M/s. Deccan Healthcare Pvt. Ltd., Hyderabad V. ACIT,C-1(2),Hyd., Hyderabad

ITA 1470/HYD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6279 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 26-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2013
• Court: TRIBUNAL
• Department Lawyers: K GOPAL KIRSHNA
• Assessee Lawyers: P MURLI MOHAN RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 1470/HYD/2013 ASSESSMENT YEAR : 2009-10 M/S DECCAN HEALTHCARE PVT. LTD., HYDERABAD. VS. ACIT, CIRCLE-1(2), HYDERABAD. PAN: AABCD 0352 N APPELLANT RESPONDENT FOR ASSESSEE: SHRI P. MURLI MOHAN RAO (AR) FOR REVENUE: SHRI K. GOPAL KIRSHNA (D.R.) DATE OF HEARING: 26/07/2016 DATE OF PRONOUNCEMENT: 24/08/2016 O R D E R PER: LALIET KUMAR, J.M. : THIS IS APPEAL FILED BY THE ASSESSEE ARISES AGAINST THE ORDER DATED 06/09/2013 PASSED BY THE LD. CIT(A)-2, HYDERABA D FOR THE A.Y. 2009-10. THE GROUNDS TAKEN BY THE ASSESSEE IN A PPEAL ARE AS UNDER:- 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS IN UPHOLDING THE ADDITION. I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 2 -: 2. THE LD. CIT(A) HAS ERRED IN SPECIFIC IN UPHOLDIN G ADDITION RS. 66,00,000/- TOWARDS LOSS CLAIM IN RESEARCH AND DEVELOPMENT EXPENDITURE IN ACCORDANCE WITH AGREEMEN T DATED ON 09/02/2000. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT WHATEVER AMOUNT PAID BY THE ASSESSEE IS IN ADVANCE TO M/S COGNEX PHARMACEUTICALS IT WAS SHOWN UNDER THE HEAD INVESTMENTS IN ASSET SIDE OF BALANCE SHEET A ND THE LOSS CLAIMED IS BECAUSE OF FAILURE OF THE RESEA RCH DONE ON A PARTICULAR ISSUE. 4. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION OF RS. 4451/- BEING THE DEPRECIABLE ASSETS WRITTEN OFF TO THE P/L ACCOUNT. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSESSEE HAS SUBMITTED ALL THE RELEVANT BOOKS A ND VOUCHERS TO THE A.O. FOR THE ASSETS WRITTEN OF FOR AN AMOUNT OF RS. 4451/- TO P/L ACCOUNT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY FILED ITS RETURN OF INCOME ON 28/09/2009 DECLARING A LOSS OF RS. 1,29,708/-. THE CASE WAS SELECTED FOR SCRUTINY ASSE SSMENT, THEREFORE, A NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT) WAS ISSUED TO THE ASSESSEE. THE ASSESSEE FILED REPLY TO THE NOTICE ON 24/7/2011 IN RESPONSE TO THE NOTICE DA TED 24/5/2011. AS PER ORDER SHEET DATED 28/10/2011, THE A SSESSEE WAS ASKED TO SUBMIT FOLLOWING DETAILS NOTE ON PRODUCT DEVELOPMENT EXPENSES (R&D) (II) CONFIRMATION OF INVES TOR. THEREAFTER THE MATTER WAS POSTED ON 11/11/2011. IN P URSUANCE I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 3 -: TO THE ORDER-SHEET DATED 28/10/2011, THE C.A. ON BEHAL F OF THE ASSESSEE APPEARED BEFORE THE LD A.O THE ASSESSEE WAS ASKED TO PROVIDE R&D AGREEMENT, COPY OF INVESTMENT AND REASONS WRITING OFF THE AMOUNT OF RS. 66,00,000/-. ON 23/12/2011, THE LD AR FOR THE ASSESSEE HAS SUBMITTED COPY OF THE R&D INVESTMENT E NTERED WITH M/S COGNEX PHARMACEUTICALS. THE ORDER SHEET DATE D 23/12/2011 FURTHER MENTIONED THAT AFTER VERIFICATION, THE R&D INVESTMENT, WHICH WAS ORIGINALLY CAPITALIZED BE ING WRITTEN OFF IN THE RELEVANT ASSESSMENT YEAR 2009-10 I S NOT ALLOWED AND ADDED BACK TO THE TOTAL INCOME. THE SAM E HAS BEEN PUT FORTH TO THE AR TO WHICH HE AGREED. 2.1 ON THE BASIS OF THE ORDER SHEET DATED 23/12/2011 A ND THE AR AGREEMENT, THE LD AO HAS COMPLETED THE ASSESSMENT AND INCOME OF THE ASSESSEE WAS ASSESSED FOR A TOTAL INCOME OF RS. 64,11,608/- AND ACCORDINGLY, THE INCOME TAX AND OTHER TAXES WERE WORKED OUT. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. A.O., THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A) AGAINST THE ORD ER DATED 30/12/2011. THE BASIC GROUND BEFORE THE LD CIT(A) WA S THAT THE LD. A.O. IN THE ORDER DATED 30/12/2011 HAS WRONGL Y MENTIONED I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 4 -: THE FACTS IN PARAGRAPH NO. 5 OF THE ASSESSMENT ORDER. H OWEVER, THE LD CIT(A) HAS DISMISSED THE APPEAL ON MERIT. FOR T HE SAKE OF CONVENIENCE AND BREVITY, THE FINDING OF THE LD CIT(A) MADE IN PARAGRAPH NO. 7.2 OF THE ORDER IS REPRODUCED HEREUND ER:- 7.2 AS PER THIS IT IS VERY CLEAR THAT THE CONTRACT SHALL REMAIN IN FORCE FOR A PERIOD OF 2 YEARS ONLY UNLESS OTHERW ISE IF BOTH THE PARTIES HAVE MUTUALLY AGREED TO RENEW THE AGREEMENT BEYOND TWO YEARS. THE AGREEMENT WAS ENTERED ON 19/02/2000. THE AMOUNT OF RS. 66,00,000/- WAS PAID IN F.Y. 2001-02. NOW SINCE THE AGREEMENT WAS TO BE IN FORCE ONLY FOR TWO YEARS, TH E AGREEMENT WOULD LAPSE W.E.F. 19/02/2002. SO IF ANY LOSS WAS TO BE CLAIMED, IT SHOULD HAVE BEEN CLAIMED IN A.Y. 2002-03 ITSELF. NOW AT THIS DISTANCE OF TIME A FTER LAPSE OF SEVERAL YEARS, THE APPELLANT CANNOT MAKE S UCH A CLAIM. ACCORDINGLY, I CONSIDER THERE IS NOT MERIT IN THE CLAIM MADE BY THE APPELLANT AND THIS GROUND OF APPE AL IS DISMISSED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE MAI N ISSUE IN THE PRESENT APPEAL IS WHETHER THE ASSESSEE CAN WRITE OFF THE R&D INVESTMENT MADE IN THE F.Y. 2001-02 IN ACCORDANCE WIT H THE AGREEMENT DATED 19/02/2000 FOR A PERIOD OF 2 YEARS , IN THE A.Y. 2009-10 OR NOT? I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 5 -: 5. DURING THE COURSE OF ARGUMENT ON 26/4/2016, IT WAS POINTED OUT BY THE LD DR THAT THIS DISALLOWANCE FOR THE AMOUNT OF RS. 66,00,000/WAS ACCEPTED BY THE AR OF THE ASSESSEE BEFORE THE LD. A.O. THEREFORE, NOW THE ASSESSEE CANNOT CHALLENGE THE FINDING OF AUTHORITIES BELOW ON THIS GROUND IN THE PRESENT APPE AL BEFORE THIS TRIBUNAL. IT IS NOT PERMISSIBLE FOR THE ASSESSEE TO WIGGLE OUT FROM THE ADMISSION /AGREEMENT MADE DURING THE ASSESSME NT PROCEEDINGS, THEREFORE, THIS GROUND RAISED BY THE ASSE SSEE BEFORE THE TRIBUNAL IS NOT SUSTAINABLE. AFTER THIS ISSUE WAS RAISED BY THE LD DR, THE REVENUE WAS DIRECTED TO PRODUCE THE ORDER-S HEET OF THE ASSESSMENT PROCEEDINGS DATED 23/12/2011AND IN COMPLI ANCE OF THE ORDER THE REVENUE PRODUCED THE ORDERSHEET ON 26/7/2 016. THE PROCEEDING SHEET DATED 23/12/2011 RECORDS AS UND ER:- 23/12/2011:- MR. P.S. RANGANATH, AR APPEARED AND E ARLIER SUBMISSIONS WERE VERIFIED. AR SUBMITTED AGREEMENT C OPY OF R&D INVESTMENT WITH COGNEX PHARMA. AFTER VERIFICATION, THE R&D INVESTMENT WHICH WAS O RIGINALLY CAPITALIZED IS BEEN WITHIN RELEVANT A.Y. 2009-10 IS BEEN NOT ALLOWED AND ADDED BACK TO TOTAL INCOME. THE ISSUE B EEN PUT FORTH TO AR TO WHICH AR AGREED. FURTHER FOR NON DEDUCTION OF TDS ON EXPLANATION AM OUNTED TO RS. 5,12,094 IS BEEN DISALLOWED U/S 40(A)(IA) AN D WEB DESIGNING I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 6 -: EXPENSES OF RS. 1,00,000/- BEING CAPITAL IN NATURE IS BEEN CAPITALIZED BUT, ASSESSEE/AR HAS ALSO NOT ABLE TO F URNISH THE RELEVANT BILLS/VOUCHERS FOR THE SAID EXPENDITURE. T HEREFORE, THE SAME I.S. RS. 1,00,000/- IS DISALLOWED. FURTHER AND WRITTEN OFF OF RS. 4451/- WAS ALSO BEE N DISALLOWED FOR NON SUBMISSION OF CORROBORATIVE EVID ENCES. ALL THE ABOVE DISALLOWANCES WERE DULY CONFRONTED B EFORE AR TO WHICH AR AGREED. THE CASE IS DISCUSSED TO BE CON SIDERED BASED ON AR SUBMISSION. ON THE BASIS OF THIS PROCEEDING SHEET, IT WAS CONTEND ED BY THE LD. DR THAT ONCE THE ASSESSEE THROUGH AR HAS ADMITTED THE F ACTUAL ASPECT BEFORE THE LD. A.O., IT IS NOT PERMISSIBLE IN L AW FOR THE ASSESSEE TO CHANGE ITS STAND AFTER ADMITTING THE SAME BEF ORE THE LD. A.O. IT WAS ALSO POINTED OUT THAT THE ORDER SHEETS ARE MAINTAINED BY THE A.O. AS A QUASI-JUDICIAL AUTHORITY , ENTRIES IN ORDERSHEET RECORDED CANNOT BE DISBELIEVED MERELY ON TH E ASSERTION OF THE ASSESSEE AND THEREFORE, IT IS FOR THE ASSESSEE TO EXPLAIN THE CONTRARY THAT THE AR OF THE ASSESSEE HAS NOT ADMITTED THE F ACTS. 6. PER CONTRA THE LD AR OF THE ASSESSEE HAS SUBMITTED THA T THE ADMISSION OF A FACT DURING THE ASSESSMENT PROCEEDINGS IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT IS ONLY CON CLUSIVE WHEN THE RECORD SHOWS THAT IT WAS CLEARLY ADMITTED BY THE PERSON I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 7 -: MAKING THE ADMISSION. IT WAS SUBMITTED THAT MERELY SIGNI NG THE ORDERSHEET AFTER SIGNATURE OF THE A.O. BY THE AR ASSES SE WAS NOT NEITHER AN ADMISSION NOR AGREEMENT NOR AN ACKNOWLEDG MENT OF THE LIABILITY. IT WAS SUBMITTED THAT IN THE ORDERSHEET, IT W AS MENTIONED AFTER VERIFICATION, THE R&D INVESTMENT WHICH WAS ORIGINALLY CAPITALIZED BEING WRITTEN OFF IN THE RELEVAN T ASSESSMENT YEAR 2009-10 IS BEING NOT ALLOWED AND ADDED BACK TO TH E TOTAL INCOME. AND THEREAFTER THE ALLEGED AGREEMENT WAS RECO RDED BY THE AO. IT IS THEREFORE SUBMITTED ON THE BASIS OF THIS ORDERSHEET THAT FIRST AO HAD DECIDED THE ISSUE AND THEREAFTER THE A R AGREEMENT WAS RECORDED. IT WAS SUBMITTED THAT THERE CANNOT BE AN ADMISSION BY THE AR AFTER THE ADJUDICATION BY THE AO. IT WAS THE ARGUMENT OF THE ASSESSEE THAT THE ADMISSION SHOULD P RECEDE THE ADJUDICATION BY THE LD AO RATHER THAN VICE VERSA. A DJUDICATION SHOULD BE BASED ON THE ADMISSION OF THE FACT BY THE ASS ESSEE AND NOT OTHERWISE. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE ADJUDICATION HAS TAKEN PLACE FIRST AND THE ADMISSION O F THE ADJUDICATION HAS TAKEN PLACE THEREAFTER. THE LD AR H AS ALSO TAKEN US TO THE DEFINITION OF THE ADMISSION AND ACKNOWLEDGEME NT AS PROVIDED UNDER EVIDENCE ACT AND SUBMITTED THAT THE MATTE R BE REMANDED BACK TO AO DECIDING THE ISSUE ON MERIT. I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 8 -: 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD INCLUDIN G THE ORDERSHEET PRODUCED BEFORE US. THOUGH THE ORDER OF THE LD AO IN RESPECT OF WRITTEN OFF R&D INVESTMENT WAS BASED ON THE ADMISSION/AGREEMENT BY THE AR, BUT THE SAID AGREEMENT OF THE AR IS NOT CLEARLY DISCERNABLE FROM THE RECORD. IN FA CT, FROM THE ORDERSHEET IT IS CLEAR THAT FIRST THE A.O. HAS CONCLUDED THAT THE WRITTEN OFF OF THE R&D INVESTMENT CANNOT BE ALLOWED IN TH E RELEVANT ASSESSMENT YEAR 2009-10 AND THEREFORE, ADDED BACK AND THEREAFTER THE A.O. HAS NOTED THE AGREEMENT OF THE AR. IN FACT, THE ASSESSEE SHOULD HAVE RAISED THIS OBJECTION BEFORE THE LD CIT(A) AT THE FIRST INSTANCE HOWEVER, AS IS CLEAR FROM THE GROUN DS OF APPEAL AND THE STATEMENT OF FACT FILED AT THE TIME OF FILING OF THE APPEAL BEFORE THE LD CIT(A), THIS OBJECTION/GROUND WAS NOT RA ISED BEFORE LD CIT (A) NOR THIS GROUND WAS RAISED BEFORE US IN T HE GROUNDS OF APPEAL. AS SEEN FROM THE ORDER OF LD. CIT(A) THE ISS UE WAS ADJUDICATED ON MERITS BUT NOT ON THE ISSUE OF AGREEMEN T. THEREFORE, IN OUR VIEW, THIS PLEA OF LD AR THAT HE HA S NOT ADMITTED BEFORE THE A.O. TO OUR MIND IS ACCEPTABLE. HOWEVER, THE LD. A.O., IN OUR VIEW HAS TO EXAMINE THE CONTENTIONS AND GIVE FIN DINGS WHETHER THE SAID EXPENDITURE CAN BE ALLOWED OR NOT IN THE I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 9 -: IMPUGNED YEAR, WHETHER IT CAN BE A LIABILITY OF THE YE AR SO AS TO ALLOW IN THIS YEAR. THEREFORE, IT WILL BE IN THE INTERE ST OF JUSTICE THAT THE MATTER BE REMANDED BACK TO THE A.O. WITH THE DIR ECTION TO DECIDE THE MATTER ON MERITS RATHER THAN ON THE ADMISSI ON AND AGREEMENT OF THE ASSESSEE IN ACCORDANCE WITH LAW. EVEN THOUGH ASSESSEE RAISED GROUNDS FOR ADJUDICATION ON MERITS, W E ARE OF THE OPINION THAT AO SHOULD EXAMINE ALL FACTS FIRST AND DECI DE ON THE BASIS OF LAW ON THE SUBJECT. THERFORE WE REFRAIN FROM GIVING ANY OPINION ON THE CLAIMS MADE. NEEDLESS TO SAY, NOTHING STATED HEREINABOVE SHALL COME IN THE WAY OF THE A.O. TO DECID E THE ISSUE ON MERIT. ACCORDINGLY, THE MATTER IS REMANDED TO THE FIL E OF THE LD. A.O. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 24/08/2016. SD/- SD/- ( B. RAMAKOTAIAH ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 24 TH AUGUST, 2016 *RANJAN I.T.A. NO. 1470/HYD/2013 M/S DECCAN HEALTHCARE PVT. LTD. VS ACIT :- 10 -: COPY FORWARDED TO: 1. M/S DECCAN HEALTHCARE PVT. LTD., C/O- P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE ACIT, CIRCLE-1(2), HYDERABAD. 3. THE CIT(APPEALS)-2, HYDERABAD 4. THE CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.