M/s Aurobindo Pharma Ltd., Hyderabad V. ACIT, Hyderabad

ITA 1265/HYD/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3152 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-05-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 29-12-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHRA SINHA
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 234B; 80IA; 147; 148; 6

Judgement Text

ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.1265/HYD/05 : A STT. YEAR: 1999-2000 M/S. AURBINDO PHARMA LTD., HYDERABAD. PAN: AABCA 7366 H VS ACIT, CIR-1(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI C.P. RAMASWAMY,ADVOCATE RESPONDENT BY : SMT. VASUNDHRA SINHA, CIT-DR O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE CIT (A)-II, HYDERABAD DATED 25-10-2005 PERTAI NING TO THE ASSESSMENT YEAR 1999-2000. 2. GROUNDS RAISED BY THE ASSESSEE READ AS FOLLOWS: - '1.THE ORDER OF THE LEARNED CIT (A), IN SO FAR AS I T IS AGAINST THE INTEREST OF THE ASSESSEE, IS AGAINST LAW, WEIGHT O F EVIDENCE AND PROBABILITIES OF THE CASE. THE FOLLOWING GROUNDS A RE MUTUALLY EXCLUSIVE. ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 2 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTIO N OF CLAIMS UNDER SECTIONS 80HHC AND 80IA IN A REASSESSMENT WHEN THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL THE MATE RIAL PARTICULARS AND THE ORIGINAL ASSESSMENT WAS ALSO A REGULAR ASSE SSMENT. THUS, THE IMPUGNED ASSESSMENT IS AB INITIO VOID AND BAD I N LAW. 3. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER O F THE ASSESSING OFFICER BY RESTRICTING THE DEDUCTIONS CLAIMED UNDER SECTIONS 80HHC AND 80IA. HE OUGHT TO HAVE ALLOWED THE DEDUCTIONS AS CLAIMED BY THE ASSESSEE BOTH UNDER SECTIONS 80HHC AND 80IA. 4. THE LEARNED CIT (A) FAILED TO APPLY PARAGRAPH NO. 3 2.11 OF THE CBDT CIRCULAR NO.621 DATED 19-12-1991. 5. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE DECIS ION OF HON'BLE ITAT, B- BENCH, BANGALORE, DATED 206-2005 IN ITA NO.3773/BANG/2004 FOR ASST. YEAR 2001-02 IN THE CAS E OF MITTAL CLOTHING CO. VS. DCIT, WHEREIN IT WAS HELD THAT PRO VISIONS OF SECTION 80IA(9) ONLY REGULATE THE DEDUCTIONS ALLOWABLE UNDE R CHAPTER VI-A AND THERE IS NO RESTRICTION CONTAINED THEREIN TO RE GULATE OTHER DEDUCTIONS.' 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BULK DRUGS AND PHARMACEUTICAL FORMULATIONS. ITS ORIGINAL ASSESSME NT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS COMPLETED UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 27-3-2002, ASSESSING THE INCOME AT RS.20,14,63,570 AGAINST THE RETURNED INCOME OF RS.1 8,74,57,723. ADDITIONS TO THE RETURNED TOTAL INCOME WERE MADE ON ACCOUNT O F DISALLOWANCE OF COMMISSION PAID TO FOREIGN AGENTS FOR SERVICES REND ERED BY THEM OUTSIDE INDIA IN CONNECTION WITH PROCUREMENT OF EXPORT BUSI NESS TO THE ASSESSEE, INCLUSION OF SALES TAX IN THE TOTAL TURNOVER FOR TH E PURPOSES OF COMPUTATION OF THE DEDUCTION UNDER SECTION 80HHC, REDUCTION OF 90% O F PROCESSING CHARGES FROM THE BUSINESS PROFITS FOR THE PURPOSES OF COMPU TING DEDUCTION U/S 80HHC ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 3 AND EXCLUSION OF OTHER INCOME TO THE EXTENT OF RS.8 ,61,578 FOR CALCULATION OF DEDUCTION UNDER SECTION 80IA IN RESPECT OF PROFITS OF INDUSTRIAL UNDERTAKING OF THE UNIT OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A)-II, HYDERABAD AND THE CIT(A) ALLOWED ALL THE GROUNDS OF APPEAL RAISED BY THE ASS ESSEE VIDE HIS ORDER DT.14- 11-2002. SUBSEQUENTLY, THE ASSESSMENT FOR THE ASSES SMENT YEAR UNDER CONSIDERATION WAS REOPENED UNDER SECTION 147 OF THE ACT ON THE GROUNDS THAT THE ASSESSEE HAD COMPUTED QUANTUM OF DEDUCTION ALLO WABLE UNDER SECTION 80HHC ON WHICH THE DEDUCTION UNDER SECTION 80IA HAD B EEN CLAIMED. THEREAFTER, A NOTICE UNDER SECTION 147 ISSUED AND A N ORDER U/S 143(3) READ WITH SEC.147 WAS PASSED ON 28-2-2005, APPLYING PROV ISIONS OF SECTION 80IA(9) WHILE COMPUTING DEDUCTION ALLOWABLE UNDER S ECTION 80HHC AND CALCULATING INTEREST CHARGEABLE UNDER SECTIONS 234B AND 234C WITHOUT GIVING SET OFF OF THE BROUGHT FORWARD MAT CREDIT WHILE RE PEATING THE ADDITIONS AND DISALLOWANCES MADE IN THE ORIGINAL ASSESSMENT. AGGR IEVED BY THE RE- ASSESSMENT ORDER, THE ASSESSEE WENT IN APPEAL BEFOR E THE CIT (A)-II, HYDERABAD. ON APPEAL, THE CIT (A)-II, HYDERABAD CONSI DERED EACH GROUND OF APPEAL RAISED BY THE ASSESSEE ELABORATELY AND ALLOW ED THE APPEAL IN PART CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN R ESTRICTING THE DEDUCTION U/S 80HHC IN LINE WITH THE PROVISIONS OF SEC.80IA(9) OF T HE ACT. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE REASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT IS MERELY A CHANGE OF OPINION. THERE IS NO FRESH MATERIAL BEFO RE THE ASSESSING OFFICER FOR INITIATION OF REASSESSMENT PROCEEDINGS UNDER SECTIO N 147 OF THE ACT. THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL THE MATE RIAL FACTS IN THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. HENCE, H IS IMPUGNED ASSESSMENT UNDER SECTION 147 OF THE ACT IS AB INITI O VOID AND BAD IN LAW. ON MERITS, HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE IS TO BE GIVEN DEDUCTION UNDER S.80HHC OF THE ACT ON THE RE MAINDER OF THE PROFIT OF THE UNDERTAKING AFTER REDUCING THE DEDUCTION CLA IMED UNDER S.80IA FROM ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 4 THE PROFIT OF SUCH UNDERTAKING. THE ASSESSEE DID N OT ATTEMPT TO GET MORE THAN 100% OF THE PROFIT OF THE UNDERTAKING AS DEDUC TION IN TERMS OF SEC.80IA AND 80HHC OF THE ACT. EVEN IF THESE DEDUCTIONS ARE A LLOWED ONE AFTER OTHER, THE PURPOSE OF INTRODUCTION OF SEC.80IA(9) COULD BE SERVED. THE DECISION OF THE ITAT, DELHI SPECIAL BENCH IN THE CASE OF ACIT V S. HINDUSTAN MINT AND AGRO PRODUCTS PVT. LIMITED (2009) 315 ITR (AT) (DEL HI) (SB) IS NOT CONTRADICTORY TO HIS SUBMISSIONS. RATHER, IT IS IN CONFORMITY WITH HIS SUBMISSIONS. THE LOWER AUTHORITIES HAVE NOT VERIFI ED WHETHER THE ASSESSEE HAS CLAIMED MORE THAN 100% OF THE PROFITS OF THE IN DUSTRIAL UNDERTAKING AS DEDUCTION IN TERMS OF SECTIONS 80HHC AND 80IA OF THE ACT. HENCE, HE SUBMITTED THAT, IF REQUIRED, THE MATTER MAY BE REST ORED TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICATION WHETHER THE ASSESSEE'S CLAIM FOR DEDUCTIONS UNDER SECTIONS 80HHC AND 80IA IS WITHIN TH E 100% OF THE PROFITS OF THE UNDERTAKING OR NOT. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER IS RIGHT IN IN ITIATING THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT DUE TO THE FACT THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE ASPECT OF REDUCING THE DEDUCTION UNDER SECTION 80IA FROM THE BUSINESS PROFITS, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. THIS ASPECT WAS NOT A N ISSUE IN THE ORIGINAL ASSESSMENT. HENCE, THERE IS NO CHANGE OF OPINION BY THE ASSESSING OFFICER IN THIS REGARD. ON MERIT, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E REVENUE BY THE DECISION OF ITAT, DELHI SPECIAL BENCH IN THE CASE OF HINDUSTAN M INT AND AGRO PRODUCTS PVT. LIMITED (SUPRA). 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 27-3-2002 AND SUB SEQUENTLY THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUIN G A NOTICE UNDER SECTION 148 ON THE GROUND THAT THE ASSESSEE CLAIMED DEDUCTI ON UNDER SECTION 80IA ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 5 AS WELL AS 80HHC OF THE ACT ON THE SAME BUSINESS PROF ITS, THUS GIVING ADDITIONAL BENEFIT TO THE ASSESSEE. MAT CREDIT WAS ALSO ALLOWED TO THE ASSESSEE BEFORE CHARGING INTEREST UNDER SECTIONS 23 4B AND 234C OF THE ACT. WE FIND MERIT IN THE CONTENTIONS OF THE LEARNED DEP ARTMENTAL REPRESENTATIVE THAT THE ASPECT OF CLAIMING DOUBLE DEDUCTION AS PER THE PROVISIONS OF SUB- SECTION (9) OF SECTION 80IA OF THE ACT WAS NOT BEFO RE THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT. HENCE, THERE WAS NO CHANGE OF OPINION BY THE ASSESSING OFFICER ON THIS ASPECT. THEREFORE, WE DO NOT SEE ANY CHANGE OF OPINION FORMED BY THE ASSESSING OFFICER FOR INITIAT ING REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN OUR C ONSIDERED VIEW, THE ASSESSING OFFICER IS RIGHT IN REOPENING THE ASSESSM ENT BY ISSUING A NOTICE UNDER SECTION 148 OF THE ACT. ON MERIT, WE FIND TH AT THIS ISSUE WAS ALREADY DEALT WITH BY THE LARGER BENCH OF DELHI TRIBUNAL IN THE CASE OF HINDUSTAN MINT AND AGRO PRODUCTS PVT. LIMITED (SUPRA). THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT A PLAIN READING OF SPECIFIC PROVISION OF SEC.80IA (9) WOULD INDICATE THAT THE LEGISLATIVE INTENT IS TO PREVENT REPETITIV E DEDUCTION BEING CLAIMED ON THE SAME PROFIT, UNDER DIFFERENT PROVISIONS OF THE CHAPTER. THIS RULING PROVIDES GUIDANCE THAT WHERE THE SAME PROFIT IS ELI GIBLE FOR DEDUCTION UNDER BOTH THE SECTIONS VIZ., 80IA AND 80HHC, THE DEDUCTION U/S 80 HHC WILL HAVE TO BE COMPUTED BY REDUCING THE DEDUCTION ALLOWED U/ S 80IA/80IB OF THE ACT. AS PER THE SPECIAL BENCH RULING, THE ISSUE CAN BE I LLUSTRATED AS FOLLOWS. THE ASSESSEE'S GROSS TOTAL INCOME MAY BE ASSUMED TO BE RS.100, COMPRISING SOLELY OF PROFITS AND GAINS FROM MANUFACTURE AND EX PORT BY THE INDUSTRIAL UNDERTAKING. THE AVAILABLE DEDUCTION U/S 80IA AND 80HHC IS ASSUMED AT 30% OF PROFIT OF THE UNDERTAKING AND 50 OF THE EXPO RT PROFIT RESPECTIVELY. THE COMPARATIVE CLAIMS OF THE ASSESSEE AND THE REVE NUE ON THE QUANTUM OF DEDUCTION ALLOWABLE U/S 80HHC WERE AS FOLLOWS. A-CLAIM OF THE ASSESSEE: PROFIT OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION: RS.100 LESS: DEDUCTION U/S 80IA AT 30% RS.30 ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 6 DEDUCTION U/S 80HHC AT 50% RS. 50 NET TAXABLE INCOME: RS. 20 B-AS PER SPECIAL BENCH RULING: PROFIT OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION: RS.100 LESS: DEDUCTION U/S 80IA AT 30% RS. 30 DEDUCTION U/S 80HHC AT 50% OF [RS.100-RS.30] RS. 35 NET TAXABLE INCOME: RS. 35 THUS, IT IS CLEAR FROM THE ABOVE WORKING LAID DOWN BY THE SPECIAL BENCH THAT THE DEDUCTION ALLOWABLE UNDER S.80HHC OF THE ACT FROM THE EXPORT PROFIT IS AT A LOWER FIGURE, BY COMPUTING THIS DEDUCTION AFTER R EDUCING THE DEDUCTION ALLOWED UNDER S.80IA OF THE ACT. THE SPECIAL BENCH RULING RELIED ON THE SPECIFIC PROVISIONS OF S.80IA [9] OF THE ACT. AC CORDINGLY, WE FEEL IT PROPER TO RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OF FICER FOR ASCERTAINING THE FACT WHETHER HE HAD WORKED OUT THE DEDUCTION UNDER S. 80 HHC OF THE ACT IN LINE WITH THE WORKING SHOWN IN 'B' ABOVE AND AS PER THE RULING OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF HINDUSTAN MINT (SUPRA). WE DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE COURT ON 30- 6-2010. SD/- G.C.GUPTA SD/- AKBER BASHA VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 30TH JUNE, 2010 COPY FORWARDED TO: ITA NO.1265/HYD/2005 M/S. AUROBINDO PHARMA LTD.HYD. 7 1. C/O SRI C.P. RAMASWAMY, ADVOCATE, FLAT NO.303, GITANJALI APARTMENTS, PLOT NO.108, SRINAGAR COLONY, HYDERABAD- 500 072, 2 ACIT, CIR-1(1), HYDERABAD. 3. 4. THE CIT, AP, HYDERABAD., CIT(A)-II, HYDERABAD. DR, ITAT, HYDERABAD. JMR*