The ACIT, Circle-8, Ahmedabad V. Torrent Pharmceuticals Ltd., Ahmedabad

ITA 241/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1977 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-10-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 21-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: P M MEHTA
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.241/AHD/2008 & C.O. NO.61/AHD/2008 (ARISING OUT ITA NO.241/AHD/2008) ASSESSMENT YEAR:1999-00 DATE OF HEARING:4.1.11 DRAFTED:7.2.11 ACIT CIRCLE-8, AHMEDABAD, 4 TH FLOOR,AJANTA COMMISSION. CENTRES, A WING, ASHRAM ROAD, AHMEDABAD TORRENT PHARMACEUTICALS LTD. TOTTENT HOUSE, NR. DINESH HALL, OFF ASHRAM ROAD, AHMEDABAD PAN NO.AAACT5456A V/S . V/S . TORRENT PHARMACEUTICALS LTD. TORRENT HOUSE, NR. DINESH HALL, OFF ASHRAM ROAD, AHMEDABAD ACIT, CIRCLE-8, AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI P.M. MEHTA, AR REVENUE BY:- SHRI ALOK JOHRI, CIT-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE AND CROSS OBJECTION (CO) BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX(APPEALS)-XIV, AHMEDABAD IN APPEAL NO. CIT(A) XIV/C.8/279/2006-07 DATED 16-10-2007. THE ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-8, AHMEDA BAD U/S143(3) R.W.S 147OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRE D TO AS THE ACT) VIDE HIS ORDER DATED 29-12-2006. ITA NO.241/AHD/2008 & CO 61/AHD/08 A.Y.99-00 ACIT CIR-8, ABD V. TORRENT PHARMACEUTICALS LTD. PAGE 2 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DI SALLOWANCE OUT OF GARDEN EXPENSES BY TREATING SUCH EXPENDITURE AS REV EXPEND ITURE U/S.37 OF THE ACT. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LD. COMMISSIONER OF INCOME-TAX(A)-XIV, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFI CER TO DELETE THE DISALLOWANCE OUT OF GARDEN EXPENSES RS.24,32,322/- BY TREATING SUCH EXPENDITURE AS REVENUE EXPENDITURE U/S.37 OF THE AC T. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STATED T HAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE D ECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1347/AHD/2007 FOR ASSESSMENT YEAR 2003-04 DATED 21-05-2010, WHEREIN THE TRIBUNAL HAS HELD IN PARA-29 AS UNDER:- 29. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS ITEMS. IN THE PRODUCTION, THE ASSES SEE USES VARIOUS TYPES OF CHEMICALS. IN ORDER TO CONTROL THE POLLUTION ARISIN G OUT OF CHEMICAL PROCESS, THE ASSESSEE HAS INCURRED EXPENDITURE FOR THE PURPOSE O F MAINTAINING GARDEN IN FACTORY PREMISES. THIS EXPENDITURE HAS BEEN CLAIMED DEDUCTION BY THE ASSESSEE HAS BEEN DISALLOWED BY THE LEARNED ASSESSI NG OFFICER AND ALLOWED BY THE CIT(A) ON APPEAL BY THE ASSESSEE. THE LEARNE D ASSESSING OFFICER MADE THE DISALLOWANCE FOR THE REASON THAT IT IS NOT INCURRED FOR THE PROCESS OF PRODUCTION. THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS) ALLOWED THE DEDUCTION TO THE ASSESSEE FOLLOWING THE DECISION OF MADHYA PRADESH HIGH COURT IN THE CASE OF STEEL TUBS PVT. LTD. (SUPRA) FOR THE REASONS THAT GARDEN EXPENSES IMPROVES THE WORKING CONDITIONS OF THE WOR KERS IN THE FACTORY AND HENCE, IT WAS AN EXPENDITURE INCURRED FOR THE BUSIN ESS OF THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE MANUFACTURING PROCESS OF THE ASSESSEE BEING SUCH THAT IT INVOLVES USE OF HAZ ARDOUS CHEMICALS WHICH AFFECT THE HEALTH OF THE WORKERS. THUS, IT IS THE D UTY OF THE ASSESSEE TO MAKE GOOD THE LOSS CAUSED TO NATURE AND TO PREVENT THE H EALTH OF THEE WORKERS ENGAGED IN PRODUCTION. THEREFORE, THE ASSESSEE MAIN TAINED THE GARDEN FOR MAINTAINING BETTER ENVIRONMENT IN THE FACTORY AND T HE EXPENDITURE INCURRED IN THE PROCESS WAS THEREFORE, FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE AND WAS RIGHTLY ALLOWED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). WE THEREFORE, CONFIRM THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THE GROUND OF AP PEAL OF THE REVENUE. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS IS SUE IN THE APPEAL OF REVENUE. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. ITA NO.241/AHD/2008 & CO 61/AHD/08 A.Y.99-00 ACIT CIR-8, ABD V. TORRENT PHARMACEUTICALS LTD. PAGE 3 4. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO TREAT THE EXP ENDITURE INCURRED ON FOREIGN REGISTRATION FEES AS REVENUE EXPENDITURE. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 :- 2. THE LD. COMMISSIONER OF INCOME-TAX(A)-XIV, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFI CER TO TREAT THE EXPENDITURE OF RS.28,14,355/- INCURRED ON FOREIGN R EGISTRATION FEES AS REVENUE EXPENDITURE. 5. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSEE IS A LIMITED COMPANY AND DURING THE YEAR ASSESSEE HAS DEBITED RS .28,14,355/- FOR REGISTRATION FEES IN FOREIGN COUNTRY FOR EXPORT. TH E ASSESSING OFFICER DISALLOWED WITHOUT CONSIDERING EVEN THE EXPLANATION OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE EXPENSES BY GIVING FOLLOWING FINDINGS IN PARA-4.2 OF HIS APPELLATE ORDER AS UNDER:- 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND I AGREE WITH THE APPELLANTS VIEWS. THE NATURE OF EXPENDITURE SUGGES TS THAT IT IS A REVENUE EXPENDITURE, WHICH WAS INCURRED FOR MAKING THE EXPORT AND NO NEW ASSETS HAVE BEEN CREATED. HENCE, THE AO IS DIRE CTED TO ALLOW THE SAME AS REVENUE EXPENDITURE. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT EXPLANATION OF THE ASSESSEE IS THAT THESE ARE THE EXPENSES INCURRED FOR OBTAINING REGIS TRATIONS IN FOREIGN COUNTRY FOR THE PRODUCT WHICH THE ASSESSEE-COMPANY PROPOSES TO MARKET IN OVERSEAS MARKET AND WITHOUT REGISTRATION OF THE PRODUCTS, TH E ASSESSEE-COMPANY WOULD NOT BE ABLE TO MARKET THE PRODUCTS IN THE OVERSEAS MARKET. FURTHER, THESE PAYMENTS ARE MADE TO DRUG REGULATORY AUTHORITIES IN VARIOUS COUNTRIES FOR THE PRODUCTS MARKET IN THE RESPECTIVE COUNTRIES. FURTHE RMORE, THESE FEES ARE TO BE PAID ON RECURRING BASIS DEPENDING UPON THE VALIDITY OF THE VARIOUS REGISTRATIONS. THE FEES HAVE BEEN PAID ON EXPIRY OF THE REGISTRATION AND OUT OF ITA NO.241/AHD/2008 & CO 61/AHD/08 A.Y.99-00 ACIT CIR-8, ABD V. TORRENT PHARMACEUTICALS LTD. PAGE 4 TOTAL PAYMENT OF RS.28,14,355/- MAJOR PAYMENT OF RS .8,03,706/- IS IN RESPECT OF PRODUCT REGISTRATION IN POLAND. LIKEWISE PAYMENT S HAVE BEEN MADE IN VIETNAM, RUSSIA, GHANA AND CHINA ETC. WE FIND THAT THE EXPORTS OVER THE YEARS HAVE INCREASED FROM THE EXPORT SALE OF RS.26 CRORES IN FINANCIAL YEAR 1998-99 TO THE EXPORTS HAVE GROWN TO RS.160 CRORES IN FINANCIAL YEAR 2005-06 AN INCREASE OF MORE THAN 600%. ACCORDINGLY, THESE E XPENSES ARE RIGHTLY ALLOWED BY CIT(A) AND WE CONFIRM THE SAME. THIS ISS UE OF REVENUES APPEAL IS DISMISSED. NOW COMING TO ASSESSEES CO NO.61/AHD/2008. 7. THE ONLY ISSUE IN THIS CO OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN REJECTING THE REASSESSMENT ORDER. FOR THIS, ASSESSE E HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN REJECTING THE ASSESSEES CHALLENGE TO THE LEGALI TY OF REASSESSMENT ORDER U/S.147/148 OF THE I.T. ACT. 8. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STATE D THAT HE HAS INSTRUCTION FROM ASSESSEE NOT TO PRESS THIS ISSUE. HENCE, THIS ISSUE IN THE CO OF ASSESSEE IS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF ASSESSEE CO IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON 11/02/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 11/02/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. ITA NO.241/AHD/2008 & CO 61/AHD/08 A.Y.99-00 ACIT CIR-8, ABD V. TORRENT PHARMACEUTICALS LTD. PAGE 5 2. THE REVENUE. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD