M/s Vijay Dairy and Farm Products (P) Ltd., Musiri v. ACIT, Trichy

ITA 413/CHNY/2009 | 2004-2005
Pronouncement Date: 22-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 41321714 RSA 2009
Assessee PAN AAACV2113N
Bench Chennai
Appeal Number ITA 413/CHNY/2009
Duration Of Justice 1 year(s) 8 month(s) 23 day(s)
Appellant M/s Vijay Dairy and Farm Products (P) Ltd., Musiri
Respondent ACIT, Trichy
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 22-12-2010
Date Of Final Hearing 25-11-2010
Next Hearing Date 25-11-2010
Assessment Year 2004-2005
Appeal Filed On 30-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE DR. O.K. NARAYANAN VICE PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER) ..... I.T.A. NO. 413/MDS/2009 ASSESSMENT YEAR : 2004-05 M/S VIJAY DAIRY AND FARM PRODUCTS (P) LTD. THURAIYUR MAIN ROAD PERAMANGALAM MUSIRI TALUK TRICHY DISTRICT. PAN : AAACV2113N (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE II TIRUCHIRAPALLI. (RESPONDENT) APPELLANT BY: SHRI V.D. GOPAL RESPONDENT BY: SHRI SHA JI P. JACOB O R D E R PER HARI OM MARATHA JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2004-05 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSION ER OF INCOME TAX (APPEALS) TIRUCHIRAPALLI DATED 20.01.2009. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING RA W MILK INTO PASTEURIZED MILK AND DURING THE COURSE OF ITS BUSIN ESS BUTTER CURD BUTTER MILK ARE PRODUCED AS BY-PRODUCTS. THE ASSES SEE HAS CLAIMED I.T.A. NO. 413/MDS/09 2 ENTIRE PROFIT OUT OF THIS BUSINESS AS DEDUCTION UND ER SECTION 80IB(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER CALLED AS TH E ACT). THE A.O. HAS DISALLOWED THE CLAIM ON THE GROUND THAT THE ASS ESSEE IS NOT ENGAGED IN MANUFACTURE OF ARTICLES OR THINGS AND TH E ASSESSEE IS NOT A SMALL SCALE UNDERTAKING AS INVESTMENT IN PLANT AN D MACHINERY IS MORE THAN THE LIMIT PRESCRIBED BY THE GOVERNMENT OF INDIA IN THIS REGARD. AGGRIEVED THE ASSESSEE WENT BEFORE CIT(AP PEALS) BEFORE WHOM SIMILAR ARGUMENTS WERE RAISED. IN ADDITION I T WAS ALSO CONTENDED THAT THE ASSESSEE-COMPANY IS ENGAGED IN P RODUCTION/ MANUFACTURE OF VARIOUS TYPES OF MILK PRODUCT AS STA TED ABOVE. AGAIN THE ASSESSEE-COMPANY HAS CLAIMED DEDUCTION ON OPERA TION AND MAINTENANCE OF COLD STORAGE PLANT FOR THE ENTIRE YE AR AND ON THIS ACCOUNT ITSELF AND HAS DISPUTED THE DISALLOWANCE M ADE BY THE A.O. BUT THE LEARNED CIT(APPEALS) HAS NOT FOUND FAVOUR WITH THE ASSESSEE AND HAS DISMISSED THE ENTIRE CLAIM. 3. NOW THE ASSESSEE IS BEFORE US BY RAISING THE FO LLOWING GROUNDS:- II. IN THE FACTS OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO AL LOW THE APPEAL GRANTING FULL RELIEF U/S 80IA/80IB(3) OF THE INCOME-TAX ACT 1961. III. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BE EN I.T.A. NO. 413/MDS/09 3 PLEASED TO HOLD THAT THE ASSESSEE WAS ENGAGED IN TH E MANUFACTURE OF MILK PRODUCTS AND THEREFORE ENTITLED TO RELIEF UNDER SECTION 80IB(3) AS PRAYED FOR. IV. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE LIGHT OF THE APPELLANTS LETTER SUBMITTED TO THE AS SESSING OFFICER DATED 01.12.2006 AND 26.07.2006 SHOULD HAVE BEEN PLEASED TO HOLD THAT THE APPELLANT HAD BEEN MANUFAC TURING MILK PRODUCTS ESPECIALLY WHEN THE ULTIMATE PRODUCTS MANUFACTURED ARE COMMERCIALLY DIFFERENT AND DISTINC T FROM THE INPUT TAKEN AS RAW MATERIAL (I.E.) MILK AND THE REFORE WOULD QUALIFY FOR RELIEF U/S.80IA(IV)(D)/ 80IB(3). V. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SH OULD HAVE BEEN PLEASED TO APPRECIATE THAT THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER TO DENY RELIEF TO THE APPELLANT ARE NOT OPPOSITE TO THE FACTS OF THE APPE LLANTS CASE. VI. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BE EN PLEASED TO HOLD THAT THE APPELLANTS INDUSTRIAL UND ERTAKING IS A SMALL SCALE UNIT THAT HAD BEEN OPERATING A COL D STORAGE PLANT AND THEREFORE IS ENTITLED TO RELIEF UNDER SEC TION 80IB(3). VII. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SH OULD HAVE BEEN PLEASED TO HOLD THAT THE CEILING OF RS.1 CRORE FIXED BY THE CONCERNED AUTHORITY UNDER THE PROVISIO NS OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT BY THE IR PROCEEDINGS DATED 10.12.1999 IS NOT APPLICABLE TO T HE APPELLANT BECAUSE THE APPELLANTS UNDERTAKING WAS ESTABLISHED ON 08.03.1996 AS WILL BE EVIDENT FROM T HE CERTIFICATE ISSUED BY THE GENERAL MANAGER DISTRICT INDUSTRIES CENTRE TIRUCHIRAPALLI WORKING UNDER DIRECTORATE OF INDUSTRIES GOVERNMENT OF TAMIL NADU . VIII. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) SHOULD HAVE BEEN PLEASED TO HOLD THAT EVEN AS PER COMMUNICATIONS ISSUED BY THE ADDITIONAL DEVELOPMENT COMMISSIONER SMALL SCALE INDUSTRIES BY COMMUNICATI ON DATED 14.03.2000 AND 19.10.2000 THE CEILING OF RS.1 CRORE WHICH WAS REDUCED FROM RS.3 CRORES IN PURSUANCE OF NOTIFICATION NO.SO 1288 E DATED 24.12.1999 WOULD NO T BE APPLICABLE TO UNITS WHICH HAVE RECEIVED PROVISIONAL OR PERMANENT REGISTRATION PRIOR TO 24.12.1999. I.T.A. NO. 413/MDS/09 4 (B) IN THE ADMITTED FACTS THAT THE APPELLANT WAS RU NNING A COLD STORAGE PLANT AND THAT THE CEILING OF RS.1 C RORE IS NOT APPLICABLE TO THE APPELLANT THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO AL LOW THE APPEAL AS PRAYED FOR BY THE APPELLANT. IX. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN CHARGING INTEREST AT THE RATE OF 1 2% ON THE INTEREST FREE LOANS TO THE DIRECTORS AMOUNTING TO RS.1 32 000 ESPECIALLY WHEN THE APPELLANT COMPANY A T THE RELEVANT POINT OF TIME HAD ITS OWN INTERNALLY GENER ATED FUNDS. X. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO ALLOW THE SUM OF RS.2 62 000 C LAIMED UNDER THE SALES PROMOTION EXPENSES ESPECIALLY WHEN THE SAID SUM OF RS.2 62 000 WAS EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF APPELLANTS BUSINESS . XI. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE EXPENSES I NCURRED FOR GIVING GIFT ARTICLES TO DEALERS WAS WITH A VIEW TO MOTIVATING THE DEALERS TO PUSH SALES TO THE APPELLA NTS PRODUCTS. XII. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SH OULD HAVE BEEN PLEASED TO ALLOW A SUM OF RS.1 20 335 CLA IM UNDER THE HEAD STAFF WELFARE EXPENSES SINCE THE ENTIRE EX PENSES WAS INCURRED IN THE COURSE OF BUSINESS WITH A VIEW TO MAINTAINING THE CORDIAL RELATIONSHIP WITH THE STAFF OF THE COMPANY BY EXPENDING FUNDS ON POOJA AND OTHER ACTIV ITIES ORGANIZED BY THE STAFF MEMBERS. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFUL LY PERUSED THE ENTIRE RECORDS AVAILABLE BEFORE US. IT WAS FOUN D THAT IN THIS CASE THE NATURE AND CLAIM OF THE END PRODUCT ARE AS UNDE R:- SL.NO. DESCRIPTION OF THE PRODUCT TURNOVER ( ` ) 1. MILK 27 12 94 639 2. BUTTER MILK 6 61 963 3. FLAVOURED MILK 38 656 4. UN-BRANDED BUTTER 2 04 83 270 I.T.A. NO. 413/MDS/09 5 5. IN SO FAR AS THE CLAIM OF THE ASSESSEE THAT IT I S A SMALL SCALE INDUSTRY WE ARE IN AGREEMENT WITH THE LEARNED A.R. BECAUSE THE CEILING OF ` 1 CRORE FIXED BY THE CONCERNED AUTHORITY UNDER THE PROVISIONS OF INDUSTRY (DEVELOPMENT & REGULATION) A CT BY THEIR PROCEEDINGS DATED 10.12.1999 IS NOT APPLICABLE IN T HE ASSESSEES CASE BECAUSE THIS UNDERTAKING WAS ESTABLISHED ON 08 .03.1996 WHICH IS EVIDENT FROM THE CERTIFICATE ISSUED BY THE GENER AL MANAGER DISTRICT INDUSTRIES CENTRE TIRUCHIRAPALLI WHO IS WORKING U NDER DIRECTORATE OF INDUSTRIES GOVERNMENT OF TAMIL NADU A COPY OF WHI CH IS ENCLOSED THEREWITH. EVEN AS PER THE COMMUNICATION ISSUED BY THE ADDITIONAL DEVELOPMENT COMMISSIONER SMALL SCALE INDUSTRIES B Y COMMUNICATION DATED 14.03.2000 AND 19.10.2000 THE CEILING OF ` 1 CRORE WHICH WAS REDUCED FROM ` 3 CRORES IN PURSUANCE OF NOTIFICATION NO.SO 1288 E DATED 24.12.1999 WOULD N OT BE APPLICABLE TO THE UNITS WHICH RECEIVED PROVISIONAL OR PERMANEN T REGISTRATION PRIOR TO 24.12.1999. IT IS THE FACT THAT THE ASSESSEE WA S RUNNING A COLD STORAGE PLANT AND THE CEILING OF ` 1 CRORE WAS NOT APPLICABLE TO IT BECAUSE IT WAS REGISTERED ON 08.03.1996. THE OTHER CONDITION THAT THE ASSESSEE SHOULD EITHER MANUFACTURE OR PRODUCE A NY ARTICLE OR THING IS CONCERNED THIS ISSUE HAS NOT BEEN CORRECT LY EXAMINED BECAUSE THE LETTERS OF THE ASSESSEE DATED 01.12.200 6 AND I.T.A. NO. 413/MDS/09 6 26.07.2006 HAVE NOT BEEN CORRECTLY APPRECIATED AND CONSIDERED BY THE A.O. TO ASCERTAIN WHETHER THE ASSESSEE PRODUCES ANY NEW ARTICLE OR THING OR NOT. THEREFORE THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. WITH A DIRECTION THAT HE SHALL EXAMINE THIS IS SUE IN THE LIGHT OF THE CLAIM MADE BY THE ASSESSEE BEFORE HIM. 6. THE OTHER ISSUES RAISED VIDE GROUND NOS. (IX) AN D (XII) ARE ALSO BEING RESTORED TO THE FILE OF THE A.O. TO EXAMINE T HE ISSUES AFTER HEARING THE ASSESSEE IN THE MANNER THE ASSESSEE MAD E THE CLAIM WITH THE HELP OF DOCUMENTS FILED IN THE PAPER-BOOK. CONSEQUENTLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 22 ND DECEMBER 2010. SD/- SD/- (DR. O.K. NARAYANAN) (HARI OM MARATHA) VICE PRESIDENT JUDICIAL MEMBER CHENNAI DATED THE 22 ND DECEMBER 2010. KRI . COPY FORWARDED TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) TIRUCHIRAPALLI (4) CIT-I TRICHY (5) D.R. (6) GUARD FILE