DCIT 8(2), MUMBAI V. PROCTER & GAMBLE HOME PRODUCTS LTD, PUNE

ITA 6774/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2139 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6774/MUM/2014 FOR ASSESSMENT YEAR: 2004- 05 DY. CIT-8(2), R.NO. 209, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020. VS. M/S PROCTER & GAMBLE HOME PRODUCTS LTD., P & G PLAZA, CARDINAL GRACIAS ROAD, CHAKALA, ANDHERI(EAST), MUMBAI -400099 PAN: AAACP4072C (APPELLANT) (RESPONDENT) ITA NO.6882/MUM/2014 FOR ASSESSMENT YEAR: 2004- 05 M/S PROCTER & GAMBLE HOME PRODUCTS LTD., P & G PLAZA, CARDINAL GRACIAS ROAD, CHAKALA, ANDHERI(EAST), MUMBAI -400099 PAN: AAACP4072C VS. DY. CIT-8(2), R.NO. 209, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.V. SINGH (DR) ASSESSEE BY : SHRI HARESH G. BUCH, JISHAAN JAIN (AR) DATE OF HEARING : 22.08.2016 DATE OF PRONOUNCEMENT : 09.11.2016 O R D E R PER PAWAN SINGH, JM: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-17, MUMBAI [FOR SHORT CIT(A) ] DATED 14.08.2014 FOR ASSESSMENT YEAR (AY)-2004-05. AS BOTH THE APPEALS A RE FILED AGAINST THE SAME ORDER OF LD. CIT(A) BY THE PARTIES, HENCE, BOT H THE APPEALS WERE ITA NOS.6774 & 6882/M/014, M/S PROCTER & GAMBLE HOME PRODUCTS LTD. 2 CLUBBED TOGETHER, HEARD AND BEING DECIDED BY A COM MON ORDER TO AVOID CONFLICTING DECISION. FIRST WE ARE TAKING THE APPEA L FILED BY ASSESSEE. ITA NO. 6882/MUM/2014 2. THE ASSESSEE HAS RAISED ONLY ONE GROUND OF APPEAL I S THAT LD CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 3 CRORES BEING AM ORTIZED PORTION FOR RELEVANT YEAR OUT OF RS. 21 CRORES PAID UNDER THE SAFEGUARD CONFIDENTIALITY AGREEMENT TO GODREJ SOAPS LTD. (GSL). 3. WE HAVE HEARD THE RIVAL CONTENTION OF THE RESPECTIV E LD REPRESENTATIVES OF THE PARTIES. AT THE OUTSET, IT WAS SUBMITTED BY LD. LD. AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE THAT THE ISSUE RAISED BY THE ASSESSEE IN HIS APPEAL IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUN AL IN ASSESSEES OWN CASE FOR AYS 1997-98 TO 2000-01 DATED 15.12.2010 VIDE IT A NO. 988, 8868- 8870/MUM/2001 & 2004. LD. DEPARTMENTAL REPRESENTATI VE (DR) FOR REVENUE NOT DISPUTED THE CONTENTION OF LD. AR FOR A SSESSEE. THUS, CONSIDERING THE CONTENTION OF LD. AR OF THE ASSESSE E, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. AS THE SAME IS COVERED AGAIN ST HIM BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 1997-98 TO 2000-01 DATED 15.12.2010 VIDE ITA NO. 988, 8868-8870/MUM/2001 & 2 004. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 6774/MUM/2014 5. THE REVENUE HAS RAISED ONLY ONE GROUND OF APPEAL T HAT LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 47 CRORES ON ACCOUN T OF REDUCTION IN G.P. WITHOUT APPRECIATING THAT THE ASSESSEE HAS GIVEN DI FFERENT EXPLANATIONS DURING THE ASSESSMENT PROCEEDINGS AND IN SET ASIDE PROCEED INGS. 6. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AN D PERUSED THE RECORD. THE LD. DR FOR THE REVENUE ARGUED THAT DURING THE ASSES SMENT, THE AO ASKED THE ASSESSEE TO FURNISH THE REASONS FOR FALL IN GROSS P ROFIT (G.P.), THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THE FALL IN G.P. RATIO WAS RELATING TO ITA NOS.6774 & 6882/M/014, M/S PROCTER & GAMBLE HOME PRODUCTS LTD. 3 SHAMPOO SACHETS WHICH CONTRIBUTE MORE THAN 50% OF G ROSS SALE. IT WAS FURTHER CONTENDED THAT EXPENSES ON PACKING OF THE B ULK SHAMPOO PRODUCTS IN SMALL SACHETS FOR 20 GM. TO HIGHER WEIGHT PACKS, WE RE THE MAIN REASONS WHICH AFFECTED THE GP RATE. THE ASSESSEE WAS FURTHE R ASKED TO FURNISH THE DETAILS THEREOF FOR EXAMINATION BY AO AND THE ASSES SEE NEITHER GAVE EVIDENCE NOR COULD PROVE ITS CONTENTION, THUS, THE AO MADE T HE ADDITION ON ACCOUNT OF REDUCTION OF GP. THE LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF AO. ON THE OTHER HAND, LD. AR FOR ASSESSEE ARGUED THAT THE AO HAS NOT APPRECIATED THE FACT BROUGHT BEFORE HIM. THE ASSESS EE DURING THE APPELLATE PROCEEDING FILED ADDITIONAL EVIDENCE TO PROVE THE C ONTENTION ABOUT FALL IN THE G.P. RATE. THE LD CIT(A) FORWARDED THE EVIDENCES TO THE AO IN HIS REMAND REPORT. THE AO HAS NOT DISPUTED IN HIS REPORT ABOUT THE FACTS OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO IN HIS REMAND REPORT GAVE THE FOLLOWING OBSERVATION: WITHOUT PREJUDICE TO THE ABOVE, THE SUBMISSIONS MA DE BY THE ASSESSEE HAVE BEEN CAREFULLY PERUSED. IT IS NOTED THAT DURIN G THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS AGGRESSIVEL Y MARKETING ITS PRODUCTS AND TRYING TO GET A FOOTHOLD IN THE LAUNDR Y SEGMENT OF THE MARKET AHEAD AND STRONGLY THAN ITS COMPETITORS. IN A BID TO DO THAT, IT REDUCED THE SELLING PRICE PER KG. OF ITS LAUNDRY PR ODUCTS VIS-A-VIS PRECEDING YEAR BY 24.75% AND THE CORRESPONDING PURC HASE PRICE PER KG. IN THE SAID PERIOD WAS REDUCED BY 13%. AS THE LAUND RY SALES CONSTITUTED 61% OF THE TOTAL TURNOVER OF THE ASSESSEE COMPANY, THIS EXCESS OF REDUCTION OF SALES PRICE OVER PURCHASE PRICE ACCOUN TED FOR A ROUGHLY 7.15% OF THE FALL IN GP. 8. WE HAVE NOTICED THAT THE AO IN HIS REMAND REPORT AC CEPTED THAT THE ASSESSEE HAS REDUCED THE SELLING PRICE OF ITS LAUNDRY PRODUC TS VIS-A-VIS THE PRECEDING YEAR BY 24.75% AND THE CORRESPONDING PURCHASE PRICE WAS REDUCED BY 13%. THE AO HAS FURTHER ACCEPTED THAT EXCESS REDUCTION O F SALE PRICE OFFERED, THE PURCHASE PRICE ACCOUNTED FOR A ROUGHLY OF 7.5% OF F ALL IN GP. WE HAVE FURTHER SEEN THAT WHILE CONSIDERING THIS GROUND THE LD CIT(A) OBSERVED THAT THE AO HAS NOT DISPUTED THAT LAUNDRY SEGMENTS CONTR IBUTES NEARBY 61% OF THE ITA NOS.6774 & 6882/M/014, M/S PROCTER & GAMBLE HOME PRODUCTS LTD. 4 ENTIRE SALES AND THE HAIR CARE SEGMENTS CONTRIBUT ES ONLY 36.12% OF THE ENTIRE SALES, THUS THE PRICE REDUCTION IN ANY SEGME NTS WILL IMPACT THE OVERALL GP OF THE ASSESSEE. THE LD CIT(A) ALSO CONSIDERED T HE FACT THAT THE PRICE OF 20 GM. ARIEL SACHET WAS REDUCED FROM RS. 3 TO RS. 2 , THE PRICE OF TIDE SACHET OF 20 GMS. (EARLIER IT WAS 25 GM SACHET) WAS BROUGH T FROM RS. 2 TO RS.1 FROM SEPTEMBER 2003, THE IMPACT OF PRICE REDUCTION WAS D ULY REFLECTED IN THE ANNUAL ACCOUNTS OF FINANCIAL YEAR 2003-04 WHICH SHO WS THE SUBSTANTIAL REDUCTION OF IN OVERALL PROFITABILITY BUT INCREASED IN VOLUMES AND OVERALL SALES WHICH BECAME DOUBLE FROM SEPTEMBER 2003 TO MARCH 20 04 PARTICULARLY IN SOAPS AND DETERGENT SEGMENT. THE LD. CIT(A) DULY CO NSIDERED THAT ASSESSEE WAS UNABLE TO REDUCE THE COST OF PURCHASE IN PROPOR TION TO REDUCTION IN SALE PRICE WHICH RESULTED IN THE REDUCTION OF GP. THUS, WE HAVE SEEN THAT THE LD. CIT(A) ANALYZED THE FACTUAL POSITION WHILE ACCEPTIN G THE DECLINE IN GP RATE. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A), WHICH WE CONFIRMS. THUS, THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH NOVEMBER, 2016 SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 09/11/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/