Income Tax Appellate Tribunal - Ahmedabad
Zaveri & Co. Exports, Ahmedabad vs Department Of Income Tax on 31 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH AHMEDABAD
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद Ûयायपीठ 'ए
ए'
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL
MEMBER,
AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER.
ITA.No. 930 /Ahd/2007 & 2971/Ahd/2009
(Assessment Years:2004-05 & 2005-06)
DCIT,
Central Circle-2(4),
Ahmedabad. Appellant
Vs.
M/s. Zaveri & Co. Exports,
Swagat Complex,
C.G. Road, Ahmedabad. Respondent
PAN: AAAFZ0697G
राजःव कȧ ओर से / By Revenue :Shri Subhash Bains, CIT
D. R.
आवेदक कȧ ओर से / By Assessee : Shri M. K. Patel with Shri
Jayesh C. Charedalal, A. R.
सुनवाई कȧ तारȣख/Date of Hearing :14.10.2014
घोषणा कȧ तारȣख/Date of
Pronouncement :31.10.2014
ORDER
PER SHAILENDRA KUMAR YADAV, JM:
These cross appeals are arising out form the order of ld. CIT(A)-III, Ahmedabad, dated 19.12.2006 for the assessment I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 2 year 2004-05 & order of ld. CIT(A)-XVI, Ahmadabad, dated 18.08.2009 for A.Y. 2005-06. They are being disposed of by way of this common order for the sake of convenience.
2. For A.Y. 2004-05 Revenue has raised following grounds:
"1. The ld. CIT(Appeal) erred in law and on facts in deleting of disallowance of expenses of Rs. 18,74,640/- made by A.O. after computing interest loading charges included in purchase price.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer on the above points."
3. Similar issue arose in ITA No. 669/Ahd/2007 in case of M/s. Zaveri & Co. vs. ACIT for A.Y. 2004-05 wherein vide para nos. 4 to 4.8 of said order, similar issue has been decided in favour of assessee.
The operative portion of the order is as under:
"4.7 This reasoned finding of the CIT(A) need not interference from our side. We find that assessee engaged in business of trading of bullion. He purchased bullion mainly from Government Corporation like State Trading Corporation of India (STC) and Mainly Metal Trading Corporation of India (MMTC). There are various correspondence between Assessing Officer and assessee on point of various queries of Assessing Officer. The chronology of events in purchase of bullion from STC as under and same is applicable to MMTC:
(a) Zaveri & Co. (buyer Indian Party) approaches STC-
Ahmedabad for purchase of gold.
(b) STC-Ahmedabad places order with Foreign Supplier at Dubai, U.A.E. or other countries.
I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 3
(c) The buyer Indian party makes advance payment to STC-A Ahmadabad.
(d) STC- Ahmedabad opens a letter of credit (L/C) with Indian Bank for the required amount.(after 30-09- 2003). Prior to 30-09-2003 buyer Indian party opens L/C on request and on authority of STC.
(e) STC- Ahmedabad makes FDR of this advance payment received. This FDR is pledged by STC- Ahmedabad for opening letter of credit with L/C opening Bank. The FDR will be for a term of one year. Upto 30-09-2003 the FDR is placed by Indian Party.
(f) The Foreign Supplier ships the Gold to STC-
Ahmedabad through Air Cargo.
(g) Gold consignment arrives at Ahmedabad Airport.
(h) STC- Ahmedabad authorises buyer-private party to collect the gold from concerned Airlines.
(i) STC- Ahmedabad arranges to pay the customs duty.
(j) Buyer-Private Party takes delivery of gold.
(k) As per terms and conditions of L/C, thepayment to Foreign Supplier is to be made by STC- Ahmadabad.
(l) The STC- Ahmedabad is required to pay a higher purchase price (as compared to the international Gold rate prevailing on date of shipment) to the Foreign Supplier due to the credit allowed to STC- Ahmedabad. The Foreign Supplier issues invoice in the name of STC- Ahmedabad.
As per import export policy of Government of India prevailing at relevant time import of bullion for trading purposes into India was permitted only to the government nominated agencies like STC, MMTC, Banks etc. Private I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 4 parties like the assessee were not allowed to import the bullion.
4.8 Assessee purchased the bullion from STC, MMTC etc. As per policy laid down by Reserve Bank of India, upto 30th September, 2003 the payment of bullion imported by STC, MMTC was made by opening letter of credit in the name of foreign supplier. This L/C was opened by the assessee at the behest and under authority of STC, MMTC, since the assessee had to make the payment for its purchases to STC/MMTC. However the Reserve Bank of India amended its policy and with effect from 1st October, 2003 and hence the assessee made the payment directly to STC / MMTC and not through the L/C in the name of Foreign Supplier of STC / MMTC. Assessee was purchasing the bullion from STC /MMTC on a credit of 365 days. Assessee was selling the bullion on spot payment basis. This resulted in purchase price at higher amount than the sale price. The sale bills issued by STC / MMTC were for a total price i.e. there was no segregation of any sort like spot price, interest etc. The invoices were for a composite amount. As per the Mercantile Method of Accounting followed by the assessee the entire purchase price as per the sale bill of STC / MMTC was treated as expenditure and debited to purchases. The sales price as per the sales bills issued by the assessee was treated as income and credited to sales account. L/C were opened by assessee (upto 30-09-2003) by putting margin money, by way of Fixed Deposits with the concerned Bank. The assessee earned interest on FDR. The bank FDR interest income on margin money was shown on accrual basis upto 31st March, 2004 as income of I.T.A.Y. 2004-05. In spite of these submissions on behalf of assessee Assessing Officer made disallowance of Rs. 2,29,45,449/- by making a hypothetical exercise which is based on presumptions and conjectures. Assessing Officer was not justified in making addition of Rs. 2,29,45,449/- by disallowing the presumed amount of interest loading charges included in the purchases of bullion on account of credit period of 365 days. Assessing Officer has presumed that the purchases from STC/MMTC are inclusive of interest and assumed this figure of interest on the basis of irrelevant data compiled by him. He further made I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 5 assumption that 90% of this assumed interest is for bullion turnover and remaining 10% for earning Bank FDR interest. Assessing Officer has apportioned the 10% assumed amount in two assessment years i.e. I.T.A.Y. 2004-05 and 2005-06 in the proportion of interest accrual of Bank FDR as well as that receivable from STC / MMTC, which is not justified. In view of all, CIT(A) was justified in deleting addition of Rs.2,29,45,449/- made by A.O. on account of interest loading, we uphold the same."
3.1 Facts being similar, so following the same reasoning, we are not inclined to interfere with the finding of CIT(A) who has rightly deleted the expenses of Rs. 18,74,640/- made by A.O. after computing interest charges included in purchase price. Same is upheld. In result, this appeal of Revenue is dismissed.
4. For A.Y. 2005-06, Revenue has raised following grounds:
"1) The Ld. CIT(A) erred in law and on facts in deleting of disallowance of expenses of Rs. 44,15,633/- made by A.O. after computing interest loading charges included in purchase price.
2) The Ld. CIT(A) erred in law and on facts in deleting of disallowance addition made on account of wastage shown in SEZ unit of Rs. 68,360/- without considering facts on its right prospective.
3) On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer on the above points."
5. In first issue, Assessing Officer made disallowance of expenses of Rs. 44,15,633/- after computing interest charges included in purchase price. In appeal, CIT(A) deleted the same. We find that similar issue arose in ITA No. 669/Ahd/2007 in case of M/s. Zaveri & Co. vs. ACIT for A.Y. 2004-05 wherein I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 6 vide para nos. 4 to 4.8 of said order as followed in ITA No. 930/Ahd/2007 on similar issue in para 3 of this order, we have decided similar issue in favour of assessee. Facts being similar, so following the same reasoning, we are not inclined to interfere with the finding of CIT(A) who has rightly deleted the expenses of Rs. 44,15,633/- made by A.O. after computing interest charges included in purchase price. Same is upheld.
6. Next issue is with regard to disallowance on account of wastage shown in SEZ unit of Rs.68,360/-. Assessing Officer observed that assessee has shown wastage of 219 gms of gold while manufacturing the gold jewellery. Assessing Officer asked to assessee to state the method of valuing the wastage. Therefore, A.O. restricted the wastage of 100 gm and made the addition of Rs.68,360/- being value of balance gold of 119 gms.
6.1 Matter was carried before first appellate authority, wherein it was submitted on behalf of the assessee that during the year assessee purchased 25,75,000 gms of raw material including gold and manufactured 25,87,799.630 gms of jewellery. There was shortage of 219.360 gms which was very meager at 0.0084%. As against this, wastage norms fixed by the GOI, Ministry of Commerce, Foreign Trade Policies for export of plain gold jewellery is allowable upto 1.25%. Since assessee has shown manufacturing loss of only 0.0084% as against permissible limit of 1.25% fixed by the concerned Ministry of GOI. Agreeing to the contentions of assessee, CIT(A) rightly observed that Assessing Officer was not justified I. T . A. Nos . 9 3 0/ A h d/ 200 7 & 29 7 1/ A hd / 200 9 A . Y. 0 4- 0 5 & 05- 06 ( M/ s . Z av er i & Co. E x por t s v s. DCI T ) Page 7 in making such addition on account of shortage/manufacturing loss. So, CIT(A) rightly deleted the addition of Rs. 68,360/- made by Assessing Officer on account of shortage. Same is upheld.
7. In the result, appeals filed by Revenue for both years are dismissed.
Pronounced in the open Court on this the 31st day of October, 2014.
Sd/- Sd/-
(ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
True Copy
S.K.SINHA
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. राजःव / Revenue
2. आवेदक / Assessee
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।