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2019 (8) TMI 841 - AT - Income TaxSuppression of sales - suppression of production of biscuits in Mumbai Unit - assessee s Contract Manufacturing Units(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% - HELD THAT - As 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 suppression of sale is not in accordance with law. Therefore, even a part of addition made by the AO cannot be sustained. Accordingly, we delete the addition made by the AO fully. Disallowance of depreciation on plant and machinery - HELD THAT - As decided in own case 2017 (12) TMI 298 - ITAT MUMBAI and 2018 (1) TMI 1077 - ITAT MUMBAI Tribunal has allowed assessee s claim. Undisputedly, learned CIT(A) 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 find any infirmity in the decision of learned CIT(A) on the issue. Accordingly, ground raised is dismissed. Accrual of income - treating the amount received towards trademark, non compete fee, etc., as revenue receipts - HELD THAT - The Hon'ble Jurisdictional High Court in Fernhill Laboratories and Industrial Establishment 2012 (7) TMI 463 - BOMBAY HIGH COURT 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 identical issue in case of Parle Biscuits Pvt. Ltd. 2010 (8) TMI 881 - ITAT MUMBAI for the very same assessment year, learned CIT(A), 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 u/s 28(va) or subjected to capital gain tax. Pertinently, the Revenue has accepted the aforesaid decision of learned CIT(A). 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 CIT(A) on the issue is sustained, though, on the basis of our independent reasoning. Ground raised is dismissed. Suppression of sales of biscuits and confectionary - HELD THAT - Undisputedly, there was a difference between the sales figures as reflected in RT 12 statement and the books of account of 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 CIT(A) 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. Disallowance on account of foreign travel expenses - HELD THAT - 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 AO 2018 (1) TMI 1077 - ITAT MUMBAI . 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 AO for denovo adjudication.
Issues Involved:
1. Deletion of addition on account of suppression of production of biscuits. 2. Deletion of addition on account of suppression of production of confectionery. 3. Deletion of addition on account of suppression of production in Contract Manufacturing Units (CMUs). 4. Disallowance of depreciation on plant and machinery. 5. Treatment of amount received towards trademark and non-compete fee as revenue receipts. 6. Disallowance on account of suppression of sales of biscuits and confectionery. 7. Disallowance of foreign travel expenses. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Suppression of Production of Biscuits: The Revenue challenged the deletion of ?8,78,18,200 added by the Assessing Officer (AO) due to alleged suppression of production and sales of biscuits in the Mumbai Unit. The AO compared the yield of biscuits in the Mumbai Unit (82.92%) with the average yield of Contract Manufacturing Units (CMUs) (90.26%) and concluded suppression of production. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, following the Tribunal's decision in the assessee’s case for the assessment year (AY) 1996-97, where similar additions were deleted. The Tribunal upheld the CIT(A)’s decision, emphasizing that the AO did not find any instance of sales outside the books and the yield varied between 87% to 100% among CMUs, making standardization of yield percentage impractical. 2. Deletion of Addition on Account of Suppression of Production of Confectionery: The Revenue contested the deletion of ?6.33 crore added by the AO for suppression of production of confectionery in the Mumbai Unit. The AO inferred suppression based on the average yield of confectionery in CMUs (98.90%). The CIT(A) deleted this addition, following the Tribunal’s decision in the assessee’s case for AY 1996-97. The Tribunal upheld the CIT(A)’s decision, noting that the facts and issues were identical to those in the earlier years where similar additions were deleted. 3. Deletion of Addition on Account of Suppression of Production in CMUs: The AO added ?25,42,000 for alleged suppression of production in CMUs. The CIT(A) deleted this addition, following the Tribunal’s decision in the assessee’s case for AY 1996-97. The Tribunal upheld the CIT(A)’s decision, as the facts were identical to those in the earlier year where similar additions were deleted. 4. Disallowance of Depreciation on Plant and Machinery: The AO disallowed depreciation of ?24,42,446 on plant and machinery. The CIT(A) allowed the claim, following the Tribunal’s decision in the assessee’s case for AY 1996-97. The Tribunal upheld the CIT(A)’s decision, noting no infirmity in the decision. 5. Treatment of Amount Received Towards Trademark and Non-Compete Fee as Revenue Receipts: The AO treated ?5,09,97,000 received for trademark and non-compete fee as revenue receipts, arguing it was for the goodwill of the business. The CIT(A) deleted this addition, noting that similar additions in the case of the assessee’s subsidiary were accepted by the Department. The Tribunal upheld the CIT(A)’s decision, emphasizing that the amount received was specifically for trademark and non-compete fee, not goodwill, and thus was a capital receipt not taxable under the law applicable at the time. 6. Disallowance on Account of Suppression of Sales of Biscuits and Confectionery: The AO noticed differences in sales figures between RT-12 statements filed with Central Excise authorities and the books of account, leading to an addition of ?1.24 crore for biscuits and ?21,51,345 for confectionery. The CIT(A) sustained the addition to the extent of ?22,28,465, following the Tribunal’s decision in the case of the assessee’s sister concern. The Tribunal upheld the CIT(A)’s decision, noting the difference was negligible and the assessee failed to reconcile the difference with supporting evidence. 7. Disallowance of Foreign Travel Expenses: The AO disallowed 25% of the foreign travel expenses claimed by the assessee due to lack of supporting evidence. The CIT(A) upheld the disallowance, following the Tribunal’s decision for AY 2006-07. The Tribunal restored the issue to the AO for fresh adjudication, allowing the assessee to furnish supporting evidence, following the Tribunal’s decision for AY 1997-98. Conclusion: The Revenue’s appeal was dismissed, and the assessee’s appeal was partly allowed for statistical purposes. The Tribunal upheld the CIT(A)’s decisions on most issues, emphasizing consistency with earlier years' decisions and the lack of adverse material to support the AO’s additions. The issue of foreign travel expenses was remanded to the AO for fresh consideration.
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