GLENMARK PHARMACEUTICALS LTD, MUMBAI V. ACIT LTU, MUMBAI

CO 3/MUM/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8974 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 18-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Assessee Lawyers: N C MOHANTY ITA MUM; C O MUM E
• Keywords: Depreciation; Cost of acquisition

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 648/MUM/2012 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX LTU, CENTRE -1, 28 TH FLOOR, CENTRE -1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400 005. ( ( ( ( / VS. M/S GLENMARK PHARMACEUTICALS LTD., B/2, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI RD., MUMBAI 400 026. #. !./ PAN : AAACG2207L ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) 01* !/C.O. NO. 03 /MUM/20 13 ARISING OUT OF ITA NO. 648 /MUM/20 12 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2007-08) M/S GLENMARK PHARMACEUTICALS LTD., B/2, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI RD., MUMBAI 400 026. ( ( ( ( / VS. ASSTT. COMMISSIONER OF INCOME TAX LTU, CENTRE -1, 28 TH FLOOR, CENTRE -1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400 005. #. !./ PAN : AAACG2207L CROSS OBJECTOR .. ( 01./ / RESPONDENT ) DEPARTMENT BY SHRI C.P. PATHAK ASSESSEE BY : SHRI N.C. MOHANTY ITA 648/MUM/2012 & C O 03/MUM/13 2 !($ E / // / DATE OF HEARING : 17-09-2013 FG- E / DATE OF PRONOUNCEMENT : 20-09-2013 'H / O R D E R PER P.M. JAGTAP, A.M . : .. , !'# THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) 24, MUMBAI DTD. 09-11-2011 AND THE SAME IS BEING DISPOSED OF ALONG WITH CROSS OBJECTION FILED BY THE ASSESSEE. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 9, 53,557/- MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF CESSATION OF LIABILITIES TOWARDS PAYMENT OF SUNDRY CREDITORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DE PRECIATION OF RS. 11,09,760/- ON ROYALTY PAYMENTS MADE TO M/S LYKA LA BS FOR ACQUIRING THE TRADE MARK. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE ISSUE RAISED IN GROUND NO. 1 RELATING TO THE ADDITION MADE U/S 41(1) OF TH E INCOME TAX ACT, 1961, IT IS OBSERVED THAT THE SAID ADDITION MADE BY THE A.O. TR EATING THE RELEVANT LIABILITIES AS CEASED TO EXIST MAINLY ON THE GROUND THAT THE SAME WERE OUTSTANDING FOR A PERIOD EXCEEDING THREE YEARS WAS DELETED BY THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES O WN CASE FOR A.Y. 2005-06. A COPY OF THE SAID ORDER DATED 20 TH OCTOBER, 2010 PASSED IN ITA NO. 6831/MUM/2008 IS PLACED ON RECORD BEFORE US AND PER USAL OF THE SAME SHOWS THAT A SIMILAR ADDITION MADE U/S 41(1) OF THE ACT WAS HELD TO BE UNSUSTAINABLE BY THE TRIBUNAL FOR THE FOLLOWING REA SONS GIVEN IN PARA NO. 37 OF ITS ORDER:- ITA 648/MUM/2012 & C O 03/MUM/13 3 WE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES . WE FIND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER O F THE ITAT IN THE CASE OF DSA ENGINEERS (BOMBAY) VS. ITO 30 SOT 31 (MUMBAI ) WHEREIN IT WAS HELD THAT IF THE ASSESSEE HAS NOT WRITTEN OFF THE L IABILITIES REFLECTED IN SUNDRY CREDITORS ACCOUNT IT WAS NOT OPEN TO THE ASS ESSING OFFICER TO MAKE ADDITION INVOKING SECTION 41(1)(1) OF THE ACT WITHOUT PROVING THAT THERE WAS CESSATION OF LIABILITIES. WE FIND THAT I N THE CASE OF THE A.O. INVOKED SECTION 41(1)(1) MERELY ON THE GROUND THAT THE LIABILITIES WERE THREE YEARS OLD. THE ORDER OF THE A.O./CIT(A) BOTH ARE NOT SUSTAINABLE THEREFORE WE SET ASIDE THE ORDERS OF THE REVENUE AU THORITIES AND ADDITION MADE BY ASSESSING OFFICER IS DELETED. THE ABOVE DECISION RENDERED IN A.Y. 2005-06 HAS BEE N FOLLOWED SUBSEQUENTLY BY THE TRIBUNAL TO DECIDE A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN A.Y. 2006-07 VIDE ITS ORDER DATED 27 TH JULY, 2012 PASSED IN ITA NO. 6957/MUM/2010. AS THE ISSUE INVOLVED IN THE YEAR U NDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2005-06 & 2006-07, WE RESPECTFULLY FOLLOW THE ORDERS OF THE T RIBUNAL FOR A.Y. 2005-06 & 2006-07 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CI T(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 1 OF REVENUES A PPEAL IS ACCORDINGLY DISMISSED. 4. AS REGARDS THE ISSUE RAISED IN GROUND NO. 2 RELA TING TO ASSESSEES CLAIM FOR DEPRECIATION ON ROYALTY PAYMENTS MADE TO M/S LY KA LABS FOR ACQUIRING THE TRADE MARK, IT IS OBSERVED THAT THE SAME IS ALSO SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 20 TH OCTOBER, 2010 (SUPRA) FOR A.Y. 2005-06 WHEREIN A SIMILAR CLAIM OF THE ASSESSE E FOR DEPRECIATION WAS ALLOWED BY THE TRIBUNAL HOLDING THAT THE ROYALTY PA YMENT MADE BY THE ASSESSEE TO M/S LYKA LABS WAS FORMING PART OF THE COST OF ACQUISITION OF THE ASSET VIZ. BRANDS. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06 ON A SIMILAR I SSUE, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ALLOWING THE ASSES SEES CLAIM FOR DEPRECIATION ON ROYALTY PAYMENTS MADE TO M/S LYKE LABS AND DISMI SS GROUND NO. 2 OF REVENUES APPEAL. ITA 648/MUM/2012 & C O 03/MUM/13 4 5. IN THE C.O., THE SOLITARY ISSUE RAISED BY THE AS SESSEE RELATES TO ITS CLAIM FOR DEPRECIATION ON REPAIRS AND MAINTENANCE EXPENSE S OF RS. 23,73,224/- TREATED BY THE AUTHORITIES BELOW AS CAPITAL EXPENDI TURE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE RELEVANT MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT O UT OF THE TOTAL DISALLOWANCE OF RS. 33.95 LACS MADE BY THE A.O. ON ACCOUNT OF RE PAIRS AND MAINTENANCE EXPENSES TREATING THE SAME AS OF CAPITAL IN NATURE, THE DISALLOWANCE TO THE EXTENT OF RS. 23,73,224/- WAS SUSTAINED BY THE LD. CIT(A). AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE HAS BEEN ACCEPTED BY THE ASSESSEE AND CONSEQUENTLY THE ASSESSEE IS ENTITLED TO DEPRECIATION ON THE REPAIRS AND MAINTENANCE EXPENSE S OF RS. 23,73,224/- TREATED AS CAPITAL IN NATURE. THE LD. D.R. HAS NOT RAISED ANY CONTENTION IN THIS REGARD. ACCORDINGLY, WE DIRECT THE A.O. TO AL LOW CONSEQUENTIAL RELIEF TO THE ASSESSEE BY ALLOWING DEPRECIATION ON THE REPAIR S AND MAINTENANCE EXPENSES TO THE EXTENT THEY ARTE TREATED AS OF CAPI TAL IN NATURE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D WHILE THE C.O. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH SEPTEMBER, 2013. . 'H E FG- I'(J 20-09-2013 G E SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; I'( DATED 20-09-2013 $.)(.!./ RK , SR. PS ITA 648/MUM/2012 & C O 03/MUM/13 5 'H E 0)KL ML- 'H E 0)KL ML- 'H E 0)KL ML- 'H E 0)KL ML-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. N () / THE CIT(A)24, MUMBAI. 4. N / CIT LTU,, MUMBAI 5. L$Q 0))( , , / DR, ITAT, MUMBAI G BENCH 6. %, R / GUARD FILE. 'H(! 'H(! 'H(! 'H(! / BY ORDER, !1L 0) //TRUE COPY// S S S S/ // /!T !T !T !T ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI