M/s Ananthpur Mining Corporation, Bellary v. JOINT COMMISSIONER OF INCOME TAX, Bangalore

ITA 1354/BANG/2014 | 2009-2010
Pronouncement Date: 17-10-2016 | Result: Allowed

Appeal Details

RSA Number 135421114 RSA 2014
Assessee PAN AACFA1477F
Bench Bangalore
Appeal Number ITA 1354/BANG/2014
Duration Of Justice 1 year(s) 11 month(s) 11 day(s)
Appellant M/s Ananthpur Mining Corporation, Bellary
Respondent JOINT COMMISSIONER OF INCOME TAX, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-10-2016
Date Of Final Hearing 21-06-2016
Next Hearing Date 21-06-2016
Assessment Year 2009-2010
Appeal Filed On 05-11-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO.1354/BANG/2014 ASSESSMENT YEAR : 2009-10 M/S. ANANTHAPUR MINING CORPORATION GANESH NAGAR NEAR KUMARA SWAMY TEMPLE INFANTRY ROAD BELLARY 583 103. PAN: AACFA 1477F VS. THE JOINT COMMISSIONER OF INCOME TAX CENTRAL RANGE 1 BANGALORE. APPELLANT RESPONDENT APPELLANT BY : S/SHRI MAYANK JAIN & MADHUR JAIN ADVOCATES RESPONDENT BY : MS. NEERA MALHOTRA CIT(DR) DATE OF HEARING : 26.08.2016 DATE OF PRONOUNCEMENT : 17.10.2016 O R D E R PER A. K. GARODIA A.M.: THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF CIT (APPEALS)-VI BANGALORE DATED 25.08.2014 FOR THE ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IN UPHOLDING THE IMPUGNED ASSESSMENT ORDER U/S.143 (3) OF THE ACT IS OPPOSED TO LAW FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (A) ERRED IN UPHOLDING THE ADDIT ION ON VALUATION OF STOCK OF RS.15 30 23 182/- ON THE GROUND THAT THE A SSESSEE HAS TO VALUE THE CLOSING STOCK ON A CONSISTENT BASIS. 3. THE LEARNED CIT(A) FAILED TO CONSIDER AND APPRE CIATE THAT THE METHOD OF VALUATION OF STOCK HAS NOT CHANGED AND IN THE FACE OF THE UNDISPUTED FACT THAT THE CLOSING STOCK CONSISTED OF ONLY RAW STOCK LYING IN ITA NO.1354/BANG/2014 PAGE 2 OF 8 MINING SITES AND DOES NOT CONSIST OF COMPONENTS LIK E SCREENING CRUSHING TRANSPORTATION AND INCIDENTAL DIRECT COSTS AND VALU ATION BEING HIGHLY TECHNICAL THE LEARNED A.O AND THE LEARNED CIT(A) C ANNOT FORM ANY OPINION WITHOUT AN EXPERT OPINION AND SHOULD HAVE A CCEPTED THE VALUATION AS REPORTED BY THE APPELLANT. 4. THE FINDING THAT THE APPELLANT HAS NOT CONSISTE NTLY FOLLOWED THE SAME METHOD OF VALUATION IS PERVERSE AND NOT SUPPOR TED BY ANY EVIDENCE. 5. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF JD PLOT RENT OF RS.2 66 91 497/- ON THE GROUND THAT IT IS NOT USED IN THE BUSINESS OF THE APPELLANT AND USED BY ONE OF THE SI STER CONCERNS OF THE APPELLANT. 6. THE LEARNED AUTHORITIES FAILED TO APPRECIATE TH AT THE STOCK OF THE APPELLANT WAS DUMPED IN THE YARD AND BECAUSE THE AP PELLANT DID NOT HAVE REQUISITE LICENSE TO EXPORT THE SAME WAS EXPORTED BY OBULAPURAM MINING COMPANY PVT. LTD. AFTER ITS FORMAL PURCHASE FROM T HE APPELLANT AND THE SAME AMOUNTED TO USER FOR THE PURPOSE OF THE BUSINE SS OF THE APPELLANT. 7. THE APPELLANT SEEKS YOUR LEAVE TO ADD ALTER A MEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING AND ALL TH E GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER GROUND. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF ACTUAL HEARING IT IS PRAYED THAT THE HONORABLE ITAT MAY B E PLEASED TO CANCEL THE ASSESSMENT ORDER IN THE INTEREST OF EQUITY AND JUST ICE. 3. GROUND NO.1 IS GENERAL IN NATURE. REGARDING GRO UND NOS. 2 3 & 4 IT IS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE TH AT ON PAGES 2 TO 8 OF PAPERBOOK (PB) IS THE TAX AUDIT REPORT FOR THE AY 2008-09. IN PARTICULAR OUR ATTENTION WAS DRAWN TO PAGE 3 OF PB AND IT WAS POINTED OUT THAT IT WAS REPORTED BY THE AUDITORS IN FORM 3CD THAT METHOD OF VALUATION OF CLOSING STOCK EMPLO YED BY THE ASSESSEE IS PURCHASE COST PLUS OTHER DIRECT COST ON FIFO BASIS. THEREAF TER HE DREW OUR ATTENTION TO THE TAX AUDIT REPORT FOR THE PRESENT YEAR AVAILABLE AT PAGES 12 & 13 OF PB. IN PARTICULAR OUR ATTENTION WAS DRAWN PAGE 13 OF PB AND IT WAS PO INTED OUT THAT IN THIS YEAR ALSO THE AUDITORS HAVE REPORTED THAT CLOSING STOCK IS VA LUED AT PURCHASE COST PLUS OTHER DIRECT COST OR MARKET VALUE WHICHEVER IS LOWER. ITA NO.1354/BANG/2014 PAGE 3 OF 8 4. THEREAFTER HE SUBMITTED THAT ON PAGES 35 & 36 OF PB IS THE COMPUTATION OF VALUE OF CLOSING STOCK AS ON 31.3.2008 AND 31.3.200 9 AND IT WAS POINTED OUT THAT SAME METHOD OF VALUATION IS ADOPTED BY THE ASSESSEE IN BOTH THE YEARS AND THEREFORE THE ADDITION MADE BY THE AO IS NOT JUSTI FIED. 5. AS AGAINST THIS THE LD. DR OF REVENUE SUPPORTE D THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARD ING THIS ISSUE I.E. ADDITION MADE BY THE AO FOR ALLEGED UNDER-VALUATION OF CLOSI NG STOCK WE FIND THAT IN PARA 3.2 OF THE ASSESSMENT ORDER THE AO HAS STATED THAT THE METHOD FOLLOWED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK HAS TO BE C ONSISTENT. THERE IS NO QUARREL ON THIS PROPOSITION. THEREAFTER THE AO HAS STATED IN THE SAME PARA OF ASSESSMENT ORDER THAT THE ASSESSEE IN EARLIER YEARS HAS VALUED THE CLOSING STOCK BASED ON THE COST OF PRODUCTION. BUT AS PER PAGE 35 OF PB IT I S SEEN THAT FOR THE YEAR ENDING 31.3.2008 CLOSING STOCK OF 59 863 M.T. WAS VALUED @ RS.679.20 PER M.T. AND THIS AMOUNT OF VALUE PER M.T. WAS ARRIVED AT BY INCLUDIN G PURCHASE COST RS.515 SHIFTING CHARGES RS.43.25 SCREENING & CRUSHING RS.45.90 OT HER EXPENSES I.E. SHIFTING CHARGES LABOUR CHARGES SUPERVISION CHARGES ETC. RS.75.04 PER M.T. FOR THE PRESENT YEAR I.E. FOR THE YEAR ENDING 31.3.2009 COMPUTATION OF CLOSING STOCK IS AVAILABLE AT PAGE 36 OF PB AND IN THIS YEAR CLOSING STOCK OF 662 352 M.T. WAS VALUED @ RS.147.25 PER M.T. AND THIS VALUE OF RS.147.25 PE R M.T. HAS BEEN ARRIVED AT BY INCLUDING EXTRACTION & EXCAVATION COST OF RS.81.25 PERMIT CHARGES RS.16 PER M.T. AND OTHER DIRECT COST RS.50 PER M.T. IT IS TRUE T HAT IN THE PRESENT YEAR NO AMOUNT HAS BEEN ADDED TOWARDS SCREENING & CRUSHING CHARGES OTHER EXPENSES I.E. SHIFTING CHARGES LABOUR CHARGES SUPERVISION CHARGES ETC. B UT IN THIS REGARD EXPLANATION WAS ITA NO.1354/BANG/2014 PAGE 4 OF 8 SUBMITTED BY THE ASSESSEE BEFORE THE AO WHICH ARE R EPRODUCED BY THE AO ON PAGE 3 OF THE ASSESSMENT ORDER AND IT WAS EXPLAINED THAT AS ON 31.3.2009 THE ENTIRE QUANTITY OF STOCK WAS UNFINISHED PRODUCT AND IT WAS ONLY EXTRACTED AND MEANT FOR SHIFTING TO STOCK PLOTS. IT WAS ALSO SUBMITTED TH AT SHIFTING CHARGES WAS INCURRED BY THE ASSESSEE ON THIS STOCK IN THE NEXT YEAR AND THE REFORE IN THE PRESENT YEAR THE CLOSING STOCK CANNOT BE VALUED AT PRODUCTION COST A PPEARING IN THE PROFIT & LOSS ACCOUNT AS HAS BEEN DONE BY THE AO. IT WAS ALSO S UBMITTED THAT SCREENING & CRUSHING EXPENDITURE WAS ALSO INCURRED IN THE NEXT YEAR AND THEREFORE NO COST WAS INCLUDED ON THAT ACCOUNT ALSO. THIS EXPLANATION OF ASSESSEE WAS REJECTED BY THE AO BUT IN VIEW OF THIS FACTUAL POSITION THAT IN THE TA X AUDIT REPORT FOR THE YEAR ENDING 31.3.2008 IT WAS REPORTED BY THE AUDITORS THAT ASS ESSEE IS VALUING ITS CLOSING STOCK AT COST ON FIFO BASIS IT HAS TO BE ACCEPTED THAT I F CLOSING STOCK AT THE END OF THE PRESENT YEAR IS WITHOUT ANY PROCESSING SUCH AS SCRE ENING CRUSHING ETC. AND WITHOUT SHIFTING; THE SCREENING CRUSHING AND SHIFTING CHA RGES CANNOT BE ADDED TO THE VALUATION OF CLOSING STOCK IN THE PRESENT YEAR AND THEREFORE IF THE TOTAL AMOUNT OF COST OF PRODUCTION IN THE PRESENT YEAR AFTER EXCLUD ING PLOT RENT IS CONSIDERED IT WILL AMOUNT TO VALUATION OF CLOSING STOCK AT A COST INCL UDING SUCH CHARGES ALSO I.E. SCREENING CRUSHING AND SHIFTING CHARGES WHEREAS T HE CLOSING STOCK WAS WITHOUT SCREENING CRUSHING AND SHIFTING. HENCE WE ARE O F THE CONSIDERED OPINION THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOVE THE ADDITION MADE BY THE AO IN VALUATION OF CLOSING STOCK IS NOT PROPER AND JUSTIFIED AND HENCE WE DELETE THE SAME. ACCORDINGLY GROUND NOS. 2 TO 4 ARE ALLOWED. 7. REGARDING GROUND NOS.5 & 6 I.E. REGARDING DISALL OWANCE OF JD PLOT RENT IT WAS SUBMITTED BY THE LD. AR OF ASSESSEE THAT AS PER PARA 4.3 OF THE ASSESSMENT ORDER THE OBJECTION OF THE AO IS THIS THAT THE ASS ESSEE HAS NEVER PUT TO USE THE PLOT ITA NO.1354/BANG/2014 PAGE 5 OF 8 FOR WHICH IT IS PAYING RENT. THE AO HAS FURTHER NO TED THAT PLOT HAS BEEN USED BY ONE OF THE ASSESSEES GROUP CONCERNS FOR ITS EXPORTS. ON THIS BASIS HE DISALLOWED THIS EXPENDITURE. THEREAFTER HE SUBMITTED THAT ON PAGE 39 TO 45 OF PB IS A COPY OF LICENSE AGREEMENT BETWEEN ASSESSEE AND CHENNAI PORT TRUST [CPT] AS PER WHICH THE ASSESSEE IS REQUIRED TO EXPORT MINIMUM 2 LAKH T ONS AT THE END OF LICENSE PERIOD BY USING THIS PLOT. THEREAFTER HE SUBMITTED THAT THE PREMISES WAS USED FOR BUSINESS PURPOSE OF THE ASSESSEE BECAUSE THE SAID PLOT WAS U SED TO STORE THE BUSINESS STOCK OF THE ASSESSEE COMPANY AND THIS FACT HAS NOT BEEN DISPUTED BY THE DEPARTMENT BECAUSE THE AO IS ALSO SAYING THAT THE PLOT IN QUES TION WAS USED BY SISTER CONCERN M/S. OBULAPURAM MINING CO. PVT. LTD. AND THIS WAS T HE EXPLANATION OF THE ASSESSEE THROUGH OUT THAT ASSESSEE HAD SOLD ITS STOCK TO ITS SISTER CONCERN M/S. OBULAPURAM MINING COMPANY PVT. LTD. WHICH USED TO EXPORT THE S TOCKS SOLD BY THE ASSESSEE AND IN THIS MANNER THE ASSESSEE WAS ACTING AS A DEEMED EXPORTER. HE FURTHER SUBMITTED THAT THE RENT PAID FOR THE PLOT WAS ON AC COUNT OF COMMERCIAL EXPEDIENCY AND MERELY BECAUSE THE INCIDENTAL BENEFIT HAS ALSO ACCRUED TO THE THIRD PARTY IT DOES NOT LEAD TO THE INFERENCE THAT ASSESSEE HAD NOT USE D THE PLOT FOR ITS OWN BUSINESS PURPOSE. RELIANCE WAS PLACED UPON THE HONBLE APEX COURT JUDGMENT IN THE CASE OF S.A. BUILDERS V. CIT 288 ITR 1 (SC) AND IT WAS SUBMITTED THAT THE JUDGMENT IS IN THE CONTEXT OF SECTION 37 AND SECTION 36(1) (III) WHERE IN IT WAS HELD BY THE HONBLE APEX COURT THAT EXPENDITURE FOR THE PURPOSE OF BUSINESS INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY AND IT IS IMMATE RIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. HE SUBMITTED THAT UNDER THESE FACTS THE DISALLOWANCE MADE BY THE AO AND UPHELD BY THE CIT(APPEALS) SHOULD BE DELETED. 8. AS AGAINST THIS THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND ALSO SUBMITTED THAT AS PER THE LICENSE AG REEMENT BETWEEN THE ASSESSEE ITA NO.1354/BANG/2014 PAGE 6 OF 8 AND CPT AVAILABLE AT PAGES 39 TO 45 OF PB THE PLOT WAS ALLOTTED TO THE ASSESSEE FOR THE PURPOSE OF STORAGE AND EXPORT OF IRON ORE LUMPS /PELLETS AND SINCE THE ADMITTED POSITION IS THAT THE ASSESSEE DID NOT EXPORT IRON O RE THE EXPENDITURE INCURRED ON LAND OF SUCH PLOT IS NOT ALLOWABLE. IN THIS REGARD HE DREW OUR ATTENTION TO CLAUSE 4(D) AND 4(E) OF THE SAID AGREEMENT AVAILABLE AT PAGE 40 OF PB AS PER WHICH IT WAS SPECIFIED THAT MINIMUM 2 LAKH TONNES OF IRON ORE HAS TO BE EX PORTED BEFORE THE END OF LICENSE PERIOD AND SINCE THIS HAS NOT BEEN DONE BY THE ASSE SSEE THE EXPENDITURE IS NOT ALLOWABLE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THIS IS THE OBJECTION OF THE AO THAT AS PER LICENSE AGREEMENT BETWEEN ASS ESSEE AND CPT THE ASSESSEE WAS REQUIRED TO MAKE EXPORTS FOR USING THIS PLOT OF ABOUT 2 LAKH TONNES OF IRON ORE BEFORE THE END OF LICENSE PERIOD AND SINCE THE ASSE SSEE HAS NOT MADE ANY EXPORT THE PLOT IN QUESTION WAS NOT USED BY THE ASSESSEE F OR BUSINESS PURPOSE AND THEREFORE EXPENDITURE ON ACCOUNT OF RENT OF PLOT I S NOT ALLOWABLE. IN THIS REGARD WE FIND FORCE IN THE SUBMISSIONS OF THE LD. AR OF ASSE SSEE THAT SINCE THE ASSESSEE HAS USED THIS PLOT FOR STORAGE OF ITS PRODUCT WHICH WAS SOLD BY ASSESSEE TO ITS SISTER CONCERN M/S. OBULAPURAM MINING CO. PVT. LTD. AND THAT COMPANY HAS IN TURN MADE THE EXPORTS IT HAS TO BE ACCEPTED THAT THE PLOT WA S USED FOR BUSINESS PURPOSE OF ASSESSEE. WHETHER THE ASSESSEE HAS FULFILLED THE CO NDITION OF EXPORT OR NOT IS NOT RELEVANT FOR THE PURPOSE OF ALLOWABILITY OF THIS DE DUCTION ONCE IT IS FOUND THAT RENT WAS PAID AND THE PLOT WAS USED FOR BUSINESS PURPOSE. IF THE CONDITIONS OF AGREEMENT ARE NOT FULFILLED CPT MAY NOT ALLOW ANY EXTENSION OR M AY LEVY PENALTY IF LEVIABLE AS PER THE AGREEMENT BUT THAT CANNOT LEAD TO DISALLOWANCE OF RENT. THIS WE CAN UNDERSTAND BY AN EXAMPLE. IF A FLAT IS TAKEN ON RENT BY AN ASS ESSEE FOR OFFICE OR FOR RESIDENCE OF ITS EMPLOYEES BUT IT WAS USED FOR STORAGE OF BUSINE SS STOCK IT CANNOT BE SAID THAT THE ITA NO.1354/BANG/2014 PAGE 7 OF 8 RENT IS NOT AN ALLOWABLE EXPENDITURE. IT MAY BE THA T THE OWNER OF THE FLAT CAN TERMINATE THE RENTAL AGREEMENT FOR USE BY THE ASSES SEE FOR STORAGE OF GOODS INSTEAD OF OFFICE OR RESIDENCE. SINCE IN THE PRESENT CASE THE AO HIMSELF HAS ACCEPTED THAT THE PLOT WAS USED FOR THE PURPOSE OF SISTER CONCERN M/S. OBULAPURAM MINING CO. AND GOODS ARE IN FACT SOLD BY THE ASSESSEE TO THIS SISTER CONCERN AND DELIVERY AT THIS PLOT WAS AN IMPORTANT ASPECT FOR AFFECTING THIS SAL E AS PER THE ASSESSEE. HENCE THE FACTS ARE NOT IN DISPUTE AND UNDER THESE FACTS THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF S.A. BUILDERS (SUPRA) IS APPLICABLE AS PER WHICH IF THE EXPENSE HAS INCURRED EXPENSES FOR BUSINESS EXPEDIEN CY AND THIRD PARTY ALSO GETS SOME BENEFIT IN THE PROCESS THEN ALSO THE EXPENDI TURE IS ALLOWABLE. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE APEX COURT AN D CONSIDERING THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE WE ARE OF THE CONS IDERED OPINION THAT THE EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF REN T OF THE PLOT IN QUESTION IS AN ALLOWABLE BUSINESS EXPENDITURE AND THEREFORE WE DE LETE THIS DISALLOWANCE AND ACCORDINGLY GROUNDS NO.5 & 6 ARE ALSO ALLOWED. 10. GROUND NO.7 IS GENERAL IN NATURE. 11. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF OCTOBER 2016. SD/- SD/- ( SUNIL KUMAR YADAV ) (A.K. GARO DIA ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE DATED THE 17 TH OCTOBER 2016. /D S/ ITA NO.1354/BANG/2014 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.