TaxTMI 
TaxTMI 
2019 (8) TMI 841
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....different varieties of biscuits and confectionaries. For the purpose of its manufacturing activities, it has set-up a unit at Mumbai. That besides, the assessee also gets the products manufactured on contract basis through a number of Contract Manufacturing Units(CMUs) spread across the Country. For the assessment year under dispute, the assessee filed its return of income on 28th November 1997, declaring total income of Rs. 35,32,52,912. During the assessment proceedings, the Assessing Officer after calling for various information and materials from the assessee and verifying them, found that the normal yield of biscuits as per the standard formula is 92.59%. Further, assessee's CMUs have given average yield of 90.26%. Whereas, the assessee has shown the yield of biscuits at its own unit at Mumbai @ 82.92%. Thus, the Assessing Officer was of the view that the yield shown by the assessee is comparatively lower than the average yield of CMUs. Thus, he concluded that the assessee has suppressed the production of biscuits which resulted in suppression of sales. Accordingly, considering the average yield of CMUs @ 90.26% as the benchmark, the Assessing Officer worked out the suppres....
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....w material and manufacture furnished by the assessee, the yield works out to 84%. He has also referred to the information obtained from contract manufacturing units to conclude that the average yield of contract manufacturing units work out to 91.55%. In this context, the Assessing Officer has also referred to the standard formula applicable and the physical enquiry conducted by him at the factory premises, wherein, it was found that the manufacturing of products at Mumbai unit is through sophisticated machinery. In the course of assessment proceedings, the assessee has explained comparative lesser yield qua contract manufacturing units due to the following reasons:- i) Variety of biscuits manufactured at Mumbai unit compared to little variety of biscuits manufactured in contract manufacturing units; ii) In case of contract manufacturing units, due to similar size of production and type of machinery used biscuit fall on the belt and tray which are manually picked up and sorted and identified for re-use or waste. Whereas, in case of Mumbai unit production being faster it is difficult to have such control and also costs for employing labour to pick and sort out bisc....
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....planation that the figure of 1059 MTs shown in the original statement was due to a mistake is believable. As far as the allegation of the Assessing Officer that the raw material "others" were not shown in the audit report, we are of the view that non-mentioning of the said item in the Annexure to the audit report may be for the reason that as per Form no.3CD, only primary raw materials are required to be shown. Therefore, non-mentioning of raw material "others" in the Annexure to the audit report cannot be considered to be very serious lapse so as to infer suppression of sales and unreliability of books of account. It is a matter of record that the goods produced by the assessee are excisable goods and subject to scrutiny and regulatory measures of Central Excise authorities. It is also a fact on record that the assessee has maintained all Central Excise registers with regard to consumption of raw materials, production of biscuits and confectionary which have been verified by the Central Excise authorities periodically and the authenticity of the entries made in the said registers have not been questioned by them. It is also a fact on record that the Central Excise registe....
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....essment years has been shown by the assessee as under:- A.Y. Percentage 1992-93 83.11% 1993-94 83.32% 1994-95 82.27% 1995-96 81.65% 54. Thus, compared to the yield of Mumbai unit in the preceding assessment years as noted above, the assessee has shown a higher yield for the Mumbai unit in the impugned assessment year. Therefore, on over all consideration of facts and circumstances of the case, we are of the considered opinion that rejection of books of account and addition made on estimate basis alleging suppression of sale is not in accordance with law. Therefore, even a part of addition made by the Assessing Officer cannot be sustained. Accordingly, we delete the addition made by the Assessing Officer fully. Ground no.8 of the Department is dismissed and grounds no.4 & 5 raised by the assessee are allowed." 9. Following the aforesaid decision, the Tribunal again deleted similar addition made by the Assessing Officer in the assessment year 1998-99 and other years while deciding the appeals in ITA no.6821/ Mum./2004 and others, dated 22nd October 2018. Facts being identical, respectfully following the aforesaid decisions of the Tri....
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....of addition made on account of suppression of production resulting in suppression of sales of biscuits and confectionery manufactured in CMUs. 16. In course of assessment proceedings, on verifying the details available on record the Assessing Officer concluded that the assessee has suppressed the production of biscuits and confectionery in CMUs resulting in suppressed sales. Accordingly, he added Rs. 25,42,000. 17. The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assessee in assessment year 1996-97.However, he submitted, learned Commissioner (Appeals) should have properly verified the facts of the impugned assessment year before deleting the addition. 18. The learned Authorised Representative supporting the decision of learned Commissioner (Appeals) submitted, the issue has been decided in favour of the assessee by the Tribunal in assessment year 1996-97. 19. We have considered rival submissions and perused the material on record. It is noticed, identical issue came up for consideration before the Tribunal in the assessment year 1996-97. While deciding the issue in the order cited supra, the Tribunal deleted the ad....
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....erring to the provisions of section 45 r/w section 55(2) of the Act, the Assessing Officer treated the amount of Rs. 5,09,97,000, as capital gain and added back to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority. 24. After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) noticed that similar addition was made in case of another subsidiary of the assessee viz. Parle Biscuits Pvt. Ltd., towards receipt of non-compete fee from GDOPL, under similar agreement. While deciding the issue in the appeal filed by the said company, the first appellate authority deleted the addition by holding that amount received for trademark/non-compete fee as capital receipt, hence, not taxable. Further, he observed, the aforesaid decision of the first appellate authority in case of the subsidiary was accepted by the Department by not filing any appeal before the Tribunal. Accordingly, he deleted the addition made by the Assessing Officer. 25. The learned Departmental Representative extensively referring to the observations made by the Assessing Officer in the as....
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...., cannot be treated as goodwill. He submitted, since the assessee lost its source of income while transferring oral care business, by negative covenant, the amount received is a capital receipt, hence, not taxable. Further, he submitted, income from transfer of trademark and non-compete fee cannot be treated as goodwill as they are distinct and different. Contesting the observations of the Assessing Officer and the contention of the learned Departmental Representative that trademark and non-compete fee are part of goodwill. The learned Authorised Representative submitted, had it been the case, there was no need for the legislature to amend the provision of section 55(2)(a) of the Act by specifically including trademark, brand name, right to manufacture, produce or carry on business in the definition of cost of acquisition. He submitted, the aforesaid amendment clearly indicates that trademark, non-compete fee, etc., were never considered to be part of goodwill. That being the case, since there is no cost of acquisition of trade mark which is self-generated and also in respect of non-compete fee, the computation mechanism provided under section 48 of the Act would fail. Hence, capit....
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....ark and non-compete fee can be treated as goodwill. On going through the terms of the agreement placed in the paper book, it is noticed that it is very specifically mentioned that the amount received by the assessee is towards trademark and non-compete fee. That being the case, the conclusion drawn by the Assessing Officer that they are in the nature of goodwill is unsustainable. Undisputedly, the Assessing Officer himself has treated the amount received by the assessee towards trademark and non-compete fee to be towards sale of capital asset viz. goodwill and resorting to the provisions of section 55(2)(a) of the Act has held that the cost of acquisition of the asset has to be taken as nil for the purpose of computing capital gain. However, on reading of section 55(2)(a) of the Act, it becomes clear that goodwill as a capital asset is distinct and separate from trademark, brand name or any other right to carry on any business. This is evident from the amendment brought to section 55(2)(a) of the Act inserting trademark, brand name, right to carry on any business, etc. Thus, from the amendments brought to section 55(2)(a) of the Act, it becomes clear that the legislature never i....
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....s Appeal 29. In ground no.1, the assessee has challenged the disallowance of Rs. 22,28,465, made on account of suppression of sales of biscuits and confectionary. 30. In the course of assessment proceedings, the Assessing Officer noticed difference in sale figures of biscuits and confectionary, as shown in RT-12 statements filed before the Central Excise authorities and as recorded in the books of account. After calling for necessary explanation from the assessee and finding the explanation of the assessee unacceptable, he added back the amount of Rs. 1.24 crore towards suppression of sale of biscuits andRs. 21,51,345, towards suppression of sales in confectionery. 31. While deciding the appeal on the issue, learned Commissioner (Appeals) following the decision of the Tribunal in case of assessee's sister concern Parle Biscuits Pvt. Ltd. in assessment year 1997-98, sustained addition to the extent of Rs. 22,28,465. 32. The learned Authorised Representative submitted, the difference in sales figure between the RT-12 statements and books of account of the assessee is negligible and works out to only 0.08%. Therefore, no addition on account of such negligible difference sh....