ITO 8(2)4, MUMBAI V. PHARMACEUTICAL RESEARCH ASSOCIATION INDIA P.LTD, MUMBAI

ITA 1643/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2772 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPT
• Keywords: Depreciation; Retrospective amendment; Competent authority; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 80HHC; 10B; 10

Judgement Text

, LH LHLH LH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH , IOU FLAG IOU FLAG IOU FLAG IOU FLAG BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH,JUDICIAL MEMBER /.ITA NO.1643/MUM/2014, /ASSESSMENT YEAR-2003-04 ITO 8(2)(4), ROOM NO. 213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS M/S PHARMACEUTICAL RESEARCH ASSOCIATION INDIA PVT. LTD. (FORMERLY KNOWN AS M/S STERLING SYNERGY SYSTEM PVT. LTD., KAMDAR SHOPPING CENTRE, OFFICE NO.5,V.S. KHANDEKAR MARG, VILE PARLE(E), MUMBAI-400057. PAN:AAACS9202R ( / APPELLANT) ( / RESPONDENT) /.ITA NO.1644/MUM/2014, /ASSESSMENT YEAR-2003-04 ITO 8(2)(4), ROOM NO. 213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS M/S PHARMACEUTICAL RESEARCH ASSOCIATION INDIA PVT. LTD. (FORMERLY KNOWN AS M/S STERLING SYNERGY SYSTEM PVT. LTD., KAMDAR SHOPPING CENTRE, OFFICE NO.5,V.S. KHANDEKAR MARG, VILE PARLE(E), MUMBAI-400057. PAN:AAACS9202R ( / APPELLANT) ( / RESPONDENT) /.ITA NO.685/MUM/2013, /ASSESSMENT YEAR-2005-06 M/S STERLING SYNERGY SYSTEM PVT.LTD. (NOW KNOWN AS M/S PHARMACEUTICAL RESEARCH ASSOCIATES INDIA PVT. LTD.) OFFICE NO.1, 1 ST FLOOR, RANG BHAVAN, M.G.CROSS ROAD, NEAR BANK OF BARODA,VILE PARLE (E), MUMBAI-400057. PAN:AAACS9202R VS DCIT 8(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ( / APPELLANT) ( / RESPONDENT) /.ITA NO.1726/MUM/2014, /ASSESSMENT YEAR-2005-06 M/S PHARMACEUTICAL RESEARCH ASSOCIATES INDIA PVT. LTD. (FORMERLY KNOWN AS M/S STERLING SYNERGY SYSTEM PVT. LTD.), OFFICE NO.1, 1 ST FLOOR, RANG BHAVAN, M.G.CROSS ROAD, NEAR BANK OF BARODA,VILE PARLE (E), MUMBAI-400057. PAN:AAACS9202R VS DCIT 8(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 2 ( / APPELLANT) ( / RESPONDENT) / REVENUE BY : SHRI NAVEEN GUPT (DR) /ASSESSEE BY : SHRI DHARMESH SHAH (AR) ' / DATE OF HEARING : 22- 06 -2016 / DATE OF PRONOUNCEMENT : 08-07-2016 ORDER/ % & IOU FLAG IOU FLAG IOU FLAG IOU FLAG PER PAWAN SINGH, JM - 1. THESE FOUR APPEALS WERE HEARD TOGETHER WITH THE CON SENT OF PARTIES AS ALL THE APPEALS ARE INTERCONNECTED ON THE FACTS AND THE GRO UNDS RAISED THEREIN. 2. FIRST WE SHALL TAKE UP THE APPEAL ITA NO. 1644/MUM/2014 FOR AY 2003-04 FILED BY REVENUE AGAINST THE ORDER OF CIT(A)-17, MU MBAI DATED 30.12.2013. THOUGH, THE REVENUE HAS RAISED AS MANY AS 8 GROUNDS OF APPEAL BUT ONLY SUBSTANTIAL GROUND OF APPEAL RAISED BY REVENUE THAT CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 10B OF INCOME TAX ACT, AND FURTHER A LLOWING BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION. RESTS OF THE GROUNDS ARE ARGUMENTATIVE IN NATURE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 01.12.2013 DECLARING TOTAL INCOM E AT NIL. THE C RETURN OF INCOME WAS SELECTED FOR SCRUTINY. IN THE RETURN O F INCOME, THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF THE ACT AMOUNTING TO RS. 75,19 ,679/-IN RESPECT OF PROFIT OF CONTRACT RESEARCH ORGANIZATION(CRO) ACTIVITIES C ARRIED BY THE ASSESSEE. THE AO DENIED THE DEDUCTION ON THE GROUND THAT ASSESSEE HAS LOSSES UNDER ITS MEDICAL TRANSCRIPTION ACTIVITY(MT) AND HENCE THE LO SSES HAVE TO BE SET OFF BEFORE CLAIMING DEDUCTION UNDER SECTION 10B OF THE ACT, THE ASSESSEE HAS BROUGHT FORWARD LOSS IS OF RS. 61,12,464/- AND THE RE IS NO INCOME AFTER SUCH SET OFF TO ALLOW DEDUCTION, APPROVAL FOR CRO ACTIVITY W AS RECEIVED BY ASSESSEE ONLY ON 5 TH DECEMBER 2003, ASSESSEE WAS NOT ENTITLED DEDUCTION IN THE YEAR UNDER APPEAL, THE LOCAL TURNOVER CARRIED OUT BY ASSESSEE EXCEED LIMIT TO 25% OF THE TURNOVER. CRO ACTIVITY IS NOT ELIGIBLE FOR DEDUCTIO N AS THE SAME DOES NOT AMOUNT TO MANUFACTURE OF COMPUTER SOFTWARE. AGGRIEV ED BY THE ORDER OF AO, ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 3 THE ASSESSEE FILED APPEAL BEFORE THE CIT (A) WHEREI N THE APPEAL OF THE ASSESSEE WAS ACCEPTED AND THE ASSESSEE WAS HELD ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. AGGRIEVED BY THE ORDER OF AO, THE REVENUE FILE D THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND AUTHORIZED REPRESENTATIVE (AR) FOR ASSESSEE AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. DR FOR REVENUE ARGUED THAT ASSESSEE HAS NOT FILED T HE NECESSARY APPROVAL FROM SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) AND THE CL AIM OF ASSESSEE WAS CORRECTLY DISALLOWED BY THE AO. THE ASSESSEE FILE D APPEAL BEFORE THE CIT(A) WHEREIN THE SAME WAS AFFIRMED BY THE FIRST APPELLAT E AUTHORITY (FAA), THEREAFTER, THE ASSESSEE FILED APPEAL BEFORE THE IT AT VIDE APPEAL NO. 3097/M/2007 AND THE MATTER WAS RESTORED TO THE FILE OF CIT(A) IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CI T VS. BLACK AND VEATCH CONSULTING PVT. LTD. (251 CTR 265), HINDUSTAN UNILE VER LTD. VS. DCIT (325 ITR 102) WHILE RESTORING THE CASE, IT WAS FURTHER O BSERVED THAT LOSS IN ELIGIBLE UNIT CANNOT BE SET OFF AGAINST THE PROFIT OF NOT EL IGIBLE UNIT. HOWEVER, IN RELATION TO SECTION 80HHC THE HONBLE SUPREME COURT IN CASE OF SHIRKE CONSTRUCTION LTD. (292 ITR 380) HAVE HELD THAT BROUGHT FORWARD L OSSES HAS TO BE ADJUSTED BEFORE ALLOWING THE DEDUCTION. AND THE CIT(A) IN TH E REMAND PROCEEDING ALLOWED THE CLAIM OF ASSESSEE. NOW THE DR FOR REVEN UE FURTHER ARGUED THAT APPROVAL WAS NOT AVAILABLE WITH THE ASSESSEE FOR TH E RELEVANT AY, HENCE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 10B OF T HE ACT. DR FOR REVENUE ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COUR T IN CIT VS REGENCY CREATIONS LTD. (2012) 27 TAXMANN.COM 322(DELHI) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS GALAXY SURFACTANS LTD. (2012) 19 TAXMANN.COM 141(BOMBAY ) LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAS AVAILED THE NECESSARY APPROVAL FROM STPI AND APPROVAL OF 100% E XPORT ORIENTED UNIT (EOU) WAS GRANTED BY STPI AUTHORITIES, THE ASSESSEE ALSO FILED A DOCUMENT/REPORT IN FORM NO. 56G, THE AR OF ASSESSEE FURTHER ARGUED THAT THE ARGUMENT OF DR ARE MISCONCEIVED. AND THE CASE OF AS SESSEE WAS CORRECTLY APPRECIATED BY CIT(A) WHILE ALLOWING THE CLAIM U/S 10B AND TO FURTHER ALLOW ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 4 THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION BEFORE ALLOWING THE DEDUCTION. AR OF ASSESSEE INVITED OUR ATTENTION TO THE REPORT OF STPI WHICH IS AVAILABLE AT PAGE NO. 15 TO 18 OF PAP ER BOOK (PB) AND FURTHER THE REPORT IN FORM NO. 56G IN RESPECT OF CLAIM OF DEDUC TION U/S 10B OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED THAT HE IS ENGAGED IN THREE DIFFERENT BUSINESS ACTIVITIES. 1. CONTRACT RESEARCH ORGANIZATION (CRO). 2. MEDICAL TRANSCRIPTION ACTIVITIES (MT). 3. TRADING AND MARKETING ACTIVITIES AND CLAIMED DEDUCTION U/S 10B IN RESPECT OF TWO ENT ITIES I.E. CRO AND M.T. AND THE TRADING AND MARKETING ACTIVITIES ARE NORMAL BUS INESS ACTIVITIES AND NOT CLAIMED ANY SPECIAL DEDUCTION, THE AO DENIED THE DE DUCTION ON THE GROUND THAT ASSESSEE HAS LOSSES UNDER M.T. ACTIVITIES AND LOSSE S HAVE TO BE SET OFF BEFORE CLAIMING DEDUCTION U/S 10B OF THE ACT. THE ASSESSEE HAS BROUGHT FORWARD LOSSES OF RS. 62,12,644/- AND THERE IS NO INCOME AFTER SU CH SET OFF TO ALLOW DEDUCTION. THE APPROVAL OF CRO WAS RECEIVED BY ASSESSEE ONLY O N 05.12.2003, THUS THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION. THE LOCAL T URNOVER OF ASSESSEE EXCEEDED THE LIMIT OF 25% OF THE TURNOVER, THUS, ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION AND CRO ACTIVITIES ARE NOT ELIGIBLE FOR DEDUCTION SINCE THE SAME DOES NOT AMOUNT TO MANUFACTURE OF COMPUTER SOFTWARE. IN FIRST ROUND O F APPEAL THE THIS TRIBUNAL REMANDED/RESTORED TO THE FILE OF CIT(A) VIDE ITA NO . 3097/M/2007 WITH THE DIRECTION TO CONSIDER THE DECISION OF HONBLE BOMBA Y HIGH COURT IN BLACK AND VEATCH CONSULTING PVT. LTD.(SUPRA), HINDUSTAN UNIL EVER LTD. (SUPRA). AND FURTHER IN RELATION TO SECTION 80HHC IN SHIRKE CONS TRUCTION LTD.(SUPRA). IT WAS FURTHER DIRECTED TO GIVE FINDING ON MERIT AS TO WHE THER THE ACTIVITIES OF ASSESSEE ARE ELIGIBLE FOR DEDUCTION U/S 10B AND SECTION 80HH E. THE CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE IN ACCORDANCE WIT H THE DIRECTION OF THIS TRIBUNAL MADE THE FOLLOWING ORDER: IN VIEW OF THE FOREGOING DISCUSSION, IT CAN BE HEL D THAT THE CRO ACTIVITIES OF THE APPELLANT ARE ELIGIBLE FOR DEDUCT ION U/S 10B OF THE ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 5 ACT AND THE FACT THAT THE APPROVAL WAS RECEIVED LAT E CANNOT BE HELD AGAINST THE APPELLANT AS THE APPROVAL ITSELF IS APP LICABLE WITH RETROSPECTIVE EFFECT. FURTHER, AS HELD IN CASE OF C IT V. SCHMETZ INDIA (P) LTD (SUPRA) AND IN CIT V. BLACK & VEATCH CONSUL TING (P) LTD (SUPRA), BY THE HONBLE BOMBAY HIGH COURT HELD THAT THAT THE DEDUCTION U/S. 10/B OF THE ACT SHOULD BE ALLOWED FI RST AND ONLY ON THE BALANCE REMAINING IF ANY, THE LOSS FROM OTHER UNITS SHOULD BE ADJUSTED. THE LD. AO ALSO WRONGLY APPLIED THE PROVI SIONS OF THE PROVISO OF SECTION 10B WHICH HELD THAT THE PROFITS FROM THE LOCAL ACTIVITY WOULD ALSO BE ELIGIBLE FOR THE DEDUCTION U /S. 10B OF THE ACT IF THE SAID ACTIVITY CONSTITUTES LESS THAN 25% OF THE TOTAL TURNOVER. TO PUT IT DIFFERENTLY, IF THE TURNOVER FROM TILE LOCAL ACTIVITY TO EXCEEDS 25% OF THE TOTAL TURNOVER R SUCH PROFIT FROM THE DO MESTIC SALES WILL NOT BE ALLOWED AS DEDUCTION U/S. 10B OF THE ACT. HO WEVER, THE PROVISIONS DO NOT STATE THAT THE WHOLE OF THE PROFI TS OF THE ELIGIBLE UNDERTAKING FROM THE ELIGIBLE ACTIVITY WOULD GET DI SALLOWED IF THE DOMESTIC TURNOVER EXCEEDS 25%. SINCE THE DOMESTIC T URNOVER EXCEEDED 25% OF THE TOTAL TURNOVER, THE APPELLANT H AD NEVER CLAIMED DEDUCTION U/S. 10B OF THE ACT IN RESPECT OF SUCH DO MESTIC SALES. UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WA S NOT CORRECT IN COMING TO THE CONCLUSION THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT IN RESPECT OF THE ENT IRE ELIGIBLE UNDERTAKING. MOREOVER, IT MAY BE POINTED OUT THAT T HE BENEFIT GIVEN TO THE DOMESTIC SALES WAS SUBSEQUENTLY WITHDRAWN BY THE LEGISLATURE W.E.F. 01.04.2002 AND THAT AS PER THE PROVISIONS AP PLICABLE FOR THE YEAR UNDER APPEAL, NO SUCH BENEFIT IF; GRANTED EVEN TO THE PROFITS FROM THE DOMESTIC SALES IRRESPECTIVE WHETHER THE SA ME EXCEEDS THE LIMIT PRESCRIBED IN THE PROVISO. IN LIGHT OF THE AB OVE, THE DISALLOWANCE OF DEDUCTION U/S. 10B OF THE ACT IS IN CORRECT AND UNJUSTIFIED, THE LD. AO IS THUS DIRECTED TO GIVE TH E DEDUCTION U/S 10B OF THE ACT TO THE APPELLANT, THIS GROUND OF APPEAL IS THUS ALLOWED. AS REGARDS THE ALTERNATIVE CLAIM OF THE APPELLANT REGA RDING THE DEDUCTION U/S. 80HHE OF THE ACT, I FIND THAT THERE IS NO DISCUSSION ON THIS ISSUE BY THE LD. AO IN HIS ORDER THOUGH AS PER THE APPELLANT THE CERTIFICATE IN FORM 56G WAS FILED BEFORE THE ASSESS ING OFFICER WHICH IS IGNORED BY HIM. SINCE, I HELD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT, THE ALTERNATE CLAIM O F THE APPELLANT IS NOT TAKEN UP FOR ADJUDICATION. 6. DR FOR REVENUE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS REGENCY CREATIONS LTD. (SUPRA) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS GALAXY SURFACTANS LTD. (SUPRA). THE DECISION OF DELHI HIGH COURT IN REGENCY CREATION LTD THAT VARIOUS FROM THE FACT OF THE PRESENT CASE. IN REGENCY CREATION THERE WAS NO VALID APPROVAL OF 100 % EOU FROM THE ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 6 COMPETENT AUTHORITY. THE DECISION OF BOMBAY HIGH C OURT IN GALAXY SURFACTANTS LTD, RATHER SUPPORT THE CONTENTION OF A SSESSEE. 7. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION, WE FIND THAT ORDER OF CIT(A) IS WELL-REASONED BASIS ON THE DECISION OF HONBLE B OMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. (SUPRA) AND BLACK AND VEATC H CONSULTING PVT. LTD.(SUPRA). THE ASSESSEE IS ALSO ENTITLED FOR ADJU STMENT OF UNABSORBED DEPRECIATION AGAINST THE INCOME FOR THE PURPOSE OF EXEMPTION U/S 10B IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COU RT IN HIMATSINGKA SEIDE LTD. VS. CIT. IN VIEW OF THE ABOVE OBSERVATION, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY CIT(A). THUS, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. ITA NO. 1643/MUM/2014 9. THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER O F CIT(A)-17, MUMBAI DATED 30.12.2013, WHEREIN THE PENALTY U/S 271(1)(C) DATED 27.03.2008 WAS DELETED. 10. THE AO HAS LEVIED THE PENALTY ON THE GROUND THAT TH E CLAIM OF ASSESSEE FOR DEDUCTION U/S 10B WAS NOT ALLOWED. HOWEVER, THE SAM E WAS DELETED BY CIT(A) ON THE GROUND THAT THE ADDITION/DEDUCTION ON THE BA SIS OF WHICH HAS BEEN DELETED BY THE APPELLATE AUTHORITY. SINCE THE QUANTUM ADDIT ION HAS BEEN DELETED BY THE FAA, HENCE, THE PENALTY LEVIED BY AO WAS ALSO DELET ED. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 11. WHILE HEARING OF THE APPEAL OF REVENUE ON THE QUANT UM ASSESSMENT FOR AY 2003-04 WE HAVE CONFIRMED THE ORDER OF CIT(A) ON TH E QUANTUM APPEAL OF THE ASSESSEE IN ITA NO. 1644/MUM/2014. THUS, IN OUR CON SIDERED OPINION, WHEN THE ENTIRE ADDITION HAS BEEN DELETED BY APPELLATE A UTHORITY, EITHER BY COMMISSIONER OF INCOME TAX APPEAL OR BY TRIBUNAL, THE ORDER OF PENALTY LEVIED UNDER SECTION 271(1)(C) DOES NOT SURVIVE. IN THE ABOVE OBSERVATION, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ITA NO. 1726/MUM/2014 12. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-17, MUMBAI DATED 30.12.2013 FOR AY-2005-06 RAISING THE FOLLOWI NG GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S. 250 OF THE A CT PARTLY ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 7 DISALLOWING THE APPEAL AGAINST THE APPEAL DIRECTED BY INCOME TAX APPELLATE TRIBUNALS ORDER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF EXPE NSES AMOUNTING TO RS. 27,57,933/- ON THE GROUND THAT THE EXPENDITU RE INCURRED IS OF CAPITAL IN NATURE. 13. THE FACT LEADING TO FILING OF THE APPEAL IS THAT WH ILE FRAMING THE ASSESSMENT, THE AO DISALLOWED A SUM OF RS. 27,57,933/- ON THE GROUN D THAT EXPENDITURE ARE CAPITAL IN NATURE AND THE SAME WAS CONFIRMED BY THE FAA. THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL AND THE SAME WAS RESTOR ED TO THE FILE OF COMMISSIONER OF INCOME TAX APPEAL WITH THE DIRECTIO N TO DECIDE THE APPEAL AFRESH. AFTER GIVING OPPORTUNITY TO THE ASSESSEE. T HE LEARNED CIT APPEALS CONFIRMED THE ADDITION OF EXPENDITURE DISALLOWED BY AO, THUS THE PRESENT APPEAL IS FILED BEFORE US. 14. WE HAVE HEARD AR OF THE ASSESSEE AND DR FOR REVENUE . AR OF ASSESSEE ARGUED THAT THE EXPENSES ARE REVENUE IN NATURE AND THE ASS ESSEE IS ENTITLED FOR THE ENTIRE EXPENSES. AR OF ASSESSEE FURTHER ARGUED THAT THIS I S SECOND GROUND OF APPEAL IN FIRST GROUND OF APPEAL, THE MATTER WAS RESTORED TO THE FILE OF CIT(A) WITH THE DIRECTION TO FILE DETAILS OF EXPENDITURE, WHICH HA VE NOT BEEN BROUGHT ON RECORD EITHER ON THE ORDER OF AO OR CIT(A) AND THUS THE IS SUE WAS RESTORED TO THE FILE OF AO FOR PASSING FRESH ORDER AFTER NECESSARY EXAMI NATION WITH REGARD TO EXPENDITURE WHETHER THEY ARE CAPITAL OR REVENUE IN NATURE. THE AR OF ASSESSEE FURTHER ARGUED THAT THE LEARNED CIT HAS NOT ALLOWED THE ALLOWABLE EXPENDITURE, WHICH WAS REVENUE IN NATURE. ALL THE EXPENDITURE WA S MADE IN THE OFFICE OF DIRECTOR OF THE ASSESSEE. ALL THE NECESSARY DOCUMEN TARY EVIDENCE WAS PROVIDED TO THE COMMISSIONER OF APPEALS, BUT THE SAME WAS NO T CONSIDERED AND THE CLAIM OF ASSESSEE WAS DISALLOWED. DR FOR REVENUE ARGUED T HAT THE ORDER OF COMMISSIONER OF INCOME TAX APPEAL ARE REASONED ONE AND DOES NOT REQUIRE ANY INTERFERENCE AT THE END OF THIS TRIBUNAL. 15. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS FILED ALL REC ORD, THE DETAILS OF BILLS AND OTHER EVIDENCE IN RESPECT OF EXPENSES INCURRED ON R EPAIR OF TENANTED PREMISES. THE AO WHILE DISALLOWING THE EXPENSES OBSERVED THAT THE EXPENSES WERE ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 8 INCURRED ON RENTAL PREMISES AND THE SAME IS NOT ACC EPTED AS REVENUE EXPENDITURE, THE ASSESSEE MADE EXPENDITURE ON ACCOU NT OF FURNITURE AND FIXTURES AND NOT ON THE BUILDING, HENCE, THESE ARE IN THE NATURE OF CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION @ 15% OUT OF R S. 27,57,993/- AND THUS GRANTED PARTIAL RELIEF OF RS. 4,13,690/-. CIT(A) WH ILE CONSIDERING THIS GROUND IN SECOND GROUND OF APPEAL OBSERVED THAT THE MATTER WA S RE-EXAMINED IN ACCORDANCE WITH THE DIRECTION OF ITAT. THE ASSESSEE WAS ASKED TO PROVIDE COPY OF AGREEMENT AND OTHER RELATED DOCUMENTS. CIT(A) FU RTHER OBSERVED THAT NO COPY OF AGREEMENT WAS PROVIDED BY THE ASSESSEE AND ASSESSEE SUBMITTED THAT THE EXPENDITURE ARE REVENUE IN NATURE AND IN THE NORMAL COURSE OF BUSINESS AND PURPOSE OF BUSINESS AND FOR CREATING ANY CAPITAL AS SETS OF ENDUR9ING IN NATURE. THE CIT(A) CONCLUDED THAT HE HAS NO REASON TO DEVIA TE FROM THE FINDING GIVEN BY HIS PREDECESSORS AND DISMISSED THE GROUND OF APP EAL. THE ASSESSEE HAS CARRIED OUT THE REPAIR AND RENOVATION IN THE DIRECT ORS OFFICE. DURING THE FIRST APPELLATE PROCEEDING, THE ASSESSEE CLAIMED EXPENSES INCURRED ON RENTED ACCOMMODATION AND THE MATTER WAS REMANDED WITH THE SPECIFIC DIRECTION TO THE AO TO PRODUCE THE COPY OF AGREEMENT WITH LANDLORD. NO SUCH COPY OF AGREEMENT WAS PRODUCED, THE DETAILS SUBMITTED BY AS SESSEE WHICH WERE FILED BEFORE THE CIT(A) IN THE DETAILS WHICH CONSIST A NU MBER OF INVOICES AND ONE OF THE INVOICE AT PAGE 25 OF PB CONTAINS THE DETAILS O F SHIFTING 200 KVA DIESEL GENERATING SET AT A-1 BUILDING AT DEEPAK COMPLEX AN D ITS COST IS CLAIMED RS. 76,000/- AND RS. 5,000/- ON ACCOUNT OF OBTAINING NO C FROM ELECTRICITY INSPECTOR AND ANOTHER BILLS DATED 02.08.2004 BY M/S R.K. ENTERPRISES FOR PLUMBING WORK, ANOTHER PLUMBING WORK OF RS. 22,409/ - AND ANOTHER BILL DATED 02.08.2004 FOR ALUMINUM DOOR OF RS. 4300/- AND SIMI LARLY A NUMBER OF OTHER INVOICES WITH NUMEROUS DETAILS WHICH ARE CERTAINLY NOT IN RESPECT OF REPAIRS AND MAINTENANCE AS CLAIMED BY ASSESSEE. HOWEVER, KEEPIN G IN VIEW THE FACT AND CIRCUMSTANCES OF THE CASE AND THE ASSESSEE IS BEFOR E THIS TRIBUNAL IN 2 ND ROUND OF LITIGATION, WE ALLOWED THE ASSESSEE 50% OF THE CLAI M OF EXPENSES OUT OF THE TOTAL EXPENDITURE CLAIMED BY ASSESSEE. THE AO IS DIRECTED ACCORDINGLY. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 9 ITA NO. 685/M/2013 . 17. THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX APPEALS-18 DATED 6 NOV 2012 CONFIRMING THE ORDE R OF PENALTY LEVIED UNDER SECTION 271( 1)(C ) OF THE ACT . 18. PENALTY ORDER UNDER SECTION 271 (1) OF THE ACT WA S LEVIED BY THE AO, ON THE GROUND THAT DEDUCTION UNDER SECTION 10 B CLAIMED BY THE ASSESSEE WAS DISALLOWED IN THE QUANTUM ASSESSMENT. THE ORDER OF PENALTY WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX APPEALS IN ITS ORDER DATED 6 NOVEMBER 2012. THE ASSESSEE HAS ALSO CHALLENGED THE QUANTUM ASSESS MENT BEFORE THE TRIBUNAL AND THE SAME WAS RESTORED TO THE FILE OF LD COMMISS IONER OF INCOME TAX APPEALS FOR FRESH ADJUDICATION. THE LEARNED COMMISS IONER OF INCOME TAX APPEAL ALLOWED THE DEDUCTION UNDER SECTION 10B OF T HE ACT AS CLAIMED BY ASSESSEE IN THE ORIGINAL ASSESSMENT VIDE ORDER DATE D 30 DECEMBER 2013. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TA X APPEAL, THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL AND THE SAME WAS DISMISSED VIDE ITA NO. 1645/M/2014, DATED 21 ST MARCH 2016. THE 30 DECEMBER 2013. THUS, IN OUR CONSIDERED OPINION, WHEN THE ADDITION HAS BEEN DEL ETED BY APPELLATE AUTHORITY , EITHER BY COMMISSIONER OF INCOME TAX APPEAL OR TRI BUNAL, THE ORDER OF PENALTY LEVIED UNDER SECTION 271(1)(C) DOES NOT SU RVIVE. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 19. IN THE RESULT, ITA NO. 1643/M/2014 AND ITA NO.1644/ M/2014 FOR AY 2003 04 FILED BY REVENUE ARE DISMISSED. THE APPEAL ITA N O. 1726/M/2014 FOR AYB2005-06 FILED BY ASSESSEE IS PARTLY ALLOWED AND APPEAL ITA NO. 685/M/2013 FILED BY ASSESSEE AGAINST PENALTY ORDER FOR SAME AY IS ALLOWED. PARTIES ARE LEFT TO BEAR OWN COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY,2016. $ % &' ()* 8 TW TWTW TWYKBZ YKBZ YKBZ YKBZ ,20 16 ./ 0 SD/- SD/- ( /RAJENDRA) ( IOU FLAG IOU FLAG IOU FLAG IOU FLAG / PAWAN SINGH) & / ACCOUNTANT MEMBER / JUDICIAL MEMBER & % */ /MUMBAI, ()* /DATE: 08 .07.2016 SK ITA NOS. 1 643, 1644, 1726/M/14 & 685/M/13 M/S PHARMACEUTICAL RESEARCH ASSOCIATION (I) PVT. LTD. 10 ' '() *) / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ *23 % 4 , 4. THE CONCERNED CIT / *23 % 4 5. DR C BENCH, ITAT, MUMBAI / 56. )73 , LH LHLH LH * , . . . & % */ 6. GUARD FILE/ . / 5 //TRUE COPY// $) % / BY ORDER, / * DY./ASST. REGISTRAR 73 , & % */ /ITAT, MUMBAI.