Document Fragment View

Matching Fragments

14. As regards the adjustment for excess weight of biscuits for other brands i.e., other than Parle-G it was submitted that usually the actual weight of biscuits in packets is more than the printed weight. Therefore, the actual production is more to this extent and this should be taken into account for working out the amount of excess consumption. The order of the CIT(A) for A.Y. 1989-90 was brought to his notice where on the basis of the direction of the CIT(A), the Assessing Officer weighed the sample packets of Parle-G to verify the claim and found that the weight of biscuits was actually more than the printed weight and accordingly had allowed the adjustment for excess consumption. However, during the year under consideration the Assessing Officer has not given similar relief in case of other brands in the same proportion in which it was allowed in Parle-G. 7 ITA 5318 & 5319/M/06 & 447/M/09 ITA 5540 & 5541/M/06 & 683/M/09 M/s. Parle Biscuits Pvt. Ltd.

Respectfully following the same, as the facts are identical, we direct the A.O. to accept the book results of the assessee as far as manufacturing of biscuits through own factory is concerned.

29. As regards the issue relating to the manufacturing of biscuits through CMUs is concerned, we find the Assessing Officer noted that the input- output ratio in the CMUs are shown by the assessee at 110.60:100 as 14 ITA 5318 & 5319/M/06 & 447/M/09 ITA 5540 & 5541/M/06 & 683/M/09 M/s. Parle Biscuits Pvt. Ltd.

20 ITA 5318 & 5319/M/06 & 447/M/09 ITA 5540 & 5541/M/06 & 683/M/09 M/s. Parle Biscuits Pvt. Ltd.

41. As can be seen by the above provision, there should be a reduction of its capital and distribution to the shareholders out of the accumulated profits. Section 80(3) of the Companies Act states that the redemption of preference shares under this section by a company shall not be taken as reducing the amount of its authorised share capital. By virtue of section 80(3) redemption of preference shares cannot be considered as reduction of authorised share capital, therefore, treating them as deemed dividend does not arise, as the provisions of section 2(22)(d) can only be invoked only when there is distribution of accumulated profits by way of reduction of share capital. On the facts of the case, assessee has purchased the preferential shares at a cost of `2 crores and they were redeemed at the same price of `2 crores. Therefore the question of invoking deemed dividend provision on this transaction does not arise, eventhough the redemption of shares are to be made out of the profits of the company by virtue of section 80(1) of the Companies Act. However, since it cannot be treated as reduction of authorised share capital by virtue of section 80(3) of the Companies Act, the amount received by assessee on redemption of preference shares cannot be treated as deemed dividend. The A.O. relied on the principles established by the Hon'ble Supreme Court in the case of CIT vs. G. Narasimham & Others 236 ITR 327. In fact this case supports the above opinion also eventhough it was given in a different context. The facts of that case were that assessee was a shareholder in a private company. Assessee held 70 shares in the company with face value of `1,000/- each. During the accounting period relevant to A.Y. 1963-64 the company passed a resolution to reduce its capital and the procedure prescribed under the Companies Act was undergone. After obtaining the orders from the Court reduction was given effect and on 26.05.1962. Subsequently the face value of shares in the company was reduced from `1,000/- to `210/-. There was a pro-rata distribution of some properties of the company and payment of money to the shareholders including the assessee. In the Income Tax proceedings connected with the property/amounts so received by the assessee on reduction of share capital in the said company, the Tribunal was required to consider whether any capital gains accrued to the assessee. The Tribunal 21 ITA 5318 & 5319/M/06 & 447/M/09 ITA 5540 & 5541/M/06 & 683/M/09 M/s. Parle Biscuits Pvt. Ltd.

a) The maida bags come in net weight and not as gross weight as made out to be by the assessee before CIT(A).

The A.O. has already allowed adjustment of 25% on account of pre-production and postproduction wastages.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to allow all adjustments that have been allowed in respect of own factory to CMUs also without appreciating the fact that the excess consumption of raw material is worked out on the total production on the different brands of biscuits irrespective of production in own factory or by 25 ITA 5318 & 5319/M/06 & 447/M/09 ITA 5540 & 5541/M/06 & 683/M/09 M/s. Parle Biscuits Pvt. Ltd.