BLACK DIMOND BEVERAGES LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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R. V. Easwar, Judicial Member -
(1.) THIS appeal is directed against the order of Commissioner of lncome-tax, dated 19-3-1990 passed under Section 263 of the Income-tax Act, 1961.
(2.) The assessee is a public limited company. It manufactures aerated drinks, such as Thumps Up, Limca etc. under franchise. The unit was in Taratola. The accounts of the company were maintained from 1st July to the 30th June the next year. During the accounting year ended 30-6-1984, the assessee set up a new unit for bottling aerated drinks at Dankuni. In respect of this new unit, the assessee maintained accounts from 1-7-1984 to 30-9-1984. The accounting year of the company was consequently changed from 30-6-1984 to 30-9-1984. The commercial production in the Dankuni Unit started on 28-9-1984 as per the Chairman's statement to the shareholders on 18-1-1986.
In the return filed in respect of the assessment year 1985-86 for the period 1-7-1983 to 30-9-1984, the assessee adjusted the loss arising in the Dankuni Unit's accounts against the profit of Taratola Unit. The loss was allowed in the assessment made on 30-3-1988. The CIT later took proceedings under Section 263 of the Income-tax Act, 1961. According to him, the assessment order was erroneous and prejudicial to the interests of revenue inasmuch as the loss of the Dankuni Unit as set off against the profits of the Taratola Unit. He took the view that the Dankuni Unit was not a new business of the assessee and the assessee cannot be permitted to opt to close the accounts of the new Unit on any date other than the date of closing adopted in respect of the accounts of Taratola Unit. In other words, the assessee did not have the option of having a separate accounting year in respect of the Dankuni Unit and the provisions of Section 3(1)(d) of the Act were not applicable. Sub-section (3) of Section 3 was not also applicable to the assessee's case since the Dankuni Unit was not a new business of the assessee, and was the same as the Taratola Unit, and, therefore the assessee cannot be permitted to have a separate accounting year in respect of the Dankuni Unit. In coming to the conclusion that the Dankuni Unit was not a new business of the assessee, the CIT relied on the fact that both the Units of the assessee were manufacturing the same type of products using the same raw-materials and were functioning under the same management. In this view of the matter, he came to the conclusion that the Income-tax Officer was in error in allowing the assessee to make up its accounts in respect of Dankuni Unit up to 30-9-1984 for the assessment year 1985-86 and thereby permitting the assessee to adjust the loss from the Dunkuni Unit against the profits of Taratola Unit. He, therefore set aside the assessment with the following observations :
Having so quoted extensively the provisions of law with regard the previous year, the facts of the case may be re-examined afresh and the provisions of law applied therein. The assessee i.e., M/s. Black Diamond Beverage Ltd. is an old assessee who had made up its account for up to the period 30-6-1984. The business of the assessee was manufacturing and sale of Aerated Water with the branch names of ï¿½Thumps Up', 'Limca' etc. at its manufacturing Unit at Taratola. The assessee set up only a new Unit to manufacture the same item under the same management and with the same finances etc. In the facts, though it could be considered as a separate Industrial Unit, it cannot be said that the assessee set up a new business. Even it is assumed only for the purpose of argument that the assessee set up a new business even then the provisions of Section 3(1)(d) will apply and the previous year could have been ending with the said financial year i.e., 31-3-1985 or since the account of the assessee have been made up to 30-6-1?984 within the said financial year ending on 31-3 1985 then at option of the assessee the accounting year of the assessee for the newly set up business could have been ending on 30-6-1984 only. Provisions of Sections 3(1)(e) and 3(2) does not apply in the facts of the case of the assessee. Provisions of Section 3(3) is also not applicable in the facts of the case of the assessee as because the case of the assessee is well covered under Section 3(1)(b) and/or 3(1)(d). Order of the Assessing Officer, is therefore, clearly wrong in taking the previous year for the new Unit as has been done by him. The order of the Assessing Officer is therefore set aside. He should call for full and proper dating and determine whether the assessee started any new business in setting up a new Unit at Dankuni. He should further examine if the previous year of the new Unit if it is, taken as a new business, be taken on ending with the said financial year. Finally, he may consider any other points which may come to his notice in this regard. It is needless to say that the Assessing Officer should allow proper opportunity before finalising the assessment order.
(3.) THE assessee questions the order of the CIT before us. Mr Bajoria appearing for the assessee strongly criticised the conclusion of the CIT. He stated that the new Unit at Dankuni was a separate source of income as far as the assessee is concerned, notwithstanding the fact that the nature of the business in that Unit was the same as that in the Taratola Unit. According to him, the assessee was free to adopt a different accounting year in respect of a different or separate source of income even under the same head under Section 3(3) of the Act. He pointed out that the CIT has confused the expression "source of income" with the expression "business" which has resulted in the erroneous conclusion that the assessee cannot have a separate accounting year in respect of the Dankuni Unit. He relied on the following judgments in support of his contention that the Dankuni Unit was a separate source of income, and therefore the assessee was free to have a different previous year in respect of the same :
(i) Seth Shiv Prasad v. CIT  84 ITR 15 (All.)
(ii) CIT v. Lady Kanchanbai  77 ITR 123 (SC)
(iii) CIT v. India Sea Foods  168 ITR 721 (Ker.)
(iv) Addl. CIT v. K. Ramachandra Rao  127 ITR 414 (AP)
(v) Tenth TTO v. B.C. Deshpande  27 ITD 194 (Bom.).;
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