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02-01-2019, Kamani Oil Industries, Section 40(a)(ia), 145(3), Tribunal Mumbai

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5 months 1 week ago #8274 by amit
Section - 40(a)(ia), 145(3), 40
Order Date - 02-01-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - Kamani Oil Industries Pvt . Ltd.
Respondent - DCIT
Justice - PAWAN SINGH, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 119Taxpundit71
Appeal No. - I .T.A. No.5465/Mum/2017
Asstt. Year - 2013-14

Order

PER : Manoj Kumar Aggarwal

1. These are cross appeals for Assessment Year [AY] 2013-14 which contest the order of Ld. Commissioner of Income Tax (Appeals)-12, Mumbai [CIT(A)], Appeal No.CIT(A)-12/DCIT-6(3)(2)/94/15-16 dated 03/07/2016 on separate grounds of appeal. It is noted that the original order by Ld. first appellate authority was passed on 21/04/2017. However, the same has subsequently been rectified on 03/07/2017 [wrongly written as 03/07/2016]. The assessee has contested the order dated 03/07/2017 whereas the revenue has contested the order dated 21/04/2017. The grounds urged by assessee read as under:

1. (a) The Commissioner of Income Tax(Appeals) - 12, Mumbai erred in rejecting the contention of the Appellant that software purchased from Techent Solution of Rs.7,43,689/- are capitalized in block of asset and on the facts and circumstances of the case of the Appellant and in law, no disallowance is attracted u/s 40(a)(ia) of the Act.

(b) Without prejudice to above, the C T(A) erred in not appreciating that on the facts and circumstance of the case and in law, no TDS u/s 194J of the Act was deductible on payment made to Technet Solution towards purchase of software; hence no disallowance is attracted u/s 40(a)(ia) of the Act.

The grounds urged by revenue reads as under:-

1.Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition on account of estimation of Gross Profit @ 9 % and rejection of books u/s. 145."

2. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) failed to appreciate the fact that the assessee had failed to provide the details of consumption of raw material (seeds) vis-a-vis yields, separately in respect of different types of oils (cotton, mustard and ground nut, etc.) extracted from different seeds, when there is huge variation in the market price of these oils, and this being one of the main reasons for rejection of book result u/s. 145."

3. The appellant prays that the order of the Ld. C1T(A) on the above grounds be set aside to the file of the AO or confirm the order of the AO "

2.1 Facts germane to the issues are that the assessee being resident corporate entity engaged in the business of manufacturing, refining and trading of edible oil & vanaspati was assessed for impugned AY in scrutiny assessment u/s 143(3) on 28/03/2016 wherein the income of the assessee was assessed at Rs.52.89 Crores after certain additions / adjustments as against returned loss of Rs.3.46 Crores e-filed by the assessee on 30/09/2013.

2.2 During assessment proceedings, it was noted that the turnover of the assessee increased from Rs.898 Crore in immediately preceding AY to Rs.942.30 crores during impugned AY whereas Gross Profit Rate fell from 3.55% to 3.03% despite there being no material change in the activities being carried out by the assessee. The assessee attributed the same to increase in cost of packing material, employee cost and change in grouping of expenses. It transpired that the manufacturing process involved procuring of various edible oils from the market-both national as well as international market and then mixing up different edible oils to manufacture different brands of products or simply refining the oil without mixing. The various manufacturing inputs included coconut oil, palm oil, ground nut oil and sesame oil etc. Although the quantitative data in respect of individual oi was available, however, manufacturing output data against the same was not available. The assessee submitted that since the manufactured products varied in mix, constitution and weight etc. such a correlation of the consumption and output for each such input was not possible. A tally of quantitative data was submitted wherein the total quantity consumed under different heads of raw material and final output as a whole was furnished. It was also submitted that very nature of the manufacturing process makes it difficult to have any reasonable and determinable correlation of the output vis-à-vis the input. However, not convinced, Ld. AO proceeded to reject the books of accounts u/s 145(3) and estimated the Gross Profit Rate [GP Rate] of 9% against

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