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Income Tax Appellate Tribunal, “C”BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Date of Hearing – 14.05.2019 Date of Order – 09.08.2019 2 Parle Products Ltd. O R D E R PER SAKTIJIT DEY. J.M.
Captioned cross appeals arise out of order dated 29th December 2017, passed by the learned Commissioner of Income Tax (Appeals)– 17, Mumbai, pertaining to the assessment year 1997–98.
./2018 Revenue’s Appeal
In total, the Revenue has raised seven grounds of appeal. Grounds no.6 and 7 being general in nature, do not require adjudication.
3. In ground no.1, the Revenue has challenged the deletion of addition of ` 8,78,18,200, made by the Assessing Officer on account of suppression of production of biscuits in Mumbai Unit, resulting in suppression of sales.
Brief facts are, the assessee company is engaged in the business of manufacturing different varieties of biscuits and confectionaries. For the purpose of its manufacturing activities, it has set–up a unit at Mumbai. That besides, the assessee also gets the products manufactured on contract basis through a number of Contract Manufacturing Units(CMUs) spread across the Country. For the assessment year under dispute, the assessee filed its return of income
3 Parle Products Ltd. on 28th November 1997, declaring total income of ` 35,32,52,912. During the assessment proceedings, the Assessing Officer after calling for various information and materials from the assessee and verifying them, found that the normal yield of biscuits as per the standard formula is 92.59%. Further, assessee’s CMUs have given average yield of 90.26%. Whereas, the assessee has shown the yield of biscuits at its own unit at Mumbai @ 82.92%. Thus, the Assessing Officer was of the view that the yield shown by the assessee is comparatively lower than the average yield of CMUs. Thus, he concluded that the assessee has suppressed the production of biscuits which resulted in suppression of sales. Accordingly, considering the average yield of CMUs @ 90.26% as the benchmark, the Assessing Officer worked out the suppression of sales due to suppression in production of biscuits at Mumbai Unit at ` 8,78,18,200, and added back to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.
Noticing that identical addition made by the Assessing Officer in assessee’s own case in assessment year 1996–97 was deleted by the Tribunal, learned Commissioner (Appeals) followed the same and deleted the addition made by the Assessing Officer in the impugned assessment year.
4 Parle Products Ltd.
The learned Departmental Representative, though, agreed that identical issue has been decided by the Tribunal in the assessment year 1996–97, however, he relied upon the observations of the Assessing Officer.
The learned Authorised Representative submitted, not only identical issue was decided in favour of the assessee by the Tribunal in assessment year 1996–97, but following the said decision, the Tribunal deleted similar disallowance made in the assessment year 1998–99 and other assessment years. In this context, he drew our attention to the orders passed by the Tribunal for the assessment years 1996–97 and 1998–99 to 2010–11.
We have considered rival submissions and perused the material on record. Undisputedly, the reasoning and factual basis on which the Assessing Officer has made the disputed addition is identical to the reasoning and factual basis on which similar addition was made in the Assessment Year 1996–97. While deciding the issue in and 3806/Mum./2012, dated 29th November 2007, the Tribunal deleted the addition with the following observations:–
“51. We have heard rival contentions and perused the material available on record. On a perusal of the order of the Departmental Authorities as well as factual aspect of the issue, it is very much clear that the issue in dispute is purely a factual one and has to be decided after
5 Parle Products Ltd. considering the facts brought on record. As could be seen, the Assessing Officer inferred suppression of sales by the assessee primarily taking into account the percentage of yield of biscuits of the assessee compared to the percentage of yield of the contract manufacturing units. The allegation of the Assessing Officer is, as per the tax audit report the percentage of yield works out to 92.55%, whereas, as per the statement and revised statement showing consumption of different raw material and manufacture furnished by the assessee, the yield works out to 84%. He has also referred to the information obtained from contract manufacturing units to conclude that the average yield of contract manufacturing units work out to 91.55%. In this context, the Assessing Officer has also referred to the standard formula applicable and the physical enquiry conducted by him at the factory premises, wherein, it was found that the manufacturing of products at Mumbai unit is through sophisticated machinery. In the course of assessment proceedings, the assessee has explained comparative lesser yield qua contract manufacturing units due to the following reasons:– i) Variety of biscuits manufactured at Mumbai unit compared to little variety of biscuits manufactured in contract manufacturing units; ii) In case of contract manufacturing units, due to similar size of production and type of machinery used biscuit fall on the belt and tray which are manually picked up and sorted and identified for re–use or waste. Whereas, in case of Mumbai unit production being faster it is difficult to have such control and also costs for employing labour to pick and sort out biscuit fallen on the belt and tray is much higher; iii) Due to different products lines at Mumbai unit, the average give away is much higher as compared to contract manufacturing units; iv) Mumbai unit has a much higher production capacity as compared to contract manufacturing
6 Parle Products Ltd. units and due to sheer volume wastages are higher in Mumbai unit; v) Since, the contract manufacturing units are receiving processing charges which in turn is directly proportionate to production they exercise a better control over the labour, machine and the processing methods; vi) Mumbai unit has a trade union and employees being of permanent nature there is always labour problem. Whereas, contract manufacturing units have small work force, hence, were able to supervise efficiently; vii) The assessee being the mother unit effort is put on new formulas and research and development; viii) Part of biscuit produced are consumed by the employees, therefore, cannot be reflected in the accounts; and ix) Waste before production takes place on account of wheat flour remaining in jute bags, grinding loss sweepage, etc., compared to the loss suffered by contract manufacturing units.
Notably, the learned Commissioner (Appeals) has found some of the reasons shown for lesser yield at Mumbai unit acceptable. As far as the discrepancies pointed out by the Assessing Officer with reference to the audited accounts and the statements of consumption of raw material filed before him, it is noticed that in the audited accounts while furnishing the quantitative details of principal items of raw materials and finished products, there is no mention of the percentage of yield. Therefore, allegation of the Assessing Officer that as per the audit report, the assessee has shown yield of 92.55% is factually incorrect. This is evident from Annexure–5 of the audit report copy of which is at Page–211 of the paper book. As far as the discrepancies pointed out in the original statement of consumption of raw materials and the revised statement furnished during the assessment
7 Parle Products Ltd. proceedings, it is a fact that the quantity of coco vita oil has been shown at 1059 MTs instead of 1860 MTs shown in the audit report. However, in the revised statement, the quantity of coco vita oil has been shown at the correct figure of 1859 MTs. Therefore, the assessee’s explanation that the figure of 1059 MTs shown in the original statement was due to a mistake is believable. As far as the allegation of the Assessing Officer that the raw material “others” were not shown in the audit report, we are of the view that non–mentioning of the said item in the Annexure to the audit report may be for the reason that as per Form no.3CD, only primary raw materials are required to be shown. Therefore, non–mentioning of raw material “others” in the Annexure to the audit report cannot be considered to be very serious lapse so as to infer suppression of sales and unreliability of books of account. It is a matter of record that the goods produced by the assessee are excisable goods and subject to scrutiny and regulatory measures of Central Excise authorities. It is also a fact on record that the assessee has maintained all Central Excise registers with regard to consumption of raw materials, production of biscuits and confectionary which have been verified by the Central Excise authorities periodically and the authenticity of the entries made in the said registers have not been questioned by them. It is also a fact on record that the Central Excise registers were produced before the Assessing Officer as well as the learned Commissioner (Appeals).
There is no allegation by the Departmental Authorities that the consumption of raw materials and production of finished products as recorded in the Excise registers were doubted by the Central Excise authorities. It is also a fact on record that the Assessing Officer has not doubted the purchases made by the assessee. It is also a fact that the assessee has maintained all books of account as required under the Income–tax Act, 1961, Companies Act, 1965 and Central Excise norms. Further, the accounts maintained by the assessee were subject to statutory audit. No specific defect or discrepancy in the books of account maintained by the assessee has been pointed out by the Assessing Officer. The alleged difference in yield was worked out on the basis of the statement and revised statement of quantitative details of consumption of raw
8 Parle Products Ltd. materials and production filed by the assessee in the course of assessment proceedings as well as the information obtained from contract manufacturing units. Further, the Assessing Officer has worked out the yield by applying the standard formula as mentioned by him in the assessment order. It is relevant to observe, in the impugned assessment year, the dispute is with regard to the manufacture of finished products in assessee’s own unit at Mumbai. In the preceding assessment year, while dealing with similar addition made by the Assessing Officer, the Tribunal in assessee’s own case in ITA no.5320/Mum./2006 and other dated 31st August 2010, held that no addition by applying the standard formula can be made. Facts are no different in the impugned assessment year as well. The Assessing Officer has not found a single instance of sale made by the assessee outside the books. At least, no adverse material to indicate out of book sales has been brought on record by the Assessing Officer. In these circumstances, making addition on estimate basis by rejecting the books of account in the absence of any adverse material brought on record cannot stand legal scrutiny. It is also a fact on record that as per the information obtained from the contract manufacturing units, the yield varies between 87% to 100%. Therefore, average yield cannot be standardized to a particular percentage. Moreover, the yield of Mumbai unit for preceding assessment years has been shown by the assessee as under:–
A.Y. Percentage 1992–93 83.11% 1993–94 83.32% 1994–95 82.27% 1995–96 81.65%
Thus, compared to the yield of Mumbai unit in the preceding assessment years as noted above, the assessee has shown a higher yield for the Mumbai unit in the impugned assessment year. Therefore, on over all consideration of facts and circumstances of the case, we are of the considered opinion that rejection of books of account and addition made on estimate basis alleging
9 Parle Products Ltd. suppression of sale is not in accordance with law. Therefore, even a part of addition made by the Assessing Officer cannot be sustained. Accordingly, we delete the addition made by the Assessing Officer fully. Ground no.8 of the Department is dismissed and grounds no.4 & 5 raised by the assessee are allowed.”
Following the aforesaid decision, the Tribunal again deleted similar addition made by the Assessing Officer in the assessment year 1998–99 and other years while deciding the appeals in Mum./2004 and others, dated 22nd October 2018. Facts being identical, respectfully following the aforesaid decisions of the Tribunal, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed.
In ground no.2, the Revenue has challenged the deletion of addition of ` 6.33 crore on account of suppression of production of confectionary in Mumbai Unit resulting in suppression of sales.
Facts relating to this issue are identical to the facts on which similar disallowance was made by the Assessing Officer in respect of production and sale of biscuits at Mumbai Unit which was the subject matter of dispute in ground no.1, herein before. The Assessing Officer noticing that the average yield of confectionary in CMUs is 98.90% inferred that the assessee has suppressed production resulting in suppression of sales. Accordingly, he worked out the quantum of 10 Parle Products Ltd.
suppressed sales at ` 6.33 crore and added back to the income of the assessee. While deciding assessee’s appeal, learned Commissioner (Appeals) followed the decision of the Tribunal in assessee’s own case for the assessment year 1996–97 and deleted the addition made by the Assessing Officer.
Though, learned Departmental Representative agreed that the issue has been decided in favour of the assessee by the Tribunal in assessment year 1996–97, however, he relied upon the observations of the Assessing Officer.
The learned Authorised Representative submitted, the issue has been decided in favour of the assessee in assessment years 1996–97 and 1998–99. Thus, he submitted, there is no need to interfere with the decision of learned Commissioner (Appeals).
We have considered rival submissions and perused the material on record. Undisputedly, identical issue came up for consideration before the Tribunal in assessment year 1996–97 and while deciding the issue in the order cited supra, the Tribunal deleted the addition made by the Assessing Officer. Since, the relevant observations of the Tribunal has already been reproduced herein above, there is no need to reproduce them again. Pertinently, while deciding identical issue in the assessment year 1998–99 also, the Tribunal following its earlier
11 Parle Products Ltd. decision deleted the addition. Facts being identical, respectfully following the decisions of the Tribunal, as referred to above, we uphold the order of learned Commissioner (Appeals) on the issue. Ground raised is dismissed.
In ground no.3, the Revenue has challenged the deletion of addition made on account of suppression of production resulting in suppression of sales of biscuits and confectionery manufactured in CMUs.
In course of assessment proceedings, on verifying the details available on record the Assessing Officer concluded that the assessee has suppressed the production of biscuits and confectionery in CMUs resulting in suppressed sales. Accordingly, he added ` 25,42,000.
The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assessee in assessment year 1996–97.However, he submitted, learned Commissioner (Appeals) should have properly verified the facts of the impugned assessment year before deleting the addition.
The learned Authorised Representative supporting the decision of learned Commissioner (Appeals) submitted, the issue has been 12 Parle Products Ltd.
decided in favour of the assessee by the Tribunal in assessment year 1996–97.
We have considered rival submissions and perused the material on record. It is noticed, identical issue came up for consideration before the Tribunal in the assessment year 1996–97. While deciding the issue in the order cited supra, the Tribunal deleted the addition made by the Assessing Officer having factually found that there is no suppression of production by the assessee. Facts being identical, respectfully following the aforesaid decision of the Tribunal, we uphold the order of learned Commissioner (Appeals) on the issue. Ground raised is dismissed.
In ground no.4, the Revenue has challenged the disallowance of depreciation of ` 24,42,446, on plant and machinery.
On a perusal of the facts on record, it is noticed that identical claim made by the assessee was disallowed by the Assessing Officer in assessment years 1996–97 and 1998–99 to 2010–11. While deciding the issue in the orders cited supra, the Tribunal has allowed assessee’s claim. Undisputedly, learned Commissioner (Appeals) has allowed the claim of deprecation in consonance with the order passed by the tribunal in assessment year 1996–97. That being the case, we do not 13 Parle Products Ltd.
find any infirmity in the decision of learned Commissioner (Appeals) on the issue. Accordingly, ground raised is dismissed.
In ground no.5, the Revenue has challenged the deletion of addition of ` 5,09,97,000, by treating the amount received towards trademark, non–compete fee, etc., as revenue receipts.
Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee had received more than ` 10 crore for selling certain brands such as Prudent Tooth Brush, Flash, Prudent, Forward Angle, etc., and also some assets like land, building, plant and machinery to Gillette Diversified Operations Pvt. Ltd. (GDOPL). Whereas, the assessee has not offered the amount received as income. On being called upon by the Assessing Officer to explain the reason for not doing so, it was submitted that the amount received is towards trademark and non–competence fee, hence, in the nature of capital receipt, therefore, no taxable. The Assessing Officer, after considering the submissions of the assessee in the context of facts and material on record including the trademark users’ agreement, concluded that the amount received towards sale of trademark and non–compete fee is nothing but towards goodwill of the business. In this context, he relied upon certain judicial precedents. Thus, ultimately, he concluded that in the garb of trademark, non–compete
14 Parle Products Ltd. fee, etc., the assessee has actually transferred the goodwill of the business. Thus, referring to the provisions of section 45 r/w section 55(2) of the Act, the Assessing Officer treated the amount of ` 5,09,97,000, as capital gain and added back to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.
After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) noticed that similar addition was made in case of another subsidiary of the assessee viz. Parle Biscuits Pvt. Ltd., towards receipt of non– compete fee from GDOPL, under similar agreement. While deciding the issue in the appeal filed by the said company, the first appellate authority deleted the addition by holding that amount received for trademark/non–compete fee as capital receipt, hence, not taxable. Further, he observed, the aforesaid decision of the first appellate authority in case of the subsidiary was accepted by the Department by not filing any appeal before the Tribunal. Accordingly, he deleted the addition made by the Assessing Officer.
The learned Departmental Representative extensively referring to the observations made by the Assessing Officer in the assessment order submitted, the amount received by the assessee, though, was 15 Parle Products Ltd.
claimed to be towards trademark and non–compete fee, however, in reality, it was towards goodwill of the business since the entire business relating to Oral Care was transferred by the assessee. Therefore, when nothing relating to the said business remains with the assessee, the payment received has to be attributed towards goodwill.
The learned Departmental Representative submitted, as per section 55(2)(a) of the Act, if the capital asset transferred is goodwill and if the cost of acquisition is not ascertainable, it could be taken as nil. Therefore, the decision of the Hon'ble Supreme Court in B.C. Shrinivasa Setty (128 ITR 294), would not apply. In support of his contention, learned Departmental Representative relied upon the following decisions:–
i) GuzdarKajora Coal Mines Ltd. v/s cit, [2972] 85 ITR 599 (SC); ii) S.C. Cambatta& Co. Pvt. Ltd. v/s Commissioner of Excess Profits Tax, [1961] 41 ITR 500 (SC); and iii) Desu Venkata Subba Rao v/s WTO, [1983] 6 ITD 341 (Hyd.).
The learned Authorised Representative strongly relying upon the observations of learned Commissioner (Appeals) submitted, under identical agreements the assessee company along with its subsidiary Parle Biscuits Pvt. Ltd., transferred certain trademark used by them in respect of Oral Care and Oral Hygiene Products Business. In this 16 Parle Products Ltd.
regard, the assessee also received certain consideration towards non– compete fee. He submitted, in the assessment completed for the very same assessment year in case of Parle Biscuits Pvt. Ltd., the Assessing Officer treated the amount received towards trademark and non– compete fee as revenue receipt. However, learned Commissioner (Appeals) deleted the addition by accepting assessee’s claim that the amount received is capital in nature. He submitted, the aforesaid decision of the first appellate authority was accepted by the Department as they did not raise the issue in appeal filed before the Tribunal. Thus, he submitted, the Department cannot take a different view in case of the present assessee. Without prejudice, the learned Authorised Representative taking us through the agreement submitted, the terms of the agreement would make it clear that the amount in dispute was received by the assessee towards trademark and non–compete fee, hence, cannot be treated as goodwill. He submitted, since the assessee lost its source of income while transferring oral care business, by negative covenant, the amount received is a capital receipt, hence, not taxable. Further, he submitted, income from transfer of trademark and non–compete fee cannot be treated as goodwill as they are distinct and different. Contesting the observations of the Assessing Officer and the contention of the learned Departmental Representative that trademark and non–compete fee are 17 Parle Products Ltd. part of goodwill. The learned Authorised Representative submitted, had it been the case, there was no need for the legislature to amend the provision of section 55(2)(a) of the Act by specifically including trademark, brand name, right to manufacture, produce or carry on business in the definition of cost of acquisition. He submitted, the aforesaid amendment clearly indicates that trademark, non–compete fee, etc., were never considered to be part of goodwill. That being the case, since there is no cost of acquisition of trade mark which is self– generated and also in respect of non–compete fee, the computation mechanism provided under section 48 of the Act would fail. Hence, capital gain cannot be computed in the absence of cost of acquisition. Thus, he submitted, the addition made cannot be sustained under any circumstances. Further, he submitted, while deciding identical issue in case of assessee’s subsidiary Parle Biscuits Pvt. Ltd., learned Commissioner (Appeals) has deleted the addition which was accepted by the Department. Since, assessee’s case stands on the same footing, learned Commissioner (Appeals)’s decision on the issue has to be upheld. In support of such contention, he relied upon the following decisions:– i) Voltas Ltd. v/s DCIT, [1998] 64 ITR 233 (Mum.); ii) Kwality Biscuits Pvt. Ltd. v/s ACIT, [2012] 19 taxmann.com 106 (Bang.)(TM); and 18 Parle Products Ltd. iii) CIT v/s Fernhill Laboratories and Industrial Establishment, [2013] 33 taxmann.com 533 (Bom.);
We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. From the facts on record it is evident, on 26th March 1997, the assessee had entered into an asset purchase agreement with Oral–B Laboratories India Pvt. Ltd., an affiliate of GDOPL, under which certain assets and machinery capital of producing Tooth Paste, Gels, Tooth Brushes and Mouth Rinses were purchased from the assessee. Similarly, the assessee entered into an agreement with Gillette Co., Boston, for use of certain trademarks relating to Oral Care and Oral Hygiene products. Under the aforesaid agreement, the assessee had also agreed to not compete with either GDOPL or any of its affiliate in respect of oral care and oral hygiene products. For transfer of trademark, the assessee received certain consideration. Similarly, the assessee also received consideration towards non–compete fee. Similar agreements were also entered into by another affiliate of the assessee viz. Parle Biscuits Pvt. Ltd. with GDOPL on 26th March 1997. Though, the assessee had claimed the amount received for trademark and towards non–compete fee as capital receipt not chargeable to tax,in view of the fact that the cost of acquisition of such assetsare unascertainable.however, the Assessing Officer by treating the amount
19 Parle Products Ltd. received towards trademark and non–compete fee as part of goodwill has subjected it to capital gain tax. Therefore, the issue which requires consideration is, whether the amount received by the assessee towards trademark and non–compete fee can be treated as goodwill. On going through the terms of the agreement placed in the paper book, it is noticed that it is very specifically mentioned that the amount received by the assessee is towards trademark and non– compete fee. That being the case, the conclusion drawn by the Assessing Officer that they are in the nature of goodwill is unsustainable. Undisputedly, the Assessing Officer himself has treated the amount received by the assessee towards trademark and non– compete fee to be towards sale of capital asset viz. goodwill and resorting to the provisions of section 55(2)(a) of the Act has held that the cost of acquisition of the asset has to be taken as nil for the purpose of computing capital gain. However, on reading of section 55(2)(a) of the Act, it becomes clear that goodwill as a capital asset is distinct and separate from trademark, brand name or any other right to carry on any business. This is evident from the amendment brought to section 55(2)(a) of the Act inserting trademark, brand name, right to carry on any business, etc. Thus, from the amendments brought to section 55(2)(a) of the Act, it becomes clear that the legislature never intended that the expression goodwill also includes trademark, brand
20 Parle Products Ltd. name, non–compete fee, etc. Further, the aforesaid amendment made to section 55(2)(a) of the Act by including trademark, brand name, etc., are not applicable to the impugned assessment year. Therefore, the ratio laid down in the decision of the Hon'ble Supreme Court in B.C. Srinivasa Setty (supra) would apply to the facts of the present case. Even, the amount received by the assessee towards trademark, non–compete fee, etc., cannot be treated as business receipt since section 28(va) of the Act was inserted to the statute by Finance Act, 2002, w.e.f. 1st April 2003. In fact, in case of Guffic Chem Pvt. Ltd. (supra), the Hon'ble Supreme Court has held that the payment received towards non–compete fee under a negative covenant is to be treated as capital receipt till the assessment year 2003–04 wherein after section28(va) of the Act came to the statute. In other decisions cited by the learned Authorised Representative it has been held that the amendment brought to section 55(2)(a) of the Act by including the term “trademark”, “brand name”, “right to carry on business”, etc., would apply prospectively from the assessment year 2002–03. This view has been expressed by the Tribunal in case of Quality Biscuits Ltd. (supra). The Hon'ble Jurisdictional High Court in Fernhill Laboratories and Industrial Establishment (supra), has held that sale of self-generated trademark is not chargeable to capital gain tax prior to 1st April 2002. It is further relevant to observe, while deciding
21 Parle Products Ltd. identical issue in case of Parle Biscuits Pvt. Ltd. for the very same assessment year, learned Commissioner (Appeals), vide order dated 30th March 2015, has held that the amount received towards non– compete fee and trade mark cannot be treated as income either under section 28(va) of the Act or subjected to capital gain tax. Pertinently, the Revenue has accepted the aforesaid decision of learned Commissioner (Appeals). Thus, on overall consideration of facts and material on record, we are of the view that the amount received by the assessee towards trademark and non–compete fee being a capital receipt is not taxable. Therefore, the decision of learned Commissioner (Appeals) on the issue is sustained, though, on the basis of our independent reasoning. Ground raised is dismissed. ./2018 Assessee’s Appeal
In ground no.1, the assessee has challenged the disallowance of ` 22,28,465, made on account of suppression of sales of biscuits and confectionary.
In the course of assessment proceedings, the Assessing Officer noticed difference in sale figures of biscuits and confectionary, as shown in RT–12 statements filed before the Central Excise authorities and as recorded in the books of account. After calling for necessary explanation from the assessee and finding the explanation of the 22 Parle Products Ltd.
assessee unacceptable, he added back the amount of ` 1.24 crore towards suppression of sale of biscuits and` 21,51,345, towards suppression of sales in confectionery.
While deciding the appeal on the issue, learned Commissioner (Appeals) following the decision of the Tribunal in case of assessee’s sister concern Parle Biscuits Pvt. Ltd. in assessment year 1997–98, sustained addition to the extent of ` 22,28,465.
The learned Authorised Representative submitted, the difference in sales figure between the RT–12 statements and books of account of the assessee is negligible and works out to only 0.08%. Therefore, no addition on account of such negligible difference should have been made. Further, he submitted, in case of Parle Biscuits Pvt. Ltd., the Tribunal has not laid down a cut off limit of 0.03% for sustaining disallowance. Thus, he submitted, the part disallowance sustained by learned Commissioner (Appeals) should be deleted.
The learned Departmental Representative relied upon the observations of learned Commissioner (Appeal).
We have considered rival submissions and perused the material on record. Undisputedly, there was a difference between the sales figures as reflected in RT–12 statement and the books of account of 23 Parle Products Ltd.
the assessee. Though, the assessee has tried to explain the difference by attributing it to inter–depot transfer and destruction of goods, however, fact remains that the assessee has not been able to reconcile the difference with supporting evidence. In these circumstances, the decision of learned Commissioner (Appeals) in sustaining the addition to the extent of 0.05% of the total turnover is reasonable, hence, it does not require interference from this forum. This ground is dismissed.
In ground no.2, the assessee has challenged the disallowance of ` 7,62,798, on account of foreign travel expenses.
Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed expenditure on account of foreign travel of directors / executives called upon the assessee to furnish necessary details. Alleging that no supporting evidence was filed by the assessee to demonstrate that such foreign travels were for the purpose of business, the Assessing Officer disallowed 25% out of the total expenditure claimed. Learned Commissioner (Appeals) also relying upon the decision of the Tribunal in assessment year 2006–07 upheld the disallowance made by the Assessing Officer.
The learned Authorised Representative submitted, though, disallowance of foreign travel expense was upheld by the Tribunal in 24 Parle Products Ltd.
the assessment year 2006–07, however, in assessment year 1997–98, the Tribunal has restored the issue to the Assessing Officer. Thus, he submitted, the issue may be restored back to the Assessing Officer so that the assessee can furnish all supporting evidences to prove the genuineness of the expenditure.
The learned Departmental Representative relied upon the observations of learned Commissioner (Appeals).
We have considered rival submissions and perused the material on record. No doubt, while deciding assessee’s appeal in the assessment year 1996–97, the Tribunal has upheld part disallowance of foreign travel expenses. However, in assessment year 1997–98, it was argued by the assessee that the foreign travel expenses incurred was not only for directors but also for other employees purely for business purpose. Considering the submissions of the assessee, the Tribunal restored the issue to the Assessing Officer vide order dated 22nd January 2018, in ITA no.6821/Mum./2004 and others. Before us also, learned Authorised Representative has submitted that facts involved in the impugned assessment year are similar to assessment year 1997–98. In view of the aforesaid, we restore the issue to the Assessing Officer for denovo adjudication. The Assessing Officer is directed to decide the issue afresh after providing due opportunity of 25 Parle Products Ltd.
being heard to the assessee. This ground is allowed for statistical purposes.
In the result, assessee’s appeal is partly allowed for statistical purposes.
To sum up, Revenue’s appeal is dismissed and assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 09.08.2019