ACIT, CIRCLE, PATIALA vs. M/S PATIALA DISTT. CO-OP MILK PRODUCTERS UNION LTD., PATIALA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’B’, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA Nos. 1228 & 1204/Chd/2017 Assessment Year: 2011-12

The Asst. CIT Vs. M/s Patiala Distt. Co-op Milk Circle, Patiala Producers Union Ltd; Sirhind Road, Patiala

PAN No. AAAAT0459K

(Assessee) (Respondent)

Assessee By : Shri. Deepak Agarwal Revenue By : Shri. Manjit Singh

Date of hearing : 08/03/2018 Date of Pronouncement : 22/05/2018

ORDER PER BENCH:

Both the above appeals have been filed by the Revenue against the

common order of Ld.CIT(A), Patiala dt. 24/05/2017.

submitted that two appeals have been filed inadvertently for the same year.

Hence appeal No. 1228/CHD/2017 may be treated as withdrawn and we

accordingly dismiss the appeal.

the following grounds:

claimed by the assessee in the P&L Account under the head ‘Plastic Crate

Breakage Expenses’ treating the same as capital expenses.

occurred during the course of handling of these items by the labour and is in the

nature of normal wear and tear while handling the milk supply and it was an

allowable expense under section 37 (1) of the Act. The Ld. CIT(A) also held that it

is seen while holding the impugned expenditures as capital in nature, the AO

has given the general finding without any elaboration thereon. It is a fact that

the milk crates are used in the normal course of business of the assessee for

carrying milk etc. Their wear and tear and breakage is quite normal in the

course of the business of the assessee. The replacement of broken crates is a

regular feature of the assessee's business and the cost of each plastic crate is

insignificant. Moreover, plastic crate have a limited life span. The expenditure so

incurred does not add to the capacity of the assessee. Rather it helps in

maintaining it and ensuring the smooth conduct of the business. Therefore, in the

given set of facts and circumstances the expenditure incurred on account of

the breakage of plastic crates is essentially of revenue nature which is clearly

allowable under section 37(1) of the Act.

supported the order of the Ld. CIT(A).

through the facts of the case and hereby hold that by any stretch of

imagination the breakage of plastic crates due to wear and tear, used for

transportation of milk sachets cannot be treated as capital expenditure and

hence, we decline to interfere in the order of the Ld. CIT(A).

increase in "store material consumed" expenses.

debited under the above said head as compared with those of the preceding

year whereas the sales had only increased by 17%. On being show caused as to

why adverse view should not be taken in respect of these expenses, the

assessee submitted that due to inadvertent error the cost of certain raw

materials like Atta, besan and sugar used for preparing panjiri to the extent of Rs.

43,85,618/- was wrongly debited to the "store material consumed" account, as

such there was no such abnormal increase of expenses. However, in the

absence of corroborative documentary evidence supporting the contention of

the assessee, the AO disallowed these expenses.

not appreciated the working of the assessee unit wherein government has

installed a pre-audit system and no payment can be made without Bill and

without the approval of the competent authority. Moreover, the sale of panjiri m

the year under consideration has been to the tune of Rs. 1,30,63,751/-whereas

the purchase for this item was only to the extent of Rs. 6,318/- only. This could not

have happened if the assessee had not purchased ingredients of panjiri i.e atta,

besan and sugar etc has explained above which were inadvertently debited to

the wrong account i.e. "store material consumed" account. Moreover, the

booking of expenses under the head store material consumed instead of

purchases has no impact on the income of the assessee in any manner. The

books of accounts of the assessee have also not been rejected and the gross

profit ratio has also been accepted as shown by the assessee.

vouchers pertaining to purchase of raw material like atta, besan, sugar would

be produced before the Assessing Officer so as to prove the genuineness of the

expenditure which could not be produced before the Assessing Officer to

support the claim during the assessment proceedings. Hence, we remand the

matter back to the file of the Assessing Officer for the limited purpose of

verification of the bills and vouchers pertaining to the purchase of raw materials

for preparing panjiri and to allow the expenditure accordingly based on the

evidences produced.

and in ITA No. 1204/CHD/2017 is partly allowed for statistical purposes.

Order pronounced in the open court.

Sd/- Sd/- (DIVA SINGH) (DR. B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 22/05/2018 AG Copy to: The Assessee, The Respondent, The CIT, The CIT(A), The DR