The ACIT, Circle-8, Ahmedabad V. Vadilal Dairy International Ltd., Ahmedabad

MA 118/AHD/2012

• Counselvise Citation: [2013] 123 COUNSELVISE.COM (IT) 9917 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 25-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Keywords: Principle of natural justice; Rule of consistency; Royalty expenses
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER MA NOS.118 & 119/AHD/2012 (IN ./ IN I.T.A. NOS.1963/AHD/2005 & 827/AHD/2006) ( ( ) *) / ASSESSMENT YEARS : 2001-02 & 2002-03 RESPECTIVELY) ACIT CIRCLE-8 AHMEDABAD (ORIGINAL RESPONDENT) ( / VS. VADILAL DAIRY INTERNATIONAL LTD. C/O.ANJUAN TRDG.PVT.LTYD. BASEMENT SHRAM SIDDHI APTS. OP: DARSHAN SOC. NR.STADIUM FIVE ROADS AHMEDABAD (ORIGINAL APPELLANT) ./ ./ PAN/GIR NO. : AABCV 0520 A ( / APPLICANT ) .. ( / RESPONDENT ) / APPLICANT BY : SHRI D.K.SINGH SR.D.R. / RESPONDENT BY : SHRI S.N.SOPARKAR, SR.ADV. / DATE OF HEARING : 01/02/2013 !'# / DATE OF PRONOUNCEMENT : 22.2.13 $% / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO MISCELLANEOUS PETITIONS HAVE BEEN FILED BY THE REVENUE BOTH DATED 25.6.12 ARISING FROM THE ORDERS OF ITAT D BENCH AHMEDABAD AS REFERRED IN THE NOMENCLATURE HEREINABO VE RESPECTIVELY DATED 17.10.2008 FOR A.Y. 2001-02 AND DATED 16.01. 2009 FOR A.Y. 2002- 03. MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 2 - 2. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.D.K.SI NGH APPEARED AND PLACED RELIANCE ON THE MISCELLANEOUS PETITION; RELEVANT PORTION IS REPRODUCED BELOW:- HONBLE ITAT VIDE PARA 5 OF ITS ORDER IN ITA NO.19 63/AHD/2005 DATED 17-10-2008 ALLOWED THE APPEAL OF THE ASSESSEE FOR A.Y. 2001-02 ON THE ISSUE OF DISALLOWANCE OF ROYALTY EXP ENSES OF RS.17,62,472/- RELYING ON THE ITS OWN JUDGMENT IN T HE CASE OF THE ASSESSEE FOR A.Y. 1995-96 TO AY 1997-98. THE SAID ORDER WAS RECEIVED IN THE OFFICE OF THE CIT AHMEDABAD-IV, AHM EDABAD ON 13/02/09. 2. HOWEVER THE FACTS OF THE CASE FOR AY 1995 TO AY 1997-98 ARE COMPLETELY DIFFERENT FROM THAT OF AY 2001-02. 3. IN A.Y. 94-95 & A.Y. 95-96, DISALLOWANCE OF ROY ALTY EXPENSES WAS MADE BY THE AO BY TREATING THE ENTIRE TRANSACTI ON AS SHAM TRANSACTION WHEREAS IN AY 2001-02 THE DISALLOWANCE OF ROYALTY EXPENSES WAS MADE AS PER EXPLANATION TO SECTION 37 OF THE ACT TREATING THE EXPENSES AS ILLEGAL. 4. IN A.Y. 96-97 THE DISALLOWANCE WAS MADE BY THE AO BY RESTRICTING THE ROYALTY EXPENDITURE TO 0.5% AND DIS ALLOWING THE BALANCE 0.5% U/S.40A(2)(B) OF THE ACT WHEREAS IN AY 2001-02 THE DISALLOWANCE WAS MADE AS PER EXPLANATION TO SECTION 37 OF THE ACT TREATING THE EXPENSE AS ILLEGAL. 5. SIMILARLY IN AY 97-98 THE DISALLOWANCE WAS MADE BY THE AO BY RESTRICTING THE ROYALTY EXPENDITURE TO 0.5% AND DISALLOWING THE BALANCE 4.5% U/S.40A(2)(B) OF THE ACT WHEREAS IN AY 2001-02 THE DISALLOWANCE WAS MADE AS PER EXPLANATION TO SECTION 37 OF THE ACT TREATING THE EXPENSE AS ILLEGAL. PRAYER OF THE DEPARTMENT IT IS THEREFORE HUMBLY PRAYED THAT: MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 3 - THE HON ITAT MAY RECALL THE ORDER PASSED ON 17-10-0 8 AND DECIDE THE CASE ON MERITS ON THE BASIS OF FACTS MEN TIONED HEREIN ABOVE AND AMEND THE ORDER ACCORDINGLY. 2.1 DR HAS ALSO FURNISHED A COMPARATIVE CHART AS UNDER: - A.Y. A.Y.2001-02 A.Y.1994-95 A.Y.1995-96 A.Y.1996-9 7 A.Y6.1997- 98 ISSUE UNDER CONSIDERATION: DISALLOWANCE OF ROYALTY EXPENSES : DISALLOWANCE WAS MADE AS PER EXPLANATION TO SECTION 37 OF THE ACT TREATING THE EXPENSES AS ILLEGAL (REFER ASSESSMENT ORDER PARA-1, PAGE NO.2 TO 7) DISALLOWANCE WAS MADE BY THE AO BY TREATING THE ENTIRE TRANSACTION AS SHAM TRANSACTION AND THE SAME WAS TREATED AS NOT FOR BUSINESS PURPOSE. (REFER ASSESSMENT ORDER PARA-4, PAGE NO.6 TO 12) DISALLOWANCE WAS MADE BY THE AO BY TREATING THE ENTIRE TRANSACTION AS SHAM TRANSACTION AND THE SAME WAS TREATED AS NOT FOR BUSINESS PURPOSE. (REFER ASSESSMENT ORDER PARA-7, PAGE NO.5) DISALLOWANCE WAS MADE BY THE AO BY RESTRICTING THE ROYALTY EXPENDITURE TO 0.5% AND DISALLOWING THE BALANCE 0.5% U/S.40A(2)(B) OF THE ACT. (REFER ASSESSMENT ORDER PARA-5 PAGE NO.17 & 18) DISALLOWANCE WAS MADE BY THE AO BY RESTRICTING THE ROYALTY EXPENDITURE 5O 0.5% AND DISALLOWING THE BALANCE 4.5% U/S. 40A(2)(B) OF THE ACT. (REFER ASSESSMENT ORDER PARA-3, PAGE NO.2 TO 4) 3. FROM THE SIDE OF THE RESPONDENT, LD.AR MR.S.N.SO PARAKAR HAS EMPHASIZED THAT THE MATTER WAS IN FACT COVERED BY T HE EARLIER DECISIONS OF THE TRIBUNAL, HENCE THE PAST ORDERS WERE RIGHTLY FO LLOWED TO DECIDE THE CONTROVERSY. HE HAS POINTED OUT THAT WHILE DEC IDING THE APPEAL FOR A.Y. 2001-02, THE TRIBUNAL HAS POINTED OUT THAT IN EARLIER YEAR, I.E. A.Y. 1994-95 A SIMILAR DISALLOWANCE WAS MADE WHICH WAS D ELETED BY FIRST APPELLATE AUTHORITY. IN THAT YEAR, NO APPEAL WAS P REFERRED BY THE TRIBUNAL. MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 4 - THEN, LD.AR MR.SOPARKAR HAS MENTIONED THAT FOR A.YS .1995-96, 1996-97 AND 1997-98 APPEALS WERE FILED BEFORE THE TRIBUNAL AND VIDE A CONSOLIDATED ORDER OF THE TRIBUNAL (ITA NOS.2364 TO 2366/AHD/2002) DATED 23.5.2008; THE ORDER OF THE CIT(A) DELETING T HE DISALLOWANCE OF ROYALTY WAS UPHELD. WHILE DECIDING THE APPEALS FO R A.YS. 2001-02 AND 2002-03 THE TRIBUNAL WAS CONSCIOUS ABOUT THE FACTS OF THE CASE AND, THEREFORE, GIVEN A CLEAR FINDING THAT THE ISSUE INV OLVED FOR THESE TWO YEARS WAS SIMILAR WITH THE EARLIER YEARS, THEREFORE, AFTE R REPRODUCING THE PORTIONS OF THE PAST ORDERS OF THE TRIBUNAL THE ISS UE WAS HELD IN FAVOUR OF THE ASSESSEE. THEREFORE, FOLLOWING EARLIER PRECEDE NT DOES NOT TANTAMOUNT TO A MISTAKE, HE CONCLUDED. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE RELEVANT ORDERS. AS FAR AS THE YEARS UNDER CONSIDERATION AR E CONCENRED, WE HAVE NOTED THAT VIDE AN ORDER U/S.143(3) DATED 26.2.2004 FOR A.Y. 2001-02, IT WAS HELD BY THE AO THAT THE USE OF THE REGISTERED T RADE MARK BY THE ASSESSEE WAS ILLEGAL. A CLEAR FINDING WAS GIVEN BY THE AO THAT THE PAYMENT OF ROYALTY TO BIFCO FOR A.Y. 2001-02 OF RS. 17,62,472/- FOR THE USE OF THE TRADE-MARK WAS ILLEGAL AND NOT ALLOWABLE AS PER EXPLANATION-2 TO SECTION 37 OF IT ACT. FOR A.Y. 2002-03 VIDE A N ASSESSMENT U/S.143(3) DATED 16.3.2005 THE AO HAS HELD THAT THE ROYALTY OF RS.12,61,543/- TO BIFCO FOR THE USE OF THE TRADE-MA RK WAS ILLEGAL AND NOT ALLOWABLE U/S.37 READ WITH EXPLANATION-2 OF IT ACT. NOW, THOSE FINDINGS OF THE AO IS REQUIRED TO BE COMPARED WITH THE VIEW TAKEN BY THE TRIBUNAL IN ASSESSMENT YEARS 1995-96, 1996-97 & 199 7-98. IN THOSE MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 5 - YEARS, REVENUE WAS IN APPEAL AND ITAT B BENCH AHM EDABAD IN ITA NOS.2364 TO 2366/AHD/2002 VIDE ORDER DATED 23 RD MAY-2008, WHEREIN HAS HELD AS UNDER:- GROUND NO.3 IN AY 1995-96, GROUND NO.1 IN AY 1996- 97 & AY 1997-98. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THESE THREE YEARS, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF ROYALTY PAID TO M/S.BELA INVESTMENT & FINANCE CO.LT D. (BIFCO) ON THE BASIS OF HIS OWN FINDINGS IN AY 1994-95. 4.1. ON APPEAL, THE LD.CIT(A), FOLLOWING HIS OWN OR DER FOR ASSESSMENT YEAR 1994-95 ALLOWED THE CLAIM 4.2. BEFORE US, BOTH THE PARTIES AGREED THAT THE RE VENUE HAS NOT PREFERRED FURTHER APPEAL AGAINST THE DECISION OF LD .CIT(A) FOR ASSESSMENT YEAR 1994-95. 4.3. IN THE LIGHT OF THESE FACTS WHEN THE LD.DEPART MENTAL REPRESENTATIVE DID NOT POINT OUT ANY INFIRMITY IN T HE FINDINGS OF ORDER LD.CIT(A) FOR THE AY 1994-95 IN THE INTEREST OF CONSISTENCY, WE UPHOLD THE ORDER OF LD.CIT(A) AND REJECT THIS GR OUND FOR THESE THREE ASSESSMENT YEARS. 4.1. THE RESPECTED COORDINATE BENCH HAS THUS DECIDE D THE ISSUE MERELY ON THE GROUND THAT THE DEPARTMENT HAD ACCEPT ED THE ORDER OF THE MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 6 - CIT(A) FOR A.Y. 1994-95 AND THEREFORE FOLLOWING THE RULE OF CONSISTENCY FOR THE SAID THREE YEARS, AS WELL, THE GROUND OF TH E REVENUE WAS NOT ACCEPTED AND THE VIEW OF LD.CIT(A) WAS UPHELD. 5. WE HAVE ALSO EXAMINED THAT FOR A.Y. 1994-95 VIDE AN ORDER U/S.143(3) DATED 31.3.1997 THE AO HAS OPINED ON PAG E 9 THAT THE AGREEMENT IN QUESTION WAS NOT A GENUINE AGREEMENT. FROM THE SIDE OF THE REVENUE, A COMPILATION HAS BEEN FILED CONTAINING TH E YEAR-WISE ORDERS OF THE AO, CIT(A) AND ITAT, RESPECTIVELY FOR AYS 1994 -95, 1995-96 1996-97 & 1997-98 AS ALSO FOR AYS 2001-02 & 2002-03 . ON PERUSAL OF THOSE ORDERS IN THE LIGHT OF THE COMPARATIVE CHART PLACED BEFORE US FROM THE SIDE OF THE REVENUE, WE ARE OF THE VIEW THAT TH E PRIMA-FACIE A MISTAKE HAS BEEN COMMITTED BY THE TRIBUNAL BY MECHANICALLY FOLLOWING FEW ORDERS OF THE TRIBUNAL WITHOUT THOROUGHLY COMPARING THE FACTS OF THOSE YEARS WITH THE FACTS OF THE YEARS UNDER APPEAL. IT IS AN ESTABLISHED PROCEDURE OF LAW; WHILE FOLLOWING A PRECEDENT; THAT BEFORE APPLYING THE RESULT OF A CASE LAW, IT IS INCUMBENT TO FIRST ADJU DGE THE COMPARABILITY. A PRECEDENT IS AN AUTHORITY ONLY FOR WHAT IT IS DECID ED. IN THE NAME OF ADHERING TO THE PRINCIPLES OF CONSISTENCY, WE CANNO T LEAVE ANY SCOPE FOR REPETITION OF ERRORS. RATHER, THE TRIBUNAL BEING T HE FINAL FACT FINDING AUTHORITY HAS THE LIBERTY OF APPLYING ITS MIND AFRE SH TO THE MATTER IRRESPECTIVE OF THE DECISION TAKEN IN EARLIER YEARS . BECAUSE OF THESE REASONS, WE HEREBY HOLD THAT AN ERROR HAS BEEN COMM ITTED BY THE TRIBUNAL, WHICH CAN BE SAID TO BE AN APPARENT MISTA KE. PRIMA-FACIE REASONING IS THAT THE FACTS COULD NOT BE SAID TO BE IDENTICAL BEING THE MA NOS.118 & 119/AHD/2012 (IN ITA NOS.1963/AHD/2005 & 827/AHD/2006 (RESPECTI VELY) ACIT VS.VADILAL DAIRY INTERNATIONAL LTD. ASST.YEARS 2001-02 & 2002-03 - 7 - DISALLOWANCE WAS MADE ON DIFFERENT GROUND, THEREFOR E, THE ISSUE IN HAND WAS NOT SQUARELY COVERED THUS RESULTED INTO AN APPA RENT MISTAKE. THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, WE H EREBY RECALL THE ORDERS IN QUESTION OF THE TRIBUNAL RESPECTIVELY DATED 17.10.2 008 AND 16.1.2009, SO THAT THE FACTS CAN BE VERIFIED AND THEREUPON THESE TWO YEARS CAN BE DECIDED AFRESH AS PER LAW. RESULTANTLY, THESE TWO MISCELLANEOUS PETITIONS ARE ALLOWED. 6. IN THE RESULT, MISCELLANEOUS PETITIONS ARE ALLOW ED. SD/- SD/- ( &..'!() ) ( * * + ) $ ,- $ ( A. K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/ 02 /2013 ..., .-../ T.C. NAIR, SR. PS ', - ./0 1'0* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 12 3 / CONCERNED CIT 4. 3 () / THE CIT(A)-XIV, AHMEDABAD 5. 67' --12, 12#, 8*$0$ / DR, ITAT, AHMEDABAD 6. ')9 : / GUARD FILE. ',( / BY ORDER, 6 - //TRUE COPY// 2/ 3 ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD