Johnson Matthey India Pvt. Ltd, v. DCIT Circle 4 (1),

ITA 418/DEL/2008 | 2002-2003
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 41820114 RSA 2008
Bench Delhi
Appeal Number ITA 418/DEL/2008
Duration Of Justice 2 year(s) 11 month(s) 21 day(s)
Appellant Johnson Matthey India Pvt. Ltd,
Respondent DCIT Circle 4 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 28-01-2011
Date Of Final Hearing 29-06-2011
Next Hearing Date 29-06-2011
Assessment Year 2002-2003
Appeal Filed On 07-02-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI K. G. BANSAL ACCOUNTANT MEMBER ITA. NO.418/D/2008 ASSESSMENT YEAR : 2002-03 M/S JOHNSON MATHEY INDIA PVT. LTD. VS. DY. C.I.T . 103 ASHOKA ESTATE BARAKHAMBA ROAD CIRCLE-4(1) NEW DELHI NEW DELHI PAN NO.AAACJ 2919A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKAS SRIVASTAVA AR RESPONDENT BY: SHRI K. RAVI RAMACHANDARAN SR. DR ORDER PER K.G. BANSAL: AM: THE FACTS OF THE CASE ARE THAT ASSESSEE-COMPANY FILED ITS RETURN ON 31.10.2002 DECLARING TOTAL INCOME OF `4 66 83 33 0/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AUTOMOBILE EXHAUST CATALYST. THE CATALYST ARE SOLD TO THE FOREIGN HOLDIN G COMPANY AND THE SALE CONSIDERATION IS DECIDED ON COST PLUS BASIS. THE RAW MATERIAL USED FOR MANUFACTURING CATALYST ARE RHODIUM PLATINUM AND PALLADIUM THE NOBLE METALS. IN THIS YEAR THE TURN OVER WAS DECLARE D AT `136 45 17 983/-. OUT OF THIS AMOUNT A SUM OF `1 09 89 411/- WAS REDUCED WITH THE NARRATION PROVISION FOR ESCALATION OF LAST YEAR REVERSED. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WA S SUBMITTED THAT THIS AMOUNT HAS BEEN TAXED IN EARLIER YEARS. IN THIS CONTEXT THE ASSESSING OFFICER CONSIDERED THE SYSTEM OF ACCOUNTING FOLL OWED BY THE ASSESSEE AND METHOD OF REVENUE RECOGNITION ADOPTED BY I T. ON CONSIDERATION OF THESE FACTORS THE ASSESSING OFFICER DID NOT AGREE WITH THE ASSESSEE. IT IS MENTIONED THAT THE ASSESSEE COULD NOT F URNISH ANY EVIDENCE IN SUPPORT OF ADJUSTMENT OF PRICE VARIATION WITH THE CUSTOMER 418-2008-JMI 2 2 THEREFORE THE DEDUCTION OF THE AMOUNT OF `1 09 89 411/- FROM THE SALE PROCEEDS WAS NOT ALLOWED. 1.1 THIS ISSUE WAS CONTESTED BEFORE THE LEARNED CIT(A)-V II NEW DELHI WHO DISPOSED OFF THE APPEAL ON 13.11.2007 IN A CONSOLIDATED ORDER FOR ASSESSMENT YEARS 2002-03 AND 2004-05 IN APPEAL NOS. 8/05- 06 AND 133/06-07. IT WAS SUBMITTED BEFORE HIM THAT T HE AFORESAID SUM IS COMPRISED OF TWO AMOUNTS:- A) `81 80 411-REDUCTION IN RESPECT OF SALES IN FINANCIAL YEAR 2000- 01; B) `28 09 000 REDUCTION IN RESPECT OF SALES IN FINANCI AL YEAR 2001- 02. 2. THE LEARNED CIT(A) CONSIDERED THE SYSTEM OF ACCOUN TING FOLLOWED BY THE ASSESSEE NOTIFICATION OF THE GOVERNMENT OF INDI A AND REVENUE RECOGNITION METHOD ADOPTED BY THE ASSESSEE. HE CAME TO THE CONCLUSION THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND RECOGNIZES THE SALES ON DISPATCH BASIS. T HEREFORE AS PER INPUT COST FORMULA THE ASSESSEE SHOULD HAVE KNOWN IT S VALUE WITHIN TWO MONTHS FROM THE ORDERS PLACED WITH ITS PARE NT COMPANY. EVEN IF A CUSHION OF TWO MORE MONTHS IS TO BE GIVEN IT SHOULD HAVE KNOWN THE INPUT COST WITHIN FOUR MONTHS. ACCORDINGLY IT SHOULD HAVE RAISED SALE INVOICES. IT WAS HELD THAT SINCE THE INCOME HAS TO BE TAXED ON THE BASIS OF NOTIFIED SYSTEM OF ACCOUNTING ON YEAR T O YEAR BASIS THE ASSESSING OFFICER WAS RIGHT IN NOT ALLOWING DEDUCTION FR OM THE SALES ON ACCOUNT OF PROVISION FOR PRICE ESCALATION. FOR THE SA KE OF CONVENIENCE THE RELEVANT PARAGRAPH OF PAGE NOS.14 & 15 OF THE IM PUGNED ORDER IS REPRODUCED BELOW:- RIVAL CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. AFTER CONSIDERING THE RIVAL SUBMISSIONS I AM OF THE VIEW THAT THE INCOME OF A PERSON HAS TO BE TAXED ON YEAR TO YEAR BA SIS AS PER THE METHOD OF ACCOUNTING SYSTEM NOTIFIED BY THE GOVT. OF INDIA INCORPORATED IN THE SECTION OF 145 OF THE INCOME-TAX ACT 1961. THE FACTS DETAILING OUT THE I NCOME OF THE ASSESSEE AND METHOD ADOPTED BY IT FOR ITS TAXATIO N 418-2008-JMI 3 3 PURPOSES WERE DULY CONSIDERED BY THE ASSESSING OFFICER. ALTHOUGH THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT S BUT I AM IN AGREEMENT WITH THE ASSESSING OFFICER THAT THE CHARGEABILITY OF THE INCOME OFFERED BY THE ASSESSEE COMPANY IS NOT IN CONFORMITY WITH THE ACCEPTED PRINC IPLE OF ACCOUNTING AND HAS RECOGNIZED THE SALES ON THE DISPATC H BASIS. AS PER THE INPUT COST FORMULA ACCEPTED BY THE ASSESSEE COMPANY IT SHOULD HAVE KNOWN ITS VALUE WITHIN TWO MONTHS FROM THE ORDERS PLACED WITH ITS PARENT COMPANY. EVEN A CUSHION OF TWO MORE MONTHS IS GIVEN T HE ASSESSEE COMPANY IT SHOULD HAVE KNOWN THE ACTUAL INPUT COST WITHIN FOUR MONTHS AND ACCORDINGLY IT SHOULD HAV E RAISED SALES INVOICES. UNDER THESE CIRCUMSTANCES THE ASSESSEE COMPANY HAD ENOUGH TIME TO REVISE ITS SALES FIGURE BEFORE FILING OF ITS RETURN OF INCOME WHICH B ECOME DUE ALMOST AFTER SIX MONTHS OF CLOSING OF THE FINANCIAL YEAR AND OFFERED THE INCOME AS PER THE NOTIFIED SYSTEM OF ACCOUNTING. IN FACT THE TOTALITY OF ALL THE DETAI LS SUBMITTED BY THE ASSESSEE COMPANY HAS CREATED LOT OF CONFUSION ABOUT THE WORKING OUT OF THE ACTUAL SALES AND INCOME THEREOF. I WAS ALSO GIVEN TO UNDERSTAND THAT IN THE SUBSEQUENT ASSESSMENT YEAR THE ASSESSEE COMPANY AHS CHANGED ITS METHOD OF ACCOUNTING AND HAS OFFERED THE INCOME STRICTLY ON MERCANTILE BASIS WITHOUT MAKING AN Y PROVISIONS AND SUBSEQUENTLY REVERSING THE SAME. SINCE T HE INCOME HAS TO BE TAXED ON THE BASIS OF NOTIFIED SYSTEM O F ACCOUNTING ON YEAR TO YEAR BASIS I UPHOLD THE FINDIN GS OF THE ASSESSING OFFICER AND THE ADDITION OF `1 09 89 411/ - TO THE TRADING RESULTS ON ACCOUNTING OF PROVISION FOR PR ICE ESCALATION RELATED TO LAST YEARS REVERSED. APPELLANTS APPEAL ON THIS GROUND STANDS DISMISSED FOR THE ASSESSMENT YEAR 2002-03. 2.1 THE ONLY SUBMISSION MADE BY THE LEARNED COUNSEL BEF ORE US IS THAT THE ASSESSEE FOLLOWED SAME SYSTEM OF ACCOUNTING AND METHOD OF REVENUE RECOGNITION AS FOLLOWED OR DONE IN EARLIER Y EARS. THE AFORESAID AMOUNTS HAD BEEN OFFERED FOR TAXATION IN EARLIER YEA RS. THE SAME AMOUNT CANNOT BE BROUGHT TO TAX IN TWO YEARS WHICH LEADS TO DOUBLE TAX OF THE SAME INCOME. THIS IS AGAINST THE ESTABLISHED CANONS OF INTERPRETATION OF FISCAL STATUES. 418-2008-JMI 4 4 2.2 THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LEA RNED COUNSEL BY RELYING ON THE ORDERS OF LOWER AUTHORITIES. 2.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSI ONS MADE BEFORE US. WE ARE OF THE VIEW THAT IRRESPECTIVE OF T HE SYSTEM OF ACCOUNTING AND REVENUE RECOGNITION METHOD ADOPTED B Y THE ASSESSEE SAME AMOUNT CANNOT BE BROUGHT TO TAX IN TWO YEARS AS I T WOULD LEAD TO DOUBLE TAXATION OF THE SAME INCOME. THE LEARNED COU NSEL WAS OPEN TO SETTING ASIDE THE CASE TO THE FILE OF THE ASSESSING OFFICE R FOR VERIFICATION THAT THE TWO AMOUNTS WERE OFFERED FOR TAXATION IN ASSE SSMENT YEARS 2001-02 AND 2002-03. IN VIEW THEREOF THE MATTER I S RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIF Y THAT `81 80 411/- HAS BEEN INCLUDED IN THE SALES OF FINANCIAL YEAR 2000- 01 AND `28 09 000/- HAS BEEN INCLUDED IN THE SALES OF FINANCI AL YEAR 2001-02. IF YES THE AMOUNT OF `1 09 89 411/- SHALL BE EXCLUDE D FROM THE SALES OF THIS YEAR. NEEDLESS TO SAY THE ASSESSEE SHALL BE GRANTED A N ADEQUATE OPPORTUNITY OF BEING HEARD. 3. OTHER GROUNDS ARE CONSEQUENTIAL IN NATURE. THE AS SESSING OFFICER SHALL RE-COMPUTE INTEREST ON THE BASIS OF HIS FI NDING IN RESPECT OF AFORESAID DIRECTIONS. 4. IN RESULT THE APPEAL IS TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 28.01.2011 . SD/- SD/- ( C.L. SETHI ) ( K.G. BANSA L ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.28.01.2011. NS 418-2008-JMI 5 5 COPY FORWARDED TO:- 1. M/S JOHNSON MATTHEY INDIA PVT. LTD. 103 ASHOKA ESTATE BARAKHAMBA ROAD NEW DELHI. 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 4(1) NEW DELH I. 3. THE CIT 4. THE CIT (A) NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY BY ORDER (ITAT NEW DELHI).