MULTIPACK SYSTEMS P. LTD, MUMBAI v. ADDL CIT RG 2(2), MUMBAI

ITA 4453/MUM/2010 | 2006-2007
Pronouncement Date: 30-09-2011 | Result: Allowed

Appeal Details

RSA Number 445319914 RSA 2010
Assessee PAN AAACN3013E
Bench Mumbai
Appeal Number ITA 4453/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant MULTIPACK SYSTEMS P. LTD, MUMBAI
Respondent ADDL CIT RG 2(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 30-09-2011
Date Of Final Hearing 19-09-2011
Next Hearing Date 19-09-2011
Assessment Year 2006-2007
Appeal Filed On 31-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.S. SYAL A.M. AND SHRI V. DURGA RAO J.M. ITA NOS. 4453 & 4454/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S MULTIPACK SYSTEMS PVT. LTD. APPELLA NT ROHIT CHAMBERS JANMABHOOMI MARG FORT MUMBAI 400 001. (PAN AAACN3013E) VS. ADDL. COMMISSIONER OF INCOME-TAX RESPONDENT RANGE 2(2) ROOM NO. 548 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. APPELLANT BY : MS. AARTI VISSANJI RESPONDENT BY : MR. V.V. SHASTRI DATE OF HEARING : 19/09/2011 DATE OF PRONOUNCEMENT : ORDER PER V. DURGA RAO J.M.: BOTH THESE APPEALS PERTAIN TO ONE ASSESSEE ARE DIR ECTED AGAINST THE ORDER OF CIT(A)- 5 MUMBAI FOR THE ASSESSMENT YEAR 2006-07. ITA NO. 4453/MUM/10 2. IN THIS APPEAL THE ASESSSEE RAISED THE FOLLOWIN G GROUND OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION MADE BY THE AO OF RS. 19 89 893/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT AND RS. 17 09 547/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT ON SERVICE TAX AND DIRECTING THE AO TO RECOMPUTED THE PROFIT AFTER MAKING ADJUSTMENTS WITH REFERENCE TO OPENING STOCK CLOSING STOCK PURCHASES AND SALES. YOUR APPELLANTS SUBMIT THAT THE SAID AMOUNTS ARE NOT THE INCOME OF YOUR APPELLANTS AND T HEREFORE THE ITA NOS. 4453 & 4454 /MUM/2010 M/S MULTIPACK SYSTEMS PVT. LTD. 2 SAME OUGHT NOT TO BE ADDED TO YOUR APPELLANTS INCO ME AND THAT THE RECOMPUTATION OF PROFIT IS ALSO NOT REQUIRED TO BE DONE. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT YOUR A PPELLANTS FOR THE PURPOSE OF VALUATION OF INVENTORIES HAVE ADOPT ED THE INCLUSIVE OF VALUATION PRESCRIBED U/S 145A OF THE A CT AND NO SUCH ADJUSTMENTS WITH REFERENCE TO OPENING STOCK CLOSIN G STOCK PURCHASES AND SALES ARE REQUIRED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO NOTICED THAT THE ASSESSEE HAD UNUTILIZED CENVAT CREDIT OF RS. 31 71 944/- ON ACCOUNT OF RAW MATERIAL AND RS. 28 41 773/- ON ACCO UNT OF SERVICE TAX WHICH HAS NOT BEEN OFFERED FOR TAXATION. BEFOR E THE AO THE ASSESSEE EXPLAINED THAT IT WAS FOLLOWING INCLUSIVE METHOD OF VALUATION OF STOCK AND HAD VALUED THE STOCK INCLUSIVE OF EXCI SE DUTY AND SALES TAX AND THEREFORE THERE WAS NO NEED TO INCLUDE MO DVAT EXCISE DUTY AND SALES TAX TO THE VALUE OF CLOSING STOCK. HOWEVE R THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT CEN VAT CREDIT WAS IN THE NATURE OF INCOME WHICH BECOMES DUE TO THE ASSE SSEE ON THE DATE WHEN INPUT WAS ENTERED IN THE FACTORY PREMISES. THE ONUS FOR WORKING OUT THE CENVAT CREDIT WAS ALSO CAST ON THE ASSESSEE WHICH CLEARLY INDICATED THAT WHATEVER THE CREDIT DETERMINED BY TH E ASSESSEE AS PER THE EXCISE RULES AND ENTERED IN THE EXCISE RECORDS THE CREDIT BECAME FINAL AND THE INCOME IN THE FORM OF CREDIT IS ACCRU ED TO THE ASSESSEE ON THE DATE OF RECEIPT OF THE INPUT SERVICES OR PRO DUCT. ACCORDINGLY THE AO MADE ADDITION OF RS. 19 89 893/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT AND RS. 17 09 547/- ON ACCOUNT OF UNU TILIZED CENVAT CREDIT ON SERVICE TAX. AGGRIEVED THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON THE DECISIONS OF THE ITAT INCLUDING THE DECISION OF JB CHEMICALS AND PHARMACEUTICALS LTD. [2006] 10 SOT 36 2 (MUM) DIRECTED THE AO TO RECOMPUTE THE PROFITS AFTER MAKI NG ADJUSTMENTS WITH REFERENCE TO OPENING STOCK CLOSING STOCK PUR CHASES AND SALES. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NOS. 4453 & 4454 /MUM/2010 M/S MULTIPACK SYSTEMS PVT. LTD. 3 4. BEFORE US THE LEARNED REPRESENTATIVES OF THE P ARTIES AGREED THAT THIS ISSUE IS COVERED BY THE JUDGEMENT OF THE HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALLUMINIUM LTD. (200 8) 297 ITR 77 (DEL.) AND CIT VS. MAHALAXMI GLASS WORKS P. LTD. [ 2009] 318 ITR 116 (BOM.). SECTION 145A OF THE ACT MANDATES THAT ADJUS TMENTS ON ACCOUNT OF TAX CESS OR FEE FOR THE PURPOSE OF VALU ATION HAS TO BE DONE ON PURCHASE AND SALE OF GOODS AND INVENTORY. THE H ON'BLE DELHI HIGH COURT IN CIT VS. MAHAVIR ALLUMINIUM LTD. (2008) 297 ITR 77 (DEL.) HELD AS UNDER:- HELD WHENEVER ANY ADJUSTMENT IS MADE IN THE V ALUATION OF INVENTORY THIS WILL AFFECT BOTH THE OPENING AS WELL AS THE CLOSING STOCK. IF ANY ADJUSTMENT WAS REQUIRED TO B E MADE BY A STATUTE EFFECT SHOULD BE GIVEN TO IT IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX P URPOSES. 5. RESPECTFULLY FOLLOWING THE ABOVEMENTIONED DECIS ION WE SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE A ND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECI DE THE ISSUE UNDER CONSIDERATION FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MAHAVIR ALUMINIUM LTD. (SUPRA). 6. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 4454/MUM/10 7. THE GROUNDS RAISED IN THIS APPEAL ARE DIRECTED A GAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF TH E AO I) IN TREATING RS. 29 02 268/- OUT OF THE TOTAL TRAVELING EXPENSES II) IN TREATING RS. 76 238/- OUT OF THE TELEPHONE EXPENSES AS LIABLE T O FRINGE BENEFIT ITA NOS. 4453 & 4454 /MUM/2010 M/S MULTIPACK SYSTEMS PVT. LTD. 4 TAX AND III) UPHOLDING THE ACTION OF THE AO IN LEV YING INTEREST U/S 11WJ AT RS. 69 931/-. 8. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAD NOT INCLUDED RS. 10 33 074/- INCURRED ON TRAVEL FOR THE SUPPLIERS RS. 48 697/- INCURRED ON FOREIGN TRAVEL OF SUPPLIERS AN D RS. 18 20 497/- BEING TRAVEL EXPENSES REIMBURSED TO THE PROFESSIONA LS IN THE VALUE OF FRINGE BENEFITS U/S 115WB(2)(F) OF THE ACT. IN RESP ONSE TO THE QUERY RAISED BY THE AO THE ASESSSEE EXPLAINED THAT THE A MOUNT OF RS. 10 33 074/- RELATING TO TRAVELING EXPENSES INCURRED TOWARDS SUPPLIERS AND NOT TO EMPLOYEES OF THE ASSESSEE. SAME EXPLANAT ION WAS OFFERED TO THE AMOUNT OF RS. 48 697/- INCURRED ON FOREIGN TRAV EL OF SUPPLIERS AND RS. 18 20 497/- ON ACCOUNT OF TRAVEL EXPENSES REIMB URSED TO THE PROFESSIONALS. THEREFORE THE ASSESSEE CONTENDED TH AT THE FBT BENEFIT HAS NO APPLICATION TO THE CASE OF THE ASSESSEE. HOW EVER THE AO REJECTING THE EXPLANATION OFFERED BY THE ASSESSEE INVOKED SUB-SECTION (2) OF SECTION 115WB OF THE ACT AND VALUE OF THE F BT @20% WORKED OUT ON THE SAID EXPENDITURE OF RS. 29 02 268/- (1033074+48697+1820497) TO RS. 5 80 454/-. ON APPE AL THE CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US THE LEARNED COUNSEL FOR THE ASESSSEE SUBMITTED THAT SECTION 115WB(2)(F) ONLY APPLIES WHERE THE EMPLOYER PAID THE AMOUNTS TO EMPLOYEES. SHE POINTED OUT THAT IN THE C ASE UNDER CONSIDERATION PAYMENT WAS MADE TO THE OUTSIDERS W HO ARE SUPPLIERS THEREFORE THE ABOVE SECTION IS NOT APPLICABLE TO T HE CASE OF THE ASESSSEE. 10. ON THE OTHER HAND THE LEARNED DR HAS PLACED RE LIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES. ITA NOS. 4453 & 4454 /MUM/2010 M/S MULTIPACK SYSTEMS PVT. LTD. 5 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. WE REFER TO THE SECTION 115WB(2) (F) WHICH READS AS UNDER:- 115WB(2)THE FRINGE BENEFITS SHALL BE DEEMED TO HAV E BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF THE EMPLOYER HAS IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT S UCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME PROFITS OR GAINS) IN CURRED ANY EXPENSE ON OR MADE ANY PAYMENT FOR THE FOLLOWING PURPOSES NAMELY: A..B..C..DEF. CONVEYANCE. 12. ON PLAIN READING OF THE ABOVE SECTION IT IS CL EAR THAT THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY T HE EMPLOYER TO HIS EMPLOYEES. IN THE CASE UNDER CONSIDERATION THE ASSE SSEE HAS INCURRED THE EXPENDITURE TOWARDS OUTSIDERS WHO ARE SUPPLIERS THEREFORE THE ABOVE SECTION IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION MADE BY THE AO IN THIS REGARD. 13. AS REGARDS THE ADDITION OF RS. 76 238/- OUT OF THE TOTAL TELEPHONE EXPENSES AS LIABLE TO FRINGE BENEFIT TAX THE SAME IS HEREBY DELETED BY FOLLOWING THE CONCLUSIONS DRAWN AS ABOVE . 14. AS REGARDS LEVY OF INTEREST U/S 115WJ AT RS. 69 931/- IT IS OBSERVED THAT SINCE THE ADDITIONS MADE U/S 115WB(2) HAVE BEEN DELETED LEVY OF INTEREST U/S 115WJ DOES NOT SURVIV E THEREFORE THE LEVY OF INTEREST IS HEREBY CANCELLED. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NOS. 4453 & 4454 /MUM/2010 M/S MULTIPACK SYSTEMS PVT. LTD. 6 16. TO SUM UP ITA NO. 4453/MUM/10 IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES AND ITA NO. 4454/MUM/10 IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER 2011. SD/- SD/- (R.S. SYAL) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 30 TH SEPTEMBER 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE H BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.