M/s. Matrix Laboratries Ltd, Secunderabad V. The CIT - IV, Hyderabad

ITA 1564/HYD/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1806 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 06-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 13-12-2010
• Court: TRIBUNAL
• Department Lawyers: S V S S PRASAD
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Revised return
• Section: 143(3); 14A; 115JB; 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1564/HYD/2010 ASSESSMENT YEAR: 2005-06 MATRIX LABORATORIES LTD., HYDERABAD [PAN: AADCM3491M] VS ADDL. COMMISSIONER OF INCOME TAX, RANGE-16, HYDERABAD FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SHRI S.V.S.S. PRASAD, DR DATE OF HEARING : 18-08-2015 DATE OF PRONOUNCEMENT : 21-08-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-IV, HYDERABAD DATED 29-0 3-2010 FOR THE AY. 2005-06. 2. IT IS NOTICED FROM THE POWER OF ATTORNEY FILED B Y THE COUNSEL THAT THE NAME OF THE COMPANY HAS BEEN CHANGED FROM MATRI X LABORATORIES LIMITED TO MYLAN LABORATORIES LIMITED. HOWEVER, NE ITHER ASSESSEE FILED ANY REVISED FORM 36 NOR BROUGHT THE CHANGE OF NAME TO THE NOTICE OF ITAT. EVEN THE REVENUE HAS NOT OBJECTED THE SAME. SINCE THE APPEAL BY I.T.A. NO. 1564/HYD/10 MATRIX LABORATORIES LTD., :- 2 -: ASSESSEE WAS FILED MUCH EARLIER, WE ARE CONSTRAINED TO PASS ORDER IN THE NAME OF M/S. MATRIX LABORATORIES LIMITED. 3. BRIEFLY STATED, ASSESSEE IS A PUBLIC LIMITED CO MPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON ON 01-11-2005 DECLARING TOTAL INCOME OF RS. 74,65,22,254/- UNDER NORMAL PROVISIONS OF THE OF THE INCOME TAX ACT [ACT] AND RS. 1,03,16,05, 170/- U/S. 115JB OF THE ACT. A REVISED RETURN WAS FILED ON 31-03-2007 MODIFYING THE INCOMES. THEREAFTER, ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ASSESSING THE TOTAL INCOME OF RS. 1,42,58,20,809/- UNDER NORMAL PROVISIONS VIDE ORDER DT. 28-12-2007 PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-16(2), HYDERABAD. THIS ORDER WAS SUBJECT MATTER OF APPEALS ON THE ISSUES TAKEN UP IN THE ASSESSMENT . IN THE MEANWHILE, LD. CIT, HYDERABAD NOTICED THAT THE ORDER IS ERRONE OUS ON THE FOLLOWING TWO GROUNDS: A) THAT APPROVAL FOR THE EXPORT ORIENTED UNITS OF THE ASSESSEE COMPANY HAS NOT BEEN RECEIVED FROM THE BOARD OF TH E APPROVALS AND THEREFORE NO DEDUCTION IS PERMISSIBL E UNDER SEC 10B OF THE ACT, AND; B) THAT ELIGIBLE PROFITS U/S. 10B OF THE ACT SHOULD BE PROPORTIONATELY REDUCED BY THE WEIGHTED DEDUCTION A LLOWED UNDER SEC. 35(2AB) OF THE ACT. 4. THE COMPANY FILED COMPLETE DETAILS BEFORE THE CI T AND MADE DETAILED SUBMISSIONS WITH REFERENCE TO THE ISSUES R AISED. HOWEVER, CIT REJECTED THE CONTENTIONS AND VIDE ORDER U/S. 263 DT . 29-03-2010, DIRECTED THE ASSESSING OFFICER (AO) TO WITHDRAW THE DEDUCTION U/S. 10B I.T.A. NO. 1564/HYD/10 MATRIX LABORATORIES LTD., :- 3 -: OF THE ACT. HE ALSO REJECTED THE CONTENTIONS OF AS SESSEE-COMPANY FOR NOT REDUCING THE ELIGIBLE PROFIT PRO-RATA BY WEIGHTED D EDUCTION GRANTED U/S. 35(2AB) OF THE ACT. 5. ASSESSEE-COMPANY FILED A WRIT OF CERTIORARI BEFO RE THE HON'BLE HIGH COURT OF ANDHRA PRADESH AGAINST THE SAID REVIS ION ORDER OF THE CIT- IV ON THE FIRST ISSSUE. THE HON'BLE HIGH COURT AFT ER A DETAILED EXAMINATION OF THE CASE PAPERS IN WP NO. 14776 OF 2 010 VIDE ITS JUDGMENT DT. 29-03-2010 SET ASIDE THE IMPUGNED ORDE R DT. 29-03-2010 IN SO FAR AS IT DISALLOWS THE CLAIM OF EXEMPTION U/ S. 10B OF THE ACT TO BE ADJUDICATED AGAIN. HOWEVER, THE HON'BLE HIGH COURT LEFT IT OPEN TO THE PETITIONER TO AGITATE IN AN APPROPRIATE FORUM WITH REGARD TO THE QUESTION OF APPORTIONMENT OF R&D EXPENSES OF ALL UNITS PROPO RTIONATELY. 6. THE OTHER ISSUE WHICH WAS TAKEN UP BY THE CIT U/ S. 263 WAS NEITHER CONTESTED BEFORE THE HON'BLE HIGH COURT NOR THERE ARE ANY DIRECTIONS WITH REFERENCE TO THE SAME. THEREFORE, IT IS THE CONTENTION OF ASSESSEE THAT AS ITAT CAN ADJUDICATE THE ISSUE TAKE N UP BY THE CIT WITH REFERENCE TO WEIGHTED DEDUCTION OF R&D EXPENDITURE TO BE ADJUSTED WHILE ALLOWING DEDUCTION U/S. 10B. 7. AT THE OUTSET, LD. COUNSEL FAIRLY ADMITTED THAT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO. 1616/HYD/2010 IN AY. 2006-07 WHEREIN, AO DISALLOWED THE AMOUNT IN THE ASSESSMENT ITSELF. ON SIMILAR FACTS, IT WAS CO NSIDERED AND HELD THAT: 51. BRIEFLY THE FACTS ARE DURING THE ASSESSME NT PROCEEDING, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED WEIGHTED DEDU CTION UNDER SECTION 35(2AB) ON THE R & D FACILITIES. HOWEVER, THE DEDUC TION CLAIMED IS NOT SUPPORTED BY REPORT IN FORM NO.3CL AND THE ASSESSEE HAS ONLY CLAIMED THE DEDUCTION ON THE BASIS OF AUDITORS CERTIFICATI ON. WHEN THE A.O. CALLED I.T.A. NO. 1564/HYD/10 MATRIX LABORATORIES LTD., :- 4 -: UPON THE ASSESSEE TO FURNISH THE CERTIFICATES IN FO RM NO.3CL, THE ASSESSEE STATED THAT THEY WILL BE IN A POSITION TO FURNISH THE SAME WITHIN A SHORT PERIOD. HOWEVER, IN ABSENCE OF CERTIFICATE IN FORM NO.3CL, THE A.O. DID NOT ALLOW THE WEIGHTED DEDUCTION CLAIMED BY THE ASSESSEE. AO ALSO OBSERVED, AT THE TIME OF CONSIDERING ALLOWANCE OF W EIGHTED DEDUCTIONS, R&D EXPENDITURE RELATING TO THE UNITS CLAIMING DEDU CTION U/S 10B IS ALSO TO BE WORKED OUT BY TAKING INTO ACCOUNT WEIGHTED DEDUC TION ALLOWED ON R&D. THE DRP ALSO CONFIRMED THE DISALLOWANCE. 52. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS OTHER MATERIALS ON RECORD. THE LEARNED A.R. FAIRLY SUBMITTED BEFORE US THAT THE ISSUE IN DISPUTE STANDS DECIDED AGAINST THE ASSESSEE BY AN O RDER OF THE ITAT, BANGALORE BENCH IN CASE OF DCIT VS. M/S. BIOCON LTD ., IN ITA.NO.248/BANG/2010 DATED 30.04.2014. ON A PERUSAL OF THE AFORESAID ORDER OF THE COORDINATE BENCH, IT IS SEEN THAT WHIL E DEALING WITH THE SPECIFIC ISSUE HAS HELD AS UNDER : 24. THUS, WHEN THE PROVISIONS OF SECTION 10A/10B O F THE ACT ARE HELD TO BE EXEMPTION PROVISIONS, THE PR OVISIONS OF SECTION 35(2AB) OF THE ACT WHICH ARE CONTAINED IN C HAPTER IV OF THE ACT WILL NOT BE APPLICABLE. RESULTANTLY, THE WEIGHTED DEDUCTION AT 150% U/S. 35(2AB) OF THE ACT WILL NOT BE ALLOWED WHILE COMPUTING INCOME OF SECTION 10A/10B UNIT. THE 10A/10B UNIT WILL GET ONLY 100% DEDUCTION OF REVENU E EXPENDITURE. THE EXCESS 50% ALLOWED AS DEDUCTION U/ S. 35(2AB) OF THE ACT HAS TO BE WITHDRAWN AS IT WILL P ULL DOWN THE PROFITS OF THE NON-10A/10B UNIT WHICH IS TAXABL E. THEREFORE, THE WITHDRAWAL OF 50% DEDUCTION ALLOWED U/S. 35(2AB) OF THE ACT WHILE COMPUTING INCOME OF NON-10 A/10B UNIT HAS TO BE UPHELD BOTH ON GENERAL PRINCIPLES AS WELL AS BY RELYING ON THE PROVISIONS OF SECTION 14A OF THE ACT . AS CAN BE SEEN, THE RATIO LAID DOWN IN THE AFORESAI D DECISION IS TO THE EFFECT THAT WHEN A PARTICULAR ASSESSEE IS CLAIM ING DEDUCTION UNDER SECTION 10A/10B, IT CANNOT CLAIM WEIGHTED DEDUCTION UNDER SECTION 35(2AB). AS IN THE PRESENT CASE, THE ASSESSEE HAS C LAIMED DEDUCTION UNDER SECTION 10B, NO DEDUCTION UNDER SECTION 35(2A B) CAN BE ALLOWED TO THE ASSESSEE. ACCORDINGLY, GROUND NO.9 IS DISMISSED . 8. RESPECTFULLY FOLLOWING THE SAME, WE HAVE TO UPHO LD THE ORDER OF CIT. HOWEVER, THE AMOUNTS DETERMINED BY CIT IN THE ORDER MAY VARY, IN CASE OF ANY VARIATION IN THE PROFITS OF THE ABOVE U NITS. SUBJECT TO ABOVE I.T.A. NO. 1564/HYD/10 MATRIX LABORATORIES LTD., :- 5 -: OBSERVATION, THE ORDER OF CIT TO THAT EXTENT IS UPH ELD. ASSESSEES APPEAL IS ACCORDINGLY TREATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 21 ST AUGUST, 2015 TNMM COPY TO 1. MATRIX LABORATORIES LTD., 1-1-151/1, IV FLOOR, S AIRAM TOWERS, ALEXANDER ROAD, SECUNDERABAD. 2. ADDL. COMMISSIONER OF INCOME TAX, RANGE-16, AAYA KAR BHAVAN, BASHEER BAGH, HYDERABAD. 3. CIT-IV, HYDERABAD. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.