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TAXAP/9/2001 6/ 6 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 9 of 2001
For
Approval and Signature:
HONOURABLE
MR.JUSTICE AKIL KURESHI
HONOURABLE
MS JUSTICE SONIA GOKANI
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
ASSTT.
C I T - Appellant(s)
Versus
HYNOUP
FOOD & OIL INDUSTRIES PVT. LTD. - Opponent(s)
=========================================================
Appearance
:
MR
MANISH R BHATT for
Appellant(s) : 1,
RULE SERVED for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 20/07/2011
ORAL
JUDGMENT
(Per
: HONOURABLE MS JUSTICE SONIA GOKANI)
Brief
facts of the present case are that the assessee respondent company
was involved in the business of processing of raw cotton seed oil,
groundnut oil, etc. The main business of the company was processing
cotton seed oil and it was also engaged doing similar job work on
behalf of others. For the assessment year 1991-1992, the Assessing
officer estimated sale outside the books. This order came to be
challenged before the CIT(Appeals) which reduced the additions made
by the Assessing Officer. Against this order of CIT(Appeals), both
the Revenue and assessee respondent approached the Income Tax
Appellate Tribunal and the tribunal by a common judgement held in
favour of the assessee and against the Revenue. The impugned
judgement of the tribunal dated 27.7.2000 is in challenge before
this Court by way of present appeal.
While
admitting the appeal, following question of law was framed for
determination of this Court :
” (1)
Whether on the facts and in the circumstances of the case,
the Appellate Tribunal has substantially erred in law in
deleting the disallowance made on account of process loss and
suppression of production and sales made on account of
satisfaction recorded by the Assessing Officer that excessive
process loss was claimed by the assessee only to suppress real
extent of production ?
(2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in directing to allow separate relief under sections 80HH and 80I of the Income Tax Act ?”
This
Court had heard at length learned Counsel Mr Manish Bhatt, senior
counsel appearing for the appellant Revenue. Though rule has been
served duly, none chose to appear for and on behalf of respondent.
At
the outset, it needs to be noted that with respect to question
No.(1), against the order of the tribunal in case of this very
assessee respondent for the assessment year 1990-1991, the Revenue
chose to approach this Court by preferring Tax Appeal No.10/2001
where identical question of law, was admitted and has been decided
by this Court in favour of the assessee and against the Revenue in
the following manner :
“9.
Quite apart from the above observations, we find that the tribunal
had examined the materials on record which included the data of the
turnover, Gross Profit rate and process loss for several years. It
was found that year after year, the Gross Profit rate of the
assessee company was increasing. Process loss was fluctuating
between a minimum of 1.9% to maximum of 3.05%. The tribunal also
observed that the product manufactured by assessee is refined
cotton seed oil which is obtained from refining raw cotton seed oil
which is in turn obtained from crushing cotton seed by ginning
factories. Cotton seed is an agricultural commodity. The quality of
cotton seed would certainly impact the raw cotton seed oil and
consequently refined cotton seed oil. Quality of raw material would
depend on several factors such as rainfall, quality of soil and
other such factors. It was also noted that if the raw cotton seed
oil is obtained from crushing of inferior quality of cotton seed,
then the process loss was likely to be higher, but Gross Profit
rate may go up since the assessee may have purchased the raw
material at a cheaper rate. Tribunal also noted that there were
instances where though process loss was high, Gross Profit rate was
also high compared to other years. Tribunal noted contention of the
assessee that the production recorded and maintained by the
assessee were being checked and supervised by the Food and Civil
Supply department of the Government. Periodic reports and returns
were submitted by the assessee. No irregularities were noticed.
Tribunal also relied on the report of one M/s. Vulcl laval, supplier
of machinery to the assessee for manufacturing of refined cotton
seed oil who had stated that process loss is typically found
depending on the quality of raw cotton seed and functioning of the
plant and would normally range between 2.65% to 4.20%. It can thus
be seen that the tribunal based its findings on several factors and
came to the conclusion that without any evidence or base the
Assessing Officer could not have held that the process loss claimed
by the assessee(in the present case at the rate of 3.05%) was
inflated or excessive.
10.
We are of the opinion that tribunal has considered the facts on
record. Several relevant factors have been examined. These facts
included uncertainty of the nature of business and fluctuating
nature of process loss. By the very nature of things, the business
of assessee depended on
quality of cotton seed oil procured from the market. Such cotton
seed oil depending on quality of cotton produced being an
agricultural commodity, naturally quality would depend on the seeds
used, the technique employed by farmers for production, soil,
rainfall, irrigation and so on. In absence of any additional
material, only on basis of an isolated answer by one of the
Directors of the company, the Assessing Officer could not have come
to the conclusion that the process loss was artificially inflated.
Tribunal had also relied on certificate given by the supplier of
machine who stated that typically the process loss ranges between
2.65% to 4.20%.
11.
In addition to above, we also notice that in earlier years, orders
passed by the tribunal were accepted by the Revenue and not carried
in appeal.
12.
Sum total of above discussion is that we do not find that the
decision of the tribunal requires reconsideration. Question No.(1)
is therefore, answered against Revenue.”
As
nothing is pointed out by the Revenue before this Court to take a
different view than already taken in case of this very assessee,
question no(1) in the present case is being answered in favour of
the assessee and against the Revenue.
With
respect to question no.(2), the issue is no longer res integra. This
Court also in Tax Appeal No.10/2001 following the decision of the
Apex Court in case of Joint Commissioner of Income-tax v.
Mandideep Eng. and PKG, IND. P. Ltd. reported in (2007)
292 ITR 1 (SC), has answered the same against the Revenue and in
favour of the assessee. The Apex Court in above case held as under:
“2.
The Madhya Pradesh High Court in J.P. Tobacco Products P. ltd. v.
CIT reported in (1998) 229 ITR 123 took the view that both the
sections are independent and, therefore, the deductions could be
claimed both under sections 80HH and 80-I on the gross total income.
Against this judgment a special leave petition was filed in this
court which was dismissed on the ground of delay on July 21,
2000(see[2000]245 ITR(st.)71). The decision in J.P.
Tobacco Products P. ltd. (1998) 229 ITR 123(MP) was followed by the
same High Court in the case of CIT v. Alpine Solvex P. ltd. in
I.T.A. No.92 of 1999 decided on May 2, 2000. Special Leave Petition
against this decision was dismissed by this Court on January 12,
2001,(see[2001]247 ITR (St.) 36).This view has been followed
repeatedly by different High Courts in a number of cases against
which no special leave petitions were filed meaning thereby that the
Department has accepted the view taken in these judgements. See CIT
v. Nima Specific Family Trust reported in [2001] 248 ITR 29(Bom);
CIT v. Chokshi Contacts P. ltd.[2001] 251 ITR 587(Raj); CIT v. Amod
Stamping[2005] 274 ITR 176 (Guj); CIT v. Mittal Appliances P. Ltd.
[2004] 270 ITR 65(MP); CIT v. Rochiram and Sons [2004] 271 ITR
444(Raj); CIT v. Prakash Chandra Basant Kumar[2005] 276 ITR 664(MP);
CIT v. S.B.Oil Industries P. Ltd. [2005] 274 ITR 495 (P&H); CIT
v. SKG Engineering P. Ltd. [2005] 119 DLT 673 and CIT v. Lucky
Laboratories Ltd. [2006] 200 CTR 305(All)
Since
the special leave petitions filed against the judgement of the
Madhya Pradesh High Court have been dismissed and the Department has
not filed the special leave petitions against the judgement of
different High Courts following the view taken by the Madhya Pradesh
High Court, we do not find any merit in this appeal. The Department
having accepted the view taken in those judgments cannot be
permitted to take a contrary view in the present case involving the
same point. Accordingly, the civil appeal is dismissed. No costs.”
In
view of the above, question no.(2) is also answered in favour of the
assessee and against the Revenue.
In
the result, Tax Appeal is dismissed.
(Akil
Kureshi,J.)
(Ms.
Sonia Gokani,J.)
(raghu)
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