THE ACIT CEN CIR-25, MUMBAI v. M/S. PARLE BISCUITS PVT. LTD, MUMBAI

ITA 3890/MUM/2007 | 2003-2004
Pronouncement Date: 13-08-2010 | Result: Dismissed

Appeal Details

RSA Number 389019914 RSA 2007
Assessee PAN AAACP0485D
Bench Mumbai
Appeal Number ITA 3890/MUM/2007
Duration Of Justice 3 year(s) 2 month(s) 25 day(s)
Appellant THE ACIT CEN CIR-25, MUMBAI
Respondent M/S. PARLE BISCUITS PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 13-08-2010
Date Of Final Hearing 11-05-2010
Next Hearing Date 11-05-2010
Assessment Year 2003-2004
Appeal Filed On 18-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JM & SHRI R.K. PANDA AM I.T.A. NO. 5320/MUM/2006 : (ASSESSMENT YEAR 2000-01 ) I.T.A. NO. 5321/MUM/2006 : (ASSESSMENT YEAR 2001-02 ) I.T.A. NO. 1412/MUM/2006 : (ASSESSMENT YEAR 2002-03 ) I.T.A. NO. 2802/MUM/2007* : (ASSESSMENT YEAR 2003-0 4) M/S. PARLE BISCUITS PVT. LTD. V.S. KHANDEKAR MARG NORTH LEVEL CROSSING VILE PARLE (E) MUMBAI-400 057 PAN:AAACP0485D VS. *ADDL. CIT. CENT. CIR. 25/ ACIT CENT. CIR. 25 AAYAKAR BHAVAN MUMBAI APPELLANT RESPONDENT I.T.A. NO. 5542/MUM/2006 : (ASSESSMENT YEAR 2000-01 ) I.T.A. NO. 5543/MUM/2006 : (ASSESSMENT YEAR 2001-02 ) I.T.A. NO. 1411/MUM/2006 : (ASSESSMENT YEAR 2002-03 ) I.T.A. NO. 3870/MUM/2007 : (ASSESSMENT YEAR 2000-01 ) ACIT CENT. CIR. 25 AAYAKAR BHAVAN MUMBAI VS. M/S. PARLE BISCUITS PVT. LTD. V.S. KHANDEKAR MARG NORTH LEVEL CROSSING VILE PARLE (E) MUMBAI-400 057 PAN:AAACP0485D APPELLANT RESPONDENT ASSESSEE BY: MR. P.J. PARDIWALA AND MR. MITESH JOSHI REVENUE BY: MR. AJIT KUMAR SINGH AND MR. DEVDASAN O R D E R DATE OF HEARING: 30.06.2010 DATE OF ORDER: 31.08.2010 PER BENCH: THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST TH E ORDERS OF THE CIT(A) FOR THE RESPECTIVE ASSESSMENT YEARS M ENTIONED ABOVE. FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. M/S. PARLE BISCUITS PVT. LTD. =================== 2 I.T.A. NO. 1411/MUM/2006 (BY REVENUE) (A.Y. 2002-03 ): I.T.A. NO. 1412/MUM/2006 (BY ASSESSEE) (A.Y. 2002-0 3): 2. THE GROUNDS OF APPEAL BY THE REVENUE AND THE GROUND S OF APPEAL BY THE ASSESSEE RELATE TO THE PARTIAL RELIEF GIVEN BY THE CIT(A) ON ACCOUNT OF ADDITION OF RS.1 57 84 868 MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MAT ERIALS. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF BISCUITS. THE SAM E ARE MANUFACTURED UNDER THE BRAND NAMES OF PARLE-G KRAC KJACK MONACO NIMKIN ETC. BESIDES HAVING ITS OWN MANUFA CTURING UNIT AT BAHADURGARH (HARYANA) AND AT NEEMRANA (RAJASTHAN) IT ALSO GETS THE MANUFACTURING DONE THROUGH ITS VARIOUS CONTRACT MANUFACTURING UNITS (CMUS) WHICH MANUFACTURE PARLE-G AND CREAM BI SCUITS. 4. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS NOTED THAT IN THE EARLIER YEAR AN ADDIT ION FOR THE DIFFERENCE BETWEEN THE ACTUAL CONSUMPTION OF RAW MA TERIALS AND THE MANUFACTURE OF THE PRODUCTS AND THE STANDARD CONSUM PTION AS PER THE STANDARD INPUT-OUTPUT FORMULA HAS BEEN MADE WHE REVER THERE HAS BEEN EXCESS CONSUMPTION. 5. HE NOTED THE FIRST ADDITION WAS MADE IN A.Y. 1988-8 9. IN THAT YEAR THE ASSESSEE WAS ASKED TO GIVE THE INPUT-OUTP UT RATIO OF THE RAW MATERIAL CONSUMED AND THE FINISHED PRODUCT MANU FACTURED. ASSESSEE SUBMITTED THE INPUT-OUTPUT RATIO AS 108.19 : 100 WHICH MEANS 108.19 KG OF RAW MATERIAL TO BE CONSUMED FOR PRODUCING 100 KG OF BISCUITS. THIS INPUT-OUTPUT RATIO WAS BASED ON SCIENTIFIC CALCULATIONS FOR IDEAL CONDITION. THE ASSESSING OF FICER FOUND THAT THE ACTUAL CONSUMPTION OF RAW MATERIAL WAS MORE THAN WH AT SHOULD HAVE BEEN CONSUMED AS PER THE FORMULA. HE THEREFOR E ADDED THE VALUE OF EXCESS RAW MATERIAL CONSUMED AS INCOME. S IMILAR ADDITION WAS MADE IN A.Y. 1989-90 ALSO. THE MATTER WENT IN APPEAL BEFORE THE CIT(A) AND IT WAS CONTENDED BEFORE THE CIT(A) T HAT THE INPUT- OUTPUT RATIO OF 108.19:100 DID NOT TAKE INTO CONSID ERATION THE M/S. PARLE BISCUITS PVT. LTD. =================== 3 VARIOUS WASTAGES IN THE CONSUMPTION OF RAW MATERIAL AS WELL AS EXCESS WEIGHT IN THE FINISHED PRODUCT. IT WAS SUBM ITTED THAT THE CONSUMPTION OF MAIDA WAS ACCOUNTED FOR IN THE BOOKS ALONG WITH THE WEIGHT OF BAGS WHICH WAS ROUGHLY 1 KG. THEREFO RE THE ACTUAL CONSUMPTION OF MAIDA WOULD BE LESS THAN WHAT HAS BE EN SHOWN IN THE ACCOUNTS. SIMILARLY THERE WERE WASTAGES ON AC COUNT OF UNFINISHED/BURNT BISCUITS WHICH WERE ALSO NOT TAKEN INTO ACCOUNT FOR MAKING THE DISALLOWANCE ON THE BASIS OF INPUT-O UTPUT RATIO . INRESPECT OF THE FINISHED PRODUCT IT WAS SUBMITTED THAT THE ACTUAL WEIGHT OF THE BISCUITS IN THE PACKETS WERE GENERALL Y MORE THAN THE PRINTED WEIGHT AND AS SUCH THE ACTUAL PRODUCTION WA S MORE THAN THE PRODUCTION RECORDED IN THE BOOKS OF ACCOUNT. THE C IT(A) ACCEPTED THE SUBMISSION OF THE AR AND SET ASIDE THE ORDER WI TH A DIRECTION TO THE ASSESSING OFFICER TO RECOMPUTE THE AMOUNT OF EX CESS CONSUMPTION AFTER TAKING INTO ACCOUNT THE SUBMISSIO N MADE BY THE ASSESSEE IN THIS REGARD. EFFECT TO THIS ORDER WAS GIVEN BY THE ASSESSING OFFICER VIDE ORDER DATED 10.05.1996 IN WH ICH THE ASSESSING OFFICER HAS CONSIDERED IN DETAIL THE SUBM ISSION MADE BY THE ASSESSEE AND HAS ALLOWED RELIEF ON ACCOUNT OF W ASTAGES AS CONTENDED BY THE ASSESSEE. 6. IN THE ORIGINAL ORDER IN THE A.Y. 1989-90 AN ADDITI ON OF RS.49 20 000 WAS MADE BY THE ASSESSING OFFICER. TH IS ADDITION WAS REDUCED TO RS.22 72 270 AFTER GIVING EFFECT TO THE ORDER OF THE CIT(A). IN GIVING EFFECT TO THE ORDER OF THE CIT(A ) ADDITION OF RS.22 72 270 WAS MADE ON ACCOUNT OF EXCESS CONSUMPT ION OF SUGAR WITHOUT SETTING OFF OF SHORT CONSUMPTION OF MAIDA A ND VANASPATI. ON FURTHER APPEAL THE CIT(A) HELD THAT SET OFF FOR SH ORT CONSUMPTION SHOULD BE ALLOWED AND ONLY NET EXCESS CONSUMPTION A FTER ALLOWING RELIEF OF 25% ON IT FOR OTHER FACTORS SHOULD BE ADD ED TO INCOME. ACCORDINGLY THE ADDITION OF RS.22 72 270 WAS REDUC ED TO RS.5 22 385. 7. IN ALL SUBSEQUENT YEARS ADDITIONS WERE BEING MADE O N THE BASIS OF THE DECISION GIVEN BY THE CIT(A) IN A.Y. 1 989-90. HOWEVER M/S. PARLE BISCUITS PVT. LTD. =================== 4 IN THE YEAR UNDER CONSIDERATION FOLLOWING THE SAME PRINCIPLE THERE WAS A SHORT CONSUMPTION OF RAW MATERIAL TO THE TUNE OF RS.1 11 21 729 INSTEAD OF EXCESS CONSUMPTION AS WAS BEING WORKED OUT IN ALL EARLIER YEARS AND AS SUCH IT WAS SUBMITT ED THAT NO ADDITION WAS TO BE MADE. THE ASSESSING OFFICER HAS HOWEVER DEPARTED FROM THE METHOD OF WORKING OUT THE EXCESS CONSUMPTION IN EARLIER YEAR AND DID NOT ALLOW FOLLOWING ADJUSTMENT. I) IN RESPECT OF PRODUCTION FROM OWN FACTORY OF THE AS SESSEE THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE FOR ALLOWING WASTAGE OF 1 KG MAIDA IN EACH BAG OF MAIDA CONSUMED. II) THE DIFFERENCE BETWEEN THE DECLARED WEIGHT OF BISCU ITS AND THE ACTUAL WEIGHT OF BISCUIT PACKETS IN RESPECT OF CRACKJACK MONACO AND NIMKIN BISCUITS WERE TAKEN ON THE SAME PROPORTION AS IN THE CASE OF PARLE-G IGNORING THE LABORATORY REPORTS OF EXCESS WEIGHT IN BISCUIT PACK ETS SUBMITTED BY THE ASSESSEE. III) NO ADJUSTMENT MADE BY THE ASSESSING OFFICER IN RESP ECT OF BISCUITS PRODUCED BY CONTRACT MANUFACTURER. THE ASSESSING OFFICER ACCORDINGLY MADE AN ADDITION OF RS.1 57 84 868 TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIALS. 8. IN APPEAL IT WAS SUBMITTED BY THE ASSESSEE THAT WH EN MAIDA BAGS ARE EMPTIED SOME MAIDA IS LEFT OVER IN THE BAG AND DO NOT GO THROUGH THE PRODUCTION PROCESS. IT WAS SUBMITTED T HAT NEARLY 1 KG OF MAIDA IS LEFT OVER IN EACH BAG WHICH SHOULD BE D EDUCTED FROM THE AMOUNT OF CONSUMPTION OF RAW MATERIAL FOR WORKING O UT THE EXCESS CONSUMPTION. IT WAS SUBMITTED THAT SUCH ADJUSTMENT HAS BEEN ALLOWED IN A.Y. 1989-90 AND IN ALL SUBSEQUENT YEARS . 9. AS REGARDS THE ADJUSTMENT FOR EXCESS WEIGHT OF BISC UITS FOR OTHER BRANDS I.E. OTHER THAN PARLE-G IT WAS SUBMIT TED THAT USUALLY THE ACTUAL WEIGHT OF BISCUITS IN PACKETS IS MORE TH AN THE PRINTED M/S. PARLE BISCUITS PVT. LTD. =================== 5 WEIGHT. THEREFORE THE ACTUAL PRODUCTION IS MORE T O THIS EXTENT AND THIS SHOULD BE TAKEN INTO ACCOUNT FOR WORKING OUT T HE AMOUNT OF EXCESS CONSUMPTION. THE ORDER OF THE CIT(A) FOR A. Y. 1989-90 WAS BROUGHT TO HIS NOTICE WHERE ON THE BASIS OF THE DIR ECTION OF THE CIT(A) THE ASSESSING OFFICER WEIGHED THE SAMPLE PA CKETS OF PARLE-G TO VERIFY THE CLAIM AND FOUND THAT THE WEIGHT OF BI SCUITS WAS ACTUALLY MORE THAN THE PRINTED WEIGHT AND ACCORDINGLY HAD AL LOWED THE ADJUSTMENT FOR EXCESS CONSUMPTION. HOWEVER DURING THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER HAS NOT G IVEN SIMILAR RELIEF IN CASE OF OTHER BRANDS IN THE SAME PROPORTI ON IN WHICH IT WAS ALLOWED IN PARLE-G. 10. AS FAR AS ADJUSTMENT IN RESPECT OF BISCUITS PRODUCE D BY CONTRACT MANUFACTURERS IT WAS SUBMITTED THAT THE A SSESSEE BESIDES MANUFACTURING BISCUITS IN HIS OWN FACTORY ALSO GETS THE BISCUITS MANUFACTURED THROUGH CONTRACTOR. ACCORDING TO THE ASSESSING OFFICER WHILE THE INPUT-OUTPUT RATIO FOR PRODUCTIO N IN RESPECT OF THE ASSESSEES OWN FACTORY IS 108.19:100 THE SAME IN R ESPECT OF CMUS IT IS 110.607:100. IT WAS SUBMITTED BEFORE THE ASSESS ING OFFICER THAT CMUS WERE IN THE NATURE OF SUB-CONTRACTOR WHO WERE GIVEN RAW MATERIAL AGAINST WHICH FIXED AMOUNT OF BISCUITS WER E RECEIVED AS FINISHED PRODUCT. THE CMUS ARE PAID ONLY THE PROCE SSING CHARGES AND ANY WASTAGE ETC. IN THE PROCESS OF MANUFACTUR ING IS ON ACCOUNT OF CMUS. THEREFORE THE INPUT-OUTPUT RATIO FOR TH E CMUS HAS TO BE HIGHER THAN THE INPUT-OUTPUT RATIO IN RESPECT OF O WN FACTORY. SINCE NO WASTAGE HAS BEEN ALLOWED IN RESPECT OF CMUS THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE RATIO OF 110.607:1 00. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NO EVIDENCE ON RECORD TO DOUBT THE GENUINENESS OF THE INPUT-OUTPUT RATIO IN RESPECT OF CMUS IN THE BOOKS OF ACCOUNT. FURTHER IF THE IN PUT-OUTPUT RATIO OF 108.190:100 IS APPLIED TO THE CMUS THE WASTAGE AS ALLOWED IN RESPECT OF OWN FACTORY SHOULD ALSO BE ALLOWED IN RE SPECT OF PRODUCTION FROM CMUS. HOWEVER AS THE CMUS WERE ON CONTRACT BASIS THE DETAILED FIGURES OF WASTAGE ARE NOT AVAI LABLE WITH THE M/S. PARLE BISCUITS PVT. LTD. =================== 6 ASSESSEE AND THEREFORE EXACT AMOUNT OF ADJUSTMENT FOR DIFFERENT KINDS OF WASTAGE AS HAS BEEN DONE IN RESPECT OF THE OWN FACTORY INPUT-OUTPUT RATIO SHALL NOT BE POSSIBLE IN THE CAS E OF CMUS. 11. BASED ON THE VARIOUS ARGUMENTS ADVANCED BY THE LEAR NED COUNSEL FOR THE ASSESSEE THE CIT(A) REJECTED THE C ONTENTION OF THE ASSESSEE FOR ALLOWING WASTAGE OF 1 KG OF MAIDA IN E ACH BAG OF MAIDA CONSUMED. HE NOTED THAT DURING THE A.Y. 1989-90 TH E ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE CIT (A) HAD ONLY MADE ADJUSTMENT IN RESPECT OF WEIGHT OF EMPTY BAG AND NO T ON ACCOUNT OF LEFT OVER MAIDA. IN ALL SUBSEQUENT YEARS ALSO ADJU STMENT FOR THE WEIGHT OF EMPTY BAG WHICH WAS FOUND TO BE NEARLY 1 KG HAS BEEN ALLOWED. HE ACCORDINGLY DIRECTED THE ASSESSING OFF ICER TO ALLOW ADJUSTMENT FOR EMPTY BAGS OF MAIDA AS HAS BEEN DONE IN A.Y. 1989- 90 AND ALL SUBSEQUENT YEARS IF IT HAS NOT ALREADY BEEN ADJUSTED IN THE ORDER PASSED. 12. AS FAR AS THE ADJUSTMENT FOR EXCESS WEIGHT OF BISCU ITS IN PACKETS FOR THE BRANDS NAMELY CRACKJACK NIMKIN AN D MONACO THE CIT(A) IN THE PRESENCE OF THE ASSESSING OFFICER HAD VERIFIED THE SAMPLE PACKETS THE RESULTS OF THE WEIGHTS OF WHICH ARE AS UNDER: (WEIGHT IN GMS) MONACO KRACKJACK NIMKIN DECLARED WEIGHT ON PACKET (NET WT. OF BISCUITS) 75 75 75 WT OF EMPTY PACKET (I.E. WRAPPER WT.) 1.4 1.5 1.2 WT OF SAMPLE (PACKED) PACKETS (I.E. WT WITH WRAPPER) 1 81 81.5 84 2 80.6 83 82.1 3 83.4 82.1 82.8 4 83.3 83.5 83.2 5 82.6 84.7 83 6 82.8 82.8 83.2 7 83.2 83.8 82 8 83.2 84.8 85.4 9 84.3 85 83.5 10 83.2 81.8 82.4 13. ON THE BASIS OF THE ABOVE HE NOTED THAT AFTER REDU CING THE WEIGHT OF EMPTY PACKETS ACTUAL WEIGHT OF BISCUITS EXCEED THE DECLARED WEIGHT. HE ACCORDINGLY DIRECTED THE ASSES SING OFFICER TO M/S. PARLE BISCUITS PVT. LTD. =================== 7 ALLOW ADJUSTMENT FOR THE EXCESS WEIGHT OF BISCUITS ON THE BASIS OF THESE RESULTS. HE FURTHER DIRECTED THE ASSESSING O FFICER TO GET THE PACKETS WEIGHED AGAIN IN CASE HE REQUIRES THE SAME AND ALLOW ADJUSTMENT ACCORDINGLY. 14. AS FAR AS THE BISCUITS PRODUCED BY THE CONTRACT MANUFACTURERS HE AGREED WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE INPUT-OUTPUT RATIO OF THE OWN FACTORY IS APPLIED TO THE CMUS ALSO THEN ADJUSTMENTS WHICH HAV E BEEN ALLOWED IN RESPECT OF OWN FACTORY SHOULD ALSO BE ALLOWED IN RESPECT OF CMUS. SINCE THE FIGURES OF EXACT WASTAGE ARE NOT AVAILABL E HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE WASTAGE IN THE SAME PROPORTION IN WHICH IT HAS BEEN ALLOWED IN RESPECT OF PARLE-G PRO DUCTION IN OWN FACTORY. HE NOTED THAT THE ASSESSEE HAS WORKED OUT THE FIGURE OF EXCESS/SHORT CONSUMPTION AFTER TAKING INTO ACCOUNT THE ADJUSTMENTS ALLOWED IN THIS ORDER. AS PER THIS CALCULATION THE RE IS SHORT CONSUMPTION INSTEAD OF EXCESS CONSUMPTION FOR WHICH NO ADDITION IS TO BE MADE. THE CALCULATION AS GIVEN BY THE ASSESS EE BEFORE THE CIT(A) IS AS UNDER: MANUFACTURED BY BAHADURGARH FACTORY PARLE G 43 63 970 MONACO (1 03 57 370) KRACKJACK (42 67 895) NIMKIN (4 76 371) ----------------- (1 07 37 666) MANUFACTURED BY NEEMRANA FACTORY 93 78 226 MANUFACTURED BY NEEMRANA FACTORY CMUS (PARLE G) ANNAKUT BISCUITS CO. PVT. LTD. (48 31 646) RISHI BAKERS PVT. LTD. (56 41 403) SWATI BISCUITS MFG. CO. LTD. (55 87 902) BALAJI BAKERS PVT. LTD. (43 05 481) --------------- (2 03 66 433) ------------------ TOTAL EXCESS/(SHORT) CONSUMPTION (2 17 25 873) 15. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO VE RIFY THESE FIGURES SUBJECT TO THE CONDITION THAT NO ADJUSTMENT IN RESPECT OF LEFT OVER MAIDA IN THE BAGS IS TO BE MADE AND ALLOW RELI EF. M/S. PARLE BISCUITS PVT. LTD. =================== 8 16. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS WEL L ASSESSEE THE REVENUE ARE IN APPEAL BEFORE US WITH THE FOLLOW ING GROUNDS OF APPEAL: ASSESSEES GROUNDS OF APPEAL : THE APPELLANT OBJECTS TO THE ORDER DATED 15.12.2005 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) CENTRAL V MUMBAI (CIT(A)) FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUND S. 1. THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE BY THE ASSESSING OFFICER (AO) FOR ALLEGED EXCESS CONSUMPTION OF RAW MATERIALS OF RS.1 57 84 868. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR COMPUTING ALLEGED EXCESS/SHORT CONSUMPTION OF RAW MATERIALS AT THE APPELLANTS CONTRACT MANUFACTURING UNITS (CMUS) AS AGAINST THE FORMULAE OF 110.607:100 AS CONTENDED BY THE APPELLANT. HE ERRED IN NOT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT IN THIS CONNECTION. 3. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19 FOR THE APPELLANTS CMUS ERRED IN NOT DIRECTING THE AO TO MAKE THE ADJUSTMENTS TO THE AMOUNT OF PRODUCTION OF THE CMUS IN COMPUTATION OF EXCESS/SHORT CONSUMPTION AT THE CMUS. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. REVENUES GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ADJUSTMENT FOR EMPTY BAGS OF MAIDA WHILE WORKING OUT THE RATIO OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION WITHOUT APPRECIATING THAT A) THE MAIDA BAGS COME IN NET WEIGHT AND NOT AS GROSS WEIGHT AS MADE OUT TO BE BY THE ASSESSEE BEFORE CIT(A). M/S. PARLE BISCUITS PVT. LTD. =================== 9 THE AO HAS ALREADY ALLOWED ADJUSTMENT OF 25% ON ACCOUNT OF PRE-PRODUCTION AND POST-PRODUCTION WASTAGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ALL ADJUSTMENTS THAT HAVE BEEN ALLOWED IN RESPECT OF OWN FACTORY TO CMUS ALSO WITHOUT APPRECIATING THE FACT THAT THE EXCESS CONSUMPTION O F RAW MATERIAL IS WORKED OUT ON THE TOTAL PRODUCTION ON THE DIFFERENT BRANDS OF BISCUITS IRRESPECTIVE OF PRODUCTION IN OWN FACTORY OR BY CMUS AND DEDUCTION WAS ALLOWED IN THE SAME PROPOSITION IN ALL THE BRANDS OF BISCUITS IGNORING THE FACT THAT P RE- PRODUCTION AND POST PRODUCTION WASTAGES ARE NOT INCLUDED IN THE PRODUCTION OF BISCUITS BY CMUS. THEREFORE QUESTION OF TAKING INPUT OUTPUT RATIO AT 110.607:100 DOES NOT ARISE. 17. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WHICH IS IN THE BUSINESS OF MANUFACTURING OF BISCUITS MANUFACTURES THE SAME AT ITS OWN FACTORY AND ALSO T HROUGH VARIOUS CMUS. THE ASSESSING OFFICER WHILE COMPLETING THE A SSESSMENT ADOPTED THE STANDARD FORMULA OF INPUT-OUTPUT RATIO OF 108.19:100 AND ACCORDINGLY CALCULATED THE EXCESS CONSUMPTION O F RAW MATERIAL TO THE TUNE OF RS.1 57 84 868 AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. HE SUBMITTED THAT WHILE MAKING THE ADDIT ION ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIAL THE ASSESSING OFFICER HAS NEITHER REJECTED THE BOOKS OF ACCOUNT NOR MADE AN A LLEGATION OF SUPPRESSED PRODUCTION. HE SUBMITTED THAT FULL DETA ILS OF PURCHASES WERE FILED AND IT HAS NOT BEEN PROVED BY THE ASSESS ING OFFICER THAT SUCH PURCHASES ARE NOT GENUINE. THERE IS ALSO NO C ASE OF THE ASSESSING OFFICER THAT THE ASSESSEE SOLD ITS GOODS OUTSIDE THE BOOKS OF ACCOUNT. HE SUBMITTED THAT THE ASSESSEE HAS MAI NTAINED ALL THE BOOKS STATUTORILY REQUIRED WHICH ARE DULY AUDITED A S PER THE COMPANIES ACT AND INCOME-TAX ACT. THE ASSESSEES A CCOUNTS COST- WISE ALSO WERE AUDITED. THE BOOKS OF ACCOUNT WERE AUDITED AND VERIFIED BY THE EXCISE DEPARTMENT. IN ABSENCE OF A NY PRIMARY MATERIAL TO REJECT ASSESSEES BOOKS OF ACCOUNT THE ASSESSING OFFICER CANNOT MAKE THE ADDITION. REFERRING TO THE CONSOLI DATED ORDER OF THE M/S. PARLE BISCUITS PVT. LTD. =================== 10 TRIBUNAL FOR THE A.YS. 1989-90 1991-92 AND 1994-95 TO 1996-97 A COPY OF WHICH IS PLACED AT PAPER BOOK PAGES 166 TO 174 THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PARA 11 OF THE ORDER AND SUBMITTED THAT THE TRIBUNAL WHILE ACCEPTING THE GRO UNDS OF THE ASSESSEE HAS HELD THAT NO ADDITION CAN BE MADE ON A CCOUNT OF EXCESS CONSUMPTION. 18. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF R.B. BANSILAL ABIRCHAND SPINNING & W EAVING MILLS VS. CIT REPORTED IN 75 ITR 260 HE SUBMITTED THAT THE A SSESSING OFFICERS RIGHT UNDER THE PROVISO TO SECTION 13(INCOME-TAX AC T 1922) ARISES ONLY IF A FINDING IS RECORDED AS TO THE UNACCEPTABI LITY OF THE METHOD AND IRREGULARITY OF THE ACCOUNTS KEPT. IN THE ABSE NCE OF SUCH A FINDING RECORDED BY THE AUTHORITY THE RESULTS CANNO T BE IGNORED OR BRUSHED ASIDE. THE MERE FACT THAT THE PERCENTAGE O F DEAD LOSS OF COTTON IS HIGH IN A PARTICULAR YEAR CANNOT LEAD TO AN INFERENCE THAT THERE HAS BEEN SUPPRESSION OF THE PRODUCTION IN THE SPINNING MILL. ACCORDINGLY IT WAS HELD THAT THE ADDITION OF RS.50 000 TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED UNDERS TATED PRODUCTION OF THE YARN AND SOFT WASTE WAS NOT JUSTI FIED. 19. REFERRING TO THE DECISION OF THE J & K HIGH COURT I N THE CASE OF INTERNATIONAL FOREST CO. VS. CIT REPORTED IN 101 IT R 721 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT MERE LOW YIELD OF OUT-TURN SAWN TIMBER OR THE MANIFESTATION OF MEAGRE GROSS PROFIT WHICH WERE THE SHEET ANCHORS O F THE ORDERS OF THE INCOME-TAX AUTHORITIES AND TRIBUNAL COULD NOT B E TAKEN AS INDICATION OF SUPPRESSION OF SALES ON THE PART OF T HE ASSESSEE. 19.1 REFERRING TO THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF MOTIPUR SUGAR FACTORY VS. CIT REPORTED IN 95 ITR 401 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHEN THE ENTIRE MANUFACTURING PROCESS OF SUGAR WAS SUBJECTED TO THE SUPERVISION AND CHECKING OF THE CENTRAL EXCI SE OFFICERS POSTED AT THE FACTORY AND THE ACCOUNTS OF THE ASSESSEE ARE AUDITED BY A M/S. PARLE BISCUITS PVT. LTD. =================== 11 REPUTED FIRM OF CHARTERED ACCOUNTANTS THE TRIBUNAL WAS WRONG IN DRAWING AN ADVERSE INFERENCE AND IN REJECTING THE A SSESSEES ACCOUNTS AND SUSTAINING THE ADDITION. 19.2 REFERRING TO THE DECISION OF THE HONBLE KERAL A HIGH COURT IN THE CASE OF ST. TERESAS OIL MILLS VS. STATE OF KER ALA REPORTED IN 76 ITR 365 HE SUBMITTED THAT DISPARITY IN CONSUMPTION OF ELECTRICITY WOULD NOT JUSTIFY THE REJECTION OF ACCOUNTS IN ABSENCE OF ANY OTHER SUPPORTING CIRCUMSTANCES BECAUSE SUCH VARIATION COU LD BE DUE TO VARIOUS FACTORS OUTSIDE THE CONTROL OF THE ASSESSEE . 20. HE SUBMITTED THAT IN THE INSTANT CASE THE DEPARTME NT HAS ESTABLISHED NOTHING EXCEPT EXCESS CONSUMPTION. REF ERRING TO PAGE 37 OF THE PAPER BOOK HE SUBMITTED THAT A DETAILED REPLY WAS GIVEN TO THE ASSESSING OFFICER. HOWEVER THE ASSESSING O FFICER HAS NOT CARRIED OUT ANY ENQUIRY WITH ANY OF THE SUPPLIERS T O PROVE THAT THE PURCHASES ARE BOGUS. REFERRING TO PAGE 39 OF THE P APER BOOK HE SUBMITTED THAT A NOTE ON COMPUTATION OF QUANTITY AN D VALUE OF RAW MATERIAL WAS GIVEN TO THE ASSESSING OFFICER. REFER RING TO PAGE 41 OF THE PAPER BOOK HE SUBMITTED THAT UNIT-WISE PRODUCT ION FIGURES WERE SUBMITTED TO THE ASSESSING OFFICER. REFERRING TO PAGES 49 TO 51 OF THE PAPER BOOK HE SUBMITTED THAT A NOTE ON YIEL D OF BISCUITS HANDING LOSS AND OPERATIONAL LOSS ETC. WAS GIVEN TO THE ASSESSING OFFICER. REFERRING TO PAGE 91 OF THE PAPER BOOK H E SUBMITTED THAT WHY A STANDARD OR THEORETICAL FORMULA CANNOT BE APP LIED TO WORK OUT THE CONSUMPTION OF RAW MATERIAL WAS GIVEN TO THE AS SESSING OFFICER. THEREFORE WITHOUT CONSIDERING ALL THESE FACTUAL DO CUMENTS THE ASSESSING OFFICER CANNOT MAKE AN ADDITION ON ACCOUN T OF EXCESS CONSUMPTION OF RAW MATERIAL. HE SUBMITTED THAT SIN CE THE TRIBUNAL HAS ALREADY DELETED SUCH EXCESS CONSUMPTION TO THE EXTENT SUSTAINED BY THE CIT(A) FOR THE A.YS. 1989-90 1991 -92 AND 1994-95 TO 1996-97 THEREFORE NO ADDITION IS CALLED FOR. 21. THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) DREW THE ATTENTION OF THE BENCH TO PAGE 4 OF THE M/S. PARLE BISCUITS PVT. LTD. =================== 12 CIT(A)S ORDER AND SUBMITTED THAT THE ASSESSEE HAS NOWHERE EXPLAINED AS TO WHY THERE WAS SHORT PRODUCTION. HE SUBMITTED THAT IF THE ACCOUNTS ARE CORRECT THERE CANNOT BE ANY SHO RT CONSUMPTION. THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE AS TO WH ETHER IT IS THE GROSS WEIGHT OR NET WEIGHT. THE WASTAGE AS SUBMITT ED BY THE ASSESSEE HAS ALREADY BEEN TAKEN CARE OF BY THE STAN DARD FORMULA. HE SUBMITTED THAT THE ASSESSING OFFICER AND THE CIT(A) HAVE NOT DISCUSSED THE ISSUE OF 108.19:100 IN A SCIENTIFIC M ANNER. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE HE SUBMITTED THAT THE MATTER MAY BE SET ASIDE TO THE ASSESSING OFFICER. 22. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJOIN DER SUBMITTED THAT NOT A SINGLE WORD ABOUT THE ORDER OF THE ITAT FOR THE EARLIER YEAR HAS BEEN MENTIONED. HE SUBMITTED THAT IT IS NOT KNOWN WHO DEVISED THE FORMULA OF INPUT-OUTPUT RATIO OF 10 8.19:100 IN THE A.Y. 19899-90. IN ANY CASE THE SAME HAS ALREADY BE EN DELETED BY THE TRIBUNAL. HE SUBMITTED THAT IN CASE OF GOOD QUALIT Y OF RAW MATERIAL LIKE MAIDA AND SUGAR THERE WILL BE LESS CONSUMPTION . THERE IS NO DISPUTE REGARDING THE WEIGHT OF THE MAIDA BAG BEING 100 KG. HOWEVER THE DISPUTE IS ONLY REGARDING THE MAIDA TH AT REMAINS IN THE BAG. HE SUBMITTED THAT THERE IS BOUND TO BE SO ME LOSS IN THE PROCESS. HE ACCORDINGLY SUBMITTED THAT NO ADDITION IS CALLED FOR. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS MANUFACTUR ING BISCUITS THROUGH ITS OWN FACTORY AS WELL AS THROUGH CMUS. A S FAR AS THE MANUFACTURING OF BISCUITS THROUGH OWN FACTORY IS CO NCERNED THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT REJECTED B Y THE ASSESSING OFFICER. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT THERE IS M/S. PARLE BISCUITS PVT. LTD. =================== 13 SALE OF GOODS OUTSIDE THE BOOKS OF ACCOUNT. FURTH ER WE ALSO FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT WHEN THE DETAILS OF THE PURCHASES ARE SUBMITTED BEF ORE THE ASSESSING OFFICER NOTHING HAS BEEN DONE TO PROVE TH AT ANY OF THE PURCHASES ARE BOGUS. WE FURTHER FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE CONSOLIDATED ORDER FOR THE A.YS. 1989-9 0 1990-91 AND 1994-95 TO 1996-97 VIDE ORDER DATED 21 ST DECEMBER 2006 AT PARA 11 OF THE ORDER HAS DISCUSSED THE ISSUE AND DELETED THE ADDITION SUSTAINED BY THE CIT(A) ON ACCOUNT OF EXCESS CONSUM PTION BY HOLDING AS UNDER: WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH TH E ORDERS OF THE REVENUE AUTHORITIES. WE ARE OF THE VI EW THAT THE APPEAL BY THE ASSESSEE ON THIS ISSUE IS TO BE ACCEPTED. IT IS TRUE THAT THE ASSESSEE COULD NOT E XPLAIN WHY THE SISTER CONCERNS CONSUMPTION OF RAW MATERIA L IS COMPARATIVELY LESS. BUT AT THE SAME TIME IT IS TO BE NOTED THAT THE ASSESSEES ACCOUNTS ARE AUDITED BOO K RESULTS ARE NOT REJECTED AND THERE IS NO CASE FOR T HE REVENUE THAT THERE IS SALE OUTSIDE THE BOOKS. REVE NUE ITSELF IS INDIRECTLY ACCEPTING ASSESSEES CONTENTIO N THAT THERE CANNOT BE STANDARD FORMULA FOR USAGE OF RAW MATERIALS. IN SOME ITEMS THERE IS EXCESS USE AND I N SOME ITEMS THERE IS LESS. THE RAW MATERIALS WHICH ARE S HOWN AS USED LESS THE REVENUE ITSELF ALLOWED SET OFF AG AINST EXCESS USE SHOWN IN SOME OTHER ITEMS WHICH INDIREC TLY ACCEPTS ASSESSEES CONTENTION THAT THERE CANNOT BE ANY STANDARD FORMULA. SECONDLY IT IS DIFFICULT TO REJE CT ASSESSEES CONTENTION THAT THE OUTPUT DEPENDS ON TH E QUALITY OF RAW MATERIAL. IT MAY DEPEND ON VARIOUS FACTORS. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE APPEAL BY THE ASSESSEE ON THIS GROUND IS T O BE ALLOWED. IT IS ALLOWED. 24. SINCE THE FACTS OF THE PRESENT CASE ON ACCOUNT OF MANUFACTURING OF BISCUITS THROUGH OWN FACTORY ARE I DENTICAL TO THE FACTS IN THE PRECEDING ASSESSMENT YEARS THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE WE ARE OF THE VIEW THAT THE BOOK RESULTS OF THE ASSESSEE SO FAR AS MANUFACTURING OF BISCUITS THROUGH OWN FACTORY IS CO NCERNED HAS TO BE ALLOWED AND NO ADJUSTMENT IS CALLED FOR. M/S. PARLE BISCUITS PVT. LTD. =================== 14 25. AS REGARDS THE ISSUE RELATING TO THE MANUFACTURING OF BISCUITS THROUGH CMUS IS CONCERNED WE FIND THE ASSESSING OF FICER NOTED THAT THE INPUT-OUTPUT RATIO IN THE CMUS ARE SHOWN BY THE ASSESSEE AT 110.60:100 AS AGAINST 108.19:100 IN CASE OF OWN FAC TORY. WE FIND THE ASSESSING OFFICER REJECTED THE VARIOUS SUBMISSI ONS GIVEN BY THE ASSESSEE AND APPLIED THE RATIO OF 108.19:100 FOR TH E CMUS ALSO. WE FIND THE CIT(A) DIRECTED THE ASSESSING OFFICER TO M AKE THE SAME ADJUSTMENTS TO THE CMUS WHICH ARE APPLICABLE TO OWN FACTORY. BASED ON THE FIGURES GIVEN BY THE ASSESSEE HE DIRE CTED THE ASSESSING OFFICER TO VERIFY THESE FIGURES SUBJECT TO THE COND ITION THAT NO ADJUSTMENT IN THE CASE OF LEFT OVER MAIDA IS TO BE MADE. ADMITTEDLY THE ASSESSEE HAS NO FULL CONTROL OVER THE CMUS. AT THE SAME TIME IT CANNOT BE BLINDLY ACCEPTED AS TO WHATEVER FIGURES G IVEN BY THE ASSESSEE ON ACCOUNT OF MANUFACTURING OF BISCUITS TH ROUGH THE CMUS HAS TO BE ACCEPTED. SOME SORT OF CONTROL IN OUR O PINION IS REQUIRED AS THERE IS EVERY POSSIBILITY OF LEAKAGE OF REVENUE THROUGH EXCESS CONSUMPTION OF RAW MATERIAL IN ABSENCE OF ANY CONTR OL MECHANISM. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE C ASE WE FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE INPUT-OUTPUT FORMULA OF 108.19:100 FOR THE C MUS IS APPLIED THEN NECESSARY ADJUSTMENT WHICH ARE ALLOWED TO THE OWN MANUFACTURING UNITS SHOULD ALSO BE ALLOWED TO THE C MUS. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON THI S ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER DIR ECTING HIM TO MAKE NECESSARY VERIFICATION AND GIVE APPROPRIATE RELIEF TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES AN D THE GROUNDS OF APPEAL NO. 2 BY THE REVENUE IS DISMISSED. 26. AS FAR AS GROUNDS OF APPEAL NO. 1 BY THE REVENUE IS CONCERNED IN VIEW OF OUR FINDING IN THE PRECEDING PARAGRAPH ACCEPTING THE BOOK RESULTS OF THE ASSESSEE FOR PROD UCTION THROUGH OWN FACTORY WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW ADJUSTM ENT FOR EMPTY M/S. PARLE BISCUITS PVT. LTD. =================== 15 BAGS OF MAIDA WHILE WORKING OUT THE RATIO OF CONSUM PTION OF RAW MATERIAL AND PRODUCTION. THE GROUNDS OF APPEAL NO. 1 BY THE REVENUE IS ACCORDINGLY DISMISSED. 27. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. I.T.A. NO. 5542/MUM/2006 (A.Y. 2000-01) (BY REVENUE ): I.T.A. NO. 5320/MUM/2006 (A.Y. 2000-01) (BY ASSESSE E): I.T.A. NO. 5543/MUM/2006 (A.Y. 2001-02) (BY REVENUE ): I.T.A. NO. 5321/MUM/2006 (A.Y. 2001-02) (BY ASSESSE E): 28. THE GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE ARE AS UNDER: I.T.A. NO. 5542/MUM/2006 (A.Y. 2000-01)(BY REVENUE) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ADJUSTMENT FOR EMPTY BAGS OF MAIDA WHILE WORKING OUT THE RATIO OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION WITHOUT APPRECIATING THAT: A) THE MAIDA BAGS COME IN NET WEIGHT AND NOT AS GROSS WEIGHT AS MADE OUT TO BE BY THE ASSESSEE BEFORE CIT(A). THE AO HAS ALREADY ALLOWED ADJUSTMENT OF 25% ON ACCOUNT OF PRE-PRODUCTION AND POST-PRODUCTION WASTAGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ALL ADJUSTMENTS THAT HAVE BEEN ALLOWED IN RESPECT OF OWN FACTORY TO CMUS ALSO WITHOUT APPRECIATING THE FACT THAT THE EXCESS CONSUMPTION O F RAW MATERIAL IS WORKED OUT ON THE TOTAL PRODUCTION ON THE DIFFERENT BRANDS OF BISCUITS IRRESPECTIVE OF PRODUCTION IN OWN FACTORY OR BY CMUS AND DEDUCTION WAS ALLOWED IN THE SAME PROPOSITION IN ALL THE BRANDS OF BISCUITS IGNORING THE FACT THAT P RE- PRODUCTION AND POST PRODUCTION WASTAGES ARE NOT INCLUDED IN THE PRODUCTION OF BISCUITS BY CMUS. THEREFORE QUESTION OF TAKING INPUT OUTPUT RATIO AT 110.607:100 DOES NOT ARISE. I.T.A. NO. 5320/MUM/2006 (A.Y. 2000-01)(BY ASSESSEE ): THE APPELLANT OBJECTS TO THE ORDER DATED 08.08.2006 PASSED BY THE COMMISSION OF INCOME-TAX (APPEALS) M/S. PARLE BISCUITS PVT. LTD. =================== 16 CENTRAL IV MUMBAI (CIT(A)) FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUND S: 1.1 THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALLEGED EXCESS CONSUMPTION OF RAW MATERIALS OF RS.1 51 32 688. 1.2 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR COMPUTING ALLEGED EXCESS/SHORT CONSUMPTION OF RAW MATERIALS AT THE APPELLANTS CONTRACT MANUFACTURING UNITS AS AGAINST THE FORMULAE OF 110.607:100 AS CONTENDED BY THE APPELLANT. HE ERRED IN NOT APPRECIATING THE SUBMISSION MADE BY THE APPELLANT IN THIS CONNECTION. 1.3 WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR THE APPELLANTS CMUS ERRED IN NOT DIRECTING THE AO TO MAKE THE ADJUSTMENTS TO THE AMOUNT OF PRODUCTION OF THE CMUS IN COMPUTATION OF EXCESS/SHORT CONSUMPTION AT THE CMUS. I.T.A. NO. 5543/MUM/2006 (A.Y. 2001-02)(BY REVENUE) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ADJUSTMENT FOR EMPTY BAGS OF MAIDA WHILE WORKING OUT THE RATIO OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION WITHOUT APPRECIATING THAT: A) THE MAIDA BAGS COME IN NET WEIGHT AND NOT AS GROSS WEIGHT AS MADE OUT TO BE BY THE ASSESSEE BEFORE CIT(A). THE AO HAS ALREADY ALLOWED ADJUSTMENT OF 25% ON ACCOUNT OF PRE-PRODUCTION AND POST-PRODUCTION WASTAGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ALL ADJUSTMENTS THAT HAVE BEEN ALLOWED IN RESPECT OF OWN FACTORY TO CMUS ALSO WITHOUT APPRECIATING THE FACT THAT THE EXCESS CONSUMPTION O F RAW MATERIAL IS WORKED OUT ON THE TOTAL PRODUCTION ON THE DIFFERENT BRANDS OF BISCUITS IRRESPECTIVE OF PRODUCTION IN OWN FACTORY OR BY CMUS AND DEDUCTION WAS ALLOWED IN THE SAME PROPOSITION IN ALL THE BRANDS OF BISCUITS IGNORING THE FACT THAT P RE- PRODUCTION AND POST PRODUCTION WASTAGES ARE NOT INCLUDED IN THE PRODUCTION OF BISCUITS BY CMUS. M/S. PARLE BISCUITS PVT. LTD. =================== 17 THEREFORE QUESTION OF TAKING INPUT OUTPUT RATIO AT 110.607:100 DOES NOT ARISE. I.T.A. NO. 5321/MUM/2006 (A.Y. 2001-02)(BY ASSESSEE ): THE APPELLANT OBJECTS TO THE ORDER DATED 08.08.2006 PASSED BY THE COMMISSION OF INCOME-TAX (APPEALS) CENTRAL IV MUMBAI (CIT(A)) FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUND S: 1.1 THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALLEGED EXCESS CONSUMPTION OF RAW MATERIALS OF RS.1 37 16 820. 1.2 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR COMPUTING ALLEGED EXCESS/SHORT CONSUMPTION OF RAW MATERIALS AT THE APPELLANTS CONTRACT MANUFACTURING UNITS AS AGAINST THE FORMULAE OF 110.607:100 AS CONTENDED BY THE APPELLANT. HE ERRED IN NOT APPRECIATING THE SUBMISSION MADE BY THE APPELLANT IN THIS CONNECTION. 1.3 WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR THE APPELLANTS CMUS ERRED IN NOT DIRECTING THE AO TO MAKE THE ADJUSTMENTS TO THE AMOUNT OF PRODUCTION OF THE CMUS IN COMPUTATION OF EXCESS/SHORT CONSUMPTION AT THE CMUS. 29. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS T AKEN BY THE ASSESSEE AS WELL AS THE REVENUE ARE IDENTICAL T O THE GROUNDS IN I.T.A. NO. 1411/MUM/2006 AND I.T.A. NO.1412/MUM/200 6. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAIS ED BY THE REVENUE HAVE BEEN DISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED FOR STATISTICAL PURPOSES . FOLLOWING THE SAME RATIO THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 3890/MUM/2007 (A.Y. 2003-04) (BY REVENUE ): I.T.A. NO. 2802/MUM/2007 (A.Y. 2003-04) (BY ASSESSE E): 30. THE GROUNDS OF APPEAL RAISED BY THE REVENUE AS WELL AS THE ASSESSEE ARE AS UNDER: M/S. PARLE BISCUITS PVT. LTD. =================== 18 REVENUES GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ADJUSTMENT FOR EMPTY BAGS OF MAIDA WHILE WORKING OUT THE RATIO OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION WITHOUT APPRECIATING THAT: A) THE MAIDA BAGS COME IN NET WEIGHT AND NOT AS GROSS WEIGHT AS MADE OUT TO BE BY THE ASSESSEE BEFORE CIT(A). THE AO HAS ALREADY ALLOWED ADJUSTMENT OF 25% ON ACCOUNT OF PRE-PRODUCTION AND POST-PRODUCTION WASTAGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO ALLOW ALL ADJUSTMENTS THAT HAVE BEEN ALLOWED IN RESPECT OF OWN FACTORY TO CMUS ALSO WITHOUT APPRECIATING THE FACT THAT THE EXCESS CONSUMPTION O F RAW MATERIAL IS WORKED OUT ON THE TOTAL PRODUCTION ON THE DIFFERENT BRANDS OF BISCUITS IRRESPECTIVE OF PRODUCTION IN OWN FACTORY OR BY CMUS AND DEDUCTION WAS ALLOWED IN THE SAME PROPOSITION IN ALL THE BRANDS OF BISCUITS IGNORING THE FACT THAT P RE- PRODUCTION AND POST PRODUCTION WASTAGES ARE NOT INCLUDED IN THE PRODUCTION OF BISCUITS BY CMUS. THEREFORE QUESTION OF TAKING INPUT OUTPUT RATIO AT 110.607:100 DOES NOT ARISE. ASSESSEES GROUNDS OF APPEAL: THE APPELLANT OBJECTS TO THE ORDER DATED 15.02.2007 PASSED BY THE COMMISSION OF INCOME-TAX (APPEALS) CENTRAL V MUMBAI (CIT(A)) FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUND S: 1. THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALLEGED EXCESS CONSUMPTION OF RAW MATERIALS OF RS.51 63 729 2. THE LEARNED CIT(A) ERRED IN NOT DIRECTING THE AO FOLLOW THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEARS 1989-90 1991-92 1994-95 1995- 96 AND 1996-97 IN RESPECT OF THE ADDITION FOR ALLEGED EXCESS CONSUMPTION OF RAW MATERIALS MADE IN THE CASE OF THE CONTRACT MANUFACTURING UNITS OF THE APPELLANT. HE FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR COMPUTING ALLEGED EXCESS/SHORT CONSUMPTION OF RAW MATERIALS AT THE APPELLANTS M/S. PARLE BISCUITS PVT. LTD. =================== 19 CMUS AS AGAINST THE FORMULAE OF 110.607:100 AS CONTENDED BY THE APPELLANT. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE AO IN APPLYING THE INPUT/OUTPUT FORMULAE OF 108.19:100 FOR THE APPELLANTS CMUS ERRED IN NOT DIRECTING THE AO TO MAKE THE ADJUSTMENTS TO THE AMOUNT OF PRODUCTION OF THE CMUS IN COMPUTATION OF EXCESS/SHORT CONSUMPTION AT THE CMUS. HE ERRED IN NOT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT IN THIS CONNECTION. 31. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS T AKEN BY THE ASSESSEE AS WELL AS THE REVENUE ARE IDENTICAL T O THE GROUNDS IN I.T.A. NO. 1411/MUM/2006 AND I.T.A. NO.1412/MUM/200 6. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAIS ED BY THE REVENUE HAVE BEEN DISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED FOR STATISTICAL PURPOSES . FOLLOWING THE SAME RATIO THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 32. GROUNDS OF APPEAL NO. 3 BY THE REVENUE READS AS UND ER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF ENTIRE EXPENDITURE ON ADVERTISEMENT AMOUNTING TO RS.16 88 82 896/- IN SPITE OF THE FACT THAT ASSESSE E HAS DEBITED ONLY 50% (I.E. 8 44 41 448/-) OF SUCH EXPE NSES IN THE BOOKS OF ACCOUNT. 33. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS INTER ALIA OBSERVED BY THE AO THAT THE ASSESSEE HAS INCURRED A N EXPENDITURE OF RS. 16.88 CRORES ON PUBLICITY AND BRAND ADVERTISING . FIFTY PERCENT OF THIS EXPENDITURE AMOUNTING TO RS. 8.44 CRORES H AS BEEN DEBITED IN THE BOOKS OF ACCOUNTS AND THE BALANCE 50% WAS CL AIMED IN THE COMPUTATION OF INCOME. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED MORE SO WHEN THE ASSESSEE ITSELF NOT CONSIDERED IT AS EXPENDITURE ACCRUED FOR THE PURPOSE OF ACCOUNTING. IN RESPONSE IT WAS INTER ALIA SUBMITTE D BY THE ASSESSEE AS UNDER:- M/S. PARLE BISCUITS PVT. LTD. =================== 20 ..UNDER SECTION 37(1) OF THE INCOME-TAX ACT A DEDUCTION OF ANY EXPENDITURE INCURRED BY THE ASSESS EE NOT BEING CAPITAL OR PERSONAL EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSI NESS IS ALLOWABLE AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF BUSINESS. HENCE ONCE EXPENDITURE IS INCUR RED THE ENTIRE AMOUNT IS ALLOWABLE AS A DEDUCTION IRRESPECTIVE OF THE FACT THAT ONLY A PART OF THE AM OUNT IS DEBITED IN ITS PROFIT & LOSS ACCOUNT. THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE/ AMORTIZATION UNDER THE ACT EXCEPT WHERE SPECIFICALLY PROVIDED VIZ. SEC TION 35DDA (VRS AMOUNTS); 35DD (AMALGAMATION EXPENDITURE) ETC. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 16 88 82 896/- ON ADVERTISEMENT DURING THE YEAR THOUGH IT MIGHT HAVE BEEN DEFERRED IN THE ACCOUNTS FOR A PERIOD OF TWO YEARS. HENCE THE ENTIRE AMOUNT OF RS. 16 88 82 896/- HAS BEEN CLAIMED AS A DEDUCTION IN COMPUTATION OF INCOME 34. THE RELIANCE WAS ALSO PLACED IN THE CASE OF AMAR R AJA BATTERIES V. ACIT (272 ITR 17 ITAT SUPPLEMENT) CO RE HEALTH CARE LTD. (78 ITD 1(TM) CIT VS. BHOR INDUSTRIES LTDD. ( 264 ITR 180) AND SILCON INTERFACES PVT. LTD. V. ITO (ITA NO.7434/MUM /03). HOWEVER THE A.O WAS OF THE VIEW THAT MATCHING CONCEPT IS A NECESSARY PREREQUISITE FOR COMPUTING TRUE AND CORRECT INCOME OF THE ASSESSEE. ADMITTEDLY THE BENEFIT IS DERIVED BY THE ASSESSEE O VER A NUMBER OF YEARS AND ON THIS BASIS ONLY THE ACCOUNTS HAVE BEE N PREPARED AND THEREFORE HE DISALLOWED THE DEDUCTION OF RS. 8 44 41 448/- AND ADDED TO THE INCOME OF THE ASSESSEE. 35. ON APPEAL LD. CIT(A) WHILE DISTINGUISHING THE DECI SIONS RELIED ON BY THE AO RELIED ON THE DECISION CITED BY THE A SSESSEE WHEREIN IT HAS BEEN HELD THAT THE ADVERTISEMENT EXPENDITURE IN ONE YEAR IS ALLOWABLE EVEN THOUGH WRITTEN OFF IN THE BOOKS OVER A PERIOD OF TIME HELD THAT THE ENTIRE ADVERTISEMENT EXPENDITURE IS A LLOWABLE IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY DELETED TH E ADDITION MADE BY THE AO. 36. AT THE TIME OF HEARING LD. D.R SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER THE LD. CIT(A) WA S NOT JUSTIFIED IN M/S. PARLE BISCUITS PVT. LTD. =================== 21 ALLOWING THE CLAIM OF ENTIRE EXPENDITURE ON ADVERTI SEMENT AMOUNTING TO RS. 16 88 82 896/- IN SPITE OF THE FAC T THAT THE ASSESSEE HAS DEBITED ONLY 50% I.E.8 44 41 448/- ON SUCH EXPE NSES IN THE BOOKS OF ACCOUNT. HE THEREFORE SUBMITS THAT THE ADDITION MADE BY THE AO BE RESTORED. HE FURTHER SUBMITS THAT SINCE THE AO HAS NOT CONSIDERED THE NATURE OF EXPENDITURE HAVING ENDURIN G BENEFIT OR CAPITAL IN NATURE THEREFORE THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO. 37. ON THE OTHER HAND LD. SR. COUNSEL FOR THE ASSESSE E WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E AO AND LD. CIT(A) RELIED ON THE FOLLOWING DECISIONS. 1. CIT VS. JAI PARABOLIC SPRINGS LTD. (2008) 306 ITR 4 2 (DEL) 2. CIT VS. SAKTHI SOYAS LTD. (2006) 283 ITR 194(MAD) 3. CIT V. BERGER PAINTS (INDIA) LTD. (NO.2) (2002) 254 ITR 503(CAL) 4. SILICON INTERFACES PRIVATE LIMITED ITA NO.7434/MUM / 03 A.Y. 2001-02 ORDER DATED 30.6.2005 HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 38. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE FACTS ARE NOT IN DISPUTE IN AS MUCH AS THE ASSE SSEE HAS INCURRED EXPENDITURE OF RS.16.88 CRORES ON PUBLICITY AND BR AND ADVERTISING AND OUT OF IT THE ASSESSEE HAS DEBITED 50% OF TOTAL EXPENDITURE I.E. 8.44 CRORES IN ITS BOOKS OF ACCOUNTS AND BALANCE EX PENDITURE OF RS. 8 44 41 448/- HAS BEEN CLAIMED IN THE COMPUTATION O F INCOME FILED ALONGWITH RETURN OF INCOME. THE A.O IN VIEW OF THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNTS TREATED THE BALANCE EXPEND ITURE OF RS.8 44 41 448/- AS DEFERRED REVENUE EXPENDITURE AN D ALLOWED ONLY RS. 8.44 CORES AS DEBITED IN THE BOOKS OF ACCOUNTS. ON APPEAL LD. CIT(A) OBSERVED THAT THERE IS NO DISPUTE THAT TH E IMPUGNED ADVERTISEMENT EXPENDITURE IS REVENUE IN NATURE AND THE EXPENDITURE IS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THAT THE ONLY DISPUTE IS WHERE THE ENT IRE EXPENDITURE IS M/S. PARLE BISCUITS PVT. LTD. =================== 22 TO BE ALLOWED AS DEDUCTION DURING THE YEAR OR IT IS TO BE ALLOWED IN TWO YEARS AS PER TREATMENT GIVEN IN THE BOOKS OF A CCOUNTS RELIED ON CERTAIN DECISIONS HELD THAT THE ENTIRE ADVERTISE MENT EXPENDITURE IS ALLOWABLE IN THIS YEAR AND HENCE DELETED THE DIS ALLOWANCE MADE BY THE AO. 39. HERE IT IS NECESSARY TO TAKE NOTE OF THE FOLLOWING CASES ON THIS ISSUE. 40. IN CIT VS. BERGER PAINTS(INDIA) LTD.(NO.2)(CAL.)(SU PRA) IT HAS BEEN HELD(PAGE 504 HEAD NOTE): HELD (I) THAT IF ACCORDING TO THE REVENUE LAWS THE ASSESSEE IS ENTITLED TO TREAT A SUM AS A REVENUE EXPENDITURE THEN THAT LEGAL RIGHT OF THE ASSESSEE IS NOT ESTOPPED BY THE TREATMENT GIVEN BY THE ASSESSEE TO IT IN ITS OWN BOOKS OF ACCOUNT. ADVERTISEMENT EXPENSES A RE NORMALLY TO BE TREATED AS REVENUE EXPENDITURE. TH E TRIBUNAL WAS JUSTIFIED IN LAW IN ALLOWING A SUM OF RS.8 29 723/- AS REVENUE EXPENDITURE.......... 41. IN CIT VS. SAKTHI SOYAS LTD. (SUPRA) IT HAS BEEN H ELD(PAGE 195 HEAD NOTE): ..(II) THAT IN RESPECT OF THE PROJECT LAUNCHING E XPENSES AMOUNTING TO RS.16 41 125/- ALSO THE ASSESSEE HAD SPENT THE MONEY MAINLY FOR ADVERTISEMENT THROUGH VISUAL AND PRINT MEDIA AND ALSO FOR DESIGNING AND PRINTING LEAFLETS BROCHURES ETC. AND HENCE THESE EXPENSES WERE ALSO IN THE NATURE OF BUSINESS EXPENDITURE ENTITLED FOR DEDUCTION IN COMPUTING THE ASSESSEES INCOME. 42. IN CIT VS. BHOR INDUSTRIES LTD.(SUPRA) IT HAS BEEN OBSERVED AND HELD (PAGE 185): ..APPLYING THE RATIO OF JUDGMENT OF THE SUPREME COURT TO THE FACTS OF THIS CASE IN THE PRESENT MAT TER THE VRS EXPENSES WERE INCURRED BY THE COMPANY TO SAVE O N THE EXPENSE. THE EXPENSE WAS NOT REFERABLE TO ANY INCOME-YIELDING ASSET. IT IS WELL SETTLED THAT OR DINARILY REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS MUST BE AL LOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT IS INCURRED AND IT CANNOT BE SPREAD OVER A NUMBER OF YEARS EVEN THOUGH THE ASSESSEE HAS WRITTEN IT OFF IN ITS BOOKS OVER A PERIOD OF YEARS EVEN THOUGH THE ASSESSEE HAS WRITTEN IT OF F IN ITS BOOKS OVER A PERIOD OF YEARS.. M/S. PARLE BISCUITS PVT. LTD. =================== 23 43. IN ACIT VS. ASHIMA SYNTEX LTD.(2009) 310 ITR(AT) 1(AHMEDABAD) (SB) THE SPECIAL BENCH OF THE TRIBUNAL WHILE CONSIDERING THE DECISION OF HONBLE SUPREME COURT I N MADRAS INDUSTRIAL CORP LTD. VS. CIT (1997) 225 ITR 802 OB SERVED AND HELD AS UNDER (PAGE-15): .....THIS JUDGMENT RELIED UPON BY THE LD. DEPARTME NTAL REPRESENTATIVE ITSELF CLARIFIES THAT THOUGH THE TAX PAYER MAY HAVE WRITTEN OFF THE EXPENDITURE IN ITS BOOKS O F ACCOUNT OVER A PERIOD SAY OF FIVE YEARS IT MUST BE ALLOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT WAS INCURRED IF IT IS REVENUE EXPENDITURE AND IF IT I S WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINE SS. IN THE CASE UNDER CONSIDERATION THERE IS NOTHING TO SUGGEST THAT WITH THIS EXPENDITURE ANY ASSET TANG IBLE OR INTANGIBLE HAS BEEN CREATED. THERE IS NO EVIDE NCE ON RECORD REGARDING ACCRUAL OF ANY SPECIFIC REVENUE IN THE YEARS UNDER CONSIDERATION OR SUBSEQUENTLY OVER A DEFINED PERIOD WITH THE INCURRING OF THE SAID EXPENDITURE. THE ASSESSING OFFICER HIMSELF ADMITTE D THE PORTION OF EXPENDITURE DEBITED IN THE PROFIT AND L OSS ACCOUNT AS REVENUE EXPENDITURE. IN THESE CIRCUMSTANCES WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 44. IN CIT VS. JAI PARABOLIC SPRINGS LTD. (2008) 306 I TR 42 (DEL) IT HAS BEEN OBSERVED AND HELD AS UNDER:- THE ASSESSEE FILED A RETURN OF INCOME DECLARING A NET LOSS AT RS. 4 40 36 000/- FOR THE ASSESSMENT YEAR 1 990- 91. THE LOSS WAS COMPUTED AT RS. 4 27 63 353 INTER ALIA BY MAKING SEVERAL ADDITIONS AND DISALLOWANCES. THE ASSESSEE INCURRED AN EXPENDITURE OF RS. 19 48 125/- AS EXPENDITURE ON ACCOUNT OF CUSTOMER INTRODUCTION CHARGES WHICH WERE DEBITED AS DEFERRED REVENUE EXPENSES IN THE BALANCE-SHEET. THE EXPENDITURE WA S WRITTEN OFF OVER A PERIOD OF FIVE YEARS STARTING FR OM THE ASSESSMENT YEAR 1990-91 AND ACCORDINGLY THE ASSESSE E CLAIMED REDUCTION OF RS. 3 89 625 IN THE RETURN. T HE CLAIM WAS ALLOWED BY THE ASSESSING OFFICER. IN APP EAL BEFORE THE COMMISSIONER (APPEALS) THE ASSESSEE CLAIMED AN ADDITIONAL GROUND THAT THE ENTIRE DEFERR ED REVENUE EXPENSES WERE DEDUCTIBLE IN THE ASSESSMENT YEAR IN APPEAL. THE APPEAL WAS ALLOWED. THE TRIBU NAL RESTORED THE MATTER TO THE ASSESSING OFFICER. THE ASSESSING OFFICER ALLOWED ONLY A REDUCTION OF RS. 3 89 625 AND DISALLOWED THE CLAIM OF RS. 15 58 500 ON THE GROUND THAT THIS WAS NOT CLAIMED BY THE ASSESSE E IN M/S. PARLE BISCUITS PVT. LTD. =================== 24 ITS RETURN OF INCOME IN THE ASSESSMENT YEAR 1990-91 . THE COMMISSIONER (APPEALS) HELD THAT THE ASSESSING OFFICER ERRED IN DISALLOWING THE EXPENDITURE ON THE SOLE GROUND THAT NO CLAIM FOR DEDUCTION OF THE AMOUNT WA S MADE IN THE RETURN OF INCOME. THIS ORDER WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL: HELD DISMISSING THE APPEAL THAT THERE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERT AIN AN ADDITIONAL GROUND WHICH ACCORDING TO THE TRIBUNA L AROSE IN THE MATTER AND FOR THE JUST DECISION OF TH E CASE. THERE WAS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL . 45. IN SILICON INTERFACES PRIVATE LIMITED ITA NO.7434/ M/03 A.Y. 2001-02 DATED 30.6.2005 THE TRIBUNAL WHILE RELYING ON THE DECISION OF THE TRIBUNAL IN AMAR RAJA BATTERIES LTD. VS. ACI T 272 ITR 1 (AT); 91 ITD 280 AND THE RATIO OF DECISION OF KEDARNATH J UTE MANUFACTURING CO. LTD. VS. CIT 82 ITR 363 (SC) HOLD ING THAT THE BOOKS OF ACCOUNTS DO NOT DETERMINE THE ALLOWABILITY OR OTHERWISE EXPENDITURE AGREEING WITH THE VIEW TAKEN BY THE C O-ORDINATE BENCH OF THE TRIBUNAL AND DELETED THE DISALLOWANCE MADE BY THE AO. 46. APPLYING THE RATIO OF AFORESAID LEGAL POSITION TO THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT MAKING OF AN ENTRY OR ABSENCE OF AN ENTRY DOES NOT DETERMINE THE ALLOWABI LITY OR OTHERWISE OF THE ITEM OF EXPENDITURE AND THE SAME C AN NOT BE CONSIDERED TO BE A FACTOR ADVERSE IF THE EXPENDITU RE IS OTHERWISE OF ALLOWABLE NATURE. IT IS NOT THE CASE OF THE REVEN UE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON PUBLICITY A ND BRAND ADVERTISING ARE NOT REVENUE IN NATURE OR HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THERE IS NOTHING TO SUGGEST THAT WITH THIS EXPENDITURE ANY ASSET TA NGIBLE OR INTANGIBLE HAS BEEN CREATED. THERE IS NO LAW UNDE R THE ACT TO SAY THAT THE REVENUE EXPENDITURE IS DEFERRED REVENUE EX PENDITURE. THE A.O HIMSELF ADMITTED THE PORTION OF EXPENDITURE DEB ITED IN THE P&L ACCOUNT AS REVENUE EXPENDITURE. THIS BEING SO WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON PU BLICITY AND BRAND ADVERTISING ARE ALLOWABLE AS REVENUE EXPENDIT URE. M/S. PARLE BISCUITS PVT. LTD. =================== 25 ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. THE G ROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 47. IN THE RESULT THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 31 ST AUGUST 2010. SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 31 ST AUGUST 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A)-IV (4) CIT(A)-V MUMBAI (5) THE CIT CENTRAL-II MUMBAI (6) THE DR C BENCH ITAT MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO