MAHINDRA UGINE STEEL CO. LTD, MUMBAI v. ADDL CIT 6()3)(1), MUMBAI

ITA 3730/MUM/2010 | 2006-2007
Pronouncement Date: 13-07-2011 | Result: Allowed

Appeal Details

RSA Number 373019914 RSA 2010
Assessee PAN AAACM4998G
Bench Mumbai
Appeal Number ITA 3730/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 3 day(s)
Appellant MAHINDRA UGINE STEEL CO. LTD, MUMBAI
Respondent ADDL CIT 6()3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 13-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2006-2007
Appeal Filed On 10-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI V.DURGA RAO JM ITA NOS.3729 & 3730/MUM/2010 : AS ST.YEAR 2005-2006 & 2006-2007 M/S.MAHINDRA UGINE STEEL COMPANY LTD. 74 SHREE GANESH APARTMENT OPP : SITLADEVI TEMPLE LADY JAMSHETJI ROAD MAHIM MUMBAI 400 016. PAN : AAACM4998G. VS. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 6(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.P.MAHAJANI RESPONDENT BY : SHRI SATBIR SINGH O R D E R PER R.S.SYAL AM : THESE TWO APPEALS BY TH E ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 17.12.20 09 IN RELATION TO THE ASSESSMENT YEAR 2005-2006 AND 2006-2007. SINCE IDENTICAL ISSU ES ARE RAISED IN THESE APPEALS WE ARE THEREFORE PR OCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. ASSESSMENT YEAR 2005-2006 2. FIRST GROUND IS AGAINST THE CONFIRMA TION OF ADDITION OF RS.2 25 57 342 MADE TO THE INCOME OF THE ASSESSEE U/S.145A. BRIE FLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TOOLS ALLOY STEEL ETC. THE ASSESSING OFFICER NOTED VI DE PARA 10 OF THE ASSESSMEN T ORDER THAT THE ASSESSEE WAS FOLLOWING `EXCLUSIVE MET HOD OF VALUATION OF STOCK WHICH WAS CONTRARY TO THE PROVISIONS OF SECTION 145A. IN HIS OPINION ADJUSTMENTS WERE RE QUIRED TO BE MADE FOR COMPLYING WITH THE PROVISIONS OF SECTI ON 145A. HE HELD THAT IF `EXCLUSIVE METHOD IS FOLLOWED IT WOULD BECOME MANDATORY TO INCREASE THE VALUATION OF CLOSING STOCK BY THE MODVAT CR EDIT AND ALSO THE EFFECT IS TO BE GIVEN FIGURES OF ITA NOS.3729 & 3730/MUM/2010 M/S.MAHINDRA UGINE STEEL CO.LTD. 2 PURCHASES SALES AND OPENING ST OCK. PROCEEDING IN THIS MA NNER HE MADE ADDITION OF RS.2 25 57 342 WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. SECTION 145A HAS BEEN INSERTED BY THE FINANCE (N O.2) ACT 1998 WITH EFFECT FROM 01.04.1999 WHICH PROVIDES THAT THE VALUATION OF PUR CHASE SALE OF GOODS AND INVENTORY FOR THE PURPOSE OF DETERMININ G THE INCOME CHARGEABLE UNDER THE HEAD `PROFITS AND GAINS OF BUSIN ESS OR PROFESSION SHALL BE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE AS SESSEE AND FURTHER AD JUSTED TO INCLUDE THE AMOUNT OF TAX DUTY CESS OR FEE ETC. ACTU ALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AS ON THE DATE OF VALUATION. THUS IT IS APPARENT THAT FROM A.Y. 1999-2000 IT HAS BECOME INCU MBENT UPON THE ASSESSEE TO VALUE PURCHASES SALES AND INVENTORY ON THE BASIS OF `INCLUSIVE METHOD. SUCH INCLUSION IN THE INVENTORY / FIGURE OF PURCH ASE AND SALES REFERS TO TAX DUTY CESS OR FEE ETC. ACTUALLY PAID OR IN CURRED BY THE ASSESSE E IN RESPECT OF SUCH GOODS. AS SUCH ALL THE FOUR COMPONENTS VIZ. OPENING STOC K PURCHASES SALES A ND CLOSING STOCK ARE REQUIRED TO BE VALUED BY INCLUDING THE AM OUNT OF TAX DUTY CESS OR FEE PAID OR INCURRED IN RELATION TO THEM . THE ASSESSING OFFICER HAS ALBEIT DONE THIS EXERCISE BUT ACCORDING TO THE LEARNED A.R. THE INCLUS ION OF DUTY TAX ETC. WAS WRONGLY MADE INASMUCH AS ONLY THE ELEMENT OF TAX DUT Y ETC. AS RELATABLE TO THESE FOUR COMPONENTS WAS REQUIRED TO BE TAKEN WH EREAS THE ASSESSING OFFICER ADOPTED A WRONG APPROACH. IT IS SEEN THAT THE LEARNED CI T(A) ALSO DID NOT D EAL WITH ASSESSEES CONTENTION AND SUMMARILY UPHELD THE ASSESS MENT ORDER ON THIS ISSUE. THE ASSESSEE ALSO WENT WRONG IN VALUING OPENING STOC K PURCHASE SALES AND CLOSING STOCK AS PER `EXCLUSIVE METHOD CONTRARY TO THE MANDA TE OF SECTION 145A. IN OUR CONSIDERED OPINION THE CORRECT PROCEDURE TO BE FOLL OWED IS TO COMPUTE BUSINESS INCOME BY FOLLOWING THE `INCLUSIVE MET HOD AS ENVISAGED U/S 145A OF THE ACT IN RESPECT OF THESE FOUR COMPONENTS DISTINCT LY. THE DETAILS OF TAX DUT Y FEE ETC. IN RESPECT OF INVENTORY PURCHASE AND SALES BEING BULKY HAVE NOT BEEN MADE AVAILABLE IN THE ITA NOS.3729 & 3730/MUM/2010 M/S.MAHINDRA UGINE STEEL CO.LTD. 3 PAPER BOOK. SINCE IT IS A MATTE R INVOLVING RECALCULATION OF THE FIGURES OF PURCHASE SALES OPENING AND CLOSING STOCK BY VERI FYING THE CORRESPONDING RECORDS WE CONSIDER IT EXPENDIENT TO RE MIT THIS MATTER TO THE FILE OF OF A.O. WE ORDER ACCORDINGLY AND DIRECT HIM TO DECIDE THIS ISSUE AFRESH AS PE R LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS MADE CLEAR THAT IN RE- DOING THIS EXERCISE THE ASSESSING OFFICER WI LL TAKE INTO CONSIDERATION ALL THE LEGAL AND FACTUAL ASPECTS RELATING TO SECTION 145A. 4. THE SECOND GROUND IS AGAINST THE CO NFIRMATION OF DISALLOWANCE U/S.14A OF THE ACT. THE A.O. HAS COMPUTED THE DISALLO WANCE U/S.14A AT RS.3 98 723. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. AGGRIEVED TH EREBY THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION OF MAKING DISALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE H ONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. VS. DCIT (2010) 328 ITR 81 (BOM) HOLDING THAT THE PROVISIONS OF SECTION 14A ARE APPLICAB LE IN CIRCUMSTANCES AS ARE PREVAILING PRESENTLY AND THE DISALLO WANCE HAS TO BE WORKED OUT BY THE AO ON SOME `REASONABLE BASIS AND NOT RULE 8D. UNDER SUCH CIRCUMSTANCES WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE AS PER THE AF ORE-NOTED JUDGMENT AFTER ALLOWING A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ASSESSMENT YEAR 2006-2007 6. BOTH THE SIDES ARE IN AGREEMENT TH AT THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF ASSESSMENT YEAR 2005-2006. FOLLOWING THE VIEW TAKEN HEREINABOVE WE SET ASIDE THE IMPUGNED ORDER AND RESTORE BOTH THE GROUNDS TO THE FILE OF A.O. FOR A FRESH DECISION. NEEDLESS TO SAY THE ITA NOS.3729 & 3730/MUM/2010 M/S.MAHINDRA UGINE STEEL CO.LTD. 4 ASSESSEE WILL BE PROVIDED A REASONABLE OPPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. 7. IN THE RESULT BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 13 TH DAY OF JULY 2011. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 13 TH JULY 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.