The ACIT(OSD)-I,Range-4, Ahmedabad V. Mann Pharmaceuticals Ltd., Ahmedabad

ITA 2137/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1955 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Rule of consistency; Valuation report
• Section: 143(3); 37(1)

Judgement Text

ITA.NO.2137/AHD/20 10 ASSESSMENT YEAR 20 05-06. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT & SHRI A.N. PAHUJA. ITA NO.2137 /AHD/2010 (ASSESSMENT YEAR: 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX (OSD)-1, RANGE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. MANN PHARMACEUTICALS LTD., BEHIND NATIONAL CHAMBERS, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: AAACM 9899 E APPELLANT BY : SHRI ANIL KUMAR, SR. D.R. RESPONDENT BY : SHRI SUNIL TALATI. ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKUL KUMAR SHRAWAT, J.M. THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF THE LD. C.I. T.(APPEALS)-XX, AHME DABAD DATED 22-3-2010. 2. THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS :- 3. GROUND NO.1 IS IN RESPECT OF ALLOWING DEPRECIATI ON @ 40% BY LD. C.I.T. (A) AS AGAINST 5% GRANTED BY THE ASSESSING O FFICER. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 23-7-2007 WERE THAT THE ASSES SEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF PHARMA ITEMS. THE ASSE SSEE HAS CLAIMED DEPRECIATION ON THE STAFF QUARTERS AT 40%. THE ASSE SSING OFFICER HAS HELD THAT THESE STAFF QUARTERS BEING USED FOR RESIDENTIA L PURPOSES, THEREFORE, ITA.NO.2137/AHD/20 10 ASSESSMENT YEAR 20 05-06. 2 QUALIFY FOR DEPRECIATION AT 5%. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS EXPLAINED THAT THOSE QU ARTERS WERE TEMPORARY WOODEN STRUCTURE. IT WAS ALSO EXPLAINED THAT THOSE WOODEN QUARTERS WERE DISMANTLED WHEN THE FACTORY WAS STARTED. TO SUBSTAN TIATE THE SAID CLAIM A VALUATION REPORT WAS ALSO FURNISHED. THE LD. C.I.T .(A) HAS GIVEN A FINDING ON FACT THAT THE QUARTERS IN QUESTION WERE FACTUALL Y WOODEN STRUCTURE. CERTAIN EVIDENCES HAVE BEEN FURNISHED AND DULY APPR ECIATED BY LD. C.I.T. (A). FINALLY HE HAS CONFIRMED THAT THE STRUCTURE WA S TEMPORARY WHICH WAS ULTIMATELY REMOVED. AN ANOTHER FACT HAS ALSO BEEN N OTED BY LD. C.I.T.(A) THAT IN THE INITIAL ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2002-03 THE ASSESSEE ITSELF HAS NOT ONLY CLAIMED BUT ALSO ALLOW ED THE DEPRECIATION @ 40%. FOLLOWING THE RULE OF CONSISTENCY AS PRONOUNC ED IN THE CASE OF JINDAL PHOTO FILMS 117 TTJ 399 (MUM) AND RADHASWAMI SATSAN G VS. CIT 193 ITR 321 (SC) THE CLAIM OF DEPRECIATION @ 40% WAS ALLOWE D. REVENUE HAS CHALLENGED THE RELIEF GRANTED. 4. ON HEARING THE RIVAL SUBMISSIONS AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE WE HAVE NOTICED THAT IT W AS AN ADMITTED FACTUAL POSITION THAT THE STAFF-QUARTERS FOR LABOURERS WERE TEMPORARY IN NATURE BEING WOODEN STRUCTURE, WHICH WAS SUBSEQUENTLY REMO VED FROM THE SITE WHEN THE FACTORY WAS STARTED. IN SUPPORT A VALUATI ON REPORT OF THE GOVT. APPROVED VALUER CERTIFYING THE NATURE OF THE IMPUGN ED ASSET HAS ALSO BEEN FURNISHED. THE REASON ASSIGNED FOR CLAIMING THE SAI D RATE OF DEPRECIATION WAS THAT AS PER OLD APPENDIX-A RULE 5 OF PART-A UND ER THE HEAD BUILDINGS VIDE CLAUSE 3(III) AS APPLICABLE FOR THE ASSESSMENT YEARS 1988-89 TO A.Y. 2002-03 THE RATE PRESCRIBED WAS 40% FOR THE CONSTRU CTION MEASURING 80 SQUARE METERS. SINCE THE QUARTERS WERE BELOW 80 SQ. METERS THEREFORE IT WAS DECIDED TO CLAIM THAT RATE OF DEPRECIATION, WHI CH WAS ALLOWED IN THE PAST AS WELL. IN SUPPORT OF THE LEGAL PROPOSITION O F RULE OF CONSISTENCY CASE LAW CITED WERE CIT VS. SMT. SWAPNA ROY 331 ITR 367 (ALL.) & POONAWALA ESTATE STUD FARM 136 TTJ 236 (PUNE). IT WAS ALSO AN ADMITTED LEGAL POSITION ITA.NO.2137/AHD/20 10 ASSESSMENT YEAR 20 05-06. 3 THAT AS PER APPENDIX-I DEPRECIATION @ 100% IS PERMI SSIBLE IN RESPECT OF TEMPORARY ERECTIONS SUCH AS WOODEN STRUCTURE FOR TH E YEAR UNDER CONSIDERATION. HOWEVER, THE LD. C.I.T. (A) HAS ALLO WED ONLY 40% AND THE ASSESSEE IS NOT IN APPEAL. UNDER THESE CIRCUMSTANCE S, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. C.I.T. (A ). THIS GROUND OF THE REVENUE IS THEREFORE, DISMISSED. 5. GROUND NO.2 IS IN RESPECT OF A DISALLOWANCE OF R S.5,74,946/- ON ACCOUNT OF GIFTS GIVEN TO DOCTORS. 6. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE A SSESSEE HAS INCURRED THE SAID EXPENDITURE FOR THE GIFTS GIVEN TO DOCTORS . THE ASSESSING OFFICER HAS MADE THE SAID DISALLOWANCE BY MENTIONING THAT A LL INDIA MEDICAL ASSOCIATION OF THE DOCTORS HAD NOT PRESCRIBED SUCH PRACTICE AND PROHIBITED THE DOCTORS FOR ACCEPTING SUCH GIFTS. AS PER THE A SSESSING OFFICER SINCE THE EXPENDITURE ON GIFTS TO DOCTORS WAS AGAINST THE RULES AND REGULATIONS OF ALL INDIA MEDICAL ASSOCIATION, THEREFORE, NOT AL LOWABLE U/S. 37(1) OF THE INCOME TAX ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 7. THE LD. C.I.T. (A) HAS GIVEN A FINDING THAT ON P ERUSAL OF THE RULES OF ALL INDIA MEDICAL ASSOCIATION AND INDIAN MEDICAL CO UNCIL, NOWHERE IT WAS FOUND THAT THE EXPENDITURE OF GIFTS TO DOCTORS WAS PROHIBITED. FURTHER A FINDING WAS GIVEN THAT THE EXPENDITURE BEING FOR TH E PURPOSE OF BUSINESS, THEREFORE, ALLOWABLE U/S. 37(1) OF THE ACT. IT WAS ALSO HELD THAT THERE WAS NO INFRINGEMENT OR VIOLATION OF LAW ON THE PART OF THE ASSESSEE FOR DISTRIBUTING THE GIFTS TO THE DOCTORS. SINCE IT WAS NOT IN VIOL ATION OF LAW HENCE THE ACTION OF THE ASSESSING OFFICER WAS REVERSED AND TH E ADDITION WAS DELETED. 8. WE HEARD BOTH THE SIDES. WE HAVE CAREFULLY PERUS ED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION F ILED BEFORE US. IT WAS VEHEMENTLY ARGUED THAT AS PER THE MEDICAL CODE OF E THICS ISSUED BY ITA.NO.2137/AHD/20 10 ASSESSMENT YEAR 20 05-06. 4 MEDICAL COUNCIL OF INDIA, COPY ANNEXED IN THE COMPI LATION, THERE WAS NO PROHIBITION SUBSCRIBED IN THE RULES. IT HAS ALSO BE EN ARGUED THAT AS PER EXPLANATION TO SECTION 37(1), SAID EXPENDITURE WAS NOT AN OFFENCE DECLARED BY ANY STATUTE OR LAW. IT HAS ALSO BEEN ARGUED THAT NO STATUTORY BODY HAS PROHIBITED SUCH GIFTS THEREFORE, THERE WAS NO INFRI NGEMENT OF LAW. SINCE THE GENUINENESS AND ACTUAL INCURRING OF EXPENDITURE HAS NOT BEEN DOUBTED BY THE REVENUE DEPARTMENT THEREFORE THE SAME HAS TO BE ALLOWED BEING WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, AS PRESCRIBED U/S. 37(1) OF THE ACT. WE FOUND FORCE IN ALL THESE ARGUMENTS AND THEREFORE CONFIRM THE FINDING OF THE LD. C.I.T. (A). THIS GROUND OF THE R EVENUE IS ALSO DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 / 3 /2011. SD/- SD/- (A. N. PAHUJA) (MUKUL KUMA R SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBE R. AHMEDABAD. DATED: 11 /03/2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XX, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.