Intas Pharmaceuticals Ltd., Ahmedabad V. The Dy.CIT.,Cent. Circle-2(1), Ahmedabad

ITA 3088/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73051 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNAKUMAR DR

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.3086, 3087 AND 3088/AHD/2010 [ASSTT.YEAR : 2006-2007, 2007-2008 AND 2008-2009] INTAS PHARMACEUTICALS LTD. 203, CHINUBHAI CENTRE ASHRAM ROAD AHMEDABAD 380 009. PAN : AAACI 5120 L /VS. DCIT, CENT.CIR.2(1) AHMEDABAD. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI VARTIK CHOKSHI + 2 3 )/ REVENUE BY : SHRI T.P.KRISHNAKUMAR, DR 5 2 &(*/ DATE OF HEARING : 8 TH JANUARY, 2014 678 2 &(*/ DATE OF PRONOUNCEMENT : 03-03-2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THESE THREE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07, 2008-09 AND 2009- 10 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. 2. CONCISE GROUNDS OF THE APPEAL OF THE ASSESSEE FO R A.Y.2006-2007 IN ITA NO.3086/AHD/2010 ARE AS UNDER: 1. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFI RMING THE ADDITION OF RS.4,37,63,203/- EVEN THOUGH THEY HAVE NOT BEEN INC URRED FOR THE EMPLOYEES OF THE APPELLANT COMPANY. ITA NO.3086, 3087 AND 3088/AHD/2010 -2- 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFI T TAX IS NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING I TEMS OF EXPENDITURE AS THEY HAVE BEEN INCURRED ONLY WITH RELATION TO NON-E MPLOYEES AND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPEL LANT. SR. NO. PARTICULARS FBT (NON-EMPLOYEES) EXPENDITURE 1 CONFERENCE 1,22,76,602 2 SALES PROMOTION INCLUDING PUBLICITY 15,33,70,687 3 CONVEYANCE 10,56,66,815 4 HOTEL, BOARDING AND LODGING 8,16,33,699 5 REPAIR, RUNNING & MAINTENANCE OF MOTOR CAR 62,49,296 6 MAINTENANCE OF GUEST HOUSE 94,301 3. THE LD.CIT(A) ERRED IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY INCORRECTLY APPLYING THE PROVISIONS OF SECTION 115WB(2) OF THE INCOME TAX ACT, 1961 AND THEREBY LEVYING FBT ON EXPENDITURE WHICH HAD NO DIRECT/INDIRECT CONNECTION TO THE EMPLOYEES OF THE APPELLANT COMPANY WHICH IS PRECONDITION AS PER THE PROVISIONS OF THE ACT AND ALSO THE LEGISLATIVE INTENT AS EXPLAINED BY THE BUDGET S PEECH IN THE EXPLANATORY NOTES. 4. THE LD.CIT(A) ERRED WHILE ACTING AS THE FIRST AP PELLATE AUTHORITY UNDER THE INCOME-TAX ACT, 1961 WAS CERTAINLY NOT BO UND BY THAT CIRCULAR AND, ACCORDINGLY, HE OUGHT TO HAVE RENDERED HIS OWN DECISION ON ALL THE ISSUES RAISED BY THE APPELLANT IN ITS APPEAL BEFORE HIM WITHOUT BEING BOUND BY THE SAID CBDT CIRCULAR. 3. CONCISE GROUNDS OF THE APPEAL OF THE ASSESSEE FO R A.Y.2007-2008 IN ITA NO.3087/AHD/2010 ARE AS UNDER: 1. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFI RMING THE ADDITION OF RS.6,23,44,459/- EVEN THOUGH THEY HAVE NOT BEEN INC URRED FOR THE EMPLOYEES OF THE APPELLANT COMPANY. 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFI T TAX IS NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING I TEMS OF EXPENDITURE AS THEY HAVE BEEN INCURRED ONLY WITH RELATION TO NON-E MPLOYEES AND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPEL LANT. ITA NO.3086, 3087 AND 3088/AHD/2010 -3- 3. THE LD.CIT(A) ERRED IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY INCORRECTLY APPLYING THE PROVISIONS OF SECTION 115WB(2) OF THE INCOME TAX ACT, 1961 AND THEREBY LEVYING FBT ON EXPENDITURE WHICH HAD NO DIRECT/INDIRECT CONNECTION TO THE EMPLOYEES OF THE APPELLANT COMPANY WHICH IS PRECONDITION AS PER THE PROVISIONS OF THE ACT AND ALSO THE LEGISLATIVE INTENT AS EXPLAINED BY THE BUDGET S PEECH IN THE EXPLANATORY NOTES. 4. THE LD.CIT(A) ERRED WHILE ACTING AS THE FIRST AP PELLATE AUTHORITY UNDER THE INCOME-TAX ACT, 1961 WAS CERTAINLY NOT BO UND BY THAT CIRCULAR AND, ACCORDINGLY, HE OUGHT TO HAVE RENDERED HIS OWN DECISION ON ALL THE ISSUES RAISED BY THE APPELLANT IN ITS APPEAL BEFORE HIM WITHOUT BEING BOUND BY THE SAID CBDT CIRCULAR. 4. CONCISE GROUNDS OF THE APPEAL OF THE ASSESSEE FO R A.Y.2008-2009 IN ITA NO.3088/AHD/2010 ARE AS UNDER: 1. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFI RMING THE ADDITION OF RS.7,97,56,984/- EVEN THOUGH THEY HAVE NOT BEEN INC URRED FOR THE EMPLOYEES OF THE APPELLANT COMPANY. 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFI T TAX IS NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING I TEMS OF EXPENDITURE AS THEY HAVE BEEN INCURRED ONLY WITH RELATION TO NON-E MPLOYEES AND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPEL LANT. 3. THE LD.CIT(A) ERRED IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY INCORRECTLY APPLYING THE PROVISIONS OF SECTION 115WB(2) OF THE INCOME TAX ACT, 1961 AND THEREBY LEVYING FBT ON EXPENDITURE WHICH HAD NO DIRECT/INDIRECT CONNECTION TO THE EMPLOYEES OF THE APPELLANT COMPANY WHICH IS PRECONDITION AS PER THE PROVISIONS OF THE ACT AND ALSO THE LEGISLATIVE INTENT AS EXPLAINED BY THE BUDGET S PEECH IN THE EXPLANATORY NOTES. 4. THE LD.CIT(A) ERRED WHILE ACTING AS THE FIRST AP PELLATE AUTHORITY UNDER THE INCOME-TAX ACT, 1961 WAS CERTAINLY NOT BO UND BY THAT CIRCULAR AND, ACCORDINGLY, HE OUGHT TO HAVE RENDERED HIS OWN DECISION ON ALL THE ISSUES RAISED BY THE APPELLANT IN ITS APPEAL BEFORE HIM WITHOUT BEING BOUND BY THE SAID CBDT CIRCULAR. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY ISSUE IN THIS GROUND OF THE APPEAL OF THE ASSESSEE FOR ALL THREE YEARS IS REGARDING ADDITION ITA NO.3086, 3087 AND 3088/AHD/2010 -4- MADE ON ACCOUNT OF FRINGE BENEFIT TAX (FBT FOR SH ORT), ALTHOUGH, THEY WERE NOT INCURRED FOR THE EMPLOYEES OF THE ASSESSEE-COMP ANY, AND WERE IN FACT WITH RELATION TO NON-EMPLOYEES AND PURELY FOR THE BUSINE SS PURPOSE OF THE ASSESSEE. HE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE ITAT, AHMEDABAD BENCH IN ARVIND FAS HIONS LTD. VS. DCIT, IN ITA NO.3508 AND 3509/AHD/2010 FOR THE ASSESSMENT YE AR 2006-07 ORDER DATED 13.12.2013 WHEREIN HELD THAT PROVISION OF FBT COU LD NOT BE INVOKED IN RESPECT OF THE EXPENSES WHICH WERE NOT INCURRED ON EMPLOYEES OR THEIR FAMILY MEMBERS. THE ITAT, AHMEDABAD BENCH HAS FOLLOWED A NUMBER OF DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL ON THIS ISSUE AS RE CORDED IN THIS ORDER. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE ASSESSEE. HE RELIED ON THE ORDERS OF THE AO AND THE CIT(A) AN D SUBMITTED THAT THE CIT(A) HAS REFERRED IN HIS APPELLATE ORDER THAT THE ISSUE IS PENDING BEFORE THE HONBLE GUJARAT HIGH COURT IN WRIT PETITION AND THE HONBLE GUJARAT HIGH COURT HAS NOT SET SIDE THE CIRCULAR NO.8 DATED 29.8.2005 OF CBDT. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE ORDER OF THE TRIBUNAL IN ARV IND FASHIONS LTD. VS. DCIT (SUPRA). WE FIND THAT THE DECISION OF THE ITAT, AH MEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA) HAS HELD THAT THE PR OVISION OF FBT COULD NOT BE INVOKED IN RESPECT OF THE EXPENSES WHICH WERE NO T INCURRED ON EMPLOYEES OR THEIR FAMILY MEMBERS. THE TRIBUNAL IN THIS CASE HA S REFERRED TO THE DECISIONS OF THE CO-ORDINATE BENCH OF THE ITAT, AHMEDABAD, PUNE AND BANGALORE, WHICH HAVE SIMILARLY HELD THAT THE FBT COULD NOT BE INV OKED ON EXPENSES WHICH WERE NOT INCURRED ON THE EMPLOYEES OR THEIR FAMILY MEMBERS. HOWEVER, WE FIND THAT THERE IS NO CLEAR CUT FINDING RECORDED BY THE AO OR THE CIT(A) IN THEIR ORDER THAT WHETHER THE ADDITION MADE WERE RELATING TO THE EXPENDITURE IN RELATION TO NON-EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE A SSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT THE EXPENSES WERE NOT RELATED TO ITS EMPLOYEES AND WERE INCURRED ONLY IN RELATION TO NON-EMPLOYEES AND FOR BUSINESS PURPOSE OF THE ASSESSEE-COMPANY. IN THESE FACTS, WE ARE OF THE VI EW THAT IT SHALL BE IN THE ITA NO.3086, 3087 AND 3088/AHD/2010 -5- INTEREST OF JUSTICE TO RESTORE THE ISSUE IN THE GRO UNDS OF THE APPEAL OF THE ASSESSEE FOR ALL THREE YEARS TO THE FILE OF THE AO WITH DIRE CTION TO DECIDE THE SAME DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE O PPORTUNITY OF HEARING TO THE ASSESSEE IN THE LIGHT OF DECISIONS OF THE ITAT, AHM EDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA). THE AO IS FURTHER DIRECTED TO RECORD A CLEAR FINDING THAT WHETHER THE EXPENSES IN QUESTION WERE INCURRED WITH RELATION TO NON-EMPLOYEES FOR THE BUSINESS PURPOSE OF THE ASSES SEE AS CLAIMED BY THE ASSESSEE-COMPANY. IN CASE THE EXPENSES ARE FOUND T O HAVE BEEN INCURRED BY THE ASSESSEE WITH RELATION TO NON-EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSESSEE, THE DECISION IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA) SHALL APPLY TO THE CASE OF THE ASSESSEE. NEEDLESS TO SAY THAT ANY DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE WRIT PETITION PENDING BEF ORE THE HONBLE HIGH COURT, AS MENTIONED BY THE CIT(A) IN ITS APPELLATE ORDER, SHALL BE BINDING ON THE AUTHORITIES. WE DIRECT ACCORDINGLY. 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( .. /G.C. GUPTA ) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD