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Assistant Commissioner of Income Tax Versus M/s Glaze Paints Limited

Disallowance of deduction claimed U/s 80IC - CIT(A) allowed part claim - Held that:- CIT(A) had given detailed findings in his order dated 06/07/2012 and verified the XIII schedule items and held that PVC Pipe do not fall in excise classification 39.09 to 39.15 of Schedule-XIII of Act or under Schedule 14. Further, the auditor had corrected the audit report in column No. 26(A) in form No. 10CCB. Further the ld DR has not controverted the finding given by the ld CIT(A). Therefore, we uphold the o .....

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has produced all the sale/purchase vouchers. There was a difference in account of some of the parties, which has been reconciled by the assessee before the ld CIT(A) and also explained the cash payment U/s 40A(3) of the Act. During the year, the assessee’s sale also has gone up compared to preceding year and there is a marginal decline in the G.P. rate. The ld DR had not controverted the finding given by the ld CIT(A). Therefore, we uphold the order of the ld CIT(A). Accordingly, this ground of .....

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ate of return, therefore, SLP was rejected after considering the Hon’ble Delhi High Court decision in the case of said assessee. Therefore, we do not find any reason to intervene in the order of the ld CIT(A). - Decided against revenue. - ITA No. 786/JP/2012 - Dated:- 19-6-2015 - Shri R.P. Tolani & shri T.R. Meena, JJ. For the Petitioner : Mrs. Neena Jeph (JCIT) For the Respondent : Shri P.C. Parwal (CA) ORDER PER: T.R. MEENA, A.M. This is an appeal filed by the revenue against the order .....

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the case in restricting the trading addition of ₹ 11,95,508/- to ₹ 77,690/- made by the A.O. 3. That the Ld. Commissioner of Income Tax (A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of ₹ 49,945/- made by the A.O. U/s 2(24)(x) r.w.s. 36(1)(va) of the Act. 2. The ld Assessing Officer observed that the assessee is engaged in the business of manufacturing and trading of paints, primer and allied products and manufacturing of PV .....

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rried out by the assessee in its wholly owned unit M/s Hariganga Polymers situated at E-87, B.H.E.L., Industrial Area, Bahdrabad, Haridwar (Uttaranchal). The ld Assessing Officer observed that this unit became fully owned unit of M/s Glaze Paint Limited w.e.f. 06/09/2007 after dissolution of partnership w.e.f. close of the business hours of 05/09/2007. It is claimed that previously the assessee company was partner in M/s Hariganga Polymers with 50% share. During the course of assessment proceedi .....

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le in Part-B at S.No. 20 plastics and articles thereof are mentioned and manufacturing of PVC Pipes is thus covered in plastics and articles thereof. Similarly in Part-C of the Fourteenth Schedule, manufacturing of PVC Pipes is not covered in audit report in form No. 10CCB dated 04/09/2009, the Auditor had certified that the undertaking or enterprise has been formed by the splitting up or the reconstruction of a business already in existence and in Point No. 26(b), the auditor has further certif .....

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igendum dated 22/1/2011 from V. Maskara & Associates, Chartered Accountants, 110 Ashoka Place, Exhibition Road, Patna whereby the auditor mentioned that reply of 26(a) of From No. 10CCB should be read as NO in place of YES . The auditor has further mentioned that the error is inadvertent, unintentional and human and is deeply regretted. After lapse of over two years, the ld Assessing Officer further held that there is no rule in the Income Tax law that such audit report can be rectified unde .....

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t B mentioned the plastics and articles and thereof with their excise classification from 39.09 to 39.15. As per excise tariff there is no any name mentioned of PVC (Poly Vinyl Chloride) Pipe. But this item is mentioned under tariff item 39.17, which is not restricted through Schedule Thirteenth. As per sub clause (II) of clause (a) of sub-section (2) of Section 80I(C) if the items manufactured is not covered under Schedule Thirteenth and unit established in industrial area or industrial growth .....

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article. Accordingly, he disallowed 80IC deduction at ₹ 37,70,488/-. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal partly by observing as under:- I have considered the assessment order as well as submission of the AR. The ld. A.O. has disallowed the claim of deduction U/s 80IC on two grounds: (i) PVC Pipe is an article or thing specified in the 13th schedule part B serial No. 20 and therefore .....

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b-section 2 provides that this section applies to any undertaking or enterprise,- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the 13th schedule………. (b) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the 14th schedule………… The appellant has its enterprise/undertaking, manufacturing PVC pipes set up at b .....

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39.15. It does not exclude enterprise/undertaking which are engaged in manufacturing any item of plastics and articles thereof as inferred by the ld. A.O.. If it were so, there was no need to mention the excise classification in schedule XIII. I find that the items mentioned against various excise classification from 39.09 to 39.15 and 39.17 are as under: Excise Classification Description of goods. 39.09 Amino-resins etc. 39.10 Silicones in primary forms 39.11 Petroleum resins etc. 39.12 Cellulo .....

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s 39.17 (39.17- 2310) which is not excluded in schedule XIII. Further, the appellant is not producing any article or thing excluded under schedule XIV Part C (applicable for the State of Uttaranchal). In view of the above discussion, I am of the considered opinion that appellant is manufacturing PVC pipes which do not fall in excise classification 39.09 to 39.15 of schedule XIII of the IT Act or under schedule XIV. Therefore, it is eligible for exemption u/s 80IC(2) of the Act., Further, I am in .....

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para 26A of form No. 10CCB. In view of above facts and circumstances it is held that the appellant is eligible for deduction U/s 80IC of the Act. However, the appellant should have excluded the other income of ₹ 17,779/- on account of interest on FDRs and bank interest while claiming the deduction u/s 80IC of the Act. I find that the claim of deduction on this amount of ₹ 17,779/- is not correct as this income is not derived from the business referred to section 80IC(2). Therefore, .....

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nd drawn our attention on Schedule-XIII from serial NO. 39.09 to 39.15 wherein it is clear that PVC pipe is not covered by this schedule. Further there was a mistake in the audit report in the column No. 26(a), which has been rectified by the concerned auditor. Therefore, deduction U/s 80IC is allowable. 6. We have heard the rival contentions of both the parties and perused the material available on record. The ld CIT(A) had given detailed findings in his order dated 06/07/2012 and verified the .....

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essing Officer observed that during the year under consideration, the company has declared gross profit of ₹ 1,26,68,380/- on total turnover/gross receipts of ₹ 4,62,90,109/- giving a G.P. rate of 27.36% as against last year s gross profit of ₹ 1,24,16,204/- on turnover of ₹ 4,14,49,005/- giving a GP rate of 29.95%. There was decline in G.P. rate. This gross profit also include interest income and other income. The assessee had declared net profit of ₹ 54,76,717/-. .....

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partment had carried out their audit with reference to stocks and had not observed anything adverse. The Excise Department is much particular with the quantity as it affects the ultimate excise. The Excise authority has accepted the declared result. The ld Assessing Officer verified the creditors with reference to copy of account received from the creditors particularly in case of M/s S.B. Shah & Co. (P) Ltd. The ld Assessing Officer found difference of ₹ 34,790/- in the account. This .....

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urchase and raw material. Similarly, M/s J.M. chemical Co. claimed to have received payment of ₹ 46,505/- on 31/3/2009 through Standard Chartered Bank from the assessee company but the assessee had not accounted for the same. The assessee could not reconcile the differences with evidence. M/s Hariganga Polymers had made cash payment of ₹ 44,607/- on 4/7/2008 for quality certification expenses in violation of provisions of Section 40A(3). The assessee had not submitted any evidence re .....

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Act was made at ₹ 44,607/-. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition partly by observing as under:- 5.3 I have considered the assessment order as well as submissions made by the ld AR, I find that the ld A.O. has rejected the books of accounts u/s 145(3) and has made a trading addition of ₹ 11,95,508/- by estimating the gross profit at ₹ 138,63,888/- by applying the G.P. rate o .....

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rtification expenses in violation of provisions of Section 40A(3). (iii) The assessee company has debited bogus purchases of raw material amounting to ₹ 13,864/- from M/s J.M. Chemicals Company and could not reconcile the differences in the balances of creditors i.e. S.B. Shah & Co. Pvt. Ltd., J.M. Chemical Co. Rejection of books of accounts: It has been submitted that the assessee has been maintaining the books of accounts, stock register, R.G. register as per guidelines prescribed un .....

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atisfaction that the books of accounts are incorrect or incomplete. It has been submitted by the AR that in the case of Singhal Dal Mills Vs. ITO (1994) 123 Taxman 15 (Del.-Trib) it was held that unless the Assessing Officer report a finding that the method of accounting adopted by the assessee is such that it would not enable the A.O. to deduce the taxable income or the books of accounts are not correct and complete, the A.O. is not empowered to reject the book results. Decline in GP Rate: Rega .....

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with A.Y. 08-09 but has ignored the GP rate of A.Y. 06-07 which was 25.43%. The average GP rate for the three years work out to 27.60%. The GP rate at 27.43% for A.Y. 09-10 is only marginally lower than the average GP rate of 27.60%. (v) Every year is a separate year and cannot be compared with the preceding year results. Difference in the account of creditors The AR has submitted that the difference in the account of creditors as per the books of the assessee and as per the books of the credito .....

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urchase is supported by invoice and is verifiable from the copy of purchase and invoice dated 18/06/2008, G.R. dated 18/06/2008 of the goods carrier etc. Regarding the payment of ₹ 46,205/- to M/s J.M. Chemicals, not entered in the books of the assessee it has been submitted that said payment has been made on the presentation of cheque in the bank 17/04/09 and is verifiable from the bank statement of the appellant. Regarding the difference of ₹ 34,912/- with respect to the accounts o .....

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been submitted that the appellant had purchased a demand draft of ₹ 44607/- in favour of M/s Bureau of Indian Stadard, Ghaziabad payable at Delhi by paying cash vide No. 270496/- and this cannot be a ground for invoking the provisions of Section 145(3). A copy of confirmation from the Vijaya Bank dated 16/01/2012 has been submitted with the reply. Findings The two instances of the difference in the account of creditors as per the books of the assessee and as per the books of the creditor i .....

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against column 28(b) of the report that the quantitative details of principal items of raw materials, finished products and by-products are not available. I find that the appellant is engaged in manufacturing of paints, primer and allied products in one unit and manufacturing of PVC pipes in another unit besides minor trading during the year. Considering the fall in rate of GP shown by the appellant which is not fully explained and the comments of the auditor that the quantitative details of pr .....

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%(average GP rate for three assessment years) would be reasonable. Applying the rate of 27.60% to the total turnover of 462,90,109/- will give gross profits of ₹ 12776070/- and this will result in an addition of ₹ 77,690/-. Accordingly, the addition under this head is upheld at ₹ 77,690/- and the appellant will get relief of ₹ 11,17,818/-. This ground is partly allowed. 9. Now the Revenue is in appeal before us. The ld DR vehemently supported the order of the Assessing Of .....

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ore, same may be confirmed. 11. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has shown G.P. rate during the year under consideration @ 27.36% as against 29.95% in immediate preceding year on gross turnover of ₹ 4,62,90,109/- during the year under consideration and ₹ 4,14,49,005/- in immediate preceding year. The assessee s item produced is under excisable items where excise audit has been done by it. The assess .....

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of revenue is dismissed. 12. Ground No. 3 of the revenue s appeal is against deleting the addition of ₹ 49,945/-. The ld Assessing Officer observed that ESI & PF payments were not made in time as per audit report. The ld Assessing Officer gave reasonable opportunity of being heard on this issue and argued that these payments were deposited before due date of furnishing of return of income. The assessee relied upon various case laws on this issue but the Assessing Officer had not found .....

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rving as under:- 8.3 I have considered the assessment order as well as submission of the Ar. I find that the courts have taken a divergent view on this matter. In the case relied upon by the appellant the question of law before the Hon'ble High Court of Delhi was: whether the ITAT was correct in law in deleting the addition relating to the employees contribution towards provident fund and ESI made by the A.O. u/s 36(1)(va) of the IT Act, 1961 ? The Hon ble Court has dismissed the appeal of t .....

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provident fund before filing of the return. Special leave petition is dismissed . In this order the Hon ble High Court of Delhi has also relied on the judgment of the Madras High Court in Nexus Computer Pvt. Ltd. (2009) 313 ITR 144 and another decision of the division bench of Delhi High Court reported as CIT Vs. Dharmendra Sharma (2008) 297 ITR 320 whereas it has disagreed with the decision of the Hon ble Bombay High Court in CIT Vs. Pamwi Tissues Ltd. (2009) 313 ITR 137. After considering the .....

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