COMMISSIONER OF INCOME TAX (CENTRAL), GURGAON V. M/S PARABOLIC DRUGS LTD.

ITA/49/2012

AI Insights

The case involves the Commissioner of Income Tax (Central), Gurgaon as the appellant and M/s Parabolic Drugs Ltd. as the respondent. The appeal was filed against the order of the Income Tax Appellate Tribunal, Delhi, which had deleted a disallowance of \\u20b970,10,95,947, treating them as revenue expenditure. The main legal contention was whether the expenditure incurred by the assessee on R&D was capital or revenue in nature. The High Court, however, did not address the substantive issues due to a lack of territorial jurisdiction, as the original assessment was made by an officer in New Delhi, and the case was later transferred to Chandigarh.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 678322 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 11-10-2012
• Assessment Year: misc
• Other Referred Cases: The Commissioner of Income Tax, Faridabad Vs. M/s Motorola India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: VIVEK SETHI
• Keywords: Capital expenditure; Intangible assets; Jurisdiction; R&D expenditure; Revenue expenditure; Weighted deduction
• Section: 143(3); 37(1); 250(6); 127; 35(2AB); 35(1)(i); 260-A

Judgement Text

"ITA No.49 of 2012 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No.49 of 2012(O & M) Date of decision:11.10.2012 Commissioner of Income Tax (Central) Gurgaon .....Appellant Versus M/s Parabolic Drugs Ltd. .....Respondent CORAM : HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.Vivek Sethi, Advocate, for the appellant. ****** G.S.Sandhawalia J. 1. The present appeal has been filed under Section 260-A of the Income Tax Act, 1961 (for brevity, the 'Act') against the order dated 17.06.2011 of the Income Tax Appellate Tribunal, Delhi Bench 'F', New Delhi passed in ITA No.2111/Del/2010 for the assessment year 2006-07. 2. The Revenue has claimed the following substantial question of law for determination of this Court: “The Hon'ble ITAT has erred in law as well as fact by deleting the disallowance of `7,10,95,947/-, treating them as revenue expenditure in contravention of the provisions of Section 35(1)(i) and 37(1) ignoring that: i. The expenditure incurred by the assessee on R&D was for creating intangible assets (new drugs and processes) with a view to produce benefit for several years and such expenditure was clearly capital in nature. ii. Originally the assessee had rightly categorized these expenditure in books so as to avail the benefit of Section 35(2AB) for weighted deduction and had changed the category as revenue expenditure, as an afterthought in the revised return, even though the nature of expenditure incurred remained same.” ITA No.49 of 2012 2 3. A perusal of the paper-book of the present appeal shows that the assessment order dated 26.12.2008, under Section 143(3) of the Act was passed by the Income Tax Officer, Ward-14(1), New Delhi. The appeal filed by the respondent-company under Section 250(6) of the Act was partly allowed by the Commissioner of Income Tax (Appeals)-XVII, New Delhi on 24.02.2010. Against the said order, the Revenue had preferred the appeal before the Income Tax Appellate Tribunal, Delhi Bench 'F', New Delhi (for brevity, the 'ITAT') and the Tribunal partly allowed the appeal vide order dated 17.06.2011. It is against the said order, the present appeal has been filed. 4. This Court, on 12.09.2012, had pointed out to the counsel for the Department to show that this Court would have jurisdiction to adjudicate this appeal as the assessment order had been passed by Income Tax Officer, Ward 14(1), New Delhi, who falls within the territorial jurisdiction of the Delhi High Court. 5. Counsel for the Department has lamely placed reliance upon the order dated 21.12.2010 passed by the Commissioner of Income Tax, Delhi- V, New Delhi, under Section 127 of the Act, whereby the assesse's case had been transferred from Income Tax Officer, Ward-14(1), New Delhi to DCIT/ACIT, Central Circle-II, Chandigarh. 6. In our opinion, the said order dated 21.12.2010 would not confer jurisdiction on this Court as the assessment order was passed in December, 2008 and the CIT(A), New Delhi, decided the appeal on 24.02.2010. Once the respondent-assessee was being assessed by the Income Tax Officer, Ward-14(1), New Delhi who had territorial jurisdiction over the assessee- respondent, this Court would have no jurisdiction to hear the present appeal ITA No.49 of 2012 3 filed under Section 260-A of the Act. 7. The matter is no longer res integra. In ITA No.44 of 2005 titled The Commissioner of Income Tax, Faridabad Vs. M/s Motorola India Ltd. decided on 03.10.2007, where the assessment was framed by the Assessing Officer at Bangalore, the Revenue in that case, had sought to justify the filing of the appeal in this Court on the ground that the assessee- respondent had requested for transfer of the case from Bangalore to Gurgaon on 02.01.2002 and the case was transferred from Bangalore to Gurgaon on 20.05.2005 under Section 127 of the Act. The Division Bench of this Court, while repelling the aforesaid contention had noticed as under: “The decision of the High Courts are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territory in relation to which it exercises jurisdiction but it does not extend beyond its territorial jurisdiction. In other words, the decision of one High Court is not a binding precedent for another High Court or for Courts or Tribunals outside its territorial jurisdiction. The doctrine of precedents and rule of binding efficacy of law laid down by the High Court within its territorial jurisdiction, the questions of law arising out of decision in a reference, has to be determined by the High Court which exercises territorial jurisdiction over the situs of the Assessing Officer and if it was otherwise then it would result in serious anomalies as an assessee affected by an assessment order at Bombay may invoke the jurisdiction of Delhi High Court to take advantage of a suitable decision taken by it. Thus, such an assessee may avoid application of inconvenient law laid down by the jurisdictional High Court of Bombay. On the basis of the aforementioned reasoning, the Division Bench sustained the objection that the jurisdiction to entertain the application under sub-section (1) and (2) of Section 256 of the Act vested in the High Court of Bombay and not of Delhi. We are in respectful agreement with the aforementioned reasoning of the Delhi High Court. Accordingly, we hold that the preliminary objection raised by ITA No.49 of 2012 4 learned counsel for the assessee-respondent is sustainable. xxxx xxxx xxxx A conjoint reading of the aforementioned provisions makes it evident that the Director General or Chief Commissioner or Commissioner is empowered to transfer any case from one or more Assessing Officers subordinate to him to any other Assessing Officer. It also deals with the procedure when the case is transferred from one Assessing Officer subordinate to a Director General or Chief Commissioner or Commissioner to an Assessing Officer who is not subordinate to the same Director General, Chief Commissioner or Commissioner. The aforementioned situation and the definition of expression 'case' in relation to jurisdiction of an Assessing Officer is quite understandable but it has got nothing to do with the territorial jurisdiction of the Tribunal or High Courts merely because Section 127 of the Act dealing with transfer has been incorporated in the same chapter. Therefore, the argument raised is completely devoid of substance and we have no hesitation to reject the same. In view of the above, the appeal is dismissed by sustaining the preliminary objection that this Court has no territorial jurisdiction over an order passed by the Assessing Officer at Bangalore. Accordingly, these appeals are returned to the revenue appellant for their filing before the competent court of jurisdiction in accordance with law.” 6. Accordingly, the present appeal is dismissed by holding that this Court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer at New Delhi. Consequently, the appeal is returned to the Revenue for filing before the competent Court of jurisdiction in accordance with law. (G.S.Sandhawalia) JUDGE 11.10.2012 (Ajay Kumar Mittal) sailesh JUDGE "