The DCIT, Circle-1(1)(1), Baroda V. M/s. Alembic Pharmaceuticals Limited, Baroda

ITA 2329/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5366 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA A GARWAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Earning of tax free income; Proportionate interest; Revenue expenditure; Capital expenditure; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 201; 64; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(1)(1), VADODARA (APPELLANT /RESPONDENT ) VS M/S. ALEMBIC PHARMACEUTICALS LTD. ALEMBIC ROAD, BARODA - 390003 PAN: AAICA5591M (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : S H RI APARNA AGARWAL , CIT - D . R. ASSESSEE BY: SHRI S.N. SOPARKAR, A.R. DATE OF HEARING : 16 - 10 - 2 018 DATE OF PRONOUNCEMENT : 26 - 10 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTAN T MEMBER : - THIS REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION FOR A. Y. 2012 - 13 , ARI SE FROM ORDER OF THE CIT(A) - 1, VADODARA DATED 22 - 05 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE REVENUE HAS RAI SED FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN RESTRICTED DISALLOWANCE U/S.1 4A R.W.RULE 8D FOR DIVERSION OF INTEREST BEARING BUSINESS FUND FOR EARNING EXEMPT INCOME WITHOUT APPRECIATING THE FACT THAT THERE IS NO LOGIC IN EXCLUDING THE AMOUNTS OF EXTERNAL COMMERCIAL BORROWING FOR CAPITAL INVESTMENT PURPOSE, INTEREST FOR DEBENTURES FOR ACQUISITION AND INTEREST ON PACKING CREDIT LOAN FROM GROSS INTEREST RECEIPTS FOR THE PURPOSE OF APPORTIONMENT UNDER RULE 8D(2)(II) AND THAT THE REDUCTION OF CURRENT LIABILITIES FROM TOTAL ASSETS IS ALSO NOT VALID AND NOT AS PER INCOME - TAX ACT. ? I T A NO . 2329 & C.O. NO. 176 / A HD/20 15 A SS ESSMENT YEAR 2012 - 13 I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW THE AMOUNT OF RS. 791.6 LACS TRANSFERRED TO DEBENTURE REDEMPTION RESERVE FOR COMPUTING BOOK PROFIT U/S,115JB OF THE ACT WITHOUT CONSIDERING THAT THE DEBENTURE REDEMPTION RESERVE IS NOT AT ALL A LIABILITY, BUT A RESERVE ONLY , AND IF IT IS CONSIDERED AS A LIABILITY, IT IS NECESSARY TO BE VERIFIED AS TO WHETHER IT IS AN ASCERTAINED LIABILITY AND THAT THE LIABILITY IS FOR CAPITAL EXPENDITURE OR REVENUE EXPENDITURE ? 3. THE LD. CIT(A) FAILED IN APPRECIATING THAT THE AMOUNT DISALL OWABLE UNDER SECTION!4A IS COVERED UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) AND, THUS, SAID AMOUNT HAS TO BE ADDED BACK WHILE COMPUTING AMOUNT OF BOOK PROFITS ? 4. THE LD. CIT(A) FAILED IN APPRECIATING THE FACT THAT THE CONTRIBUTION OF EMPLOYE ES' HAS TO BE DEPOSITED WITHIN THE PRESCRIBED TIME AS PER PROVIDENT FUND ACT, AND IN CASE OF EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND, THE TIME LIMIT IS 20 TH DAY OF SUBSEQUENT MONTH (INCLUSIVE OF GRACE PERIOD) ? CROSS OBJECTION NO. 176/AHD/2014 3 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN CROSS OBJECTION: - 1. RE: DISALLOWANCE U/S. 14A AMOUNTING TO RS. 9,65,507/ - 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERR ED TO AS 'THE LEARNED CIT (A)']) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER DISALLOWED EXPENDITURE U/S 14A READ WITH RULE 8D WITHOUT REACHING SATISFACTION THAT THE AMOUNT DISALLOWED BY THE APPELLANT WAS NOT ADEQUATE. 1.2 THE LEARNED CIT(A) ERRED IN NO T APPRECIATING THAT DIE APPELLANT HAD VERY LARGE OWN FUNDS WHICH WERE MORE THAN SUFFICIENT FOR THE PURPOSE OF MAKING THE INVESTMENTS. 1.3 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT INVESTMENT WHICH DOES NOT PRODUCE EX EMPT INCOME OUGHT TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE U/S 14A. 2. RE: DISALLOWANCE OF AMOUNT CONTRIBUTED TO EMPLOYEE STATE INSURANCE CORPORATION AMOUNTING TO RS. 3,52,674/ - 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARN ED CIT (A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER DISALLOWED THE AMOUNT CONTRIBUTED BY THE ASSESSEE TOWARDS ESIC AFTER THE DUE DATE AS PER THE ESIC REGULATIONS WITHOUT CONSIDERING THAT THE SAME WAS DEPOSITED BEFORE THE DUE DATE OF FILING RETURN OF INCOME. 4.2 THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE REASON FOR DELAY IN PAYMENT WAS SOME TECHNICAL PROBLEM WITH THE SERVER OF THE CORPORATION AND THE SAME WAS COMMUNICATED TO THE CORPORATION. 4 . SOME OF THE GROUNDS OF APPEAL OF THE REVE NUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE INTERCONNECTED , THEREFORE , FOR THE SAKE OF CONVENIENCE , THEY ARE ADJUDICATED TOGETHER. 5 . THE BRIEF FACT OF THE CASE IS THAT THE ASSESSE HAS FILED RETURN OF INCOME ON 28 TH S EP, 2012 DECLARING TOTAL INCOME OF R S. 37 , 07 , 80 , 480/ - . SUBSEQUENTLY, THE I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 3 CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S.143(2) OF THE ON 6 TH AUGUST, 2013. FURTHER FACT S OF THE CASE ARE DISCUSSED UNDER RESPECTIVE GROUND OF APPEAL. GROUND NO. 1 OF REVENUE (DISALLOWANCE U/S. 14A R.W. RULE 8D) AND CROSS OBJECTION NO.1 OF THE ASSESSEE 6 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED EXEMPT INCOME MAINLY IN THE NATURE OF DIVIDEND INCOME , H OWEVER, IT HAS NOT MADE ANY DISALLO WANCE OF EXPENSES INCURRED TOWARDS EARNING EXEMPT INCOME. THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS . 35 , 312/ - DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY WAS HAVING INTEREST BEAR ING FUND WHICH MIGHT HAVE BEEN USED FOR INVESTMENT PURPOSE, THEREFORE, HE WAS OF THE VIEW THAT PROPORTIONATE INTEREST NEEDS TO BE DISALLOWED. THE ASSESSEE HAS EXPLAINED THAT NO BORROWED FUND HAS BEEN USED FOR INVESTMENTS THEREFORE NO DISALLOWANCE SHOULD BE MADE U/S. 14A O F TH E ACT H OWEVER , IT HAS HIMSELF SUOMOTTO DISALLOWANCE OF RS. 61,300/ - U/S. 14A OF THE ACT. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND STATED THAT ASSESSEE HAS NOT CONSIDERED FOR SUCH DISALLOWANCE ANY PROPORTIONATE INTEREST EX PENSES, ADMINISTRATIVE EXPENSES, COMMON FACILITY, UTILIZATION OF ASSETS OF BUSINESS FOR INVESTMENT A CTIVITIES. CONSEQUENTLY , HE HAS WORKED OUT THE DISALLOWANCE AS PER RULE 8D R.W.S 14A TO THE AMOUNT OF RS. 9 , 65 , 507/ - . 7 . THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 4.12 THE GROUND OF APPEAL NO. 3 OF THE APPELLANT IS IN RESPECT OF ADDITION OF EXPENSES DISALLOWED U/S 14A FOR COMPUTING BOOK PROFIT U/S 115JB OF RS. 9,65,507/ - . THE GROUND OF APPEAL NO. 3.1 OF THE APPELLANT IS THAT THE AO HAS ERRED IN DISALLOWING RS. 9,65,507/ - WHILE COMPUTING BOOK PROFITS U/S 1153B BY INVOKING THE PROVISIONS OF S. 14A READ WITH RULE 8DI WITH REGARD TO THIS GROUND OF APPEAL, THE SUBMISSION OF THE APPELLANT AS REPRODUCED IN EARLIER PARAGRAPHS HAS BEEN CONSIDERED. IN THIS REGARD IT IS MENTIONED THAT I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 4 THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF ALEMBIC LTD. FOR AY 2007 - 08 WHILE DECIDING THE SIM ILAR ISSUE IN ITS ORDER IN ITA NO. 1928/AHD/2010 DATED 27/03/2014 HAS MENTIONED THAT FOR MAKING ADJUSTMENT U/S 115JB, THE ITAT, MUMBAI BENCH IN THE CASE OF M/S ESSAR TELEHOLDINGS LTD. VS DCIT IN ITA NO. 3850/MUM/2010 FOR 2005 - 06 HAS HELD THAT PROVISIONS O F SUB SECTION 2 AND 3 OF SECTION 14A CANNOT BE IMPORTED INTO CLAUSE (F) OF EXPLANATION TO SECTION 115JB OF THE ACT. AS PER ITAT; AHMEDABAD IT IS HELD BY THE HON'BLE ITAT MUMBAI BENCH THAT CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB REFERS TO AMOUNT DEBITE D TO P&L ACCOUNT, WHICH CAN BE ADDED BACK TO THE BOOK PROFIT WHILE COMPUTING THE BOOK PROFIT U/S 115JB. AS PER HON'BLE ITAT, AHMEDABAD SIMILAR VIEWS HAVE BEEN TAKEN BY THE ITAT, DELHI BENCH IN THE CASE OF GOETZE (INDIA) LTD. 32 SOT 101. THUS, THE HON'BLE I TAT HAS HELD THAT ADJUSTMENT MADE BY THE AO IS NOT AS PER LAW. RESPECTFULLY FOLLOWING THIS DECISION OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF ALEMBIC LTD. FOR AY 2007 - 08 IT IS HELD THAT THE AO IS NOT CORRECT IN DISALLOWING RS. 9,65,507/ - WHILE COMPUTING B OOK PROFIT U/S 115JB BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. IN VIEW OF THIS THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS. 9,65,507/ - WHILE COMPUTING/ BOOK PROFIT U/S 115JB. THUS, THE GROUNDS OF APPEAL NO. 3 AND 3.1 OF THE APPE LLANT ARE ALLOWED. 8 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO - ORDINATE OF THE ITAT VIDE ITA NO. 101/AHD/2015 FOR ASSESSMENT YEAR 2011 - 12 IN THE CASE OF THE ASSESSEE ITSELF. IT WAS CONTENDED THAT CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 VIDE ITA NO. 1912/AHD/2012 HA S ALSO DECIDED T HE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. 9 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT THE CO - ORDINATE BENCH OF THE ITAT VIDE ITA NO. 1912/AHD/2012 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE CO - ORDINATE BENCH IS REPRODUCED AS UNDER: - 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AS THE FACTS EMERGE, WE FIND THAT THE ASSESSEE S OWN FUNDS, I.E., EQUITY, RESERVE AND SURPLUS FUNDS AMOUNTING TO RS.32,699.06 LAKHS FAR EXCEED THE TAX FREE INVESTMENTS. THE IMPUGNED INVESTMENTS ARE OLD AND OUT OF OWN FUNDS HAVE NOT BEEN REBUTTED. RELYING ON THE HON BLE GUJARAT H IGH COURT JUDGMENTS IN THE CASE OF HITACHI HOME AND LIFE SOLUTIONS (I) LTD (SUPRA), TORRENT POWER LTD (SUPRA) AND OTHER JUDGMENTS MENTIONED ABOVE, WE ARE OF THE VIEW THAT WHEN THE ASSESSEE POSSESSES OWN FUNDS MUCH MORE THAN THE TAX FREE INVESTMENTS, THE DI SALLOWANCE U/S 14A READ WITH RULE 8D CANNOT BE MADE. THERE IS ALSO MERIT IN THE PLEA OF LD. COUNSEL ON THE COUNT THAT THE BURDEN OF ESTABLISHING THE NEXUS HAS BEEN WRONGLY ATTRIBUTED TO THE ASSESSEE AND IT WAS FOR THE ASSESSING OFFICER TO REBUT THE ASSESS EE S CONTENTION AND DEMONSTRATE THAT THE TAX FREE INVESTMENTS WERE NOT FROM OWN FUNDS BUT FROM BORROWED FUNDS. IN THE ABSENCE OF SUCH REBUTTAL, IT CANNOT BE ASSUMED THAT THE ASSESSEE MADE TAX FREE INVESTMENTS OUT OF BORROWED FUNDS. THE ASSESSEE HAS SUO MOTO I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 5 OFFERED RS. 2 LAKHS OUT OF INCOME OF RS.3,18,472/ - AS DISALLOWED U/S 14A OF THE ACT. IN VIEW OF OUR FOREGOING OBSERVATIONS AND RELYING ON HON BLE GUJARAT HIGH COURT JUDGMENTS, WE ARE OF THE VIEW THAT NO DISALLOWANCE BEYOND WHAT HAS BEEN SUO MOTO DISA LLOWED BY THE ASSESSEE CAN BE MADE. IN THE RESULT, THE ASSESSEE S GROUND IN THIS BEHALF IS ALLOWED AND THAT OF REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH OF THE ITAT, WE CONSIDER THAT ASSESSEE ITSELF HAS ALREADY DISAL LOWED AN AMOUNT OF RS. 61,300/ - WHICH IS HIGHER THAN DIVIDEND INCOME OF RS. 35 ,3 12/ - EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, THEREFORE, WE DO NOT ANY MERIT IN THE APPEAL OF THE REVENUE AFTER TAKING IN TO CONSIDERATION A NUMBER OF JUDICI AL PRONOUNCEMENT OF THE COORDINATE BENCHES AHMEDABAD. . ACCORDINGLY, THE DECISION OF THE LD. CIT(A) IS JUSTIFIED, THEREFORE, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. IN THE LIGHT OF THE DISCUSSION MADE WHILE ADJUDICATING THE APPEAL OF THE REVE NUE AS SUPRA IN THIS ORDER WE DO NOT FIND ANY MERIT IN THE CROSS OBJECTION GROUND OF CROSS THEREFORE THE SAME IS DISMISSED. THEREFORE THE APPEAL OF THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ON THE ISSUE ARE DISMISSED. 2 ND GROUND OF APPEAL 10 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS TRANSFERRE D A SUM OF RS. 7,91,60,000/ - TO DEBENTURE REDEMPTION RESERVES THEREFORE THE ASSESSING OFFICER ASKED THE ASSESSE TO EXPLAIN WHY DEBENTURE REDEMP TION RESERVES SHOULD NOT BE ADDED BACK TO BO O K PROFIT. THE ASSESSEE HAS EXPLAINED THAT EVEN IN THE PR E CEEDING ASSESSMENT YEARS THE LD. CIT(A) HAS ALLOWED THE REDUCTION SET APART FOR DEBENTURE BY WAY OF TRANSFER OF DEBENTURE REDEMPTION RESERVES FOR ASSESSM ENT YEAR 2009 - 10, ASSESSMENT YEAR 2010 - 11 AND ASSESSMENT YEAR 2011 - 12 RESPECTIVELY . IT WAS ALSO STATED THAT THE CASE OF THE ASSESSEE WAS ALSO COVERED BY THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF R AY M O ND LTD. APPEAL NO 1324 OF 2010 WHEREIN IT IS HELD THAT AMOUNT SET APART AS DEBENTURE REDEMPTION RE SERVES IS NOT A RESERVE S WITHIN I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 6 MEANING OF EXPLANATION (B) TO SECTION 1115JA AND SHOULD NOT BE ADDED BACK FOR COMPUTING THE BOOK PROFIT U/S. 1115JB OF THE ACT. TH E ASSESSING OFFICER HAS NOT ACCEP TED THE EXPLANATION OF THE A SSSESSEE. HE REFERRED CLAUSE (B) OF THE EXPLANATION TO SECTION 115JB AND STATED THAT THE SAID AMOUNT IS TO BE ADDED TO THE NET PRO FIT FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF T HE ACT. THE ASSESSING OFFICE R BY REFERRING CLAUSE (C) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT STATED THAT T HE AMOUNT OR AMOUNT SET ASIDE AS PROVISION MADE FOR MEETING L IABILITIES OTHER THAN ASCERTAIN ED LIABILITY ARE TO BE ADDED TO INCREASE THE BOOK PROFIT WORKED OUT BY THE A SSESSEE. HE WAS OF THE VIEW THAT THE ASSESSEE HAS COMPUTED THE BOOK PROFIT ON TH E BASIS OF THE PROFIT TRANSFER TO THE BALANCE SHEET OF THE ASSESSEE COMPANY WHERE THE PROFIT WAS REDUCED BY DEBENTURE REDEMPTION RESERVE BE F ORE TRANSFERRING THE PROFIT TO THE BALANCE SHEET. HE F URTHER OBSERVED THAT DEBENTURE I S KIND OF LOAN WHICH IS OF THE NATURE OF CAPITAL EXPENDITURE SO ALSO THE PROVISION MADE FOR SUCH REPAYMENT OR DEBENTURE LOAN IS CAPITAL IN NATURE AND NOT DEDUCTIBLE IN WORKING OUT THE NET PROFIT. THEREFOR E , CITING THE PROVISION OF CLAUSE (B) OF THE EXPLANATION OF SECTION 115JB , THE CLAIM OF THE ASSESSEE WAS DISALLOWED AND ADDED BACK TO THE BOOK PROFIT OF THE ASSESSEE COMPANY. 11 . THE ASSESSEE HAS FILED APPEAL AGAINST THE DECISION OF LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE ASSESSEE OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 5.2 THE REASONS FOR MAKING DISALLOWANCE OF RS. 7,91,60,000/ - TRANSFERRED TO DEBENTURE REDEMPTION RESERVE FOR COMPUTIN G BOOK PROFIT U/S 115JB AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS ABOVE SUBMISSION OF AR OF THE APPELLANT HAVE BEEN CONSIDERED. IN THIS REGARD, IT IS MENTIONED THAT MY PREDECESSOR I.E. CIT(A) - I, BARODA IN HIS APPELLATE ORDER IN APPEAL NO.CA B - 1/41/11 - 12 DATED 07 - 06 - 2012 IN THE CASE OF M/S; ALEMBIC LTD. FOR AY 2009 - 10 WHILE DECIDING THE SIMILAR ISSUE HAS MADE DISCUSSION ON PAGE NO.38, 39, 40, 41, 42, 43 & 44 OF SUCH APPELLATE ORDER AND HAS HELD THAT AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION R ESERVE IS REQUIRED TO BE ALLOWED AS DEDUCTION FOR COMPUTING BOOK PROFIT U/S 1153B IN APPELLANT'S CASE. THUS, THE LD. CIT(A) IN THIS REFERRED ORDER HAS ALLOWED THE CLAIM OF THE APPELLANT. FOLLOWING THE DECISION OF LD. CIT(A) AS GIVEN IN HIS ABOVE ORDER, THE AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE FOR COMPUTING BOOK PROFIT U/S 115JB IS ALLOWED. THUS, THE GROUNDS OF APPEAL NO. 4, 4.1 AND 4.2 OF THE APPELLANT ARE ALLOWED. I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 7 12 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTA L REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS SUBMITED PAPER BOOK CONTAINING THE BILL AND EXPLANATION SUBMITTED BEFORE THE ASSE SSING OFFICER AND LD. CIT(A) D URING THE COURSE OF ASSESSMENT PROCEEDINGS AN D APPELLATE PROCEEDINGS. HE HAS ALSO STATED THAT CO - O RDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITS ELF FOR ASSESSMENT YEAR 2009 - 10 , ASSESSMENT YEAR 2010 - 1 1 AND ASSESSMENT YEAR 2011 - 12 VIDE ITA NO S. 1912/AHD/2012, 2855/AHD/2013 & 101/AHD/2015 RE SPECTIVELY HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSSESSEE. 13 . AFTER CONSIDERING THE ABOVE FACTS AND FINDINGS AND DECISION OF THE CO - ORDINATE BENCH WHEREIN IT IS HELD AMOUNT TRANSFERRED TO DETERMINE RESERVE IS REQUIRED TO BE ALLOWED AS DEDU CTION FOR COMPUTING BOOK PROFIT U/S. 1115JB, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A). THEREFORE, A PPEAL O F T HE REVENUE IS DISMISSED. 4TH GROUND OF APPEAL OF THE REVENUE AND 2 ND GROUND OF CROSS OBJECTION OF THE ASSESSEE 1 4 . DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS DEDUCTED ESIC CONTRIBUTION FROM ITS EMPLOYEES BUT DID NOT DEPOSIT IN THE GOVT. ACCOUNT WITHIN THE PRESCRIBED PERIOD AS PER RESPECTIVE LAW. THEREFORE, THE ASSESSING OFFICE R HAS DISALLOWED AN AMOUNT OF RS. 15 , 84 , 888/ - AS PER PROVISION OF SECTION 2(24) R.W.S. 36(1)(VA) OF THE ACT. 1 3 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSSESSEE. THE RELEVANT PART OF THE DECISION OF CIT(A) IS REPRODUCED AS UNDER: - 6.2 THE REASONS AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER FOR MAKING DISALLOWANCE OF RS. 15,84,884/ - BEING ESIC PAYMENT AS WELL AS ABOVE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED. IT IS PLEADED B F THE APPELLANT THAT THE AO HAS WRONGLY CONSIDERED THE DUE DATE OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND INSTEAD OF DUE DATE FOR EMPLOYEES' CONTRIBUTION TO ESIC. AS PER THE APPELLANT ACCORDINGLY THE AO HAS WRONGLY I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 8 MENTIONED 20 TH OF NEXT MONTH AS THE DU E DATE INSTEAD OF 21 ST OF NEXT MONTH (EXCLUDING FIVE GRACE DAYS) AS THE DUE DATE FOR CONTRIBUTION TOWARDS ESIC AS PER THE ESIC REGULATIONS. AS PER THE APPELLANT ALL PAYMENT! MADE DURING THE GRACE PERIOD ARE REGARDED AS PAYMENTS MADE WITHIN THE DUE DATE IN VIEW OF THE FACT THAT UNDER THE PROVIDENT FUND AND ESIC REGULATIONS, A GRACE PERIOD OF FIVE DAYS IS ALLOWED FOR MAKING PAYMENT OF THE DUES. THE APPELLANT HAS RELIED UPON DECISIONS OF VARIOUS HON'BLE COURTS INCLUDING THE DECISION OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF ROTEX MFGI & ENGG. (GUJ) (P) LTD., 90 TT3 171. AS PER THE APPELLANT ACCORDINGLY THERE SHALL BE NO DISALLOWANCE FOR MONTH OF JANUARY 2012 AS THE DATE OF PAYMENT IS VERY MUCH WITHIN THE DUE DATE AND ON ACCOUNT OF NO DELAY THE DISALLOWANCE FOR MONTH OF JANUARY DOES NOT HOLD GOOD. WITH REGARD TO THIS SUBMISSION OF APPELLANT, IT IS MENTIONED THAT EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND AND ESIC ETC. ARE REQUIRED TO BE MADE ON OR BEFORE DUE DATE. AS REGARDS PLEA OF THE APPELLANT THAT THE AO HAS W RONGLY CONSIDERED THE DUE DATE OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND, THE SAME IS FOUND TO BE TENABLE. IN MY OPINION, THE DUE DATE IN RESPECT OF PAYMENT OF EMPLOYEES' CONTRIBUTION IS REQUIRED TO BE CONSIDERED 21 ST OF NEXT MONTH AND SUCH DUE DATE IS REQUIRED TO BE EXTENDED FURTHER BY INCLUDING GRACE PERIOD OF FIVE DAYS AND ACCORDINGLY, THE DUE DATE AS PER ESIC REGULATION INCLUDING GRACE PERIOD SHOULD BE 26 TH OF THE NEXT MONTH. IN VIEW OF THIS THE AO IS DIRECTED TO ALLOW THOSE PAYMENTS BEING EMPLOYEE S' CONTRIBUTION TO ESIC WHICH HAVE BEEN MADE ON OR BEFORE 26 TH OF THE NEXT MONTH. 1 5 . WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE AND PERUSED THE MATERIAL ON RECORD CAREFULLY.WE CONSIDER THAT LD. CIT(A) HAS DISCUSSED THE IMPUGNED ISSUE IN DETAIL HOL DING THAT THE DUE DATE IN RESPECT OF PAYMENT OF EMPLOYEES' CONTRIBUTION IS REQUIRED TO BE CONSIDERED 21 ST OF NEXT MONTH AND SUCH DUE DATE IS REQUIRED TO BE EXTENDED FURTHER BY INCLUDING GRACE PERIOD OF FIVE DAYS AND ACCORDINGLY, THE DUE DATE AS PER ESIC RE GULATION INCLUDING GRACE PERIOD SHOULD BE 26 TH OF THE NEXT MONTH ISSUE. DURING THE APPELLATE PROCEEDING BEFORE US THE REVENUE HAS FAILED TO CONTROVERTED THE FINDINGS OF THE LD. CIT(A) WITH ANY RELEVANT MATERIAL THEREFORE WE DO NOT FIND ANY ERROR IN THE DEC ISION OF THE LD.CIT(A).ACCORDINGLY THE GROUND OF APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. 16. REGARDING CROSS OBJECTION OF THE ASSESSEE WE OBSERVE THAT LD.CIT(A) HAS GRANTED R ELEVANT RELIEF TO THE ASSESSEE BY CONSIDER ING THE DUE DATE AND GRACE PE RIOD AND RESTRICTED THE TOTAL DISALLOWANCE TO RS . 352674/ - AS AGAINST THE DISALLOWANCE OF RS. 15 , 84 ,888 / - MADE BY THE ASSESSING OFFICER. AFTER CONSIDERING THE FINDINGS OF THE LD.CIT(A) THAT THERE WAS NO RELAXATION EXTENDED BY THE ESIC CORPORATION FOR OCCU RRING ANY DELAY ON ACCOUNT OF TECHNICAL FAULT WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE. FURTHER AFTER TAKING INTO I.T.A NO. 2329 & CO NO. 176 /AHD/20 14 A.Y. 2012 - 13 PAGE NO D CIT VS. M/S. ALEMBIC PHARMACEUTICALS LTD. 9 CONSIDERATION THE DECISION OF HON BLE HIGH COURT IN THE CASE OF G UJARAT S TATE R OAD TRANSPORT C ORPORATION 265 CTR 64 (GUJ) THAT THE ASSESSEE HAS TO DEPOSIT THE EMPLOYEES CONTRIBUTION WITHIN THE DATE PRESCRIBED IN THE RESPECTIVE ACT, WE DO NOT FIND ANY MERIT IN THE CROSS OBJECTION OF THE ASSESSEE ON THIS ISSUE. ACCORDINGLY, THE SAME IS DISMISSED. 1 7 . IN THE RESULT, THE A PPEA L OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 26 - 10 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 26 /10 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,