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IN THE INCOME TAX APPELLATE TRIBUNAL "J", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM (Assessment Year 1998-99) (Assessment Year 1999-00) (Assessment Year 2000-01) (Assessment Year 2001-02) (Assessment Year 2002-03) (Assessment Year 2003-04) (Assessment Year 2004-05) (Assessment Year 2005-06) (Assessment Year 2006-07) (Assessment Year 2007-08) (Assessment Year 2008-09) (Assessment Year 2009-10) (Assessment Year 2010-11) M/s. Parle Products Pvt. Ltd., Vs. ACIT CEN CIR-25 / DCIT North Level Crossing CEN CIR-24, / CIR 25 Vile Parle (E) Aayakar Bhavan Mumbai - 400057 Mumbai-400020 PAN/GIR No. AAACP0486A Appellant) .. Respondent) (Assessment Year 1998-99) (Assessment Year 1999-00) (Assessment Year 2000-01) ITA No.6821/Mum2004 and other appeals M/s. Parle Products Pvt. Ltd., (Assessment Year 2001-02) (Assessment Year 2002-03) (Assessment Year 2003-04) (Assessment Year 2004-05) (Assessment Year 2005-06) (Assessment Year 2006-07) (Assessment Year 2007-08) (Assessment Year 2008-09) (Assessment Year 2009-10) (Assessment Year 2010-11) ACIT CEN CIR-25 / DCIT Vs. M/s. Parle Products Pvt. Ltd., CEN CIR-24, / CIR 25 North Level Crossing Aayakar Bhavan Vile Parle (E) Mumbai-400020 Mumbai - 400057 PAN/GIR No. AAACP0486A Appellant) .. Respondent) Assessee by Shri Nitesh Joshi Revenue by Dr. Rajeev Harit and Ms. Aarju Garodia Date of Hearing 10/01/2018 Date of Pronouncement 22/01/2018 आदे श / O R D E R PER BENCH:

Whereas, as per the audit report, the yield works out to 92.55%. Further, the Assessing Officer observed, in the statement of quantitative details submitted before him, the assessee has shown 1059 MTs of coco vita oil as against 1860 MTs reported by the auditor. Further, though, the assessee in the statement furnished before the Assessing Officer has claimed consumption of "other materials" at 3335 MTs. It was not mentioned in the tax audit report. Further, the assessee has revised the figures of consumption of Mumbai unit from 36690 MTs to 38490 MTs. To further verify the percentage of yield the Assessing Officer sought information from the contract manufacturing units. From the information obtained from contract manufacturing units, he found that consumption of other materials were shown at nil. He also found variation in the consumption of material as recorded in the books of the assessee for contract manufacturing units. He also observed, all the raw materials are provided by the assessee to the contract manufacturing units. He ITA No.6821/Mum2004 and other appeals M/s. Parle Products Pvt. Ltd., further observed, as per revised statement filed during the assessment proceedings, the yield for Mumbai Unit worked out to 82.67% for Biscuit and 85.99% for confectionary. Whereas, the corresponding figure for contract manufacturing unit were 91.65% and 100.24% respectively. When the Assessing Officer called upon the assessee to explain the difference in consumption, the assessee submitted that the difference in consumption of coco vita oil was on account of clerical mistake and the actual consumption was 1860 MTs. Thus, on the basis of difference found in the percentage of yield as per tax audit report and the statements filed by the assessee as well as the information obtained from the contract manufacturing units regarding percentage of yield, the Assessing Officer called upon the assessee to submit further details and also the standard formula applicable for consumption and production. In response, the assessee submitted, itemwise details of consumption and production cannot be filed as it was manufacturing various items and the details submitted before the Assessing Officer were as per books of account. The assessee also submitted, quantity of itemwise ingredients for various items of confectionary was taken as a whole and no separate records were available. To explain reason for difference in percentage of yield between its manufacturing unit at Mumbai and the contract manufacturing units assessee submitted, its unit at Mumbai was manufacturing various items of biscuits and confectionary for many years while the contract manufacturing unit have started recently and were mainly manufacturing Parle-G biscuit. The assessee, though, admitted that there is a standard formula but the theoretical form is not scientific and practical for working out consumption and production. Further, the assessee submitted, the standard formula cannot be applied due to various other factors as enumerated before the Assessing Officer. The assessee also advanced various other reasons for difference in percentage of yield between its Mumbai unit and contract manufacturing units. The Assessing Officer, however, did not accept the contention of the assessee on various grounds as summarized in Para-19.5 of the first appellate order. Further, the Assessing Officer comparing the production and sales at Mumbai unit with that of contract manufacturing units found that the sales at Mumbai unit was much less than the quantity available for sale, while for contract manufacturing units the quantity sold was more than the quantity available for sale. The Assessing Officer observed, as per standard formula, the yield should work out to 92.59%. He observed, the contract manufacturing units were showing average yield of 91.65% whereas, the Mumbai unit was showing yield of 82.69%. Thus, the Assessing Officer inferred that the assessee did not maintain records for consumption, production and sales of Mumbai Unit in a proper manner or the details were withheld purposely. Thus, on the aforesaid reasoning, the Assessing Officer taking into consideration the difference in percentage of yield shown by the ITA No.6821/Mum2004 and other appeals M/s. Parle Products Pvt. Ltd., contract manufacturing units and the assessee concluded that such difference of 8.96% was suppressed production resulting in suppressed sales. Taking into consideration consumption of raw material of Mumbai unit at 37498 MTs, he worked out the suppressed production at 3359.820 MTs and by adopting Rs.36,025, as average sale price, the Assessing Officer worked out the suppressed production of biscuits resulting in suppressed sales at Rs.12,10,44,000 and added it to the income of the assessee. Being aggrieved of such addition, assessee preferred appeal before the first appellate authority.

ITA No.6821/Mum2004 and other appeals M/s. Parle Products Pvt. Ltd.,

16. Precise observation of the Tribunal in the case of Parle Biscuits Pvt.

Ltd., is as under:-

32. Ground No. 3 in assessee appeal pertain to the disallowance of long term capital loss of Rs.35,58,718/- on account of redemption of preference shares.

33. The facts in brief are that assessee claimed capital loss of Rs.35,58,718/- on account of redemption of preference shares. The total consideration received by assessee on redemption of preference shares has two categories. The preference shares are of SFR Ltd. and Himachal Futuristics Communications Ltd. Both these preference shares were allotted to the assessee company in the month of July 1995 at a face value of Rs.1,000/- and were redeemed in July 1997 at a value of Rs.1,000/-, i.e. same value. In the notes attached to the statement of Income assessee stated that redemption of preference shares amounts to transfer within the meaning of section 2(47) relying on the decision of the Hon'ble Supreme Court in the case of Anarkali Sarabhai vs. CIT 224 ITR 422. Assessee claimed indexation benefit on cost of acquisition of Rs.2 crores thereby arriving at the cost of acquisition at Rs.2,35,58,718/-. The resultant difference was claimed as capital loss on redemption of preference shares. The A.O. did not agree with the above and stated that the receipt of money on redemption has to be treated as dividend within the meaning of section 2(22)(d) relying on the judgment of the Hon'ble Supreme Court in the case of CIT vs. G. Narasimham & Others 236 ITR 327. He held that since the amount was to be covered within the provisions of section 2(22)(d) the question of claiming capital loss does not arise and since redemption has taken place after 30.06.1997 the dividend was not taxable as such. Therefore long term capital loss pertaining to redemption of preference shares at Rs35,58,718/- was disallowed. Assessee contested the same before the CIT(A). The CIT(A) vide para 9.2 considered that similar issue had come up in A.Y. 1998-99 before the CIT(A) in the case of assessee's holding company Parle Products Pvt.

Ltd. in which the issue was decided against the assessee. Following the same, on identical facts the ground was rejected. There is no discussion about the issues contested by assessee in the order of CIT(A)..

34. The learned counsel for the assessee placed on record the order of the CIT(A) in the case of Parle Products Pvt. Ltd. for A.Y. 1998-99 wherein the loss in that year was only Rs.41,200/- but most of the discussion of the CIT(A) pertain to sale of 12% preferential shares which are sold through a broker in the market for which loss of Rs.25,54,923/- was claimed but disallowed. He referred to the finding of the CIT(A) in para 10.5 and submitted that this issue was not ITA No.6821/Mum2004 and other appeals M/s. Parle Products Pvt. Ltd., discussed by the CIT(A) on contentions but rejected only on the reason that the nature of preference shares are not on record. It was f further submitted that the appeal of A.Y. 1998-99 in Parle Product Pvt. Ltd. on this issue was still pending but the issue can be decided on merits as there is no discussion on the contentions raised by the assessee. The learned counsel submitted that: -