M/s Ozone Pharmaceuticals Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 360/DEL/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5277 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 04-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI SENIOR
• Keywords: Business income; Tax effect
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE G.D. AGRAWAL, HON'BLE VICE-PRESIDENT AND SHR I RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO.3862/DEL/2009 ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF IT, VS. M/S. OZONE PHARMACE UTICALS CIRCLE 13(1), PVT. LTD, 1, LSC, BLOCK A-3, NEW DELHI. JANAKPURI, NEW DELHI. (PAN: AAACO0056H) (APPELLANT) (RESPONDENT) CROSS OBJ. NO.360/DEL/2009 ( ITA NO.3862/DEL/2009 ) ASSESSMENT YEAR: 2004-05 M/S. OZONE PHARMACEUTICALS VS. DEPUTY COMMISSIONE R OF IT, PVT. LTD, 1, LSC, BLOCK A-3, CIRCLE 13(1), JANAKPURI, NEW DELHI. NEW DELHI. (PAN: AAACO0056H) (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RS NE GI, SENIOR DR ASSESSEE BY: SHRI TARUN KUMAR, ADV. ORDER PER BENCH: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 23.6.2009 PASSED FOR ASSESSMENT YEAR 2004-05. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, ASSESSEE HAS FILED CROSS-OBJECTION BEARING NO.360/DEL/2009. THE REVENUE HAS PLEADED TH AT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.89,66,363. THE 2 ASSESSEE IN ITS CROSS-OBJECTION HAS PLEADED THAT TH ERE IS NO TAX EFFECT IN THIS APPEAL, THEREFORE, IT IS NOT MAINTAINABLE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS FILED ITS RETURN OF INCOME ON 21.9.2004 DECLARING NIL INCOME AFTER CLAI MING DEDUCTION UNDER SEC. 80IB OF THE INCOME-TAX ACT, 1961. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF ALLOPATHIC AS WELL AS AYURVEDIC MEDICINES AT ITS PLANT SITUATED AT BADDI IN HIMACHA N PRADESH AND GAUHATI IN ASSAM. IT HAS INCURRED AN EXPENDITURE OF RS.8,96,63 ,621 TOWARDS SALES PROMOTION AND INCENTIVES. ASSESSING OFFICER DISALLO WED 10% OF THESE EXPENSES AND ACCORDINGLY MADE AN ADDITION OF RS.89, 66,363. ON APPEAL, THIS ADDITION HAS BEEN DELETED BY THE LEARNED CIT(APPEAL S). 3. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT IN THIS YEAR, ASSESSEE IS ENTITLED FOR A DEDUCTION UNDER SEC. 80IB @ 100%. THUS, EVEN IF, FOR ARGUMENT SAKE, THIS DISALLOWANCE IS RESTORED THEN THE ADDITION WOULD BE NEUTRALIZED BY GIVING A DEDUCTION . THUS, ULTIMATELY, THERE WILL BE NO TAX IMPLICATION. HE DREW OUR ATTENTION T OWARDS PAGE 4 OF THE ASSESSMENT ORDER WHERE ASSESSING OFFICER HAS COMPUT ED THE TAXABLE INCOME AT NIL. ON THE OTHER HAND, LEARNED DR SUBMITTED THA T THERE WILL BE RECURRING 3 EFFECT ON THIS ISSUE AND, THEREFORE, ITS APPEAL SHO ULD NOT BE DISMISSED FOR WANT OF TAX EFFECT. HE PLACED ON RECORD COPY OF THE HON'BLE SUPREME COURTS DECISION IN THE CASE OF CIT, CENTRAL VS. SURYA HARB AL LTD. IN SLP NO.1369/2011. 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER HAS COMPUTED TH E INCOME OF THE ASSESSEE AS UNDER: INCOME FROM BUSINESS : RS.1,35,56,781 (AS DECLARED IN THE RETURN OF INCOME) ADD: 10% DISALLOWANCE OF CASH PAYMENTS (AS DISCUSSED IN PARA 3 ABOVE) : RS. 89,66,363 TOTAL INCOME RS.2,25,23,146 LESS: DEDUCTION U/S. 80-IB RESTRICTED TO TOTAL INCO ME (AS CLAIMED IN THE RETURN OF INCOME ) : RS.2,25,2 3,146 TOTAL INCOME : RS. NIL 5. FROM THE PERUSAL OF THE ABOVE COMPUTATION, IT RE VEALS THAT ASSESSEE HAS DECLARED NIL INCOME AFTER CLAIMING DEDUCTION UNDER SEC. 80IB. ASSESSING OFFICER HAS ALSO DETERMINED NIL INCOME EVEN AFTER M AKING DISALLOWANCE AT 10% OF SALES PROMOTION EXPENSES. IN OTHER WORDS, TH E DISALLOWED AMOUNT HAS BEEN INCLUDED IN THE BUSINESS INCOME OF THE ASSESSE E AND A DEDUCTION UNDER SEC. 80-IB @ 100% HAS BEEN ALLOWED ON SUCH DISALLOW ANCE. FACED WITH THIS 4 FACTUAL POSITION, WE ARE OF THE VIEW THAT THERE IS NO TAX IMPLICATION AND THERE IS NO NEED TO GO INTO THE ISSUE, WHETHER 10% OF SAL ES PROMOTION EXPENSES DESERVES TO BE DISALLOWED OR NOT? THE PRESENT APPEA L IN VIEW OF THE BOARDS INSTRUCTION NO.5 OF 2008, IS NOT MAINTAINABLE. LEAR NED DR AT THE TIME OF HEARING EXPRESSED HIS APPREHENSION THAT DISMISSAL O F REVENUES APPEAL WOULD EFFECT ITS RIGHT IN SUBSEQUENT YEARS. IN OUR OPINIO N, THIS APPREHENSION IS MISPLACED BECAUSE, WE ARE NOT DECIDING THE ISSUE ON MERIT I.E. WHETHER EXPENSES INCURRED TOWARDS SALES-PROMOTION ARE TO BE ALLOWED COMPLETELY OR NOT. IN ORDER TO ELIMINATE HIS APPREHENSION, WE OBS ERVE THAT THIS ORDER WOULD NOT BE CONSIDERED AS A PRECEDENT FOR OTHER YEARS WH ERE DISPUTE WOULD BE REQUIRED TO BE ADJUDICATE ON MERIT. WE ARE DISMISSI NG THE APPEAL OF REVENUE SIMPLY FOR THE REASONS THAT THERE IS NO TAX EFFECT INVOLVED IN THIS APPEAL AGAINST THE ORDER OF LEARNED CIT(APPEALS). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED WHEREAS THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 21.10.201 1 SD/- SD/- ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE- PRESIDENT JUDICIAL MEMBER DATED: 21/10/2011 MOHAN LAL 5 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR