The DCIT, Bharuch Circle, Bharuch V. Euphoric Pharmaceuticals Pvt. Ltd., Bharuch

ITA 314/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9991 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 11-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2012
• Court: TRIBUNAL
• Department Lawyers: JAYANT JAVERI
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS.314/AHD/2012 ALONG WITH ITA NOS. 2625 & 2626/AHD/2013 (ASSESSMENT YEARS:2007-08 & 2008-09) DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH APPELLANT VS. EUPHORIC PHARMACEUTICALS PVT. LTD., A1/173, GIDC, ANKLESHWAR, DIST.- BHARUCH - 393002 R ESPONDENT PAN: AAACE4962A / BY REVENUE : SHRI JAYANT JAVERI, SR. D.R. /BY ASSESSEE : SHRI SURENDRA MODIANI, A.R. /DATE OF HEARING : 11.11.2016 /DATE OF PRONOUNCEMENT : 18.11.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE THREE REVENUES APPEALS PERTAIN TO ASSESSMENT YEARS 2007-08 & 2008-09. FORMER ASSESSMENT YEAR INVOLVES TWO CAS ES. ITA NO.314/AHD/2012 ARISES AGAINST CIT(A)-IV, BARODAS ORDER DATED ITA NOS.314/AHD/2012 WITH ITA NOS.2625 & 2626/AHD/1 3 (DCIT VS. EUPHORIC PHARMACEUTICALS PVT. LTD.) A.Y. 2007-08 & 2008-09 - 2 - 15.11.2011 PASSED IN APPEAL NO. CAB/IV-126/2011-12 DELETING SECTION 271(1)(C) PENALTY OF RS.27,17,786/- PERTAINING TO H YPOTHETICAL INTEREST DISALLOWANCE/ADDITION OF RS.67,53,335/- WHICH FORMS SUBJECT MATTER OF LATTER APPEAL ITA NO.2625/AHD/2013 SEEKING TO REVIV E THE SAID QUANTUM ADDITION IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. SECOND ASSESSMENT YEAR 2008-09 INVOLVES APPEAL I TA NO.2626/AHD/2013 PREFERRED AGAINST CIT(A)-II, BAROD AS ORDER DATED 20.06.2013 IN CASE NO.CAB/II-114/12-13 IN IDENTICAL QUANTUM PROCEEDINGS DELETING INTEREST DISALLOWANCE OF RS.66,86,079/- DI SALLOWED ON ALLEGED BORROWED FUNDS DIVERTED FOR NON BUSINESS PURPOSES. 3. BOTH THE LEARNED REPRESENTATIVES STATE AT THE OU TSET THAT THE SOLE ISSUE OF INTEREST DISALLOWANCE IN QUANTUM APPEALS IS IDEN TICAL EXCEPT THE FACT THAT THE ONLY VARIATION THEREIN IS QUA THE RELEVANT FIGU RES INVOLVED I.E. RS.67,53,335/- AND RS.68,86,079/-; RESPECTIVELY. 4. WE COME TO THE COMMON FACTS INVOLVED IN BOTH ASS ESSMENT YEARS. THIS ASSESSEE MANUFACTURES PHARMACEUTICAL DRUGS. T HE ASSESSING OFFICER NOTICED IT TO HAVE ADVANCED A SUM OF RS.45,52,837/- TO ITS SISTER CONCERN M/S. INDIAN ANTIBIOTICS PVT. LTD. IN ASSESSMENT YEA R 2007-08 AND RS.3,67,21,166/- IN LATTER ASSESSMENT YEAR WITHOUT CHARGING ANY INTEREST. THE ASSESSEES CASE WAS THAT ITS SISTER CONCERN HAD BEEN EXCLUSIVELY ENGAGED IN SALE OF ITS PRODUCTS ON COMMISSION BASIS . THE ASSESSING OFFICER OBSERVED IN BOTH ASSESSMENT ORDERS THAT THE ASSESSEE HAD NOT PROVED ANY COMMERCIAL EXPEDIENCY FOR ADVANCING THE ABOVE H UGE SUMS TO ITS SISTER CONCERN WITHOUT CHARGING ANY INTEREST. HE ACCORDIN GLY OBSERVED THAT IT HAD DIVERTED ITS INCOME FOR NON BUSINESS PURPOSES TO SI STER CONCERN AND ALSO DID ITA NOS.314/AHD/2012 WITH ITA NOS.2625 & 2626/AHD/1 3 (DCIT VS. EUPHORIC PHARMACEUTICALS PVT. LTD.) A.Y. 2007-08 & 2008-09 - 3 - NOT INITIATE APPROPRIATE STEPS TO RECOVER THE SAME. THE ASSESSING OFFICER WOULD CHARGE HYPOTHETICAL INTEREST DISALLOWANCE(S)/ ADDITION(S) IN QUESTION @ 18%. HE FURTHER IMPOSED SECTION 271(1)(C) PENALT Y IN ASSESSMENT YEAR 2007-08 QUA THE SAME. 5. THE ASSESSEE PREFERRED THE APPEAL. THE CIT(A) R EVERSES ASSESSING OFFICERS ACTION. HE FOLLOWS THIS TRIBUNALS ORDER IN ITA NO.1983/AHD/2010 IN ASSESSEES CASE FOR A.Y.2006-07 UPHOLDING THE LOWER APPELLATE ORDER DELETING IDENTICAL INTEREST DISALLO WANCE/ADDITION AFTER HOLDING THAT ASSESSEES SAID SISTER CONCERN IS EXCL USIVELY ENGAGED IN PROMOTION OF ITS PRODUCT. IT INCURRED LOSSES ON AC COUNT OF INADEQUATE MARGIN ALLOWED THEREIN. LEARNED CO-ORDINATE BENCH FURTHER APPEARS TO HAVE FOLLOWED HONBLE APEX COURTS DECISION IN SA BUILDE RS LTD. VS. CIT & ANOTHER (2007) 288 ITR 1 (SC) TO CONCLUDE THAT THER E EXISTED DUE COMMERCIAL EXPEDIENCY IN THE INTEREST FREE ADVANCES GIVEN TO THE ABOVE SISTER CONCERN. THE CIT(A) ACCORDINGLY FOLLOWS THE SAME IN THE TWO IMPUGNED ASSESSMENT YEARS AS WELL. HE THEREAFTER D ELETES THE CORRESPONDING PENALTY AS ALREADY STATED IN THE FORM ER ASSESSMENT YEAR. ALL THIS LEAVES THE REVENUE AGGRIEVED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE C ASE FILE. IT HAS COME ON RECORD THAT THIS TRIBUNAL HAS ALREADY CONCL UDED IN PRECEDING ASSESSMENT YEAR IN ASSESSEES CASE ITSELF THAT ITS INTEREST FREE ADVANCES GIVEN TO ABOVE SISTER CONCERN DO HAVE COMMERCIAL EXPEDIEN CY EMBEDDED THEREIN SINCE IT PROMOTES ITS PRODUCTS ON VERY LOW MARGINS. LD. DEPARTMENTAL REPRESENTATIVE FAILS TO POINT OUT ANY DISTINCTION O N FACTS IN THESE ASSESSMENT YEARS. WE THUS FIND NO REASON TO INTERFERE IN CIT( A)S QUANTUM ORDERS IN ITA NOS. 2625 & 2626/AHD/2013. THAT BEING THE CASE , THE REVENUES ITA NOS.314/AHD/2012 WITH ITA NOS.2625 & 2626/AHD/1 3 (DCIT VS. EUPHORIC PHARMACEUTICALS PVT. LTD.) A.Y. 2007-08 & 2008-09 - 4 - GRIEVANCE IN ITS PENALTY APPEAL ITA NO.314/AHD/2012 (SUPRA) HAS NO LEGS TO STAND. THESE THREE APPEALS ARE ACCORDINGLY DECL INED. 7. THESE THREE REVENUES APPEALS ARE ACCORDINGLY DI SMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF NOVEMBER, 2016.] SD/- SD/- (N. K. BILLAIYA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD: DATED 18/11/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE / CONCERNED CIT 4 - / CIT (A) ! '##$% & '% () / DR, ITAT, AHMEDABAD * !+, / GUARD FILE. BY ORDER / % /( & '% ()