ACIT, New Delhi v. M/s Gamma Pizzakraft (P) Ltd.,, New Delhi

ITA 4323/DEL/2012 | 2008-2009
Pronouncement Date: 30-04-2014 | Result: Dismissed

Appeal Details

RSA Number 432320114 RSA 2012
Assessee PAN AACCG3988Q
Bench Delhi
Appeal Number ITA 4323/DEL/2012
Duration Of Justice 1 year(s) 8 month(s) 20 day(s)
Appellant ACIT, New Delhi
Respondent M/s Gamma Pizzakraft (P) Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 30-04-2014
Date Of Final Hearing 05-12-2013
Next Hearing Date 05-12-2013
Assessment Year 2008-2009
Appeal Filed On 09-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI D.K. SRIVASTAVA ITA NO. 4323/DEL/2012 ASSTT. YR: 2008-09 ACIT CIRCLE 12(1) VS. M/S GAMMA PIZZAKRAFT (P) LTD. NEW DELHI. MANSAROVAR 90 NEHRU PLACE NEW DELHI. PAN: AACCG 3988 Q ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SATPAL SINGH SR. DR RESPONDENT BY : SHRI SURESH MALIK CA O R D E R PER R.P. TOLANI J.M: : THIS IS REVENUES APPEAL AGAINST THE ORDER OF CIT (A)-XV NEW DELHI DATED 1-5-2012 RELATING TO A.Y. 2008-09. FOLLOWING GROUNDS ARE RAISED: 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS. 8 69 139/- MADE BY THE AO ON AC COUNT OF ADDITIONAL DEPRECIATION. 2. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS. 6 72 040/- MADE BY THE AO ON A CCOUNT OF CAPITALIZATION ON CONTINUING FEES/ ROYALTY EXPENSES . 2. BRIEF FACTS ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING FOOD SERVICES AND MANUFACTURING EATABLES AND SUPPLY ING THEM TO DIFFERENT PARTIES. THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATI ON OF RS. 8 69 139/- ON THE GROUND THAT IT IS ENGAGED IN THE PRODUCTION OF FOOD ARTICLES WHICH ARE ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 2 DIFFERENT FROM THE RAW-MATERIAL. ASSESSING OFFICER HOWEVER DISALLOWED THE SAME RELYING ON HONBLE SUPREME COURT JUDGMENT IN T HE CASE OF INDIAN HOTELS LTD. VS. ITO & OTHERS 112 TAXMAN 48 (SC) HO LDING THE ACTIVITY TO BE NEITHER MANUFACTURE OR PRODUCTION. 2.1. THE ASSESSEE INCURRED AN EXPENDITURE OF RS. 26 88 161/- BY WAY OF EXPENDITURE ATTRIBUTABLE TO ROYALTY EXPENSES/ CONTI NUING FEE. THE ASSESSING OFFICER HOWEVER ESTIMATED 25% OF THE EXPENDITURE AT RS. 6 72 040/- AS CAPITAL IN NATURE RELYING ON SOUTHERN SMITH GEAR AN D THE DISALLOWANCE WAS MADE. 2.2. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL. LD . CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE EARLIER ORDE RS PASSED BY HIM AND HIS PREDECESSOR FOR A.Y. 2006-07 AND 2007-08. 2.3. AGGRIEVED REVENUE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE AT THE OUT SET CONT ENDS THAT THE RELEVANT PARAS OF CIT(A)S ORDER FOR A.Y. 2007-08 WILL BE RE LEVANT AS UNDER: THE GROUNDS OF THE APPEAL FILED BY THE REVENUE WER E AS UNDER: 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS. 13 85 238/- MADE BY THE AO ON ACCOUNT OF ROYALTY EXPENSES. 2. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS. 5 99 464/- MADE BY THE AO ON ACCOUNT OF ADDITIONAL DEPRECIATION. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G? 2. THE HONBLE TRIBUNAL HEARD THE MATTER ON 13-09-2 012 AND PRONOUNCED THE ORDER ON 21-09-2012. IN THE SAID ORDER THE GROUND NO. 1 & 3 RAISED BY THE REVENUE WERE DISMISS ED. REGARDING GROUND NO. 2 THE HONBLE BENCH CONSIDERE D IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. C IT(A)-VII ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 3 AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE AFRESH AND PASSING A SPEAKING ORDER AS THE EARLIER ORDER P ASSED WAS A CRYPTIC ORDER WHEREIN IT WAS NOT EXPLAINED AS TO WH ICH SPECIFIC PRODUCTS ARE MANUFACTURED BY THE ASSESSEE OR WHAT A RE THE INGREDIENTS USED THEREIN OR WHAT IS THE MANUFACTURI NG PROCESS INVOLVED AND HOW THE ASSESSEE FULFILLS THE CONDITIO NS STIPULATED UNDER SEC. 32(1)(IIA) OF THE ACT. 3.1. THUS THE ISSUE OF ROYALTY I.E. GROUND NO. 2 OF THE REVENUES APPEAL STANDS CONCLUDED IN ASSESSEES FAVOUR. 3.2. THE ISSUE OF ADDITIONAL DEPRECIATION AFTER SET TING ASIDE WAS REDECIDED BY CIT(A) HOLDING THAT THE ASSESSEE WAS INTO MANUFA CTURE AND PRODUCTION OF ARTICLE OR THING IN THE IMPUGNED ASSESSMENT YEAR. W HILE PASSING THE ORDER THE CIT(A) HAS RELIED ON THE ORDER OF HIS PREDECES SORS. THUS THE ISSUE OF ROYALTY STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE ITAT. 3.3. APROPOS THE ADDITIONAL DEPRECIATION LD. COUNSE L CONTENDS THAT PIZZAS PASTAS MANUFACTURED BY THE ASSESSEE ARE DIFFERENT C OMMERCIAL COMMODITIES THAN THE RAW-MATERIAL USED THEREIN LIKE FLOUR OIL YEAST BABY CORN VARIOUS VEGETABLES/ NON-VEGETABLES SPICES ETC. IN THIS BEH ALF THE ASSESSEE USES FRESH VEGETABLES WHICH ARE CUT DOWN TO PARTICULAR SIZES A FTER SANITIZING. ALL THE VEGETABLES ARE KEPT IN A CHILLER (1-4 DEGREE CELSIU S). AFTER OPENING THE CANNED PRODUCTS THESE ARE KEPT IN THE CHILLER. FRO ZEN PRODUCTS ON THE OTHER HAND INVOLVES A 3 DAYS THAWING PROCESS. THE FROZEN TOPPING IS KEPT IN DEEP FREEZER AT THE SAME TEMPERATURE. FROM HERE PACKETS ARE TAKEN FOR THAWING IN CHILLER (1-4 DEGREE CELSIUS). THE TOPPINGS GET READ Y TO USE IN 3 DAYS. THE SHELF LIFE OF ALL THE TOPPINGS IS ONLY 4 HOURS. 3.4. ON RECEIVING ORDERS FROM THE CUSTOMER PIZZAS ARE PREPARED USING DESIRED TOPPINGS AND PUT IN OVENS. ALL VEG AND NON- VEG TOPPINGS SAUCES AND ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 4 CHEESE ARE KEPT IN DIFFERENT BINS AT A DEFINED TEMP ERATURE AND ARE SERVED ACCORDING TO ORDER. 3.5. LIKEWISE FOR MANUFACTURING OF PASTA A GENERIC TERM FOR ITALIAN VARIANTS OF NOODLES FOOD MADE FROM DOUGH OF FLOUR WATER AND/ OR EGGS THAT IS BOILED. IT IS A TRADITIONAL ITALIAN PREPARATION MADE UP OF WATER OIL AND FLOUR AND TAKES THE NAME OF ITS SHAPE. THE ASSESSEE COMPA NY MANUFACTURES TO TYPES OF PASTAS; OVEN BAKED AND SAUTED PASTAS. 3.6. LD. COUNSEL RELIED ON FINANCE (NO. 2) ACT 200 9 BROUGHT ON STATUTE W.E.F. 1-4-2009 A DEFINITION OF THE TERM MANUFACT URING BY INSERTING A NEW CLAUSE (29 BA) TO SECTION 2 AS UNDER: (29BA) MANUFACTURE WITH ITS GRAMMATICAL VARIATI ONS MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR A RTICLE OR THING - (A) RESULTING IN TRANSPORTATION OF THE OBJECT OR AR TICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME CHARACTER AND USE; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSIT ION OR INTEGRAL STRUCTURE. THE ABOVE AMENDMENT IS CLARIFICATORY IN NATURE. IN VIEW OF THE ABOVE DEFINITION THE FOOD ITEMS PRODUCED BY THE AP PELLANT GET COVERED IN SUB-CLAUSE (A) OF THE CLAUSE (29BA) OF S ECTION 2. ACCORDINGLY THE VARIOUS CATERING ACTIVITIES CARRIE D OUT BY THE APPELLANT INCLUDING MAKING OF PIZZA PASTA AND OTHE R FOOD ITEMS ARE HELD TO BE MANUFACTURING IN NATURE. 8.8. FROM THE MANUFACTURING PROCESS STARTED ABOVE O NE CAN EASILY CONCLUDE THAT THE PROCESS OF MAKING PIZZA AN D PASTA BY THE APPELLANT COMPANY IS A STEP-WISE SYSTEMATIC PRO CESS WHICH IS STRICTLY IN ACCORDANCE WITH THE SPECIFICATION OF THE PROCESSES REQUIRED BY THE LICENSOR AND HENCE THE APPELLANT IS ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION ACCORDINGLY. ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 5 3.7. RELIANCE IS PLACED ON ITAT AHMEDABAD BENCH IN THE CASE OF DEEPKIRAN FOODS (P) LTD. VS. ACIT 155 TTJ 57 HOLDI NG THAT THE ASSESSEE S BUSINESS OF PREPARING FOOD ITEMS LIKE PRATHA SAMOS A DHOKLA AMOUNT TO MANUFACTURE AND INCOME WAS ELIGIBLE FOR DEDUCTION U/S 10B. THE ITAT BESIDES RELYING ON CATENA OF JUDGMENTS DISTINGUISHE D THE APPLICABILITY OF RATIO OF DECISION IN THE CASE OF INDIAN HOTELS LTD. VS. ITO & OTHERS 112 TAXMAN 48 (SC) BY FOLLOWING OBSERVATIONS: 13. ON THE BASIS OF MATERIAL ON RECORD WE FIND TH AT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10B IN THE PAST ASSESSMENT YEARS AND THE CLAIM OF THE ASSESSEE WAS ALLOWED WHI LE FRAMING THE ASSESSMENTS FRAMED U/S 143(3) AND THE ASSESSMEN TS HAVE ATTAINED FINALITY. IT WAS SUBMITTED THAT THERE WAS NO CHANGE IN THE FACTS IN THE YEAR UNDER APPEAL AS COMPARED TO T HE FACTS OF EARLIER YEARS. THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. D.R. BY BRINGING ANY CONTRARY MATERIAL ON RECORD. WE FURTHER FIND THAT THE HONBLE J.K. HIGH COURT IN THE CASE OF PANKAJ JAIN (SUPRA) AFTER DISTINGUISHING THE HONBL E APEX COURT IN THE CASE OF INDIAN HOTELS (SUPRA) HAS HELD THE MANUFACTURE OF BREAD TO BE A MANUFACTURING ACTIVITY . THUS IN VIEW OF THE TOTALITY OF FACTS OF THE CASE WE HOLD THAT THE ISSUE BEFORE US IS COVERED WITH THE DECISION OF HON BLE J.K. HIGH COURT IN THE CASE OF PANKAJ JAIN PROP AAGAN FO OD INDUSTRIES (SUPRA) IN FAVOUR OF THE ASSESSEE AND WE ARE OF THE VIEW THAT THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING AND THE ACTIVITY OF PRODUCTION OF THE FOODSTUFF IS A MANUFA CTURING ACTIVITY (EXCEPT FOR THE ITEMS OUTSOURCED FROM OTHE R PARTIES). 3.8. FURTHER RELIANCE IS PLACED ON THE RATIO OF DEC ISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M.R. GOPAL 58 ITR 598 (MAD.) HOLDING AS UNDER: MANUFACTURE MEANS: ANYTHING MADE FROM RAW MATERI ALS BY THE HAND BY MACHINERY OR BY ART AS CLOTHES IRON UTENSILS ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 6 SHOES MACHINERY ETC.; A MANUAL OCCUPATION OR TRADE TO PRODUCE BY LABOUR ESPECIALLY NOW ACCORDING TO AN ORGANIZED PLAN AND WITH DIVISION OF LABOUR AND USUALLY WITH MACHINERY . IT SEEMS UNARGUABLE HAVING REGARD TO THE MEANING OF MANUFACT URE THAT THE PROCESS EMPLOYED IN CONVERTING BOULDERS INTO SM ALL CHIPS OF STONES WITH THE AID OF LABOUR AND MACHINERY IS NOT A MANUFACTURING PROCESS. SURELY LABOUR IS EMPLOYED AN D SOMETHING IS CONVERTED INTO SOMETHING ELSE A PRODU CT WHICH IS OF VALUE AND IS USED AND IN THAT SENSE THE CHIPS A RE A NEW PRODUCTION AS A RESULT OF A MANUFACTURING PROCESS. 3.9. THUS THE ASSESSEES ACTIVITY IS OF MANUFACTUR E AND PRODUCTION OF ARTICLE OR THING AND THEREFORE ADDITIONAL DEPRECIAT ION IS ALLOWABLE. 4. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. APROPOS THE ISSUE OF ROYALTY THE ITAT IN EARLIER YEARS HAS DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. RES PECTFULLY FOLLOWING THE SAME WE DISMISS GROUND NO. 1 RAISED BY THE REVENUE . 5.1. APROPOS GROUND NO. 1 I.E. ADDITIONAL DEPRECIA TION IN OUR CONSIDERED OPINION RELEVANT ASPECT OF THE ISSUE STANDS DECIDED BY THE COORDINATE BENCH OF THE ITAT IN THE CASE OF DEEPKIRAN FOODS (P) LT D. (SUPRA) IN WHICH THE MANUFACTURING OF EATABLES LIKE PARATHA SAMOSA DHO KLA HAVE BEEN HELD TO BE A MANUFACTURING PROCESS. IN THIS JUDGMENT THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF INDIAN HOTELS LTD. (S UPRA) RELIED UPON BY THE ASSESSING OFFICER HAS BEEN HAS BEEN CONSIDERED AND HELD TO BE ON DISTINGUISHABLE FACTS. THE ASSESSING OFFICER HAS HE LD THAT EATABLES RETAINED THE CHARACTERISTICS OF ORIGINAL INGREDIENTS. THIS ASSUM PTION HAS BEEN CATEGORICAL DISLODGED BY ITAT AHMEDABAD BENCH BY HOLDING THAT T HE RAW MATERIAL BEING IN THE FORM OF WHEAT POTATO ETC. ARE TOTALLY DIFFERENT WHICH IS A NEW COMMERCIAL COMMODITY CALLED BY VARIOUS NAMES AND DI STINCTLY SOLD IN THE ITA 4323/DEL/2012 ACIT VS. M/S GAMMA PIZZAKRAFT (P) LTD. 7 MARKET. RESPECTFULLY FOLLOWING THE SAME WE HOLD THA T THE ASSESSEE IS ENGAGED IN THE ACTIVITIES OF PRODUCTION AND MANUFAC TURE OF ARTICLE OR THING AND IS ELIGIBLE FOR ADDITIONAL DEPRECIATION. THIS G ROUND OF THE REVENUE IS DISMISSED. 6. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30-4-2014. SD/- SD/- ( D.K. SRIVASTAVA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-04-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR