AMAR IMMUNODIAGNOSTICS, MUMBAI V. DCIT (OSD) CIR 10(3), MUMBAI

ITA 2827/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9793 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JIGAR MEHTA
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.2827/M/2015 ASSESSMENT YEAR: 2011-12 M/S. AMAR IMMUNODIAGNOSTICS PVT. LTD., 116, SHREE DIAMOND CENTRE, LBS MARG, VIKHROLI (WEST), MUMBAI 400 083 PAN: AAECA6561D VS. DCIT (OSD) 10(3) MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI JIGAR MEHTA, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 04.05.2017 DATE OF PRONOUNCEMENT : 24.07.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 10.02.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2011-12. 2. THE ASSESSEE HAS TAKEN TWO GROUNDS OF APPEAL. 3. GROUND NO.1 RELATES TO DISALLOWANCE OF RS.19,00, 000/- UNDER SECTION 40A(2)(B) TREATING THE REMUNERATION PAID TO ONE OF THE DIRECTORS AS UNREASONABLE AND EXCESSIVE. 4. GROUND NO.2 RELATES TO DISALLOWANCE OF RS.5,10,0 00/- UNDER SECTION 40A(2)(B). FOR THE SAKE OF CONVENIENCE, BOTH THE GROUNDS ARE A DJUDICATED TOGETHER. ITA NO.2827/M/2015 M/S. AMAR IMMUNODIAGNOSTICS PVT. LTD. 2 THE SHORT FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 30.09.2011 DECLARI NG TOTAL INCOME AT RS.1,05,82,029/-. THE CASE WAS SELECTED FOR SCRUTI NY AND IN RESPONSE TO NOTICE UNDER SECTION 143(2) AND UNDER SECTION 143(1) ASSES SEE ATTENDED FROM TIME TO TIME AND SUBMITTED VARIOUS DETAILS AS CALLED FOR. ASSESSEE IS A COMPANY ENGAGED IN BUSINESS OF DEALING IN DIAGNOSTIC KITS A ND IMMUNOLOGICAL REAGENTS. ASSESSEE IS ALSO ENGAGED IN RESEARCH ACTIVITY AND H AS BEEN DULY REGISTERED WITH DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, G OVERNMENT OF INDIA (DSIR) AND IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTIO N 35(2AB) OF INCOME TAX ACT. DURING THE YEAR, THE ASSESSEE HAS ACHIEVED GR OSS TURNOVER OF RS.4,05,24,877/- AND EARNED PROFIT OF RS.1,86,95,53 7/- AS PER COMPUTATION OF INCOME FILED. THE PROFIT IS 46.13 % OF TURNOVER. T HE TOTAL TAX PAID IS RS.40,73,900/-. ASSESSEE HAS ALSO DEBITED EXPENSE OF RS.81,42,008/- AS R&D EXPENDITURE. AS IT WAS DULY REGISTERED WITH DSIR DE DUCTION A/S 35(2AB) OF INCOME TAX ACT, 1961 @ 200% OF ACTUAL SUCH EXPENDIT URE WAS CLAIMED. ASSESSEE VOLUNTARILY PAID ADDITIONAL TAX AND COULD NOT FILE THE REVISED RETURN AS THE TIME FOR REVISING THE RETURN HAD ELAPSED. FINAL FORM 3CL WAS RECEIVED IN NOV 2013. AS PER THE 3CL, THE INCOME WAS REVISED AN D ADDITIONAL TAX WAS PAID. ALL THESE FACTS ALONG WITH REVISED COMPUTATIO NS AND TAX CHALLANS WERE SUBMITTED TO ASSESSING OFFICER (HEREINAFTER REFERRE D TO AS THE AO) DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AMONG OTHER THIN GS ASSESSEE HAS PAID REMUNERATION OF RS.24,00,000/- TO SMT PRITI BHANUSH ALI AND RS.6,00,000/- WAS ALSO PAID TO HER AS SUPERVISION CHARGES. ASSESSEE HAS ALSO PAID OFFICE/LABORATORY RENT OF RS.6,00,000/- FOR THE USE OF THEIR BUSINESS PREMISES TO MR. JAYANT BHANUSHALI. THE AO OBSERVED THAT SINCE THE ASSESSEE COMPANY HAS NOT FURNISHED ANY EVIDENCE TO PROVE THE REASONABLEN ESS OF THE PAYMENT MADE TO MS. PREETI BHANUSHALI THAT THESE PAYMENTS ARE COMPA RABLE TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE COMPANY, ACCORDINGLY AN AMOUNT OF RS.19,00,000/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ITA NO.2827/M/2015 M/S. AMAR IMMUNODIAGNOSTICS PVT. LTD. 3 ASSESSEE. SIMILARLY, AS THE ASSESSEE HAS NOT FURNI SHED ANY EVIDENCE TO PROVE THE COMPARABLE RATES IN RESPECT OF THE PAYMENT TO S HRI JAYANT BHANUSHALI AND AMOUNT OF RS.5,10,000/- IS DISALLOWED AND ADDED BAC K TO THE TOTAL INCOME OF THE ASSESSEE. THUS, THE TOTAL DISALLOWANCE UNDER S ECTION 40A(2)(B) IS RS.24,10,000/-. THE AO FURTHER OBSERVED THAT THE A SSESSEE COMPANY HAS CREDITED AN AMOUNT OF RS.38,02,375/- AS FD INTEREST AS AGAINST RS.39,85,970/- APPEARING IN THE 29AS WHEREAS THE TDS AMOUNTING TO RS.3,98,597/- HAS BEEN CLAIMED ON THE WHOLE OF THE FD INTEREST. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION TO THE NON-CREDITING OF B ALANCE INTEREST INCOME AMOUNTING TO RS.1,83,595/-. HENCE, THE AO ADDED RS .1,83,595/- TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER, SINCE THERE WAS N O EVIDENCE SUBMITTED BY THE ASSESSEE IN RESPECT OF THE COMPUTATION OF INCOME, T HE AO DISALLOWED RS.14,250/-. 5. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. DURING THE COURSE OF HEARING BEFORE US, THE LD. A.R. HAS SUBMITTED THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2010-11 IN ITA NO.554 3/M/2014 DECIDED ON 15.12.2016 AND PRAYED THAT THIS APPEAL MAY BE ALLOW ED. 7. LD. D.R. HAS RELIED UPON THE ORDERS OF THE REVEN UE AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2010-11 IN ITA NO.5543/M/2 014 DECIDED ON 15.12.2016. THE RELEVANT FINDING OF THE TRIBUNAL R EADS AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED FROM THE DOCUMENTS PLACED BE FORE US THAT SMT. PRITI BHANUSHALI WAS ENGAGED WITH THE DAY TO DAY BUSINESS OPERATIONS OF THE ASSESSEE COMPANY AND WAS HANDLING PAYROLL, ACCOUNTS, BANKING, MARKETING AND DEALING WITH VARIOUS GOVERNMENT AUTHORITIES ETC. AND THUS COMPARING HER MULTI FACETED ROLE WITH THE ITA NO.2827/M/2015 M/S. AMAR IMMUNODIAGNOSTICS PVT. LTD. 4 TECHNICAL DIRECTOR WAS NOT JUSTIFIED. BOTH OPERATED IN THEIR OWN UNIQUE FIELD. FURTHER, AO WAS MISLED BY THE FACT THAT SHE WAS BEING PAID H IGHER REMUNERATION OF RS.30 LACS AS AGAINST RS.11 LACS BEING PAID TO THE HIGHLY SKILLED DIRECTOR OF T HE COMPANY. BOTH DIRECTORS HAD DIFFERENT FUNCTIONAL AREA AND COULD N OT BE COMPARED WITH EACH OTHER. FURTHER, AO LOST SIGHT OF THE FACT THAT THE TECHNIC AL DIRECTOR WAS PAID ADDITIONAL SUM OF RS. 15 LACS ON ACCOUNT OF R & D CONSULTANCY WHICH S HATTERS THE BASIC FOUNDATION OF AO'S PREMISES. THE INCOME TAX RETURN OF THE DIRECTO RS REVEALS THAT BOTH FALL UNDER THE HIGHEST TAX BRACKET AND HENCE THERE WAS NO REQUIREM ENT OF ASSESSEE COMPANY TO PAY UNREASONABLE OR EXCESSIVE AMOUNT TO THE DIRECTOR. D ISALLOWANCE U/S 40A(2) COULD BE MADE ONLY IN CASE WHERE THE PAYMENT FOR SERVICES VI S--VIS MARKET PRICES OF SUCH SERVICES WERE EXCESSIVE OR UNREASONABLE AND NO T BY MAKING COMPARISON INTER-SE IN THE MANNER AS DONE BY AO. NO COMPARABLE DATA HAS BE EN RELIED UPON BY AO TO ASCERTAIN THE TRUE VALUE OF THE SERVICES BEING REND ERED BY THE DIRECTOR. IN SUCH A SITUATION, ABOVE CITED CBD T CIRCULAR 6-P COMES INTO PICTURE WHERE IT HAS BEEN STATED THAT NO ADDITION COULD BE MADE U/S 40A(2) IN CASE THERE WAS NO ATTEMPT TO EVADE TAXES. OUR VIEW IS F URTHER FORTIFIED BY THE CITED JUDGMENT OF JURISDICTIONAL BOMBAY HIGH COURT WHERE THE HON'BLE COURT HAS OBSERVED THAT WHERE REVENUE WAS NOT IN A POSITION T O POINT OUT HOW ASSESSEE EVADED PAYMENT OF TAX BY ALLEGED PAYMENT OF HIGHER COMMISS ION TO ITS SISTER CONCERN, SINCE SISTER CONCERN WAS ALSO PAYING TAX AT HIGHER RATE, DISALLOWANCE OF ALLEGED EXCESS COMMISSION PAID TO SISTER CONCERN WAS NOT JUSTIFIED . HENCE, FINDING STRENGTHS IN THE VARIOUS ARGUMENTS OF THE LD. A.R., WE ARE INCLINED TO ALLOW BOTH THE GROUNDS OF THE ASSESSEE AND DELETE IMPUGNED ADDITIONS OF RS.19 LAC S & RS.5.10 LACS. BOTH GROUNDS OF ASSESSEES APPEAL SUCCEEDS. 9. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF TH E TRIBUNAL, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2017. SD/- SD/- (RAMIT KOCHAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.07.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.2827/M/2015 M/S. AMAR IMMUNODIAGNOSTICS PVT. LTD. 5 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.