A. Menarini India Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-1(1)(1), Ahmedabad

ITA 2423/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1880 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 14-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 28; 43B; 143(2); 139(1); 22

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2423/AHD/2018 / ASSESSMENT YEAR: 2015-16 MENARINI INDIA P.LTD. A-101, SHAPATH IV NR. KARNAVATI CLUB S.G. HIGHWAY AHMEDABAD 380 015 VS DCIT, CIR.1(1)(1) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : WRITTEN SUBMISSIONS REVENUE BY : SHRI SHAURYA S. SHUKLA, SR.DR / DATE OF HEARING : 01/12/2020 /DATE OF PRONOUNCEMENT : 4/ 12/2020 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 1, AHMEDABAD DATED 17.10.20128 PASSED FOR THE ASSTT.YEAR 2015-16. 2. THE GROUNDS OF APPEAL ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THE ASSESSEE R AISES TWO ISSUES VIZ. (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.11,14,726/- BY HOLDING THAT THE SAME WAS NOT DEPOSITED IN THE RELE VANT FUND ON OR BEFORE THE DUE DATE, AND (II) THE LD.CIT(A) HAS ERR ED IN CONFIRMING ACTION ITA NO.2423/AHD/2018 - 2 - OF THE AO IN INVOKING SECTION 35DD OF THE ACT AND T HEREBY DISALLOWING AN AMOUNT OF RS.4,26,968/- OUT OF EXPENDITURE ON CO NSULTANCY AND LEGAL FEES. 3. BRIEF FACTS OF THE CASE IN THIS REGARD ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONTRACT SALES AND MARKET AND TRADING IN PHARMACEUTICAL PRODUCTS. IT HAS FILED RETURN UNDER SECTION 139(1) OF THE ACT DECLARING TOTAL LOS S OF RS.(-)20,95,42,163/- WHICH WAS THEREAFTER TAKEN FOR SCRUTINY ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT. DURING THE ASSESS MENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT AS PER THE TAX AUDIT REP ORT THE ASSESSEE HAS NOT MADE PAYMENT TOWARDS THE CONTRIBUTION OF EMPLOY EES PF WITHIN THE DUE DATE I.E. PROVIDENT FUND AMOUNT WHICH WAS T O BE DEPOSITED ON 15 TH JANUARY, 2015 WAS ACTUALLY DEPOSITED ON 22 ND JANUARY, 2015 ONLY. TO THE SHOW CAUSE NOTICE, IT WAS EXPLAINED BY THE ASSE SSEE THAT THOUGH THE PAYMENT TOWARDS EMPLOYEES CONTRIBUTION OF PF WAS N OT DEPOSITED WITHIN THE DUE DATE, BUT THE SAME WAS DEPOSITED BEF ORE THE DATE OF FILING OF THE RETURN, AND THEREFORE, AS PER THE DECISION O F CIT VS. RAJASTHNA STATE BEVERAGES CORPN.AND CIT VS. VINAY CEMENT, COM PANY LTD., (SC) 213 CTR 268, PAYMENT OF EMPLOYEES CONTRIBUTION OF PF BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME SHALL NOT BE DISALLOWED AND ADDED TO THE INCOME UNDER SECTION 36(1)(VA) OF THE ACT. HOWEVER, THE LD.AO DID NOT ACCEPT THIS SUBMISSION OF THE ASSESSEE, AND RELYING ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION, HELD THAT DEDUCTION WOULD BE ALLOWABLE ONLY IF THE SUM OF CONTRIBUTION IS CRE DITED TO THE ASSESSEES ACCOUNT IN THE RELEVANT FUNDS ON OR BEFORE THE DUE DATE AS PRESCRIBED UNDER THE PROVISION SECTION 36(1)(VA) OF THE ACT. HE ACCORDINGLY ITA NO.2423/AHD/2018 - 3 - DISALLOWED THE CLAIM OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERR ED FIRST APPEAL. THE ACTION OF THE AO WAS CONFIRMED BY THE LD.CIT(A). A SSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. AFTER HEARING BOTH THE SIDES ON THE ISSUE, AND G OING THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, WE FIND THAT THIS ISSUE HAS BEEN SETTLED BY THE HONBLE JURISDICTIONAL HIGH COU RT ON TWO OCCASIONS, VIZ. IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CO RPORATION LTD. (SUPRA) AND M/S.CHECKMATE FACILITY & ELECTRONICS SOLUTIONS P.LTD. VS. DCIT, WHEREIN IT IS HELD THAT THE EMPLOYEES CONTRIBUTION TO THE EMPLOYEES PROVIDENT FUND (EPF)/ EMPLOYEES STATE INSURANCE CO RPORATION (ESIC) DEPOSITED BEYOND THE DUE DATE PRESCRIBED UNDER SECT ION 36(1)(VA) OF THE INCOME-TAX ACT, 1961 WOULD NOT BE ELIGIBLE FOR DEDU CTION UNDER SECTION 43B OF THE ACT, EVEN IF DEPOSITED BEFORE THE DUE DA TE OF FILING THE TAX RETURN. IN OTHER WORDS, WITH RESPECT TO THE EMPLOY EES CONTRIBUTION RECEIVED BY THE ASSESSEE IF THE ASSESSEE HAS NOT CR EDITED THE SAID SUM TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUND S ON OR BEFORE THE DUE DATE MENTIONED IN EXPLANATION TO SECTION 36(1) (VA), THE ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTION OF SUCH AMOUNT I N COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE ACT. WE ARE BOUND TO FOLLOW THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT ON TH IS ISSUE. THEREFORE, THERE IS NO MERIT IN THIS GROUND OF APPEAL ASSESSEE . IT IS REJECTED. 5. NEXT ISSUE AGITATED BY THE ASSESSEE IS AGAINST D ISALLOWANCE OF AN AMOUNT OF RS.4,26,968/- ON ACCOUNT OF EXPENDITURE O N CONSULTANCY AND LEGAL FEES. ITA NO.2423/AHD/2018 - 4 - 6. IN THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,96,630/- AND RS.3,37,080/- AGAINST TAX CONSULTANCY WITH TRANSACTION TAX AS PREPARATIO N OF AMALGAMATION OF MRPL WITH MIP AND LAYER FEES FOR MERGER RESPECTIVELY AS REVENUE EXPENSES. THE LD.AO SOUGHT DETAILS OF SUCH EXPENSES AND EXPLANATION AS TO WHY THE SAME SHOULD NOT BE CONSIDERED UNDER SECTION 35D OF THE ACT AND 4/5 TH OF THE SUCH EXPENDITURE BE NOT DISALLOWED. IT WAS EXPLAINED BY THE ASSESSEE THAT THE SAID EXPENDITURE WAS INCURRED DURING THE ROUTINE COURSE OF BUSINESS AND SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. HOWEVER, THE LD.A O DID NOT ACCEPT THIS EXPLANATION OF THE ASSESSEE, AND NOTED THAT SINCE T HE TRANSACTION ENTERED UNDER PREPARATION OF AMALGAMATION OF MRPL WITH MIP AND LAWYERS FEES FOR MERGER WHICH ITSELF EXPLAINS TH AT THE SAID EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF AMALGAMATION OR DEMERGER OF AN UNDERTAKING, AND THEREFORE SECTIO N 35D IS APPLICABLE. ACCORDINGLY, THE LD.AO APPLIED PROVISION OF SECTION 35DD AND ALLOWED AN AMOUNT OF RS.1,96,630/- BEING 1/5 TH OF TOTAL EXPENDITURE, AND BALANCE AMOUNT OF RS.3,37,080/- WAS DISALLOWED. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A ), WHO HOWEVER UPHELD THE ORDER OF THE AO. STILL AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE TRIBUNAL. 7. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESS EE. HOWEVER, THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS. THE PLEADI NGS THEREIN ARE MORE OR LESS SIMILAR TO CONTENTIONS RAISED BY THEM BEFOR E THE REVENUE AUTHORITIES. APART FROM THAT IT HAS PLEADED THAT TH E LD.AO HAS MISCONCEIVED AND MISCONSTRUED THE NATURE OF THE EXP ENDITURE AS THAT OF AMALGAMATION/MERGE AND IN FACT THERE WAS NO AMALGA MATION OR MERGER ITA NO.2423/AHD/2018 - 5 - OF ANY UNDERTAKING DURING THAT YEAR, AND THEREFORE PROVISION OF SECTION 35DD IS NOT APPLICABLE TO THE ASSESSEE. IT FURTHER PLEADED THAT FINDINGS OF THE REVENUE AUTHORITIES ARE FACTUALLY INCORRECT, AS THE EXPENDITURE WAS INCURRED IN THE NATURE OF ROUTINE BUSINESS ACTIVITI ES. THE LD.AO FAILED TO APPRECIATE THE EXACT PURPOSE AND OBJECT FOR WHICH S UCH EXPENDITURE WERE INCURRED, AND THAT THE IMPUGNED ADDITION MADE ON THE BASIS OF NON-APPRECIATION OF THE NATURE OF THE EXPENDITURE M AY BE DELETED. ON THE OTHER HAND, THE LD.DR SUPPORTED ORDERS OF THE R EVENUE AUTHORITIES. 8. WE HAVE HEARD LEARNED DR AND GONE THROUGH THE RE CORD AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. THE AO IN THE ORDER HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH DE TAILS AND IT DID NOT STATE ANYTHING NOR PRODUCED ANY CORROBORATING EVIDE NCE IN SUPPORT OF ITS CLAIM OF EXPENSES. THE CONCURRENT FINDINGS OF REVENUE AUTHORITIES THAT PURPOSE FOR WHICH THE EXPENDITURE WAS INCURRED IS SPECIFIC AND THE CLAIM OF EXPENDITURE AGAINST TAX CONSULTANCY UNDER THE COLUMN TRANSACTION TEXT OF LEDGER OF TRANSACTIONS, THE T ERM PREPARATION OF AMALGAMATION OF MRPL WITH MIP AND LAWYER FEES FOR MERGER RESPECTIVELY MENTIONED, WERE NOT SUCCESSFULLY REBUT TED BY THE ASSESSEE BEFORE US ALSO. THIS TREATMENT AND CLASSIFICATION OF THE SAID EXPENDITURE IN THE ACCOUNTING TRANSACTION BY THE ASSESSEE CLEAR LY SHOWS THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF AMALGAMATION OR DEMERGER WHICH WOULD ATTRACT PROVIS IONS OF SECTION 35DD. BEFORE US ALSO, THE ASSESSEE CANNOT BETTER ITS CASE, AND RATHER SIMPLY REITERATED THE SUBMISSIONS AS WERE MADE BEFO RE THE LOWER AUTHORITIES. THEREFORE, FOR THE REASONS DISCUSSE D IN THE ORDERS OF THE REVENUE AUTHORITIES, AND THE VERY PREMISE ON WHICH THE ASSESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE IS FOUND T O BE FACTUALLY TENABLE ITA NO.2423/AHD/2018 - 6 - AND HENCE, INVOCATION OF PROVISION UNDER SECTION 35 DD OF THE ACT CANNOT BE SAID TO BE INCORRECT AND UNJUSTIFIED. THIS GROU ND ACCORDINGLY IS REJECTED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2020. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER