Cadila Pharmaceuticals Ltd., Ahmedabad V. The Dy.CIT.,(OSD)Range-1, Ahmedabad

ITA 2052/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8624 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-02-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 18-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: S N SOPARKAR
• Section: 115JB; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA. NO.2052/AHD/2011 (ASSESSMENT YEAR:2001-02) CADILA PHARMACEUTICALS LTD. 708, SARKHEJ DHOLKA ROAD, BHAT, AHMEDABAD-382210 APPELLANT VS. DCIT(OSD), RANGE-1, AHMEDABAD RESPONDENT PAN: AAACC6251E /BY APPELLANT : SHRI S. N. SOPARKAR, A.R. /BY RESPONDENT : SHRI M. K. SINGH, SR. D.R. !' /DATE OF HEARING : 25.02.2015 #$% !' /DATE OF PRONOUNCEMENT : 30.03.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, AHMEDABAD, DATED 19.07.2011 FOR A.Y. 2001-02 ON THE FOLLOWING GROUNDS: ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 2 APPELLANT CRAVES LEAVE TO SUBMIT THE FOLLOWING CON CISE GROUNDS OF APPEAL BEFORE THE HON'BLE ITAT: 1. GENERAL 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFI RMING ADDITION RS.33,91,715/-TO THE BOOK PROFIT U/S 115JB OF THE ACT. LD. CIT (A) OUGHT TO HAVE DELETED ADDIT ION CONSIDERING VARIOUS JUDICIOUS I PRONOUNCEMENTS. IT BE SO HELD NOW. 3, 4 & 6. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS. 35,99,516/- OF REVERSAL OF PROVISION OF INCOME TAX TO THE BOOK PROFIT U/S 115J B OF THE ACT. BOTH THE LOWER AUTHORITIES IGNORED FACTS T HAT DUE TO STATUTORY DISCLOSURE REQUIREMENTS APPELLANT COMPANY HAS SHOWN SEPARATELY CURRENT YEAR PROVISION S OF RS. 1, 25, 00,000/-(DEBIT) AND REVERSAL OF PROVI SION OF INCOME TAX OF RS.35,99,516/-(CREDIT) HOWEVER DEBITED ONLY NET PROVISION RS. 89,00,484/- IN RETUR N OF INCOME AND COMPUTATION U/S 115JB OF THE ACT. LD. CI T (A) OUGHT TO HAVE DELETED ADDITION CONSIDERING THIS FACTUAL ASPECT. IT BE SO HELD NOW. 5. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONSIDE RING ONLY CREDIT PARTS OF PRIOR PERIOD EXPENDITURE AND IGNORED DEBIT PART OF PRIOR PERIOD EXPEND ITURES. LD. CIT (A) OUGHT TO HAVE CONSIDERED BOTH DEBIT AND CREDIT PARTS OF PRIOR PERIOD EXPENDITURES. IT BE SO HELD NOW. 2. AT THE OUTSET, LEARNED AUTHORIZED REPRESENTATIVE POINTED OUT THAT ASSESSEE HAS NOT PRESSED THE ISSUE REGARDI NG ADDITION OF RS.35,99,516/-. ACCORDINGLY, SAME IS DISMISSED. 3. THE ONLY ISSUE SURVIVES WITH REGARDS TO ADDITION OF RS.33,91,715/-. ASSESSING OFFICER STATED IN ASSESS MENT ORDER DATED 22.11.2010 ON THIS ISSUE AS UNDER: ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 3 8.1. HAVE CAREFULLY CONSIDERED REPLY OF THE ASSESSE E AND NOT FOUND ACCEPTABLE. ON THE ISSUE OF ADDING BACK OF PR IOR PERIOD EXPENSES, THE ASSESSEE HAS ONLY FURNISHED DE TAILS OF EXPENSES AND ALLOW ABILITY OF THESE EXPENSES HAS NO T BEEN EXPLAINED BY THE ASSESSEE. PERUSAL OF THE DETAILS F URNISHED BY THE ASSESSEE REVEALS THAT EXPENSES CLAIMED ARE O N ACCOUNT OF SALARY, INTEREST, STATIONERY, INSURANCE, TRAVELLING, ETC ... WHICH ARE RELATED TO YEARS RANGING FROM 199 9-00 TO 1998-99. 9. THESE EXPENSES ARE TO BE DISALLOWED SINCE THESE DO NOT RELATE TO THE. CURRENT YEAR. HERE THE EXPENDITURE I NCURRED IS NOT MATCHING WITH THE YEAR OF EARNING REVENUE. NO P ROOF HAS BEEN SUBMITTED REGARDING THE CRYSTALLIZATION OF THE EXPENDITURE IN THE CURRENT YEAR. NO BILLS, NO VOUCH ERS, NO REASONING FOR LACK OF PROVISIONING FOR THE EXPENSES IN THE EARLIER YEAR WERE SUBMITTED. ACCORDINGLY, THE CLAIM FOR DEDUCTION OF PRIOR PERIOD EXPENDITURE OF RS. 27.36 LACS IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 10. ON THE ISSUE OF LOSS BY FIRE, THE ASSESSEE HAS CLAIMED RS. 85.02 LACS BUT HOW THIS FIGURE IS ARRIVED WAS E XPLAIN BY THE ASSESSEE AS UNDER:- THE ASSESSEE LOST RS. 1,44,42,752 + 40,40,932 = RS. 1,84.83,684/- DUE TO FIRE AS PER CERTIFICATE ISSUED BY FOODS AND DRUGS CONTROL ADMINISTRATOR DATED 22/02/2001. O UT OF THIS THE ASSESSEE RECEIVED 1,05,36,758/- FROM INSUR ANCE COMPANY AGAINST CLAIM OF FIRE. IN ADDITION TO THE L OSS OF FIRE THE ASSESSEE HAS ALSO REDUCED RS.5 LACS FROM THE RE CEIPTS AS EXPENDITURE FOR GETTING REALIZATION OF CLAIM. THE CLAIM OF ASSESSEE REGARDING REDUCTION OF RS. 5 LACS OUT OF INSURANCE CLAIMED CANNOT BE ACCEPTED BECAUSE THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCES FOR SUCH EXPENDITURE. HENCE, THE LOSS BY FIRE CLAIMED IS RES TRICTED TO RS. 79,46,926/- (1,84,83,684 - 105,36,758). 11. THE AMOUNT DEBITED BELOW THE LINE IN P&L A/C T OWARDS PRIOR PERIOD EXPENSES ARE REQUIRED TO BE ADDED BACK WHILE ARRIVING AT THE AMOUNT OF BOOK PROFIT AS PER THE DE CISION OF ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 4 ITAT MADRAS IN CASE OF SHREE RAJENDRA MILLS LTD. VS . DCIT. (63 TTJ 697) & ITAT DELHI IN CASE OF INNOVATIVE TEC H PARK LTD VIS. ACIT (79 ITO 445) WHERE IT WAS HELD THAT P RIOR YEAR EXPENSES SHOULD NOT BE DEDUCTED IN COMPUTING BOOK P ROFIT U/S1158J. ACCORDINGLY, AS DISCUSSED ABOVE THE FIGUR E OF CLAIM IN THE COMPUTATION OF INCOME OF RS. 33,00,641 /- AS PRIOR PERIOD EXPENDITURE AND EXTRA ORDINARY ITEMS I S REVISED AS UNDER:- 1. PRIOR PERIOD EXPENDITURE (NOT ALLOWABLE AS DISCUSSED ABOVE) RS. NIL 2.LOSS BY FIRE (AS DISCUSSED ABOVE) RS.79,46,926/- 3.CREDITS IN RESPECT OF EXCESS PROVISION FOR INCOME TAX (AS PER REPLY OF THE ASSESSEE DATED 25/03/2010.) RS. 35.99 LACS 4.OTHER CREDITS PRIOR PERIOD (AS PER REPLY OF THE ASSESSEE DATED 25/03/2010.) RS.44,39 LACS TOTAL PRIOR PERIOD AND EXTRAORDINARY ITEMS REVISED RS. 91,074/- 12. HENCE, AS DISCUSSED ABOVE, AS AGAINST, THE DEDU CTION CLAIMED OF RS. 33,00,641 IN THE COMPUTATION OF INCO ME OUT OF BOOK PROFIT, ERE WILL BE ADDITION OF RS. 91,074/ - IN THE BOOK PROFIT. PENALTY U/S.271(1)(C) IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. (DISALLOWANCE OF RS. 33,91.7151 -) 13. ON THE ISSUE OF ADDING BACK OF PROVISION OF INC OME TAX OF RS. 33.99 LACS, THE ASSESSEE HAS CLAIMED THAT TH IS BEING REVERSAL OF EXCESS PROVISION FOR INCOME TAX PERTAIN ING TO PAST PERIOD. 14. AFTER CONSIDERING REPLY OF THE ASSESSEE, VIDE O RDER SHEET DOLED 13/09/2010. THE ASSESSEE WAS ASKED TO FURNISH LEDGER EXPLAINING THE INCOME TAX PROVISION FOR LAST YEARS. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY DETAILS IN THIS REGARD. ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 5 15. THE ASSESSEE COMPANY HAD MADE PROVISIONS OF INC OME LAX OF RS. 1,25 CRORES. HOWEVER, WHILE COMPUTING TA XABLE INCOME IF HAS ADDED BACK ONLY RS. 89,00,484/-. THUS DIFFERENCE OF RS. 35,99,516/- WAS ALSO REQUIRED TO BE ADDED BACK IN THE BOOK PROFIT, WHICH WAS NOT DONE BY THE ASSESEE COMPANY.' 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN CIT(A) HELD AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. IN THIS CASE THE REVISION ORDER UNDER SECTION 263 WAS PASSED BY CIT SETTING A SIDE THE ASSESSMENT TO THE ASSESSING OFFICER TO CONSIDER PRI OR PERIOD ITEMS AND DIFFERENCE IN TAX PROVISIONS DEBITED. APP ELLANT DID NOT APPEAL AGAINST THE ORDER OF CIT UNDER SECTION 2 63 AND THEREFORE REVISION ORDER IS FINAL. ASSESSING OFFICE R NOTICED PRIOR PERIOD ITEMS CLAIMED BY THE APPELLANT WHICH A S PER THE DECISIONS OF ITAT REFERRED IN THE ASSESSMENT ORDER ARE NOT DEDUCTIBLE FROM BOOK PROFIT. APPELLANT ARGUED THAT IT CONTAINED EXTRA ORDINARY ITEM INCLUDING LOSS BY FIR E ALSO. HOWEVER IT IS SEEN THAT ASSESSING OFFICER CONSIDERE D LOSS BY FIRE ALLOWABLE WITH MINOR ADJUSTMENT BASED ON FACTS OF THE CASE. WHAT IS HELD TO BE NOT DEDUCTIBLE IS ONLY PRI OR PERIOD EXPENSES. PRIOR PERIOD INCOME AND OTHER ITEMS CANNO T BE ADJUSTED AND ACCORDINGLY ASSESSING OFFICER IS JUSTI FIED IN NOT ALLOWING PRIOR PERIOD ITEMS FROM BOOK PROFIT FOR TH E PURPOSE OF SECTION 115 JB. THIS ADJUSTMENT IS ACCORDINGLY CONFIRMED. AS REGARDS PROVISIONS FOR TAX, THE SAME HAS TO BE CLEARLY ADDED TO THE BOOK PROFIT. IT IS NOT IN DISP UTE THAT APPELLANT DEBITED RS 1.25 CRORES AS INCOME TAX PROV ISION HOWEVER IN THE COMPUTATION OF BOOK PROFIT ONLY 89 L ACS WERE ADDED. THEREFORE THERE WAS A SHORTFALL OF RS 35.99 LACS. THE AMOUNT WAS THEREFORE CORRECTLY ADDED BY THE ASSESSI NG OFFICER TO THE BOOK PROFIT. APPELLANT CLAIMED THAT THE EXCESS PROVISION OF TAX WAS CREDITED WHICH WAS EARLIER INC LUDED IN BOOK PROFIT. HOWEVER APPELLANT COULD NOT ESTABLISH THIS ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 6 CLAIM BY RECORDS OR DOCUMENTS. THEREFORE APPELLANT 'S CLAIM CANNOT BE ACCEPTED. THE ADDITION IS ACCORDINGLY CON FIRMED. 3.2 SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF AS SESSEE INTER ALIA SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.33,91,715/- IN BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT. CIT(A) SHOULD HAVE DELETED THE ADD ITION IN VIEW OF ACCORDING TO VARIOUS JUDICIAL PRONOUNCEMENT S ON THE ISSUE. LEARNED AUTHORIZED REPRESENTATIVE ALSO POIN TED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY ORDE R OF ITAT B BENCH, AHMEDABAD, IN CASE OF ASSESSEES OWN CASE FO R A.Y. 2006-07 IN ITA NOS. 1146 & 1518/AHD/2011, WHEREIN S IMILAR ISSUE HAS BEEN DECIDED BY TRIBUNAL IN FAVOUR OF ASS ESSEE BY OBSERVING AS UNDER: 21. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ME GHMANI ORGANICS LTD.(SUPRA), THE QUESTION NO.1(C) BEFORE T HE HON'BLE COURT WAS AS UNDER:- '(C) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLATE TRIBUNAL ERRED IN DIRECTING TO REDUCE THE PRIOR ITA NO.1146/AHD/2011 (BY ASSESSEE) AND PERIOD EXPENSES OF RS.71,16,879/- FOR THE COMPUTATION OF TAXABLE INCOME U/S.115JA OF THE ACT, 1961?' 21.1. THE HON'BLE GUJARAT HIGH COURT ANSWERED THE QUESTION IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDE R:- '10. IN THAT VIEW OF THE MATTER, AS RIGHTLY POINTED OUT BY THE COUNSEL FOR THE ASSESSEE, IN VIEW OF THE DECISIONS OF THE APEX COURT IN THE CASE OF APOLLO T YRES LTD. VS. COMMISSIONER OF INCOME-TAX REPORTED IN ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 7 (2002) 255 ITR 273 AND IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. HCL COMNET SYSTEMS AND SERVICES LTD. REPORTED IN (2008) 305 ITR 405(SC), THE ASSESSING OFFICER, COULD NOT HAVE VARIED THE PROFIT AND LOSS ACCOUNT OF THE COMPANY DULY AUDITED AND PREPARED IN TERMS OF THE PROVISIONS CONTAINED IN THE COMPANIES ACT.' '12. WE HAVE, HOWEVER, PROCEEDED ON THE BASIS OF TH E FACTS RECORDED BY THE TRIBUNAL. MATERIAL ASPECT OF THE TRIBUNAL'S RECORDING THE FACT IS THAT THE AMOUNT OF RS.71 LAKHS WAS REDUCED BY THE ASSESSEE PASSED ON AFTER APPROVAL OF THE COMPANY IN ITS AGM, WHICH WAS ALSO ACCEPTED BY THE AUDITORS. IF THAT BE SO, THE ASSESSING OFFICER THEREAFTER COULD NOT HAVE MADE AN Y FURTHER ADJUSTMENT DEHORS THE PROVISIONS OF SECTION 115JA OF THE ACT. HOWEVER, IF THESE FACTS ARE FOR S OME REASON TO CORRECTLY RECORDED BY THE TRIBUNAL, SUREL Y, IT WOULD BE OPEN FOR THE REVENUE TO APPROACH THE TRIBUNAL SEEKING RECTIFICATION OF ITS ORDER. ONLY F OR THIS PURPOSE, WE DO NOT FIND ANY REASON TO ENTERTAIN THE PRESENT TAX APPEAL.' 21.2. WE, RESPECTFULLY FOLLOWING THE AFORESAID JUDG EMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. MEGHMANI ORGANICS LTD.(SUPRA) AND ALLOW THIS GROUND OF ASSESSEE'S APPEAL. 4. IN VIEW OF ABOVE, WE ARE NOT INCLINED TO CONCUR WITH THE FINDING OF CIT(A) WHO HAS CONFIRMED THE ADDITION OF RS.33,91,715/- MADE TO BOOK PROFIT U/S. 115JB OF TH E ACT. WE FIND THAT TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 06-07 ALLOWED THE APPEAL BY FOLLOWING THE DECISION OF CIT VS. MEGHMANI ORGANICS LTD. (SUPRA), WHEREIN IT HAS BEEN HELD THAT MATERIAL ASPECT OF TRIBUNALS RECORDING THE FACT IS THAT AMOUNT OF RS. 71 LACS WAS REDUCED BY ASSESSEE PASSED ON AF TER APPROVAL OF COMPANY IN ITS AGM, WHICH WAS ALSO ACCE PTED BY ITA NO. 2052/AHD/11 A.Y. 01-02 [CADILA PHARMACEUTICALS LTD. VS. DCIT (OSD)] PAGE 8 THE AUDITORS. IF THAT BE SO, THE ASSESSING OFFICER THEREAFTER COULD NOT HAVE MADE ANY FURTHER ADJUSTMENT DEHORS T HE PROVISIONS OF SECTION 115JA OF THE ACT. NOTHING CO NTRARY BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FAC TS BEING SIMILAR SO FOLLOWING SAME REASONING, WE ARE NOT INC LINED TO CONQUER WITH THE FINDING OF CIT(A) AND ASSESSING OF FICER IS DIRECTED TO DELETE THE ADDITION OF RS.33,91,715/- A S DISCUSSED ABOVE. 5. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF MARCH, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/03/2015 TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. +, / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 , , / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / & ,