TaxTMI 
TaxTMI 
2012 (10) TMI 718
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.... and in law by deleting addition of Rs.13,48,752/- made on account of sale of raw material by the assessee company to its holding company at less than the market price on the ground that it was a distress sale, ignoring that : i). If the holding company could find a market for the raw material then the sale could have been made by the subsidiary assessee company directly to the buyers instead of to the holding company. ii) In the facts and circumstances of the case the sale of the raw material by the assessee company to its holding company at less than the market price cannot be said to be a distress sale." 3. In this case the assessee company was engaged in trading of packed fruit juices under the brand name 'Tropicana'. As....
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....ak India Limited. The laminate which was purchased from Tetra Pak India Limited was specific to product and had the brand "Tropicana Twister" printed on it. Thus, it could not be used for any other product. The management in order to recover at least part of the cost sold it to a third party namely M/s Ankit Paper Company. The said laminate was sold for a sum of Rs.186,673/- which was purchased at cost of Rs.7,555,291/-. This decision to sell the waste laminate was also taken to avert the continued cost of storing the same. The management also decided to sell the old concentrate of 'Tropicana Twister', as its shelf life was going to expire. The company sold the concentrate at cost price to M/s Pepsico India Holdings Private Limited, Chem....
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....en it had already invested hugely on the installation of new machinery and the import of raw and packing material. Assessing Officer further observed that it was surprising that the assessee company could not find any other buyer for raw material except its own holding company to whom it was sold off without earning anything. Assessing Officer held if the holding company could find market for 'Tropicana Twister', it should not have been out of assessee's reach as well. Assessing Officer further observed that assessee company has therefore, extended undue benefit to its holding company which is a specified person u/s. 40A(2)(b) in not charging the market price for the concentrate of Tropicana Twister. In this background, Assessing Officer he....
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....issioner of Income Tax (A) deleted the addition made in this regard. Ld. Commissioner of Income Tax (A) further deleted the addition made by the Assessing Officer regarding the loss in sale of packing material amounting to Rs.7,182,327/-. Further, Ld. Commissioner of Income Tax (A) observed that Assessing Officer has not appreciated that the product could not be launched. In order to minimize the loss, the concentrate was sold. Ld. Commissioner of Income Tax (A) concluded that the facts do not suggest the estimation of GP on the said sale when it is distress sale. He held that business consideration of the assessee cannot be questioned on flimsy grounds. 5. Against the above order the Revenue is in appeal before us. 6. We hav....
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....cted in this case. He further submitted that no discrepancy has been found in the books of accounts in this case. 6.1 We have carefully considered the submissions and perused the records. We find that in this case assessee company purchased raw material namely fruit juice concentrate during the year 31.3.2002 for the purpose of manufacturing 'Tropicana Twister', a proposed new brand of juice drinks. The aforesaid raw material had been purchased in the preceding year and represented the raw material and was in respect of the proposed new brand of juice drinks. However, due to change in the market and lack of demand in the aforesaid product in the Indian Market, proposed launch of the aforesaid product could not be materialized and launch ....
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....dian market. We find that it is the contention of the assessee that the said aforesaid concentrate has a limited shelf life, since the same was due to expire. Assessee had to sell the same to its holding company to minimize the loss in this regard. Thus, we find that this was a business decision of the assessee and Revenue cannot question the same. Moreover, we note that there is no evidence that assessee has sold the concentrate to its holding company which in turn has made a profit in this regard, by selling it to others. Hence, the contention of the revenue that assessee could also have found buyers as the holding company is also devoid of cogency. 6.3 In this regard, we refer the decision of the Hon'ble Apex Court in the case of Ld. ....