TRANSFORMER STANDS ALLOWED AT A PARTICULAR RATE IN EARLIER ASSESSMENT YEAR . 5.1 THE FOURTH GROUND OF REVENUE IS THAT THE LD. C IT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF CLAIM OF PF & ESI AMOUNTING TO RS. 1,26,682/- 5.2 THE AO HAS DISALLOWED THESE EXPENSES ON THE GRO UND THAT THESE HAVE BEEN PAID LATE. HOWEVER, THESE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN. THE LD.CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT IN CASE THE PAYMENTS HAVE BEEN MADE BEFORE DUE DATE OF FILING OF RETURN THEN THESE ARE ALLOWABLE. 5.3 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE STAND S COVERED BY THE DECISION OF APEX COURT IN THE CASE OF VINAY CEMENT 307 ITR 202. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V SABRI ENTERPRISE 298 ITR 141 HELD THAT EMPLOYEES CONTRIBUTION IS ALLOWABLE IF THE SAME IS PAID BEFORE THE DUE DATE O F RETURN. THE HONBLE DELHI HIGH COURT RECENTLY IN THE CASE OF EMPLOYEES CONTRIBUTI ON HAS ALSO HELD THAT THE SAME IS ALLOWABLE IN CASE THE SAME IS PAID BEFORE THE DUE D ATE OF RETURN CIT V SPL INDUSTRIES. HENCE THE LD.CIT(A) WAS JUSTIFIED IN DIRECTING THE A.O. TO ALLOW RS.1,26,682/- 5 6.1 THE ISSUES RAISED IN THE CROSS OBJECTION ARE TH E SAME AS RAISED IN THE APPEAL FILED BY THE REVENUE. 6.2 WE UPHOLD THE REJECTION OF BOOKS OF ACCOUNT AND THEREFORE, THE FIRST GROUND OF THE C.O. IS DECIDED AGAINST THE ASSESSEE. 7.1 WE HAVE HELD THAT GROSS PROFIT RATE OF 17.30% I S TO BE APPLIED AND THEREFORE, THE TRADING ADDITION SUSTAINED BY THE LD.CIT(A) IS CONF IRMED. THUS THE SECOND GROUND OF THE C.O. OF THE ASSESSEE IS DISMISSED. 8.1 THE THIRD GROUND OF THE C.O. IS IN RESPECT OF ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. 8.2 WHILE DECIDING THE APPEAL OF THE REVENUE, THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE. 9.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16- 12-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 16/12/2011 MISHRA COPY TO: 1. THE ACIT, CIRCLE- BARMER 2. M/S. MALANI IMPEX INC BARMER 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 66/JODH/11) A.R.. ITA T: JODHPUR 6 7 8 9