MEDIORALS LABORATORIES P.LTD, MUMBAI V. DCIT CEN CIR 2, MUMBAI

CO 144/MUM/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7046 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Block assessment
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO.3403/MUM/2011 (ASSESSMENT YEAR:2008-09) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, 9 TH FLOOR, OLD CGO BLDG.ANNEX, M K ROAD, MUMBAI-400020. M/S MEDIORALS LABORATORIES P.LTD., 12, GUNBOW STREET, HORNBY VIEW BLDG., FORT, MUMBAI-400001. PAN: AAACA5146M APPELLANT V/S RESPONDENT CROSS-OBJECTION NO.144/MUM/2011 IN ITA NO.3403/MUM/2011 (ASSESSMENT YEAR:2008-09) M/S MEDIORALS LABORATORIES P.LTD., 12, GUNBOW STREET, HORNBY VIEW BLDG., FORT, MUMBAI-400001. PAN: AAACA5146M DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, 9 TH FLOOR, OLD CGO BLDG.ANNEX, M K ROAD, MUMBAI-400020. CROSS-OBJECTOR V/S RESPONDENT REVENUE BY : SHRI P.C.MAURYA ASSESSEE BY : SHRI D.R.JA IN DATE OF HEARING : 23.2.2012 DATE OF PRONOUNCEMENT : 20.3.2012 ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 2 ORDER PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 9.2.2011 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEAR 2008-09 AGAINST WHICH THE ASSESSEE HAS ALSO FILED CROSS-OBJECTION. THE REVENUES APPEAL AND A SSESSEES CROSS-OBJECTION ARE DISPOSED OF BY THIS COMMON ORDE R FOR THE SAKE OF CONVENIENCE. ITA NO.3403/MUM/2011 (BY REVENUE) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING A ND DISTRIBUTION OF FORMULATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE IN AD DITION TO MANUFACTURING AT ITS OWN FACTORY, GOT SOME OF THE P RODUCTS MANUFACTURED ON JOB WORK BASIS. SUCH JOB WORKERS, I N PHARMACEUTICAL PARLANCE, ARE CALLED AS LOAN LICENS EE MANUFACTURERS (HEREINAFTER REFERRED TO AS LLMS). T HE ASSESSEE HAS CLAIMED DEDUCTION U/S 80LB IN RESPECT OF PROFIT S OF MANUFACTURING DONE AT THE PREMISES OF LLMS ALSO. TH E AO ALSO REPRODUCED THE DETAILS OF MANUFACTURING PROFITS BEF ORE DEPRECIATION ARISING TO THE ASSESSEE COMPANY FROM I TS OWN ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 3 FACTORY AT SATARA AND FROM MANUFACTURING DONE BY LL MS IN A TABULAR FORM AS UNDER : S.NO. NAME OF THE UNIT DETAILS OF INCOME (IN CRORES) DETAILS OF PROFIT 1 SATARA UNIT 13.14 3,12,95,117 2 LOAN LICENCEE: 5.09 49,12,971 TOTAL 18.23 3,62,08,088 ACCORDING TO THE AO THE ASSESSEE HAS CLAIMED DEDUC TION U/S 80IB AMOUNTING TO RS.87,64,897/- WHICH INCLUDED AN AMOUNT OF RS.14,73,891/- PERTAINING TO LLMS. THE ASSESSEE CLAIMED THAT ALL RAW MATERIAL FOR MANUFACTURING AT THE PREM ISES OF LLMS ARE PROVIDED BY IT AND WHOLE MANUFACTURING TAKES PL ACE UNDER ITS DIRECT SUPERVISION AND CONTROL. UNDER THE CIRCU MSTANCES THE AO OBSERVED THAT THE BASIC ISSUE FOR DETERMINATION AND ADJUDICATION IS WHETHER THE ASSESSEE COMPANY IS ENT ITLED TO DEDUCTION U/S.80-IB(5) ON MANUFACTURING DONE BY LLM S. THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSIONS OBS ERVED THAT THE ASSESSEES SUBMISSIONS HAVE BEEN DEALT WITH IN DETAIL IN THE ASSESSMENT YEAR 2007-08 AND FOLLOWING THE SAME VIEW HELD THAT THE ASSESSEE IS NOT ENTITLED TO THE DEDUC TION U/S 80IB ON THE GOODS GOT MANUFACTURED BY LLMS. THE AO FURT HER HELD THAT THE ASSESSEE IS ALSO NOT ENTITLED TO THE DED UCTION U/S ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 4 80IB ON OTHER INCOME AND INTEREST INCOME AND ACCORD INGLY COMPUTED THE DEDUCTION U/S 80IB AS UNDER :- THE TOTAL BUSINESS INCOME OF THE ASSESSEE RS.3,22,65,635/- LESS : DISALLOWED (I) OTHER INCOME RS.14,14,588/- (II) INTEREST RS.16,20,097/- (III) LLM : RS.49,12,971/ - RS.80,16,784 /- PROFIT ELIGIBLE FOR DEDUCTION U/S 80-IB RS.2, 42,48,851/- DEDUCTION ALLOWED U/S 80-IB@30% R S.72,74,655 /- 3. ON APPEAL, THE LD. CIT(A) FOLLOWING THE APPEL LATE ORDERS OF THE EARLIER YEARS AND THE ORDER OF THE TRIBUNA L IN OKASA PRIVATE LIMITED (PART OF THE SAME GROUP) DIRECTED T HE AO TO ALLOW THE CLAIM OF THE DEDUCTION U/S 80IB OF THE A CT. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. GROUND TAKEN BY THE REVENUE READS AS UNDER : I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT TH E ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80 IB ON THE PROFITS DERIVED FROM THE WORK/MANUFACTURING GOT DON E THROUGH LEASE AND LICENSE MANUFACTURERS (LLMS). ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 5 6. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT THIS ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007 -08. HE HAS ALSO PLACED ON RECORD THE COPY OF THE SAID ORDE RS OF THE TRIBUNAL. HE, THEREFORE, SUBMITS THAT THE ORDER PA SSED BY THE LD. CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE IN DCIT V/S M/S MEDIORALS LABORATORIES P.LTD. IN ITA NO.5913/MUM/2007 (AY-2005-06) AND ITA NO.5915/MUM/2 007 (AY-2005-06) AND C.O. NO.298 & 304/MUM/2007 ORDER D ATED 24.2.2009 WHEREIN VIDE PARAGRAPHS 5,6 AND 7 OF TH E ORDER IT HAS BEEN HELD AS UNDER : 5. HAVING GONE THROUGH THE ORDER OF THE LOWER AUTH ORITIES AND THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CA SE FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04, WE FIND TH AT ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 6 THE IMPUGNED ISSUE HAS BEEN WRECKED UP IN ASSESSMEN T YEAR 2001-02 AND TRIBUNAL HAD ADJUDICATED THE ISSUE IN DETAIL AND HAS GIVEN A FINDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. THIS O RDER OF THE TRIBUNAL WAS FOLLOWED IN SUBSEQUENT YEARS I.E. ASSESSMENT YEARS 2002-03 AND 2003-04 AND DEDUCTION UNDER SECTION 80IB IN RESPECT OF THE INCOME DERIVED FROM MANUFACTURING ACTIVITIES GOT CARRIED OUT THROUGH LL M WAS ALLOWED. THE RELEVANT OBSERVATION OF THE TRIBUNAL I N THE ASSESSMENT YEAR 2001-02 ARE AS UNDER : 13. WE HAVE HEARD BOTH THE PARTIES AND HAVE CONSIDERED THE SUBMISSION. AFTER CONSIDERING THE SUBMISSIONS AND VARIOUS OTHER MATERIAL ON RECORD, W E FOUND THAT THE ORDER OF THE LEARNED CIT(A) IS LIABL E TO BE SUSTAINED. WE NOTED THAT SIMILAR DISALLOWANCE WA S MADE BY THE ASSESSING OFFICER WHILE MAKING BLOCK ASSESSMENT ORDER FOR 1-4-92 TO 19-9-2000. THE ASSESSING OFFICER REDUCED DEDUCTION U/S.80IB ON ACCOUNT OF INCOME GENERATED THROUGH MANUFACTURING GOT FROM LLM. THE MATTER REACHED TO THE TRIBUNAL AN D THE TRIBUNAL BY FINDING OUT THE FACT IN CASE OF GRO UP CASE VIZ., OKASA PVT.LTD. AND OKASA PHARMA PVT. LTD . DECIDED IN II(SS)A NO.259/MUM/2003 IN FAVOUR OF THE ASSESSEE. IN THIS ORDER, IT WAS HELD THAT THE BENEF IT OF DEDUCTION U/S.80IA WAS AVAILABLE TO THE ASSESSEE ON THE INCOME DERIVED THOUGH LLM. FOLLOWING THIS ORDER OF THE TRIBUNAL IN THE CASE OF OKASA PVT. LTD. AND OKA SA PHARMA PVT.LTD. THE APPEAL OF THE ASSESSEE FOR BLOC K PERIOD WAS ALSO ALLOWED BY THE TRIBUNAL IN IT(SS)A NO.644/MUM/2003 VIDE ORDER DATED 21-11-2006. A COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECO RD. 6. SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW I N EARLIER YEARS, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THESE APPEALS. WE, ACCORDINGLY, DECIDE THIS ISSUE IN FAVO UR OF THE ASSESSEE. WE, THEREFORE, FIND NO INFIRMITY IN THE O RDER OF THE CIT(A) WHO HAS DECIDED THE ISSUE IN CONSONANCE WITH THE ORDER OF THE TRIBUNAL. 7. IN CROSS OBJECTIONS, THE COMMON ISSUE IS RAISED WITH REGARD TO THE DISALLOWANCE OF CLAIM OF DEDUCTION UN DER SECTION 80IB ON SALE OF SCRAPS. THE ISSUE WAS ALSO EXAMINED BY THE TRIBUNAL IN EARLIER YEARS AND IT WA S HELD ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 7 THAT DEDUCTION UNDER SECTION 80IB WILL BE ALLOWED O N THE SALE OF SCRAP. WE, THEREFORE, FOLLOWING THE ORDER O F THE TRIBUNAL FOR EARLIER YEARS, DECIDE THIS ISSUE IN FA VOUR OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS S ET ASIDE IN THIS REGARD AND ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. 9. THE ABOVE ORDER HAS BEEN CONSISTENTLY FOLLOWED B Y THE TRIBUNAL FOR THE ASSESSMENT YEARS 2006-07 AND 2007- 08. 10. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING TH E CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THE ASSESSEE IS ENT ITLED FOR DEDUCTION U/S 80IB AND ACCORDINGLY, WE DECLINE TO I NTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE U/S 80IB OF THE ACT. THE GROUNDS TA KEN BY THE REVENUE ARE, THEREFORE, REJECTED. CROSS-OBJECTION NO.144/MUM/2011(BY ASSESSEE) 11. GROUND TAKEN BY THE ASSESSEE READS AS UNDER : THE CIT(A) ERRED IN RESTORING BACK TO THE FILE O F THE AO, THE DISALLOWANCE OF RS.4,57,781/- U/S 14A 12. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE ABOVE G ROUND TAKEN BY THE ASSESSEE IN CROSS-OBJECTION WHICH WAS NOT OBJECTED TO BY THE LD. DR. ITA NO.3403/MUM/2011 CO NO.144/MUM/2011 8 13. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER S UPPORTING MATERIALS PLACED ON RECORD BY THE LD. COUNSEL FOR T HE ASSESSEE, THE GROUND TAKEN BY THE ASSESSEE IN CROSS-OBJECTION IS, THEREFORE, REJECTED BEING NOT PRESSED. 14. IN THE RESULT, THE REVENUES APPEAL AND ASSESSE ES CROSS- OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH MARCH, 2012. SD S D (G.E.VEERABHADRAPPA) (D.K.AGARWAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 20TH MARCH, 2012. SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUM BAI