Appeal details
Counselvise Citation
129824514 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2013
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
15-06-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1298 / P N/ 20 12 ASSESSMENT YEAR : 2007 - 08 SCIGEN BIOPHARMA PVT. LTD., PLOT NO . 18, INTERNATIONAL BIOTECH PARK, HINJEWADI, PUNE, MAHARASHTRA VS. CIT (APPEAL) - V, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAGCS5624R APPELLANT BY: SHRI RISHI V. LODHA RESPONDENT BY: SHRI Y.K. BHASKAR DATE OF HEARING : 11 - 09 - 2013 DATE OF PRONO UNCEMENT : 30 - 09 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED OF THE LD. CIT(A) - V, PUNE DATED 04 - 04 - 2012 FOR THE A.Y. 2007 - 08. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS IN THE APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT APPEAL (V) HAS ERRED IN NOT ACCEPTING THE FACT THAT THE TREATMENT GIVEN AT THE TIME THE CONTRACT WAS ENTERED INTO WAS CORRECT IN ALL RESPECT I.E. THE PROJECT WAS TURNKEY PROJECT. 2. ON THE FACTS GIVEN AN D IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT APPEAL (V) HAS ERRED IN PARTIALLY DELETING TDS UNDER SECTION 201(1) OF THE INCOME TAX ACT AND TO COMPUTE INTEREST UNDER SECTION 201(1A) OF INCOME TAX ACT FROM THE DATE OF PAYMENT/CREDIT TILL DATE OF COMPLE TION OF ASSESSMENT IN CASE OF DEDUCTEE FOR A.Y. 2008 - 09. 2 . THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. M/S. BIOPHARMAX BV NETHERLANDS HOLDS 100% SHAREHOLDING IN M/S. BIOPHARMAX INDIA PVT. LTD. M/S. BIOPHARMAX HAD ENTERED INTO AN 2 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE AGREEMENT WI TH M/S. SCIGEN BIOPHARMA X PVT. LTD. (THE ASSESSEE) ON 17 - 10 - 2006 FOR ESTABLISHMENT OF AN INSULIN MANUFACTURING UNIT AT PUNE ON TURNKEY BASIS. THE ASSESSING OFFICER HAS NOTED THAT M/S. BIOPHARMAX INDIA PVT. LTD., IS IN THE FIELD OF ESTABLISHING INSULIN MAN UFACTURING UNIT ON A TURNKEY BASIS AND HAS THE EXPERIENCE, KNOWLEDGE AND EXPERTISE IN THE CONSTRUCTION AND ENGINEERING OF BIOPHARMACEUTICALS. THE ASSESSEE COMPANY I.E. SCIGEN BIOPHARMA X PVT. LTD. WAS EARLIER KNOWN AS SHREYA BIOTECH AND HAD S TARTED THE CON STRUCTION OF THE I NSULIN MANUFACTURING FACILITY AT PUNE. IN THE YEAR 2008 THE COMPANY WAS TAKEN OVER BY SCIGEN BIOPHARMA X PVT. LTD. WHEREAS THE ORIGINAL AGREEMENT WAS SIGNED IN 2006, AN A DDENDUM TO THE AGREEMENT WAS SIGNED ON 19 - 05 - 2008 BETWEEN SCIGEN AND BIOPHARMAX INDIA PVT. LTD., (IN SHORT BIOPHARMA X ) TO CONTINUE AND RETAIN THE SERVICES OF BIOPHARMAX IN ESTABLISHMENT OF THE INSULIN MANUFACTURING UNIT. THE ADDENDUM WAS ENTERED INTO IN VIEW OF THE FACT THAT THE ASSESSEE COMPANY WAS A 100% EOU AND DESIRED TO UTILIZE THE TAX BENEFIT. 3. THE ASSESSING OFFICER EXAMINED THE AGREEMENT AS WELL AS ADDENDUM BETWEEN THE ASSESSEE AND M/S. BIOPHARMAX AND IT WAS NOTICED BY HIM THAT THE DESIGNS, DRAWINGS AND OTHER TECHNICAL DOCUMENTATION HAVE BEEN PREPARED BY THE CO NTRACTOR I.E. BIOPHARMAX , THOUGH THE COPYRIGHTS VESTED IN WITH THE ASSESSEE COMPANY . THE DESIGNS, DRAWINGS AND TECHNICAL DOCUMENTATION WERE SPECIFICALLY PREPARED FOR THE ASSESSEE COMPANY BY BIOPHARMAX AS NOTED BY THE ASSESSING OFFICER. IN ADDITION TO THE SETTING UP OF THE PLANT, M/S. BIOPHARMAX WAS ALSO REQUIRED TO PROVIDE CERTAIN TECHNICAL SERVICES LIKE TRAINING THE PERSONNEL OF THE ASSESSEE COMPANY IN MAINTENANCE OF THE FACILITY AND ALSO TO PROVIDE A MAINTENANCE MANUAL INCLUSIVE OF ALL THE DOCUMENTATION , INSTRUCTIONS AND PROTOCOLS REQUIRED IN ORDER TO OPERATE 3 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE AND MAINTAIN THE FACILITY IN ACCORDANCE WITH GMP, FDA AND EMEA REQUIREMENTS. 4. THE CONTRACT PRICE FOR THE PROJECT, INCLUDING THE PROVISION OF CERTAIN TECHNICAL SERVICES WAS WORKED OUT AT RS.45,6 8,12,000/ - WHICH WAS PAYABLE IN INSTALLMENTS. AS PER THE TERMS OF THE AGREEMENT AS NOTED BY THE ASSESSING OFFICER ALL THE DESIGNS, DRAWINGS, SPECIFICATIONS, NOTES AND OTHER WORKS DEVELOP ED EXCLUSIVE LY BY BIOPHARMAX FOR THE ASSESSEE COMPANY WOULD BECOME TH E PROPERTY OF THE ASSESSEE AND COULD BE USED BY THE ASSESSEE COMPANY IN ANY OTHER CONSTRUCTION . THE ASSESSING OFFICER HAS EXAMINED THE CONTENTS / TERMS OF THE AGREEMENT AND ADDENDUM AND HAS OBSERVED THAT M/S. BIOPHARMAX HAS PROVIDED TECHNICAL SERVICES TO M/S. SCIGEN BIOPHARMAX PVT. LTD., (THE ASSESSEE) AND HE HAS NOTED THAT THE TAX HAS BEEN DEDUCTED U/S. 194J. THE ASSESSEE COMPANY I.E. SCIGEN HAS DEDUCTED THE TAX U/S. 194C OF THE ACT INSTEAD OF U/S.194J . HE HAS NOTED THAT THE SAID FACT CAME TO THE LIGHT WHEN THE CENTRAL EXCISE DEPARTMENT HAD CONDUCTED A SURVEY IN THE CASE OF M/S. BIOPHARMAX AND DETECTED THAT M/S. BIOPHARMAX HAD NOT PAID SERVICE TAX ON THE ADVANCES RECEIVED FROM THE ASSESSEE COMPANY . T HE STATEMENTS OF TWO OF THE PERSONS CONCERNED WITH M/ S. BIOPHARMAX WERE RECORDED BY THE CENTRAL EXCISE DEPARTMENT ON AND 15 - 02 - 2008 AND 19 - 02 - 2008. THE ASSESSING OFFICER HAS OBSERVED THAT SHRI SANJAY ASHER, NON - EXECUTIVE DIRECTOR OF M/S. SCIGEN I N HIS STATEMENT H AS STATED THAT M/S. BIOPHARMAX INDIA PVT. LTD . A RE PROVIDING TECHNICAL CONSULTANCY SERVICES TO M/S. SCIGEN IN RELATION TO THE SETTING OF THE INSULIN MANUFACTURING PLANT/ UNIT. 5. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE STATEMENT GIVEN BY SHRI IIAN BEN CANAN, VICE PRESIDENT (OP E RATIONS) OF M/ S. BIOPHARMAX 4 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE DATED 15 - 02 - 2008 WHO HAS STATED THAT THE CONTRACT PRICE OF RS.45.68 CRORES WAS FOR DESIGN, SUPPLY, ERECTION AND COMMISSIONING OF INSULIN MANUFACTURING PLANT. HE HAS ALSO STATED THAT UP TO FEBRUARY, 2008, BIOPHARMAX HAD RECEIVED RS.4.67 CRORE S AS A DVANCE FROM THE ASSESSEE COMPANY . HE HAS ALSO STATED THAT BIOPHARMAX WOULD NOT BE GETTING A GREED THE CONTRACT PRICE OF RS.41 CRORES SINCE THE CAPITAL GOODS W OULD BE SUPPLIED BY M/S. SCIGEN AND THE CONTRACT PRICE INCLUDES SUPPLY OF CAPITAL GOODS AS P ER THE AGREEMENT. AS PER HIS STATEMENT M/S. BIOPHARMAX HAS PROVIDED THE DESIGN OF THE PLANT TO M/S. SCIGEN AND THE SAID ADVANCE WAS TOWARDS THE DESIGN, TECHNICAL ADVICE AND FOR SUPERVISING THE ERECTION OF THE PLANT. ON THE BASIS OF THE STATEMENT RECORDED OF VICE PRESIDENT (OPERATIONS) OF M/S. BIOPHARMAX AS WELL AS NON - EXECUTIVE DIRECTOR OF THE ASSESSEE COMPANY AND AFTER EXAMINING THE TERMS OF THE AGREEMENT THE ASSESSING OFFICER CONCLUDED THAT THE ADVANCES IS MADE BY ASSESSEE COMPANY WERE FOR PROVIDING TEC HNICAL SERVICES AND HENCE THE PROVISIONS OF SEC. 194J ARE APPLICABLE AND NOT SEC. 194C. 6. THE ASSESSING OFFICER H E LD THAT THERE WAS A SHORT DEDUCTION OF TAX TO THE EXTENT OF 3.366% AND HE , THEREFORE, PASSED THE ORDER U/S. 201(1) AND 201(1A) OF THE INCO ME - TAX ACT DATED 02 - 12 - 2012 DETERMINING THE AMOUNT PAYABLE BY THE ASSESSEE TOWARDS THE SHORT DEDUCTION OF TAX AT RS.15 , 66 , 369 / - AND ALSO LEVIED THE INTEREST AT RS.8 , 06 , 680 / - AND DETERMINED THE TOTAL AMOUNT PAYABLE AT RS.23,73,049/ - . THE ASSESSEE CHALLENGE D THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 201(1) AND 201(1A) OF THE INCOME - TAX ACT BEFORE THE LD. CIT(A). THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE AGREEMENT WITH M/S. BIOPHARMAX WAS IN THE NATURE OF THE WORKS CONTRACT AND THE SAME IS COVERED U/S. 194C AND NOT SEC. 194J. THE LD. CIT(A) WAS NOT IMPRESSED 5 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE WITH THE SUBMISSIONS OF THE ASSESSEE AND HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER I.E. DCIT(TDS). THE OPERATIVE PART OF THE REASONING IS AS UNDER: THUS, FROM THE PERUSAL OF APPENDIX C & G AS WELL AS VARIOUS CLAUSES OF THE AGREEMENT ANALYSED BY THE DCIT(TDS), IT CLEARLY EMERGES THAT M/S. BPIPL WAS PROVIDING TECHNICAL SERVICES TO THE APPELLANT COMPANY. THERE MAY BE AN ELEMENT OF CONTRACT BUT THAT ALSO GETS EXTINGUISHED BY VIRTU E OF ADDENDUM DATED 19/05/2008 WHEREIN THE APPELLANT COMPANY WAS ENTITLED TO MAKE DIRECT PAYMENT OF PROCUREMENT OF MATERIALS AND M/S. BPIPL WAS TO PROVIDE TECHNICAL SERVICES. IT IS WELL ESTABLISHED FACT THAT ONCE THE ADDENDUM IS SIGNED OR AN AGREEMENT IS R EVISED, THEN THE REVISED AGREEMENT TAKES THE PLACE OR ORIGINAL AGREEMENT. THE APPELLANT'S CLAIMS THAT WHEN THE PAYMENT OF RS.4,65,35,0287 - WAS MADE, AT THAT TIME IT WAS NOT. KNOWN TO THE APPELLANT THAT THE AGREEMENT IS GOING TO BE REVISED AND THEREFORE AT THAT: TIME THE APPELLANT WAS JUSTIFIED IN DEDUCTING TDS AS PER SEC. L94C AS IT WAS A CONTRACT. THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE IN VIEW OF ANALYSIS OF VARIOUS CLAUSES OF THE AGREEMENT BY THE DCIT(TDS), FROM THE READING OF APPENDIX C AND G AS WELL AS CONSIDERING THE STATEMENT OF TWO EMPLOYEES OF M/S. BPIPL RECORDED BY CENTRAL EXCISE AUTHORITIES WHERE THEY HAVE ACCEPTED THAT M/S. BPIPL WAS PROVIDING TECHNICAL SERVICES TO THE APPELLANT COMPANY. IT IS ALSO IMPORTANT TO NOTE THAT THE STATEMENT OF THESE TWO EMPLOYEES WERE RECORDED ON 15/02/2008 AND 19/02/2008 WHICH WERE PRIOR TO SIGNING OF ADDENDUM TO THE AGREEMENT WHICH WAS 19/05/2008. THEREFORE, THE STATEMENTS OF THESE TWO EMPLOYEES WERE RECORDED ON THE BASIS OF ORIGINAL AGREEMENT ITSELF. THERE FORE, ON TOTALITY OF FACTS, IT IS CLEAR THAT THE APPELLANT COMPANY HAD WRONGLY DEDUCTED TDS U/S.194C INSTEAD OF 194] OF THE IT. ACT. THEREFORE, THE ACTION OF THE DCIT(TDS) IN TREATING THE PAYMENT BEING COVERED U/S. 194J IS JUSTIFIED AND NO INTERFERENCE IS REQUIRED. ACCORDINGLY, GROUND NOS. L & 2 ARE DISMISSED. 6 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE COPIES OF AGREEMENT AS WELL AS ADDENDUM FILED BY THE ASSESSEE IN THE COM PILATION. WE HAVE ALSO ANXIOUSLY GONE THROUGH THE REASONING GIVEN BY THE LD. CIT(A). IN THIS CASE, IT IS NOT DISPUTED THAT THE ADDENDUM WAS EXECUTED TO CONVERT THE NATURE OF THE AGREEMENT FOR TAKING THE BENEFIT OF 100% EOU BY SHOWING THAT M/S. BIOPHARMAX HAS AGREED TO PROVIDE ALL TECHNICAL SERVICES TO THE ASSESSEE FOR SETTING UP THE INSULIN PLANT IN PUNE. ALL THE TECHNICAL SPECIFICATIONS, DESIGNS AND SUPERVISION WERE M/S. BIOPHARMAX . IT IS NOT ALSO DISPUTED BEFORE US THAT CENTRAL EXCISE DEPARTMENT HAS C ARRIED OUT THE SURVEY IN THE CASE OF M/S. BIOPHARMAX TO VERIFY IN RESPECT OF THE SERVICE TAX LIABILITY & STATEMENT OF SHRI SANJAY ASHER, NON - EXECUTIVE DIRECTOR OF THE ASSESSEE COMPANY WAS ALSO RECORDED, WHO STATED THAT M/S. BIOPHARMAX WERE PROVIDING TECHNI CAL CONSULTANCY SERVICE IN RELATION TO THE SETTING UP OF THE INSULIN MANUFACTURING UNIT. THE VICE - PRESIDENT OF M/S. BIOPHARMAX IN HIS STATEMENT DATED 15 - 02 - 2008 HAS STATED THAT THERE WAS A MODIFICATION OF THE AGREEMENT AND THE ASSESSEE HAS DECIDED TO SUPP LY ALL THE BASIC CAPITAL GOODS AND ONLY THE DESIGNING AND TECHNICAL ADVICE AND SUPERVISION ON THE ERECTION OF THE PLANT WAS ASSIGNED TO M/S. BIOPHARMAX. ALL THESE FACTS ARE NOT IN DISPUTE AS PER THE ADDENDUM . WE FIND THAT THE CONTRACT IS RESTRICTED ONLY FOR PROVIDING THE DESIGNING AND TECHNICAL SPECIFICATIONS OF THE PLANT AS WELL AS SUPERVISING OF THE ERECTION OF THE PLANT. ADDENDUM IS A CONTINUATION OF THE ORIGINAL AGREEMENT ITSELF AND HENCE, IT RELATE BACK TO THE ORIGINAL CONTRACT. IN OUR OPINION , THE RE IS NO MERIT IN THE ARGUMENT TAKEN BY THE ASSESSEE THAT THE AGREEMENT WITH M/S. BIOPHARMAX IS IN THE NATURE OF THE WORKS CONTRACT FOR SETTING UP THE INSULIN MANUFACTURING UNIT WHEN IN FACT AS RIGHTLY H E LD BY THE DCIT (TDS) THAT THE AGREEMENT IS FOR PROVI DING TECHNICAL 7 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE SERVICES. WE, ACCORDINGLY CONFIRMED THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND NO. 1. 8. SO FAR AS GROUND NO. 2 IS CONCERNED IT IS IN RESPECT OF INTEREST CHARGED BY THE DCIT (TDS) U/S. 201(1A) OF THE ACT. IT WAS CONT ENDED BY THE ASSESSE THAT M/S. BIOPHARMAX HAS FILED THEIR INCOME - TAX RETURN AND PAID THEIR TAX AND HENCE, THERE WAS NO LOSS TO THE REVENUE. THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF M/S. HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. CIT 293 ITR 226 (SC) IN SUPPORT OF THE PROPOSITION THAT IN CASE THE DEDUCTEE HAVE PAID TAX ON THE AMOUNT WHICH ARE LIABLE FOR TDS , NO DEMAND U/S. 201 CAN BE RAISED. THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE AS THE EVIDENCE WAS PRODUCED SHOWING THAT M/S. BIOPH ARMAX HAS DECLARED THE SAID INCOME IN THE A.Y. 2008 - 09 AND HAS CLAIMED THE REFUND TO THE EXTENT OF RS.7,20,250/ - . THE LD. CIT(A) FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. (SUPRA) HELD THAT DEMAND U/S. 201 (1) C ANNOT BE RAISED IN VIEW OF THE FACT THAT THE AMOUNT IN QUESTION HAS BEEN OFFERED FOR TAX BY THE PAYEE BUT IN RESPECT OF THE INTEREST IT IS HELD THAT THE ASSESSEE WILL BE LIABLE TO PAY INTEREST UP TO THE COMPLETION OF THE ASSESSMENT FOR THE A.Y. 2008 - 09 IN THE CASE OF DEDUCTEE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION U/S. 201(1) OF THE INCOME - TAX ACT AND COMPUTE INTEREST U/S. 201(1 A ) OF THE INCOME - TAX ACT FROM THE DATE OF PAYMENT/CREDIT TILL THE DATE OF COMPLETION OF THE ASSESSM ENT IN THE CASE OF DEDUCTEE FOR THE A.Y. 2008 - 09. WE FIND THAT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. (SUPRA) THE HON'BLE SUPREME COURT HAS HELD THAT EVEN IF NO DEMAND CAN BE RAISED IF THE DEDUCTEE HAS DEPOSITED THE TAX BUT AT THE SAME TIME THE ASSESSEE WILL BE LIABLE FOR THE INTEREST. WE FIND NO MERIT IN THE GROUND NO. 2 AS THE LD. CIT(A) HAS GIVEN DIRECTIONS IN ACCORDANCE WITH LAW, THE GROUND NO. 2 IS DISMISSED. 8 ITA NO. 1298/PN/2012, SCIGEN BIP HARMA PVT. LTD., PUNE 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OP EN COURT ON 30 - 09 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 30 TH SEPTEMBER, 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V, PUNE 4 TH E CIT - V, PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE
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