The ACIT, Cir. 8, Ahmedabad V. Torrent Pharmaceuticals Ltd, Ahmedabad

ITA 3146/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9353 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-08-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 31-07-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 143(1); 143(2); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES C BENCH: AHMEDABAD (BEFORE S/SHRI R.V. EASWAR, VP AND A N PAHUJA, AM) ITA NO. 3146/AHD/2003 A Y: 2000-01 ACIT CIRCLE-8,4 TH FLOOR, A WING, AJANTA COMMERCIAL CENTRE, ASHRAM ROAD, AHMEDABAD VS TORRENT PHARMACEUTICALS LTD., TORRENT HOUSE, NR. DINESH HALL, ASHRAM ROAD,AHMEDABAD [PAN: AAACT 5466A] APPELLANT RESPONDENT ASSESSEE BY SHRI SN SOPARKAR WITH SHRI P M. MEHTA, AR DEPARTMENT BY SHRI SHELLEY JINDAL, DR ORDER A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATE D 21-05-2003 OF THE LEARNED CIT(A)-XIV, AHMEDABAD, RA ISES THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DE LETING ADDITION OF RS.24,16,896/- MADE ON ACCOUNT OF MARKET DEVELOP MENT EXPENSES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DE LETING ADDITION OF RS.12,74,66,253/- MADE ON ACCOUNT OF SELLING, P UBLICITY AND MEDICAL LITERATURE EXPENSES. 3. THE LD. CIT(A) HAS ERRED IN LAW BY ALLOWING THE CLAIM FOR DEDUCTION OF RS. 3,74,83,747/- U/S. 35(2AB). 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DEL ETING ADDITION OF RS. 1,96,58,990/- MADE ON ACCOUNT OF PRESENTATIO N ARTICLES. 5. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DEL ETING ADDITION OF RS.24,57,449/- MADE ON ACCOUNT OF PACKING MATERI AL FROM M/S. BALDEVBHAI DOSABHAI. 6. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DEL ETING ADDITION OF RS.2,75,49,042/- MADE ON ACCOUNT OF PURCHASES MA DE FROM VIMAL CHEMICALS. ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 2 7. ON THE FACTS AND IN T4HE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 8. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET-ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 2. FACTS IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING INCOME OF RS.38,30,99,000/- FILED ON 30-11-2000 BY THE ASS ESSEE, MANUFACTURING PHARMACEUTICAL PRODUCTS, AFTER BEING PROCESSED ON 2 5-5-2001 U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 21-11-2001. IN THE MEANWHILE, THE ASSESSEE SUBMITTED A REVISED STATEM ENT OF INCOME ON 9-2-2001, DECLARING INCOME OF RS.37,99,50,648/-. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED FROM A NOTE 4 IN THE RETURN THAT THE ASSESSEE INCURRED EXPENDITURE OF RS .36,25,344/- ON MARKET DEVELOPMENT, TREATING THE SAME AS DEFERRED REVENU E EXPENDITURE. TO A QUERY BY THE AO, THE ASSESSEE CONTENDED THAT THE EXPENDITURE WAS INCURRED ON THE PROMOTION OF PUBLIC RELATIONS, GOODWILL AND WELL BE ING OF THE ASSESSEE COMPANY. HOWEVER, THE AO WHILE RELYING UPON HIS OWN FINDING S IN THE ASSESSMENT YEAR 1998-99,ALLOWED ONLY ONE THIRD OF MARKET DEVELOPMEN T EXPENDITURE AND REMAINING TWO THIRD WERE DISALLOWED FOR ALLOWANCE I N THE SUBSEQUENT TWO YEARS.. 3. ON APPEAL, THE LEARNED CIT(A) WHILE RELYING UPON HIS OWN ORDER IN THE ASSESSMENT YEAR 1998-99 AND 1999-2000, ALLOWED THE CLAIM OF THE ASSESSEE. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET, THE LEARNED AR ON BE HALF OF THE ASSESSEE WHILE RELYING UPON THE DECISION DATED 29-6-2007 OF THE IT AT IN THE ASSESSEES OWN CASE IN ASSESSMENT YEAR 1998-99 IN ITA NO.446/AHD/2 002 SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID DECISION OF THE TRIBUNAL. THE LEARNED DR DID NOT DISPUTE THESE SUBM ISSIONS OF THE LEARNED AR. ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 3 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. WE FIND THAT THE TRI BUNAL WHILE ADJUDICATING A SIMILAR CLAIM IN THE ASSESSEES OWN CASE IN THE AY 1998-99 CONCLUDED IN THEIR ORDER DATED 29-6-2007 AS UNDER: 6. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.1,79,71,792 OUT OF TOTAL MARKET DEVELOPMENT EXPE NDITURE OF RS.2,69,57,688. THE ASSESSEE HAD TREATED THE SAME A S DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT, BUT CL AIMED DEDUCTION FOR THE FULL AMOUNT AS REVENUE EXPENDITURE IN THE C OMPUTATION OF TOTAL INCOME. THE ASSESSING OFFICER HAS DISALLOWED 2/3 RD OF THE SAID EXPENDITURE I.E., RS.1,79,71,792 ON THE BASIS OF TH E REASONS GIVEN IN PARAS 5.1 AND 5.2 OF THE ASSESSMENT ORDER. THE A SSESSEE HAD INCURRED EXPENSES ON MARKET DEVELOPMENT EXPENSES ON PUBLICITY IN EUROPE AND RUSSIA WITH AN AIM TO ENTER THE EXPORT M ARKETS. FOR THE PURPOSE OF PUBLICITY, THE COMPANY MADE PAYMENT TO Y OUNG RUBICAM TOWARDS THE PRODUCTION OF LITERATURE, CORPO RATE FOLDER, BROCHURES/STICKER, TV AND PRINT MEDIA ADVERTISEMENT CAMPAIGN ETC. TOTAL OF SUCH EXPENDITURE INCURRED WAS OF RS.2,63,6 6,326. THE ASSESSING OFFICER ALLOWED ONE THIRD OF SUCH EXPENDI TURE AND THUS DISALLOWED THE CLAIM OUT OF SUCH EXPENSES OF RS.1,7 9,71,792 AND HELD THAT THE SAME WILL BE ALLOWED ONE THIRD IN EAC H OF THE SUBSEQUENT YEARS. IN APPEAL, THE CIT(A) HAS DELETED SUCH DISALLOWANCE AS MADE BY THE ASSESSING OFFICER. 7. DURING THE COURSE OF HEARING BOTH THE PARTIES A GREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE ITAT, AHMEDABAD BENCH IN ASSESSEES OWN CASE FOR THE AY 1997-98 IN ITA NO.1044/AHD/2002, WHEREIN THE ITAT HAS UPHELD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAIS ED BY THE REVENUE BY OBSERVING IN ITS ORDER IN PARAGRAPH 6-SE RIES, WHICH IS REPRODUCED AS UNDER : 6.1. GROUND NO. 5 IS WITH REGARD TO THE DELETION OF DISALLOWANCE OF RS 10,72,83,461/- OUT OF MARKET DEVELOPMENT EXPENSES . 6.2. THE ASSESSEE CLAIMED RS. 16,09,25,191/- BY WAY OF DEDUCTION BEING THE EXPENDITURE ON MARKET DEVELOPMENT. ON BEING ASKED TO EXPLAIN THE CLAIM BY THE ASSESSING OFFICER, THE ASSESSEE FILED REPLY VID E ITS LETTER DATED 24.03.2000 THE CONTENTS OF WHICH WERE THAT ON THE REQUEST OF MINISTRY OF HEALTH & MEDICAL INDUSTRIES RUSSIAN FEDERATION VIDE THEIR LETTER DAT ED ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 4 26.07.1996, THE ASSESSEE AGREED TO SUPPLY MEDICINES FREE OF COST TO THE GOVT. OF RUSSIA FOR THE PURPOSE OF PROMOTING AND DEVELOPING THE EXPORT MARKET WHICH WA S ACTUALLY YIELDED BENEFIT TO THE ASSESSEE COMPANY IN THE SUBSEQUENT YEARS IN THE FORM OF EXPORT ORDERS OF IT S PHARMACEUTICAL MEDICINES. THEREFORE, THE ASSESSEE INCURRED EXPENDITURE OF RS. 16,09,25,191/- TOWARDS SUPPLY OF MEDICINES FREE OF COST TO RUSSIAN GOVT. A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER ALLOWED 1/3 RD OF THE ABOVE EXPENDITURE OF RS. 5,36,41,730/- OUT OF THE AFORESA ID EXPENDITURE AND DISALLOWED 2/3 OF THE EXPENDITURE RESULTING TO THE DISALLOWANCE OF RS, 10,72,83,461/- ON THE GROUND THAT THE ASSESSEE IN ITS BOOKS OF ACCOUN T CONSIDERED THIS EXPENDITURE AS DEFERRED REVENUE EXPENDITURE AND ALSO MENTIONED IN ITS LETTER THE SA ID EXPENDITURE YIELDED BENEFIT TO THE ASSESSEE COMPANY IN THE SUBSEQUENT YEARS ON THE FORM OF EXPORTS AND THEREFORE HE TREATED AS THE EXPENDITURE ON SELLING, PUBLICITY AND MEDICAL LITERATURE. 6.3 ON APPEAL, THE CIT(A) DELETED THE AFORESAID DISALLOWANCE BY FOLLOWING THE ORDER OF CIT(A) IN EA RLIER YEARS. 6.4 THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LEARNED AR BESIDES RELYING ON THE ORDER OF THE CIT(A) SUBMITTED THAT T HIS ISSUE IS COVERED IN FAVOUR OF THE ITAT BY THE DECIS ION OF ITAT, AHMEDABAD C BENCH IN ASSESSMENT YEAR 1993- 94 VIDE ITS ORDER DATED 23.02.2005 IN ITA NO. 1150/A/1997. 6.5 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD AS WELL AS PERUSING THE ORDER OF THE ITAT(SUPRA), WE FIND THAT ON THE SIMILAR ISSUE THE ITAT HAS DISMISSED THIS GROUN D OF APPEAL OF THE REVENUE IN THE AFORESAID ORDER BY UPHOLDING THE ORDER OF THE CIT(A). THE RELEVANT GRO UND OF THAT APPEAL AND OBSERVATIONS OF ITAT THEREIN ARE AS UNDER: 3. THE LEARNED CIT(A,) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS,2,44,03,667/- OUT OF EXPENSES ON SELLING, PUBLICITY ETC. ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 5 14. THE LEARNED DR ADMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSTT. YEAR 1992-93 WHEREBY PARA-18, THE TRIBUNAL HAS UPHOLD THE ORDER OF THE CIT(A,), VIDE WHICH SIMILAR ADDITION WAS DELETED. COPY OF THE SAID ORDER IS PLACED AT PAGE NOS. 39 TO 50 OF THE PAPER HOOK. (ITA NO.4226/AHD/1995, ITA NO.4204/ AHD/1995 DATED 17-4-2002). THE SAID PARA FOR THE SAKE OF CONVENIENCE IS REPRODUCED HEREIN BELOW: 18. GROUND NO. VI IS RELATED TO MEDICAL LITERATURE ETC. EXPENSES FOR RS.1,25,03,910. IT HAS BEEN FOUND BY THE AO THAT THE ASSESSEE DEBITED EXPENDITURE UNDER THE HEAD PUBLICITY AND MEDICAL LITERATURE EXPENSE AMOUNTING TO RS.1,87,57,742 OUT OF WHICH 66.66% DISALLOWED AS PER PAST PRACTICE. THE CALCULATION OF THE IMPUGNED ADDITION 66.66% OF RS. 1,87,57,742 COMES TO RS. 1,25,03,910. THE CIT(A) HAS DELETED THE SAME WITH THE OBSERVATIONS THAT THERE WAS NO CHANGE IN THE NATURE OF EXPENSES IN EARLIER YEARS, FOLLOWING THE SAME REASONS AS IN EARLIER YEARS THERE WAS NO BASIS TO DISALLOW 66.66% EXPENSES AS DEFERRED CAPITAL EXPENDITURE, THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1988-89 IN ITA NO.4938/91. THE RELEVANT OBSERVATION OF THE TRIBUNAL IN THAT CASE IS REPRODUCED BELOW: THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF REVENUE AS PER THE DECISION OF THE TRIBUNAL IN THE CASE OF TORRENT LABORATORIES 59 TTJ 676 WHICH ALTHOUGH RELATED TO DISALLOWANCE U/S. 37(3A,) YET THE RATIO IS APPLICABLE TO DEDUCTION U/S.37 ALSO. I T WAS SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION THE AO HAS DISALLOWED ONLY 4/5 TH OF THE EXPENSES PRESUMABLY CONSIDERING THE SAME AS DEFERRED REVENUE EXPENDITURE. IT WAS PLEADED THAT THE CIT(A) HOWEVER HAS ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVSARI COTTON & SILK MILLS SUPRA. ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 6 AFTER CONSIDERING THE SUBMISSION OF THE PARTIES TO THE DISPUTES, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) REQUIRES NO INTERFERENCE AS IT IS BASED ON THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVSARI COTTON & SILK MILLS SUPRA. ACCORDINGLY THIS GROUND OF APPEAL IS ALSO DISMISSED. 15. AFTER HEARING BOTH THE PARTIES, RESPECTFULLY FOLLOWING THE AFORE CITED DECISION, WE FIND NO MERITS IN THIS GROUND AND THE SAME IS DISMISSED. THE ORDER OF THE LEARNED CJT(A) IN THIS REGARD IS UPHELD. 6.6. IN PRINCIPLE, THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION IS SIMILAR TO THE FACTS AND CIR CUMSTANCES OF THE CASE IN ASSESSMENT YEAR 1993-94, RESPECTFULL Y FOLLOWING THE ORDER OF THE ITAT(SUPRA), WE UPHOLD T HE ORDER OF THE CIT(A) ON THIS COUNT AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 6. IN THE LIGHT OF THE AFORESAID DECISION OF THE TR IBUNAL FOR THE AY 1998-99, FOLLOWING THEIR DECISION FOR THE ASSESSMENT YEAR 19 97-98 IN ITA NO.1044/AHD./2002 WHILE UNDISPUTEDLY FACTS AND CIRC UMSTANCES REMAINING THE SAME AS IN THE EARLIER ASSESSMENT YEARS, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1 IS DISMISSED. 7. GROUND NO.2 RELATES TO DISALLOWANCE OF RS.12,74, 66,253/- ON ACCOUNT OF SELLING, PUBLICITY AND MEDICAL LITERATURE EXPENSES. RELYING UPON HIS OWN ORDER IN ASSESSMENT YEAR 1998-99, THE AO ALLOWED ONE THIRD O F THE CLAIM FOR DEDUCTION OF THE SAID EXPENDITURE WHILE DISALLOWING THE REMAINI NG AMOUNT. 8. ON APPEAL, THE LEARNED CIT(A), FOLLOWING HIS OWN ORDERS FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 AND THE DECI SION OF THE ITAT FOR THE AY 1992-93, ALLOWED THE CLAIM OF THE ASSESSEE. 9. BOTH THE PARTIES AGREED THAT ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION DATED 29-6-2007 OF THE ITAT IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 1998-99 IN ITA NO.446/AHD/2002 . ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 7 10. WE FIND THAT THE TRIBUNAL WHILE ADJUDICATING A SIMILAR CLAIM IN THE ASSESSEES OWN CASE IN THE AY 1998-99, CONCLUDED IN THEIR ORDER DATED 29-6- 2007 AS UNDER:: 10. DURING THE COURSE OF HEARING, BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, AHMEDABAD BENCH IN ASSESSEES OWN CASE FOR THE AY 1997- 98 IN ITA NO.1044/AHD/2002 , WHEREIN THE ITAT HAS UPHELD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAISED B Y THE REVENUE BY OBSERVING IN ITS ORDER IN PARAGRAPH 3-SERIES, WH ICH IS REPRODUCED AS UNDER: 3 .1. GROUND NO. 2 IS IN RESPECT OF DELETION OF DISALLOWANCE ON ACCOUNT OF SELLING PUBLICITY AND MEDICAL LITERATURE EXPENSES RS.7,83,87,877/-. 3.2 FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFIC ER FOLLOWING EARLIER YEARS ALLOWED ONLY 1/3 RD EXPENDITURE . THE CIT (A) FOLLOWED EARLIER YEARS ORDERS OF CIT (A) AND DELETED THE ADDITION. AGGRIEVED, THE DEPARTMENT HAS COME UP IN APPEAL AND URGED CANCELLATION OF THE CIT (A) ORDER. 3.3 HEARD THE PARTIES. IT IS FOUND THAT THIS MATTER IS ALSO COVERED BY THE ORDER DATED 23.02.05 OF THE ITAT, AHMEDABAD PASSED IN APPEAL FILED BY THE DEPARTMENT BEATING ITA NO.1150/A/ 1997 FOR THE ASSESSMENT YEAR 1993-94 WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 13. GROUND NO.3 READS AS UNDER: 3. THE ID. CIT(A)HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,44,03,667/- OUT OF EXPENSES ON SELLING, PUBLICITY ETC. 14. THE ID. DR ADMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A Y 1992-93 WHEREBY PARA 18, THE TRIBUNAL HAS UPHOLD THE ORDER OF THE CIT(A) ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 8 VIDE WHICH SIMILAR ADDITION WAS DELETED. COPY OF TH E SAID ORDER IS PLACED AT PAGE NOS.39 TO 50 OF THE PAPER BOOK (ITA NO.4226/AHD/1995, ITA NO.4204/AHD/ 1995 DATED 17.4.2002). THE SAID PARA FOR THE SAKE OF CONVENIENCE IS REPRODUCED BELOW 18. GROUND NO. VII RELATED TO MEDICAL LITERATURE ETC. EXPENSES FOR RS. 1,25,03,910/-. IT HAS BEEN FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE DEBITED EXPENDITURE UNDER THE HEAD PUBLICITY AND MEDICAL LITERATURE EXPENSES AMOUNTING TO RS.1,87,57,742/- OUT OF WHICH 66.66% DISALLOWED AS PER PAST PRACTICE THE CALCULATION OF THE IMPUGNED ADDITION ) 66.66% OF RS.1,87,57,742/- COMES TO RS. 1,25,03,910/-. THE CIT(A) HAS DELETED THE SAME WITH THE OBSERVATIONS THAT THERE WAS NO CHANGE IN THE NATURE OF EXPENSES IN EARLIER YEARS, FOLLOWING THE SAME REASONS AS IN EARLIER YEARS THERE WAS NO BASIS TO DISALLOW 66.66% EXPENSES AS DEFERRED CAPITAL EXPENDITURE. THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1988-89 IN ITA NO.4938/91. THE RELEVANT OBSERVATION OF THE TRIBUNAL IN THAT CASE IS REPRODUCED BELOW: THE ID. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AS PER THE DECISION OF THE TRIBUNAL IN THE CASE OF TORRENT LABORATORIES 59 TTJ 676 WHICH ALTHOUGH RELATED TO DISALLOWANCE U/S 37(3A) YET THE RATIO IS APPLICABLE TO DEDUCTION U/S 37 ALSO. IT WAS SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER HAS DISALLOWED ONLY 4/5 OF THE EXPENSES PRESUMABLY CONSIDERING THE SAME AS DEFERRED REVENUE EXPENDITURE. IT WAS PLEASED THAT THE CIT (A) HOWEVER HAS ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 9 IN THE CASE OF NAVSARI COTTON & SILK MILLS SUPRA AFTER CONSIDERING THE SUBMISSION OF THE PARTIES TO THE DISPUTES, WE ARE OF THE OPINION THAT TILE ORDER OF THE CIT(A) REQUIRES NO INTERFERENCE AS FT IS BASED ON THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF NAVSARI COTTON & SILK MILLS SUPRA. ACCORDINGLY THIS GROUND OF APPEAL IS ALSO DISMISSED. 15. AFTER HEARING BATH THE PARTIES, RESPECTFULLY FOLLOWING THE AFORE CITED DECISION, WE FIND NO MERITS IN THIS GROUND AND THE SAME IS DISMISSED. THE ORDER OF THE ID. C]T(A) IN THIS REGARD IS UPHELD. 3.4 THUS, RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL AS THE REVENUE DID NO DISPUTE THAT FACTS WERE NOT IDENTICAL, WE UPHOLD THE ORDER OF THE CIT (A), DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE ITAT, AS THE REVENUE DID NOT DISPUTE THAT FACTS WERE NOT IDENTICAL, WE U PHOLD THE IMPUGNED ORDER OF THE CIT(A) IN DISALLOWANCE MADE B Y THE ASSESSING OFFICER. 11. IN THE LIGHT OF THE AFORESAID DECISION OF THE T RIBUNAL FOR THE AY 1998-99, FOLLOWING THEIR DECISION FOR THE ASSESSMENT YEAR 19 97-98 IN ITA NO.1044/AHD./2002 WHILE UNDISPUTEDLY FACTS AND CIRC UMSTANCES REMAINING THE SAME AS IN THE EARLIER ASSESSMENT YEARS, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND N O.2 IS DISMISSED. 12. GROUND NO.3 RELATES TO CLAIM FOR DEDUCTION OF R S.3,74,83,747/- U/S 35(2AB) OF THE ACT. FOLLOWING HIS OWN ORDER FOR THE AY 1998-99 AND 1999-2000, THE AO DISALLOWED THE CLAIM FOR DEDUCTION U/S 35(2A B) OF THE ACT ON THE GROUND THAT PRESCRIBED REPORT IN FORM 3CL WAS NOT SUBMITTE D WITHIN THE STIPULATED TIME TO DGIT(EXEMPTIONS). ON APPEAL, THE LEARNED CIT(A) FOL LOWING HIS OWN ORDERS FOR THE AY 1998-99 AND 1999-2000 ALLOWED THE CLAIM OF T HE ASSESSEE. ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 10 13. BOTH THE PARTIES AGREED THAT ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION DATED 29-6-2007 OF THE ITAT IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 1998-99 IN ITA NO.446/AHD/2002 14. WE FIND THAT THE TRIBUNAL WHILE ADJUDICATING A SIMILAR CLAIM IN THE ASSESSEES OWN CASE IN THE AY 1998-99 CONCLUDED IN THEIR ORDER DATED 29-6- 2007 AS UNDER: 16. HAVING HEARD BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT,AHMEDABAD IN ITANO.311/AHD/2005 IN CASE OF CLARIS LIFESCIENCES LTD V. ACIT, WHEREIN THE ITAT HAS DEALT WITH IDENTICAL ISSUE AND HELD THAT THE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION IN RESPE CT OF ENTIRE EXPENDITURE INCURRED FOR DEVELOPMENT OF IN-HOUSE R &D FACILITY IN TERMS OF SECTION 35(2AB) AND THE CLAIM OF THE ASSES SEE SHALL BE ALLOWED. THE RELEVANT PORTION OF THE SAID ORDER, I. E., PARAGRAPH 12 IS QUOTED HEREUNDER: 12. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD. SECTION 35(2AB) HAS BEEN REPRODUCED ABOVE. IT SHALL BE OUR ENDEAVOUR FIRST TO ASCERTAIN IMPORT OF PLAIN AND SIMPLE MEANING OF THIS SECTION. ALL ALONG, SECTION SPEAKS OF (I) DEVELOPMENT OF FACILITY AND (II) INCURRING OF EXPENDITURE BY THE ASSESSEE FOR DEVELOPMENT OF SUCH FACILITY (III) APPROVAL OF THE FACILITY BY THE PRESCRIBED AUTHORITY WHICH IS DSIR IN THE INSTANT CASE AND (IV) ALLOWANCE OF WEIGHTED DEDUCTION ON THE EXPENDITURE SO INCURRED BY THE ASSESSEE. PROVISION NOWHERE SUGGESTS OR IMPLIES THAT R&D FACILITY IS TO BE APPROVED FROM A PARTICULAR DATE IN OTHER WORDS IT IS NOWHERE SUGGESTED THAT DATE OF APPROVAL ONLY WILL BE CUT-OFF DATE FOR ELIGIBILITY OF WEIGHTED DEDUCTION ON THE EXPENSES INCURRED FROM THAT DATE ONWARDS. A PLAIN READING CLEARLY MANIFESTS THAT ASSESSEE HAS TO DEVELOP FACILITY WHICH PRESUPPOSES INCURRING EXPENDITURE IN THIS BEHALF, APPLICATION TO THE PRESCRIBED AUTHORITY, WHO AFTER FOLLOWING PROPER PROCEDURE WILL APPROVE THE ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 11 FACILITY OR OTHERWISE AND THE ASSESSEE WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPENDITURE SO INCURRED. THESE WORDS REFER BACK TO THE FACILITY WHICH IS SO DEVELOPED. CONSEQUENTLY, A PLAIN READING CLEARLY INDICATES THAT THE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION ON EXPENDITURE SO INCURRED BY THE ASSESSEE FOR DEVELOPMENT OF FACILITY. THIS CAN BE VIEWED FROM ANOTHER ANGLE. PROVISION POSTULATES APPROVAL OF R&D FACILITY WHICH IMPLIES THAT A DEVELOPMENT FACILITY SHALL BE IN EXISTENCE, WHICH IN TURN PRE-SUPPOSES THAT ASSESSEE MUST HAVE INCURRED EXPENDITURE IN THIS BEHALF. IF WE ACCEPT INTERPRETATION OF THE LOWER AUTHORITIES, IT CREATES ABSURDITY IN THIS PROVISION , INASMUCH AS, WORDS WHICH ARE NOT PROVIDED IN THE STATUTE ARE TO BE READ IN, WHICH IS AGAINST SETTLED PROPOSITION OF LAW WITH REGARD TO PLAIN AND SIMPLE MEANING OF PROVISION. THEREFORE, A PLAIN READING CANNOT BE GIVEN AWAY AND AN INTERPRETATION CANNOT BE ASSUMED SO AS TO PROVIDE A CUT-OFF DATE FOR ELIGIBILITY OF WEIGHTED DEDUCTION OF EXPENDITURE, WHICH IS NOT PROVIDED BY THE LAW. FURTHER RULE 6(5A) PROVIDES AS UNDER: [5(A) THE PRESCRIBED AUTHORITY SHALL, IF HE IS SATISFIED THAT THE CONDITIONS PROVIDED IN THIS RULE AND IN SUB-SECTION (2AB) OF SECTION 35 OF THE ACT ARE FULFILLED, PASS AN ORDER IN WRITING IN FORM NO.3CM: PROVIDED THAT A REASONABLE OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO THE COMPANY BEFORE REJECTING AN APPLICATION] FORM NO.3CM WHICH IS ORDER OF APPROVAL READS AS UNDER: FORM NO.3CM ORDER OF APPROVAL OF IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY UNDER SECTION 32(2AB OF THE INCOME-TAX ACT, 1961 ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 12 1. NAME, ADDRESS AND PAN OF THE COMPANY. 2. NATURE OF THE BUSINESS OF THE COMPANY MANUFACTURE/PRODUCTION OF ARTICLE OR THING. 3. OBJECTIVES OF THE SCIENTIFIC RESEARCH TO BE CONDUCT ED BY IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY. 4. ADDRESS AT WHICH SUCH RESEARCH & DEVELOPMENT FACILITY IS LOCATED. 5. REF. NO. AND DATE OF THE APPLICATION. THE ABOVE RESEARCH & DEVELOPMENT FACILITY IS APPROVED FOR THE PURPOSE OF SECTION 35 (2AB), SUBJE CT TO THE CONDITIONS UNDERLINED THEREIN. RULE ALSO PROVIDE ONLY TO THE EFFECT THAT IF CONDITIONS ARE FULFILLED THE PRESCRIBED AUTHORITY S HALL PASS AN ORDER IN FORM NO.3CM. IT NOWHERE REFERS TO ANY CUT-OFF DATE FOR ELIGIBILITY OF WEIGHTED DEDUCT ION. SIMILARLY, FORM NO.3CM WHICH IS ORDER OF APPROVAL, DOES NOT PROVIDE ANY POWER TO THE PRESCRIBED AUTHOR ITY OR ANY STIPULATION TO SET OUT A CUT-OFF DATE IN THI S BEHALF. A PLAIN AND HARMONIOUS READING OF PROVISIO N, RULE AND FORM CLEARLY SUGGEST THAT ONCE FACILITY IS APPROVED, ENTIRE EXPENDITURE SO INCURRED ON DEVELOPMENT OF R&D FACILITY HAS TO BE ALLOWED FOR WEIGHTED DEDUCTION AS PROVIDED BY SECTION 35(2AB). IN OUR CONSIDERED VIEW, A PLAIN AND SIMPLE READING IS ENOUGH TO GIVE MEANING OF PROVISION. AN INTERPRETA TION IS TO BE APPLIED WHEN THERE IS AN AMBIGUITY IN THE MEANING OF PROVISIONS. IN OUR VIEW THERE IS NO SUC H AMBIGUITY HERE. EVEN IF WE ASSUME THAT THERE IS ANY SLIGHT DOUBT IN THE MEANING/LANGUAGE OF PROVISION, WE HAVE TO RE FER TO LEGISLATIVE INTENT. TO BOOST UP R&D FACILITY IN INDIA, LEGISLATURE PROVIDED THIS PROVISION TO ENCOU RAGE THE DEVELOPMENT OF THE FACILITY BY PROVIDING DEDUCT ION OF WEIGHTED EXPENDITURE. SINCE WHAT IS STATED TO B E PROMOTED WAS DEVELOPMENT OF FACILITY, INTENTION OF THE LEGISLATURE BY MAKING ABOVE AMENDMENT, IS VERY CLEA R THAT ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE ON DEVELOPMENT OF FACILITY, IF APPROVED HAS TO BE ALLO WED FOR THE PURPOSE OF WEIGHTED DEDUCTION. IN OUR VIEW , LEGISLATIVE INTENTION FOR BRINGING THE AMENDMENT AL SO JUSTIFIES PLAIN AND SIMPLE MEANING OF THE SECTION. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSEE IS ENT ITLED TO WEIGHTED DEDUCTION IN RESPECT OF ENTIRE EXPENDIT URE ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 13 INCURRED FOR DEVELOPMENT OF IN-HOUSE R&D FACILITY IN TERMS OF SECTION 35 (2AB) AND CLAIM OF THE ASSESSEE SHALL BE ALLOWED. THIS GROUND OF THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE ITAT, WE ALLOW THIS GROUND OF APPEAL AND HOLD THAT THE WEIGHTED DEDUCTI ON AS CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. WE ORDER ACCORDINGLY. 15. IN THE LIGHT OF THE AFORESAID DECISION OF THE TRIBUNAL FOR THE AY 1998- 99 WHILE UNDISPUTEDLY FACTS AND CIRCUMSTANCES REMAI NING THE SAME AS IN THE EARLIER ASSESSMENT YEAR, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.3 IS DISMISSED. 16. GROUND NO. 4 IN THE APPEAL RELATES TO CLAIM F OR DEDUCTION OF RS.1,96,58,990/- ON ACCOUNT OF PRESENTATION ARTICLES WHILE GROUND NO .5 IN THE APPEAL RELATES TO ADDITION OF RS.24,57,449/- ON ACCOUNT OF PACKING MA TERIALS FROM BALDEVBHAI DOSABHAI COTTON CO.. THE AO NOTICED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN THE FOLLOWI NG PURCHASES FROM BALDEVBHAI DOSABHAI COTTON CO. : (1) PURCHASE OF STATIONARY ARTICLES RS.3,93,17., 980/- (2) PACKING MATERIALS RS. 49,14,899/- FOLLOWING HIS OWN ORDER FOR THE AY 1999-2000 ,WHERE IN IT WAS FOUND THAT SINCE M/S. BALDEVBHAI DOSABHAI COTTON CO.DID NOT DEAL IN PRESENTATION ARTICLES, THE AO DISALLOWED 50% OF THE EXPENDITURE ON PRESENTATION A RTICLES AND PACKING MATERIALS. ON APPEAL, THE LEARNED CIT(A) FOLLOWING HIS OWN ORDER DATED 18-11- 2002 FOR THE AY 1999-2000 DELETED THE ADDITION. 17. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORES AID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON BEHALF OF THE ASS ESSEE WHILE INVITING OUR ATTENTION TO THE DECISION DATED 29-5-2009 OF THE IT AT IN THE ASSESSEES OWN CASE IN ITA NO.590/AHD/2003 FOR THE AY 1999-2000 CONTEND ED THAT THE ISSUE OF ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 14 PRESENTATION ARTICLES IS SQUARELY COVERED BY THE AF ORESAID DECISION OF THE TRIBUNAL. LD. AR ADDED THAT APPLYING THE SAME PRINC IPLE, ADDITION ON ACCOUNT OF PACKING MATERIAL HAD BEEN DELETED BY THE LD. CIT(A) . ON THE OTHER HAND, THE LEARNED DR DID NOT DISPUTE THE SUBMISSIONS OF THE L EARNED AR. 18. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. WE FIND THAT WHILE A DJUDICATING A SIMILAR CLAIM IN RESPECT OF PRESENTATION ARTICLES, THE ITAT IN THEIR DECISION DATED 29-5-2009 IN THE ASSESSEES OWN CASE FOR THE AY 1999-2000 HELD AS UN DER: 27 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD ALON G WITH THE ORDER OF THE TAX AUTHORITIES. WE NOTED THA T THE INCURRENCE OF THE EXPENDITURE BY THE ASSESSEE FOR T HE PURPOSE OF BUSINESS HAS NOT BEEN DENIED BY THE AO. THE AO HAS MERELY PRESUMED AS IF THE ASSESSEE HAS INFLA TED THE COST OF THE EXPENDITURE SO INCURRED BY GETTING THE BILLS FROM M/S BALDEVBHAI DOSABHAI COTTON CO. WE DO NOT FIND ANY COGENT MATERIAL OR EVIDENCE ON RECORD WHICH MAY PROVE THAT THE ASSESSEE HAS INFLATED THE EXPENS ES EXCEPT PRESUMPTION BEING MADE BY THE AO. THE AO HA S NOT DENIED THE INCURRENCE OF THE EXPENDITURE FOR TH E PURPOSE OF BUSINESS AND THE TRANSACTION BEING ENTER ED DURING THE COURSE OF THE BUSINESS. THE ASSESSEE HAS SUBMITTED ALL THE NECESSARY EVIDENCE INCLUDING THE FACT THAT THE PAYMENT HAS BEEN MADE BY THE ASSESSEE FOR THE SUPPLY OF PRESENTATION ARTICLES THROUGH THE ACCOUNT PAYEE CHEQUES. MERELY ON THE BASIS OF SUSPICION HOWSOEVER STRONG IT MAY BE, IT CANNOT BE PRESUMED T HAT THE ASSESSEE HAS INFLATED THE EXPENDITURE. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE. THUS, THIS GROUND STANDS DISMISSED. 18.1 THOUGH THE ISSUE RELATING TO CLAIM OF PACKING MATERIAL WAS NOT INVOLVED IN AY 1999-2000, SINCE THE ASSESSEE SUBMITTED THE RE LEVANT EVIDENCE REGARDING THE AFORESAID CLAIM OF PACKING MATERIAL WHILE PAYME NT IS ALSO STATED TO HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES, THERE SEEMS TO BE NO JUSTIFICATION FOR DISALLOWING 50% OF THE EXPENDITURE, MERELY ON THE P RESUMPTION THAT THE EXPENDITURE MIGHT HAVE BEEN INFLATED. THEREFORE, FO LLOWING THE REASONING GIVEN ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 15 BY THE TRIBUNAL IN RELATION TO PRESENTATION ARTICLE S IN THE AY 1999-2000 AND THE REVENUE HAVING NOT BROUGHT TO OUR NOTICE ANY MATERI AL CONTRARY TO THE FINDINGS OF THE LD. CIT(A), WE ARE OF THE OPINION THAT THE DECI SION OF THE LEARNED CIT(A) IN DELETING THESE DISALLOWANCES DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, BOTH THE GROUND NOS. 4 AND 5 ARE REJECTED. 19. GROUND NO.6 IN THE APPEAL RELATES TO DELETION O F ADDITION OF RS.2,75,49,042/- ON ACCOUNT OF PURCHASES FROM M/S. VIMAL CHEMICALS. RELYING UPON HIS OWN ORDER FOR THE PRECEDING ASSESSMENT YEA R, THE AO WAS OF THE OPINION THAT VIMAL CHEMICALS WAS INVOLVED IN CIRCUI TOUS TRANSACTIONS TO INCUR FICTITIOUS LOSSES. ACCORDINGLY, THE AO DISALLOWED 1 4.5% OF THE TOTAL PURCHASES FROM VIMAL CHEMICALS, RESULTING IN ADDITION OF RS.2 ,75,49,042/-. ON APPEAL, RELYING UPON HIS OWN ORDER IN AY 1999-2000, THE LEA RNED CIT(A) DELETED THE ADDITION. 20. THE LEARNED AR WHILE INVITING OUR ATTENTION TO THE DECISION OF THE ITAT DATED 29-5-2009 IN THE ASSESSEES OWN CASE IN ITA N O.590/AHD/2003 FOR THE AY 1999-2000 CONTENDED THAT THE ISSUE IS SQUARELY COVE RED BY THE AFORESAID DECISION OF THE TRIBUNAL. ON THE OTHER HAND, THE LE ARNED DR DID NOT DISPUTE THESE SUBMISSIONS OF THE LEARNED AR. 21 . WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE, TH E ITAT IN THEIR AFORESAID DECISION DATED 29-5-2009 HELD AS UNDER: 23 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CA SE LAW AS RELIED ON BEFORE US. IT IS NOT DENIED THAT M/S VIMA L CHEMICALS IS NOT A CONCERN IN WHICH THE ASSESSEE IS ANY WAY RELATED. NO MATERIAL WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY PROVE THAT T HE FINDINGS GIVEN BY THE CIT(A) IS INCORRECT TO THE EFFECT THAT THE PRICE AT WHICH SIMILAR MATERIAL HAS BEEN PURCHASED BY THE ASSESSEE FROM OTHER PARTIES OTHER THAN M/S VIMAL CHEMICALS ARE COMPARAB LE WITH THE PRICES AT WHICH THE MATERIAL IS PURCHASED FROM M/S VIMAL CHEMICALS. THE COMPARATIVE PRICE DETAILS ARE DULY F ILED BY THE ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 16 ASSESSEE. THE CIT(A) HAS GIVEN CATEGORICAL FINDING ABOUT THE FACT THAT THE TRANSACTIONS HAVE BEEN ENTERED INTO THROUG H THE BANKING CHANNEL. THE ASSESSEE HAS GIVEN ALL THE NECESSARY D ETAILS. THE GENUINENESS OF THE PURCHASES HAS NOT BEEN DENIED / DOUBTED. THE SELLER AND THE ASSESSEE BOTH ARE INDEPENDENT PARTIE S AND ARE NOT CONNECTED IN ANY WAY. IF THE PURCHASER HAS SOLD THE GOODS TO THE ASSESSEE AFTER BUYING FROM THE MANUFACTURER AT A HI GHER PRICE AT WHICH HE PROCURED FROM THE MANUFACTURER, THE MARGIN WILL BE THE PROFIT OF THE SELLER I.E. M/S VIMAL CHEMICALS. THIS CANNOT BE THE BASIS FOR MAKING THE DISALLOWANCE IN THE HANDS OF T HE ASSESSEE, UNTIL AND UNLESS IT IS PROVED THAT M/S VIMAL CHEMIC ALS IS A BOGUS CONCERN AND THE ASSESSEE HAS ACTUALLY MADE THE PURC HASES NOT FROM M/S VIMAL CHEMICALS BUT FROM JK DRUGS AND PHAR MACEUTICALS CO. LTD. IF ANY PERSON IS ENGAGED IN THE BUSINESS I T IS IMPLIED THAT HE WILL BUY THE GOODS FROM THE MANUFACTURER AT A LO WER RATE AND WILL SELL TO ITS CUSTOMERS AT A HIGHER RATE. THE MARGIN IN BETWEEN IS THE PROFIT OF THE SAID CONCERN. NO MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON RECORD WHICH MAY PROVE THAT THE ASSESSEE HAS DIRECTLY PURCHASED THE MATERIAL FROM JK DRUGS AND PHARMACEUT ICALS CO. LTD. OR M/S JK DRUGS AND PHARMACEUTICALS CO. LTD. O R M/S VIMAL CHEMICALS ARE RELATED WITH THE ASSESSEE. UNDER THES E FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT NO INTERFEREN CE IS CALLED FOR IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWAN CE AMOUNTING TO RS.26,99,529/-. THUS, THIS GROUND STANDS DISMISSED . 21.1 IN THE LIGHT OF THE AFORESAID DECISION OF T HE TRIBUNAL FOR THE AY 1999-2000 WHILE UNDISPUTEDLY FACTS AND CIRCUMSTANCES REMAININ G THE SAME AS IN THE EARLIER ASSESSMENT YEAR, WE HAVE NO ALTERNATIVE BUT TO UPHO LD THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.6 IS DISMISSED. 22. GROUND NOS. 7 AND 8 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED. 23. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21S T AUGUST,2009 SD/- S D/- (R. V. EASWAR) (A.N. PAHUJA) VICE PRESIDENT ACCOUNTANT MEMBER DATE:21ST AUGUST,2009 LAKSHMIKANT/ ITA NO.3146/AHD/2003 TORRENT PHARMACEUTICALS LTD. 17 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE 2. ACIT CIRCLE-8,4 TH FLOOR, A WING, AJANTA COMMERCIAL CENTRE, ASHRAM ROAD, AHMEDABAD 3. CIT(A)-XIV ,AHMEDABAD 4. THE CIT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD