DCIT., Circle-3(2), Hyderabad, Hyderabad V. M/s Suven Life Sciences Limited, Hyderabad

ITA 1965/HYD/2014

• Counselvise Citation: 196522514 RSA 2014
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 31-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: P MURALIKRISHNA
• Keywords: Retrospective amendment
• Section: 80HHC; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1965/HYD/2014 (ASSESSMENT YEARS 2010-11) DY. COMMISSIONER OF INCOME - TAX, CIRCLE 3(2), HYDERABAD V/S M/S. SUVEN LIFE SCIENCES LIMI T ED, HYDERABAD (PAN - AADCS 4044 C ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KONDA RAMESH DR RESPONDENT BY : SHRI P.MURALI KRISHNA DATE OF HEARING 03.12.2015 DATE OF PRONOUNCEMENT 23.12.2015 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-I I, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2010-11. 2. FOLLOWING GROUNDS ARE URGED BEFORE US: 1. THE LEARNED CIT(A) ERRED BOTH IN LAW AND ON F ACTS OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN DELETING THE INTEREST CHARGED U/S. 234B OF THE IT ACT. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THOUGH THE RELEVANT AMENDMENT TO SEC.115JB WAS BROUGHT THROUGH FINANCE ACT, 2011, THE ASSESSEE HAS FAILED TO FILE THE REVISED TURN OF INCOME WITHDRAWING THE 80HHC CLAIM FROM THE BOOK PROFIT TILL THE ISSUE IS NOTICED IN THE SCRUTINY PROCEEDIN GS. 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CHARGING OF INTEREST U/S. 234B IS MANDATORY WHICH IS WITH REFERENCE TO ASSESSED TAX AN THERE IS NO ITA NO.1965/HYD/2014 M/S. SUVEN LIFE SCIENCES LIMITED, HYDERABAD 2 OTHER PROVISION IN THE ACT TO GIVE RELIEF FOR THE ERROR/FAILURE WHETHER VOLUNTARY OR INVOLUNTARY BY THE ASSESSEE. 5. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TI ME OF HEARING. 3. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUF ACTURE OF BULK DRUGS AND INTERMEDIATES. FOR THE YEAR UNDER CONSID ERATION, IT RETURNED LOSS OF RS.12.10 CRORES UNDER THE NORMAL PROVISIONS OF THE ACT AND INCOME OF RS.53.55 LAKHS UNDER S.15JB OF THE ACT. THOUGH THE RETURN WAS ORIGINALLY PROCESSED UNDER S.143(1), IT WAS LAT ER ON TAKEN UP FOR SCRUTINY BY ISSUING A NOTICE UNDER S.143(2). DURING THE COURSE OF EXAMINATION, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE REDUCED AN AMOUNT OF RS.3,15,18,576 FROM THE BOOK PROFIT TO WARDS DEDUCTION UNDER S.80HHC OF THE ACT WHEREAS NO SUCH DEDUCTION UNDER S.80HHC WAS ADMISSIBLE FROM BOOK PROFITS. WHEN CALLED UPON TO EXPLAIN, THE ASSESSEE COMPANY SUBMITTED THAT THE DEDUCTION WAS C LAIMED IN THE CONTEXT OF APEX COURT DECISION IN THE CASE OF AJANT HA PHARMA LTD. V/S. CIT(327 ITR 305). HOWEVER, THIS SECTION HAS BEEN A MENDED WITH RETROSPECTIVE EFFECT, NULLIFYING THE DECISION OF TH E APEX COURT, WHICH COULD NOT BE FORESEEN. THE COMPANY, THEREFORE, HAD NO OBJECTION FOR THE DISALLOWANCE OF THE SAID CLAIM. THE ASSESSING OFFICER ACCORDINGLY PROCEEDED TO RECOMPUTE THE BOOK PROFIT UNDER S.115J B OF THE ACT AND BASED ON THE RECOMPUTED BOOK PROFIT, INTEREST UNDER S.234B AND 234C WAS CHARGED. IT MAY ALSO BE NOTICED THAT THE ASSESS ING OFFICER DISALLOWED DERIVATIVE LOSS OF RS.50,49,000 DEBITED TO THE PROFIT & LOSS ACCOUNT ON MARK TO MARKET BASIS, STATING THAT IT W AS ONLY A NOTIONAL LOSS UNTIL THE CONTRACT IS SETTLED. HE ALSO FURTHE R DISALLOWED A SUM OF RS.26,65,090 BY APPLYING RULE 8D OF THE IT RULES, B Y OBSERVING THAT THE EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND I NCOME, WHICH IS ITA NO.1965/HYD/2014 M/S. SUVEN LIFE SCIENCES LIMITED, HYDERABAD 3 EXEMPT UNDER S.10(23) OF THE ACT, AND THEREFORE, IT ATTRACTS DISALLOWANCE UNDER S.14A OF THE ACT. 4. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT INTEREST IS NOT CHARGEABLE UNDER S.234B AND S.234C OF THE ACT, SINCE THE ASSESSEE CANNOT BE EXPECTED TO DO AN IMPOSSIBILITY OF PAYING ADVANCE TAX ON AN ISSUE WHICH WAS OTHERWISE COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE APEX COURT. IN OTHER WORDS, THE ASSESSEE COMPANY PAID ADVANCE TAX BY ESTIMATING ITS INCOME I N ACCORDANCE WITH THE THEN PREVAILING LEGAL POSITION, AND IT IS ONLY ON ACCOUNT OF SUBSEQUENT RETROSPECTIVE AMENDMENT IN LAW THAT THE ADVANCE TAX PAID BY THE ASSESSEE COMPANY FELL SHORT OF THE INCOME A S PER THE AMENDED LAW, AND THEREFORE, BY NO STRETCH OF IMAGINATION, I T CAN BE HELD THAT THERE WAS ANY DEFAULT ON THE PART OF THE ASSESSEE I N PAYMENT OF ADVANCE TAX IN ACCORDANCE WITH PROVISIONS OF S.208 TO S.210 OF THE ACT, AND CONSEQUENTLY, THE ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER S.234B AND234C. ASSESSEE ALSO CHALLENGED OTH ER DISALLOWANCES. 5. THE LEARNED CIT(A) OBSERVED WITH REGARD TO DIS ALLOWANCE OF EXPENDITURE UNDER S.14A OF THE ACT, THAT INVESTMEN T WAS MADE OUT OF INTEREST FREE FUNDS AND, AT ANY RATE, THE DISALLOWA NCE, IF ANY, DESERVES TO BE RESTRICTED TO RS.4,45,750 AS AGAINST RS.26,65 ,090 MADE BY THE ASSESSING OFFICER. AS REGARDS THE DERIVATIVE LOSS O F RS.50.49 LAKHS, THE LEARNED CIT(A) NOTICED THAT THE TRANSACTION MATURED /CRYSTALISED DURING 2009 AND THEREAFTER IT WAS DEBITED TO ASSESSEES AC COUNT. THEREFORE, EVEN ACCORDING TO THE CBDTS INSTRUCTION NO.3 OF 20 10, THE DERIVATIVE LOSS WAS TO BE ALLOWED AS DEDUCTION, IF THE TRANSAC TION HAS MATURED. HE THEREFORE, SET ASIDE THE DISALLOWANCE. ON THESE TWO ISSUES, REVENUE HAS NOT FILED ANY APPEAL. ITA NO.1965/HYD/2014 M/S. SUVEN LIFE SCIENCES LIMITED, HYDERABAD 4 6. WITH REGARD TO THE MAIN CLAIM OF THE ASSESSEE ABOUT NON- CHARGEABILITY OF INTEREST UNDER S.234B AND S.234C O F THE ACT, THE LEARNED CIT(A) RELIED UPON THE FOLLOWING DECISIONS TO OBSERVE THAT INTEREST ARISES ONLY UPON DEFAULT, AND HENCE, IT IS IN THE NATURE OF A QUASI-PUNISHMENT AND IN SUCH AN EVENT, MERELY BECA USE WHEN LIABILITY TO PAY INTEREST AROSE DUE TO RETROSPECTIV E AMENDMENT OF LAW, THE SAME SHOULD NOT ENTAIL PAYMENT OF INTEREST. (A) STAR INDIA PVT. LTD. V/S. CCE (280 ITR 321)-SC (B) EMAMI LTD. VS. CIT (337 ITR 470)-CAL. (C) SANKHLA POLYMERS PVT. LTD. (352 ITR 452)- HE ACCORDINGLY SET ASIDE THE INTEREST CHARGED BY T HE ASSESSING OFFICER. 7. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US CONT ENDING THAT INTEREST CHARGEABLE UNDER S.234B AND S.234C IS AUTO MATIC UPON COMPUTATION OF INCOME AND HENCE, THE FIRST APPELLAT E AUTHORITY HAS NO POWER TO CANCEL SUCH INTEREST CHARGED BY THE ASSESS ING OFFICER. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASS ESSEE RELIED UPON THE DECISION OF THE HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF QUALITY BISCUITS (284 ITR 434) TO SUBMIT THAT INTER EST UNDER S.234B AND S.234C CANNOT BE CHARGED IF THE INCOME IS ASSE SSED AS PER MAT PROVISIONS, AND, AT ANY RATE, ASSESSEE COULD NOT HA VE ANTICIPATED RETROSPECTIVE AMENDMENT TO DISCHARGE THE TAX LIABIL ITY AS PER THE AMENDED PROVISIONS OF THE ACT, AND HENCE, IT IS NOT A FIT CASE FOR THE CHARGING OF INTEREST IN THE LIGHT OF THE DECISIONS REFERRED TO BY THE LEARNED CIT(A). IT IS ALSO SUBMITTED THAT THERE IS NO CONTRARY VIEW IN THE MATTER, AND THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. ITA NO.1965/HYD/2014 M/S. SUVEN LIFE SCIENCES LIMITED, HYDERABAD 5 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. WE ARE CONCERNED WITH THE PREVI OUS YEAR COMMENCING ON 1.4.2009 AND ENDING ON 31.3.2010. AS PER THE DECISION OF THE APEX COURT, ASSESSEE WAS ENTITLED T O DEDUCTION UNDER S.80HHC FOR THE PURPOSE OF COMPUTATION OF BOOK PROF IT UNDER S.115JB OF THE ACT, AND THEREFORE, ASSESSEE NEED NOT HAVE T O PAY ADVANCE TAX. IT IS ALSO NOT IN DISPUTE THAT THE AMENDMENT WAS BR OUGHT WITH RETROSPECTIVE EFFECT BY THE FINANCE ACT, 2010 NULLI FYING THE EFFECT OF THE ABOVE APEX COURT DECISION. THUS, PRIOR TO 31.3.2010 , ASSESSEE COULD NOT HAVE FORESEEN THE RETROSPECTIVE AMENDMENT OF L AW, AND HENCE, ASSESSEE COMPANY CANNOT BE EXPECTED TO DO THE IMPOS SIBILITY OF PAYING ADVANCE TAX AS PER THE LAW NOT ON THE FIELD AS ON 3 1.3.2010. UNDER IDENTICAL CIRCUMSTANCES, COURTS HAVE HELD THAT INTE REST UNDER S.234B AND S.234C NEED NOT BE CHARGED MERELY BECAUSE THERE WAS VARIANCE BETWEEN BOOK PROFIT COMPUTED BASED ON RETROSPECTIVE AMENDMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT PLA CED ANY DECISION OF THE HIGHER FORUM WHEREIN A CONTRARY VIEW HAS BEE N TAKEN ON THIS ISSUE. HAVING REGARD TO THE CIRCUMSTANCES OF THE C ASE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) DOES NOT C ALL FOR INTERFERENCE. WE, THEREFORE, DISMISS THE APPEAL FILED BY THE REVE NUE. ORDER PRONOUNCED IN THE COURT ON 23.12.2015 SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 23 RD DECEMBER, 2015 ITA NO.1965/HYD/2014 M/S. SUVEN LIFE SCIENCES LIMITED, HYDERABAD 6 COPY FORWARDED TO: 1. M/S. SUVEN LIFE SCIENCES LIMITED, 8 - 2 - 234, SDE SERENE CHAMBERS, ROAD NO.7, BANJARA HILLS HYDERABAD 500 016 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(2), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD 4. COMMISSIONER OF INCOME - TAX III, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.