The ACIT, Central Circle-1, Baroda V. M/s. Sun Pharmaceuticals Industries Ltd., Baroda

ITA 1285/AHD/2008

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1673 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-04-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 10-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Keywords: Reopening of assessment; Depreciation; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 80HHC; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 1285 & 1286/AHD/2008 (ASSESSMENT YEARS: 2001-02 & 2002-03) ASSTT. COMMISSIONER OF INCOME TAX, CC-1, BARODA V/S M/S. SUN PHARMACEUTICAL INDUSTRIES LTD., SPARC CENTRE, TANDALJA ROAD, BAORDA (APPELLANT) (RESPONDENT) PAN: AADCS3124K APPELLANT BY : SHRI R.I. PATEL, CIT/D.R. RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 28 -04-201 6 DATE OF PRONOUNCEMENT : 06-05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 1285 & 1286/AHD/2008 ARE APPEALS BY THE RE VENUE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-IV, A HMEDABAD DATED 26.12.2007 PERTAINING TO A.Y. 2001-02 & 2002-03. BO TH THESE APPEALS ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 2 HAVE COMMON GRIEVANCE, THEREFORE, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GRIEVANCE OF THE REVENUE READ AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWIN G THE CLAIM OF ASSESSEE ON THE GROUND THAT AS SPARC WAS AN INDUSTRIAL UNDER TAKING AND ELIGIBLE FOR DEDUCTION U/S. 80IB. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTI NG NOT TO REDUCE THE UNABSORBED LOSSES OF THE AMALGAMATION COMPANY FOR C OMPUTATION OF DEDUCTION U/S. 80HHC OF THE ACT, WHICH IS CONTRARY TO THE DECISION OF THE APEX COURT IN THE CASE OF M/S. IPCA LABORATORIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON T HE ABOVE POINTS. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO TH E ABOVE EXTENT. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E MOVED AN APPLICATION CHALLENGING THE REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT HE IS RE LYING ON RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 WHICH ALL OWS RESPONDENT TO SUPPORT THE ORDER APPEALED AGAINST ON ANY GROUNDS D ECIDED AGAINST HIM. 4. SINCE THE CHALLENGE OF THE REOPENING OF THE ASSESSM ENT GOES TO THE ROOT OF THE MATTER, WE DECIDED TO PROCEED FIRST BY DECIDING THE ADMISSIBILITY OF THIS APPLICATION OF THE ASSESSEE Q UA RULE 27OF THE ITAT, RULES. RULE 27 OF THE ITAT RULES READ AS UNDER:- RESPONDENT MAY SUPPORT ORDER ON GROUNDS DECIDED AGAI NST HIM . ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 3 27. THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALED , MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDE D AGAINST HIM. 5. THE LD. D.R. STRONGLY OBJECTED TO THIS APPLICATION MOVED BY THE LD. COUNSEL. THE LD. D.R. VEHEMENTLY STATED THAT RULE 2 7 IS NOT AT ALL APPLICABLE ON THE FACTS OF THE CASE. IN SUPPORT OF HIS CONTENTION, THE LD. D.R. STRONGLY RELIED UPON THE DECISION OF THE TRIBU NAL, AHMEDABAD BENCH IN THE CASE OF SANDIP M. PATEL 137 ITD 104. T HE LD. D.R. ALSO RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF KANPUR INDUSTRIAL WORKS 59 ITR 407 AND ALSO IN THE CASE OF SELF KNITTING WORKS 227 TAXMAN.COM 253 (P&H). IT IS THE SAY OF THE LD. D.R. THAT THE PROPER COURSE FOR THE ASSESSEE SHOULD HAVE BEEN TO APPROACH THE TRIBUNAL BY EITHER FILING CROSS APPEAL S OR CROSS OBJECTIONS BUT IN NO CASE THE ASSESSEE COULD TAKE THE RECOURSE OF RULE 27. 6. THE LD. D.R. CONTINUED BY STATING THAT THE RESPONDE NT CAN SUPPORT THE ORDER BUT CANNOT DESTROY THE ORDER AND THE RESPONDE NT CANNOT TRAVEL BEYOND SUBJECT MATTER OF APPEAL FILED BY THE APPELL ANT. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTING THE APPLICA BILITY OF RULE 27 STATED THAT THE ASSESSEE DID NOT PREFER APPEAL BECA USE THE JUDGMENT WAS IN ITS FAVOUR BUT THE ASSESSEE CAN VERY MUCH DE FEND THE ADVERSE FINDING GIVEN BY THE FIRST APPELLATE AUTHORITY WITH IN THE PURVIEW OF RULE 27. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAREFU LLY PERUSED THE JUDICIAL DECISIONS RELIED UPON BY THE LD. D.R. IT I S A SETTLED PROPOSITION OF LAW THAT RULE 27 SANCTIONS A DEFENDANT ONLY TO SUPPORT THE ORDER OF LD. CIT(A) AND NOT PERMITTED TO ATTACK THE JUD GMENT AND BY SUPPORTING THE VERDICT OF THE FIRST APPELLATE AUTHO RITY, SIDE BY SIDE CAN ARGUE AGAINST ANY OF THE GROUNDS HELD AGAINST HIM. THE DEFENDANT HAS ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 4 A RIGHT TO URGE UNDER RULE 27 THAT A PARTICULAR FIN DING WAS WRONGLY GIVEN AND IF THAT ADVERSE FINGING IS UPHELD THAN TH E FAVORABLE RESULT OF THE APPEAL MAY GET OVER-TURNED. IN OTHER WORDS, THE JUDGMENT BEING FAVORABLE BUT COULD HAVE AN ADVERSE FINDING OR REAS ONING AND THAT GROUND THOUGH AGAINST THE RESPONDENT CAN BE DEFENDE D IN RULE 27, NEVERTHELESS BY SUPPORTING THE FINAL VERDICT. THE DECISION RELIED UPON BY THE LD. D.R. DO NOT SUPPORT THE STAND OF THE REV ENUE FOR EXAMPLE THE DECISION OF THE HONBLE HIGH COURT OF PUNJAB AN D HARYANA (SUPRA) DECLINED THE APPLICABILITY OF RULE 27 ON THE FACT T HAT THE ASSESSEE WANTED TO CHALLENGE THOSE ISSUES BY FILING AN APPLI CATION UNDER RULE 27 WHICH WERE NOT CHALLENGED AT BEHEST BY REVENUE. 8. THE FACTS OF THE PRESENT CASE ARE THAT THE REOPENIN G WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY INTERALIA WITH OTHER GROUNDS ON MERITS OF THE CASE, THE LD. CIT(A) DECIDED THE ISSU ES RAISED ON MERITS IN FAVOUR OF THE ASSESSEE BUT UPHELD THE REOPENING OF THE ASSESSMENT. THE REVENUE HAS PREFERRED AN APPEAL AGAINST THE DEC ISION OF THE LD. CIT(A) GIVEN IN FAVOUR OF THE ASSESSEE AND THE ASSE SSEE HAS MOVED AN APPLICATION UNDER RULE 27 CHALLENGING THE REOPENING OF THE ASSESSMENT. 9. IN OUR UNDERSTANDING OF THE LAW, THE ASSESSEE HAS E VERY RIGHT ON THE FACTS OF THE CASE, TO MOVE AN APPLICATION UNDER RUL E 27 AND THE SAME IS ADMITTED. AS MENTIONED ELSEWHERE, SINCE THIS GOE S TO THE ROOT OF THE ASSESSMENT, WE PREFER TO DECIDE FIRST. 10. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO THE NOT ICE THAT THIS IS SECOND REOPENING ON MORE OR LESS THE SAME SET OF FA CTS. IT IS THE SAY OF THE LD. COUNSEL THAT THE FIRST REOPENING WAS QUA SHED BY THE TRIBUNAL ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 5 VIDE ORDER DATED 21.08.2015 IN ITA NO. 1199/AHD/200 6, 1279/AHD/06, 1200/AHD/06 & 1280/AHD/06. THE LD. COUNSEL FURTHER STATED THAT SINCE ON THE SAME SET OF FACTS THE EARLIER REOPENING WAS QUASHED, THE SAME VIEW SHOULD BE TAKEN. PER CONTRA, THE LD. D.R. RELI ED UPON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT GIVEN IN THE CASE OF ASSESSEE ITSELF IN 353 ITR 474. 11. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE RELEVANT M ATERIAL FACTS ARE LIKE THIS. IN THIS CASE, ASSESSMENT U/S. 143(3) OF THE A CT WAS COMPLETED ON 28.03.2003 AND IN THE ASSESSMENT SO FRAMED THE ASSE SSING OFFICER HAS AT LENGTH CONSIDERED THE CLAIM OF DEDUCTION U/S. 80 HHC OF THE ACT. ISSUES RELATING TO UNABSORBED DEPRECIATION WAS ALSO CONSIDERED BY THE A.O. UNABSORBED DEPRECIATION AND UNABSORBED BUSINES S LOSS WERE DISCUSSED AT LENGTH QUA THE AMALGAMATION. THE MATTE R TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL QUASHED THE REASSESSM ENT PROCEEDINGS VIDE ORDER DATED 21.08.2015 (SUPRA). 12. ONCE AGAIN IN NOTICE U/S. 148 WAS ISSUED AND SERVED UPON THE ASSESSEE ON 24.03.2006. THE REASONS GIVEN FOR THE R EOPENING OF THE ASSESSMENT READ AS UNDER:- NAME OF THE ASSESSEE: M/S. SUN PHARMACEUTICALS IND. LTD. ASST. YEAR 2001-02 ANNEXURE-A (COLUMN NO. 10) REASONS FOR THE BELIEF THAT THE INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE CASE OF SUN PHARMACEUTICALS INDUS TRIES LTD., BARODA ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 6 2. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF B ULK DRUGS AS WELL AS FORMULATION PRODUCTS. AS PER SECTION 72 A, CARRY FO RWARD AND SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWA NCE IN AMALGAMATION OR DEMERGER IS ADMISSIBLE TO A COMPANY OWING AN INDUST RIAL UNDERTAKING OR A SHIP WITH ANOTHER COMPANY INDUSTRIAL UNDERTAKING MEANS ANY UNDERTAKING WHICH IS ENGAGED IN (A) THE MANUFACTURE OR PROCESSI NG O GOODS OR (B) THE MANUFACTURE OF COMPUTED SOFTWARE OR (C) THE BUSINES S OF GENERATION OR DISTRIBUTION OR ELECTRICITY OR ANY OTHER FORM OF PO WER OR (D) MINING OR (E) THE CONSTRUCTION OF SHIPS, AIRCRAFTS OR RAIL SYSTEM. TH E AMALGAMATION OF SUN PHARMA RESEARCH CENTRE LTD WAS MADE ASSESSEE COMPA NY W.E.F. 10.04.2000. THE UNABSORBED LOSS OF RS. 54,77,830/- OF SPARC (AMALGAMATION COMPANY), DURING THE PREVIOUS YEAR RE LEVANT TO A.Y. 2001-02. THE SPARC LTD., ENGAGED IN RESEARCH WORK WAS NOT AN INDUSTRIAL UNDERTAKING SINCE THE STATUTORY CONDITION WAS NOT SATISFIED, TH E ASSESSEE COMPANY WAS NOT ELIGIBLE FOR SET OFF OF UNABSORBED BUSINESS LOS S OF AMALGAMATION COMPANY. 3. I HAVE, THEREFORE, REASONS TO BELIEVE THAT THE I NCOME OF RS. 54,77,830/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDING LY NOTICE U/S. 148 IS ISSUED. BAORDA (AMAL GARG) DATE: 02. 2000 DY. COMMISSIONER OF INCO ME-TAX CENTRAL CIRCLE-1, BARODA 13. A PERUSAL OF THE AFOREMENTIONED REASONS SHOWS THAT FOR SIMILAR REASONS, THE ASSESSMENT WAS ALREADY REOPENED AND TH E REOPENING QUASHED BY THE TRIBUNAL. THE RELEVANT PART OF THE F INDINGS OF THE TRIBUNAL READ AS UNDER:- ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 7 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 11. WE FIND THAT IN THE COURSE OF THE ORIGINAL ASSE SSMENT PROCEEDINGS THE CLAIM FOR DEDUCTIONS UNDER SECTION 80HHC AND 80IA O F THE ACT WERE DISCUSSED IN LENGTH AND ON THOSE ISSUE THE MATTER W AS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO HAD PARTLY ALLOWED THE AP PEAL. ON THESE FACTS, IN THE LIGHT OF THE LAW LAID DOWN BY HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF UNITED PHOSPHORUS LIMITED VS. ACIT [(2011) 56 DT R 193 (GUJ)], THE ORDER OF THE A.O. STOOD MERGED WITH THE ORDER OF THE CIT( A) AND HAD NO EXISTENCE OF ITS OWN, AND, AS SUCH, ASSESSMENT COULD NOT BE R EOPENED IN RESPECT OF THE SAID ITEM. FOR THIS SHORT REASON ALONE, THE IMPUGNE D REASSESSMENT PROCEEDINGS MUST STAND QUASHED. WHEN IT WAS PUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, HE DID NOT HAVE MUCH T O SAY EXCEPT TO PLACE RELIANCE ON THE STAND OF THE AUTHORITIES BELOW AND SUBMIT THAT A PARTICULAR ASPECT OF THE DEDUCTION WAS NOT SPECIFICALLY CONSID ERED BY THE A.O. AND THE LD. CIT(A). THAT ASPECT OF THE MATTER IS, HOWEVER, NOT REALLY RELEVANT BECAUSE ONCE WE COME TO THE CONCLUSION THAT ORDER OF THE A. O. STOOD MERGED IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF DEDUCTION U NDER SECTION 80IA AND 80HHC OF THE ACT, AS WE ARE OBLIGED TO HOLD IN THE LIGHT OF LAW LAID DOWN BY HON'BLE JURISDICTIONAL HIGH COURT, THESE ASPECT OF THE MATTER ARE WHOLLY ACADEMIC. 12. FOR THE REASONS SET OUT ABOVE, WE HOLD THAT THE REASSESSMENT PROCEEDINGS WERE VITIATED IN LAW. THE IMPUGNED REAS SESSMENT ORDER STANDS QUASHED, ACCORDINGLY. 14. AS MENTIONED ELSEWHERE, THE REASONS FOR REOPENING T HE ASSESSMENT BEING SIMILAR IN NATURE. RESPECTFULLY FO LLOWING THE FINDINGS OF THE CO-ORDINATE BENCH, WE QUASHED THE REASSESSME NT ORDER. ITA NOS. 128 5 & 1286/AHD/2008 . A.YS. 2001- 02 & 2002-03 8 15. AS THE REASSESSMENT ORDER STANDS QUASHED. FOR THE R EASONS SET OUT ABOVE, WE SEE NO NEED TO ADDRESS OURSELVES TO O THER ISSUES RAISED IN REVENUES APPEAL. GIVEN OUR ABOVE CONCLUSIONS, A LL THESE THINGS RENDERED INFRUCTUOUS AND ACADEMIC. 16. IN THE RESULT, THE REOPENING OF THE ASSESSMENT IS Q UASHED UNDER RULE 27; APPEALS FILED BY THE REVENUE ARE ACCORDING LY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06- 05 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD