DCIT, Ernakulam V. Kreem Drinks (p) Ltd, Ernakulam

ITA 77/COCH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6256 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• 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. NOS. 73-79/COCH/2014 ASSESSMENT YEARS : 2008-09 & 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. 1. CREAM PACKS P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACC 9366C] 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACC 9368C] ASSESSMENT YEAR : 2008-09 2. M/S. COMBINED FOODS P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACC 9366C] ASSESSMENT YEAR : 2010-11 3. M/S. SOUTH SHORE ICE CREAM P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAGCS 6807A] ASSESSMENT YEAR : 2010-11 4. M/S. KREEM DRINKS P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACK 8718N] ASSESSMENT YEAR : 2010-11 5. M/S. JOJO FROZEN FOOD S P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACJ 8843K] ASSESSMENT YEAR : 2010-11 I.T.A. NOS. 73-79/COCH/2014 2 6. M/S. HIGH RANGE FOODS P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. [PAN: AAACH 6076L] ASSESSMENT YEAR : 2010-11 (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) REVENUE BY SHRI K.K. JOHN, SR. DR ASSESSEE BY SHRI A.S. NARAYANAMOORTHY, CA DATE OF HEARING 21/04/2014 DATE OF PRONOUNCEMENT 25/04/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS, FILED AT THE INSTANCE OF THE RE VENUE IN RESPECT OF DIFFERENT ASSESSEES, ARE DIRECTED AGAINST THE RESPE CTIVE ORDERS PASSED BY THE LD. CIT(A)-I, KOCHI. SINCE THE ISSUE URGED IN THESE APP EALS IS IDENTICAL IN NATURE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OFF BY THIS COMMON ORDER. 2. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSI DERATION IS ABOUT THE TAXABILITY OF FREEZER DEPOSITS RECEIVED BY THESE ASSESSEES FROM T HEIR CUSTOMERS. 3. SHRI K.K. JOHN, THE LD. DR SUBMITTED THAT THE CI T(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL; HOWEVER, THE REVENUE HAS ALR EADY FILED APPEAL IN THE HIGH COURT AND THE MATTER IS PENDING. ACCORDING TO THE LD. DR, THE ASSESSEE COLLECTED DEPOSITS IN RESPECT OF FREEZER; HOWEVER, THE SAME W AS NOT SHOWN AS INCOME. ACCORDING TO THE LD. DR, THE DEPARTMENTS STAND IS THAT THE DEPOSITS COLLECTED IN RESPECT OF FREEZER HAVE TO BE CONSIDERED AS INCOME OF THE ASSESSEE. I.T.A. NOS. 73-79/COCH/2014 3 3.1 ON THE CONTRARY, SHRI A.S. NARAYANAMOORTHY, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE OBJECTION FILED BY THE ASSESSEE WAS CONSIDERED BY THE TRIBUNAL ELABORATELY AND THIS TRIBUNAL FOUND THAT T HE DEPOSITS FROM THE VENDORS IN RESPECT OF FREEZER CANNOT BE CONSIDERED AS INCOM E OF THE ASSESSEE AND THE LD. CIT(A) HAS FOLLOWED ONLY THE ORDER OF THE TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND RELEVANT MATERIAL ON RECORD. THE ISSUE ARISES IS WHETHER TH E DEPOSITS IN RESPECT OF THE FREEZER HAS TO BE CONSIDERED AS INCOME OF THE ASSES SEE OR NOT. AS RIGHTLY SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THIS I SSUE WAS CONSIDERED BY THE TRIBUNAL IN ONE OF THE ASSESSEES FOR THE EARLIER AS SESSMENT YEAR AND FOUND THAT SUCH DEPOSITS CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE ORDER DATED 08.08 .2012 PASSED BY THE TRIBUNAL IN THE CASE OF M/S. KREEM FOODS (P) LTD. I N ITA NO. 597/COCH/2010 RELATING TO ASSESSMENT YEAR 2007-08:- 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A COPY OF THE ORDER DATED 25-05-2012 PASSED BY THIS BENCH IN THE CASE OF JOJO FROZEN FOOD (P) LTD. AND CREAM PACKS (P) LTD. IN I.T.A. NOS. 655 & 654/COCH/2010 WHEREIN THE TRIBUNAL HAS CONSIDERED A N IDENTICAL ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. FOR TH E SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE SAID ORDER IN RESPECT OF THE ABOVE SAID ISSUE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE COPY OF THE ORDER PASSED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF HIGH RANGE FOODS (P) LTD, REFERRED SUPRA. IN RESPECT OF THE FIRST ISSUE, I.E., WHETHER THE DEPOSITS RECEIVED FROM THE DEALERS CAN BE CONSIDERED AS INCOME OF THE ASSESSEE, THE TRIBUNAL HAS OBSERVED A S UNDER. I.T.A. NOS. 73-79/COCH/2014 4 THE ASSESSEE RECEIVED DEPOSIT FOR THE SUPPLY OF FR EEZER FROM THE CONCERNED VENDORS. THE FREEZERS ARE REQUIRED TO SAF E KEEP THE EDIBLE ICE-CREAMS. THEY ARE REQUIRED FOR THE PURPOS E OF BUSINESS. THE SMALL VENDORS MAY NOT BE INCLINED TO PURCHASE T HE FREEZERS AS THEY ARE NOT AFFORDABLE TO THEM CONSIDERING THEI R STATUS. THIS MADE THE ASSESSEE COMPANY TO SUPPLY FREEZER ON THE RECEIPT OF FIXED DEPOSIT AND THE COMPENSATION OF THE SPREAD-OV ER PERIOD. THEY ARE ATTACHED WITH A LIABILITY. THE ACCRUAL CO MES ONLY ON TERMINATION OF AGREEMENT. THE BUSINESS NECESSITY RE QUIRES CORDIAL RELATIONSHIP WITH VENDORS. THE ASSESSEE CAN NOT TREAT THESE TWO AMOUNTS AS RECEIPTS IN THE NATURE OF INCO ME UNLESS THE SO-CALLED AGREEMENT TERMINATED. IN OTHER WORDS IT IS NOT A DEBT OWNED BY THE ASSESSEE. HENCE, UNDER THE ABOVE FACT S AND CIRCUMSTANCES OF THE CASE, THIS ISSUE TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY SETTING ASIDE THE ORDERS OF THE AUT HORITIES. BESIDES THE ASSESSEE NEVER TREATED THIS AS INCOME I N THE BOOKS. THE ASSESSEE CONSISTENTLY HOLDING IT SO AS THE AMOU NT ATTACHED WITH A LIABILITY TO REFUND. THE ASSESSEE NEVER ADM ITTED THIS AMOUNT AS INCOME IN THE BOOKS. ONLY ACCRUED INCOM E AROSE TO THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR ALSO CAN BE BROUGHT TO TAX UNDER THE INCOME-TAX PROVISIONS WHIC H IS A SETTLED LAW. IN OTHER WORDS, THERE MUST BE A DEBT OWNED TO THE ASSESSEE AND UNTIL THIS IS CREATED IN FAVOUR OF THE ASSESSEE AS A DEBT DUE TO THE ASSESSEE, IT CANNOT BE SAID AS INC OME 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 CLEA RLY DISTINGUISHABLE ON FACTS. IN THAT CASE, ASSESSEE I TSELF ADMITTED THIS AS INCOME AS PER THE BOOK ENTRIES. HENCE, IT IS DISTINGUISHABLE. THE DECISION RELIED BY THE LD. COUNSEL FOR THE ASSE SSEE IN THE CASE OF CIT VS. REALEST BUILDERS AND SERVICES LTD. 307 ITR 202 (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); I.T.A. NOS. 73-79/COCH/2014 5 (D) STAR INDIA P. LTD. VS. ADDL. CIT 311 ITR (ST) 235 (MUMBAI). (E) GOVIND PRASAD PRABHU NATH 171 ITR 417 (ALL.); (F) HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST L TD. 161 ITR 524 (SC); (G) ACE BUILDERS PVT. LTD. VS. CIT 2 25 ITR 746 (SC); (H) MANTRA TANTA YANTRA VIGYAN VS. CIT 300 ITR 14 0 (RAJ.); AND (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 T HE GIVEN 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 UNDER APPEAL. 7. SINCE THE CO-ORDINATE BENCH HAS ALREADY T AKEN A VIEW ON IDENTICAL ISSUE, BY FOLLOWING THE SAID DECISION, WE HOLD THAT THE DEPOSITS COLLECTED FROM VENDORS CANNOT BE CONSIDERE D AS THE INCOME OF THE ASSESSEE SO LONG AS THE AGENCY AGREEMENT CON TINUES. 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 DE LETE THE ADDITION MADE ON THIS ISSUE IN THE HANDS OF BOTH THE ASSESSE ES HEREIN. 5. THE ONLY OBJECTION OF THE LD. DR IS THAT THE A PPEAL WAS FILED AGAINST THE ORDER OF THE TRIBUNAL AND THE SAME IS PENDING BEFOR E THE HIGH COURT. BUT ON A QUERY FROM THE BENCH, THE LD. DR SUBMITTED THAT HE DOES NOT HAVE KNOWLEDGE OF ANY STAY GRANTED BY THE HONBLE HIGH COURT ON THE O PERATION OF THE EARLIER ORDER OF THE TRIBUNAL. SINCE THE LD. CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL, WE I.T.A. NOS. 73-79/COCH/2014 6 ARE OF THE CONSIDERED OPINION THAT MERE PENDING OF THE APPEAL BEFORE THE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL CANNOT BE A REASON TO TAKE A DIFFERENT VIEW. THEREFORE, BY FOLLOWING THE ORDER OF THE TRI BUNAL FOR THE EARLIER ASSESSMENT YEAR, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DEPOSITS COLLECTED BY THE ASSESSEE FOR FREEZER CANNOT BE CON SIDERED AS INCOME OF THE ASSESSEE. 6. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE STAND DISMISSED. PRONOUNCED ACCORDINGLY ON 25-04- 2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH APRIL, 2014 GJ COPY TO: 1. 1. CREAM PACKS P. LTD., 28/3030, CHERUPARAMBATH ROAD, KADAVANTHRA, KOCHI- 682 020. 2. M/S. COMBINED FOODS P. LTD., 28/3030, CHERUPARAM BATH ROAD, KADAVANTHRA, KOCHI-682 020. 3. M/S. SOUTH SHORE ICE CREAM P. LTD., 28/3030, CHE RUPARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. 4. M/S. KREEM DRINKS P. LTD., 28/3030, CHERUPARAMBA TH ROAD, KADAVANTHRA, KOCHI-682 020. 5. M/S. JOJO FROZEN FOODS P. LTD., 28/3030, CHERUP ARAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. 6. M/S. HIGH RANGE FOODS P. LTD., 28/3030, CHERUPA RAMBATH ROAD, KADAVANTHRA, KOCHI-682 020. 7. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. 8. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . I.T.A. NOS. 73-79/COCH/2014 7 9. THE COMMISSIONER OF INCOME-TAX, KOCHI. 10. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 11 GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN