COMMISSIONER OF INCOME TAX V. CADILA PHARMACEUTICALS LTD.

TAXAP/399/2007

AI Insights

The case revolves around a tax dispute between the Commissioner of Income Tax and Cadila Pharmaceuticals Ltd. concerning several disallowances made by the Assessing Officer (AO) in the assessment year 2001-02. The main issues pertained to the disallowance of unpaid PF/ESI contributions and the computation of interest under section 234B of the Income Tax Act. The ITAT had earlier ruled in favor of the assessee, Cadila Pharmaceuticals, leading to the present appeal by the Commissioner of Income Tax. The High Court's decision affirmed the ITAT's judgment, citing precedents from the Supreme Court that supported the Tribunal's findings.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 728557 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 21-12-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Aloma Extrusions Ltd., Commissioner of Income Tax vs. M.A. Presstressed Works
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SWATI SOPARKAR
• Assessee Lawyers: MAUNA BHATT
• Keywords: Disallowance; Income Tax; Interest computation; MAT; PF & ESI
• Section: 139; 234B; 80HHC; 36 (1) (iii); 115JB; 35(2AB); 43B(b); 40A(2)(a)

Judgement Text

"O/TAXAP/399/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 399 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH Sd/­ and HONOURABLE MR.JUSTICE R.D.KOTHARI Sd/­ ============================================= 1. Whether Reporters of Local Papers may be allowed to see the judgment ? No 2. To be referred to the Reporter or not ? No 3. Whether their Lordships wish to see the fair copy of the judgment ? No 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5. Whether it is to be circulated to the civil judge ? No ============================================= COMMISSIONER OF INCOME TAX....Appellant(s) Versus CADILA PHARMACEUTICALS LTD.....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.D.KOTHARI Date : 21/12/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 11.08.2006 passed by the learned Income Tax Appellate Tribunal, Ahmedabad Bench ‘D’ [hereinafter referred to as “ITAT”] in Page 1 of 5 O/TAXAP/399/2007 JUDGMENT ITA No.1184/Ahd/2005 for the assessment year 2001­02, the Revenue has preferred the present tax appeal to consider the following substantial questions of law. “[A] Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance made u/s.43B(b) read with second proviso, in respect of unpaid PF/ESI amount which remained unpaid even during the grace period available? [B] Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to recompute interest u/s.234B after allowing credit of MAT?” [2.0] That the assessee filed the return of income for the assessment year 2001­02 as a total income of Rs.2,80,86,670/­. However, the tax was paid under section 115JB of the Income Tax Act, 1961 [hereinafter referred to as “Act”] as MAT at Book Profit of Rs.14,34,81,161. Thereafter the revised return of income was filed at total income of Rs.2,96,01,803/­ and the Book Profit was revised at Rs.14,33,31,204/­. That the AO made disallowance/additions on the following counts. 1. Disallowance of prior period expenses Rs.27,36,460/­ 2. Disallowance (Protective) of discount/Premium on Zero pct. Debs. Rs.40,08,750/­ 3.a Disallowance u/s.40A(2)(a) of Rent Rs.21,00,000/­ 3.b Disallowances u/s.40A(2)(a) of Management Consultancy fees Rs.30,00,000/­ 4. Disallowance of depreciation on Mercedes Car Rs.13,26,787/­ 5. Disallowance of weightage in reduction on expenses connected with sec.35(2AB) approved R & D Rs.25,23,138/­ 6. Disallowance in respect of PF/ESI payments within grace period Rs. 7,47,328/­ 7. Computation of deduction u/s. 80HHC based on different basis than that adopted by the Assessee Rs.11,78,956/­ Page 2 of 5 O/TAXAP/399/2007 JUDGMENT 8a Not allowing the deductions claimed by way of notes forming part of the return, which are preoperative expenses & SAP/ENP exps. Not computed in assessee’s working but deductions claimed in notes to return 8b Not computing deduction u/s.36(1(iii) in respect of int. capitalized and carried forward (pre­operative) in balance sheet in spite of details being provided during the proceedings Not computed in assessee’s working but deductions claimed in notes to return 9. Incorrect computation of book profits by including additions of prior period expenses & Mercedes deprn. disallowed in normal income assessment and not allowing deduction in respect of eligible export profits to the extent of 100%. 10. Incorrect higher computation of interest u/s.234­B and C. [2.1] Feeling aggrieved and dissatisfied with the order passed by the AO making disallowances / additions on the aforesaid counts, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) vide order dated 10.01.2005 dismissed the said appeal confirming the disallowance/additions made by the AO. However, directed the AO to charge the interest under section 234B only after allowing the credit of MAT. [2.2] Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), the assessee preferred appeal before the learned ITAT insofar as the order passed by the learned CIT(A) confirming the disallowance/additions made by the AO on the aforesaid counts. The revenue also preferred appeal against the order passed by the learned CIT(A) in directing the AO to charge the interest under section 234B only after allowing the credit of MAT. By impugned judgment and order the learned ITAT has deleted the disallowance under section 43B(b) of the Act read with second proviso, in respect of unpaid PF/ESI amount. By impugned judgment and order the learned ITAT has also directed the AO to re­compute the interest under section 234B of the Act after allowing credit of MAT. Page 3 of 5 O/TAXAP/399/2007 JUDGMENT [2.3] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT, the revenue has preferred the present tax appeal to consider the following substantial questions of law. “[A] Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance made u/s.43B(b) read with second proviso, in respect of unpaid PF/ESI amount which remained unpaid even during the grace period available? [B] Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to recompute interest u/s.234B after allowing credit of MAT?” [3.0] Heard learned advocate appearing on behalf of the respective parties at length. At the outset it is required to be noted that the first question i.e. deleting the disallowance made u/s.43B(b) read with second proviso, in respect of unpaid PF/ESI amount is concerned, the said question is now not res integra in view of the decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax vs. Aloma Extrusions Ltd. reported in (2009)319 ITR 306 (SC). It is required to be noted that it was the case with respect to employer’s contribution as per section 43B(b) of the Act and it is not in dispute that employer’s contribution with respect to PF/ESI amount was as such deposited before the due date of filing of the return under section 139 of the Act. Considering the fact that second proviso to section 43B came to be deleted and as per the decision of the Hon’ble Supreme Court in the case of Aloma Extrusions Ltd. (Supra), the deletion of second proviso to section 43B of the Act and amendment in the first proviso to section 43B is held to be retrospective in operation, it cannot be said that the learned Tribunal has committed any error and/or illegality in deleting the disallowance made under section 43B(b) of the Act in respect of the unpaid PF/ESI amount. Applying the ratio/law laid down by the Hon’ble Supreme Court in the case of Aloma Extrusions Ltd. (Supra), question No.(A) is answered Page 4 of 5 O/TAXAP/399/2007 JUDGMENT against the revenue. [3.1] Now, so far as the question No.(B) i.e. the order passed by the Appellate Tribunal directing the Assessing Officer to recompute interest u/s.234B after allowing credit of MAT is concerned, the same is also now not res integra in view of the decision of the Hon’ble Superme Court in the case of Commissioner of Income Tax vs. M.A. Presstressed Works reported in 220 ITR 226. We have considered the decision of the Hon’ble Supreme Court in the case of M.A. Presstressed Works (Supra). Applying the ratio/law laid down by the Hon’ble Supreme Court in the case of M.A. Presstressed Works (Supra) to the facts of the case on hand, it cannot be said that the learned ITAT has committed any error and/or illegality in directing the AO to re­compute the interest under section 234B of the Act after allowing credit of MAT. Under the circumstances, question No.(B) is also answered against the revenue. [4.0] In view of the above, present Tax Appeal fails and the same deserves to be dismissed and is, accordingly, dismissed. No costs. Sd/­ (M.R. SHAH, J.) Sd/­ (R.D. KOTHARI, J.) Ajay Page 5 of 5 "