Hyderabad Pharma Infrastructure Technolofies Ltd., Hyd, Hyderabad V. ACIT, Circle-2(2), Hyd, Hyderabad

ITA 387/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6336 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: D SAMVIT
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC) : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO.387/HYD/2015 ASSESSMENT YEAR 2010-2011 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD 500 018. PAN AABCH7419L VS. THE ACIT, CIRCLE-2(2) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. D. SAMVIT FOR REVENUE : MR. K.J. RAO DATE OF HEARING : 23.06.2016 DATE OF PRONOUNCEMENT : 15.07.2016 ORDER THIS APPEAL BY THE ASSESSEE-COMPANY IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A)-II, HYDERABAD AND IT PERTAINS TO THE A.Y. 2010-2011. THE FOLLOWING GROUNDS WERE URGED BEF ORE US AS PER THE REVISED FORM NO.36 FILED ON 26.10.2015. 1. THE APPELLATE ORDER OF THE LEARNED CIT(A)-2, HYDERA BAD DATED 27.01.2015 IN ITA NO. 0131/AC-2(2)1CIT(A)-2/20 12- 13 FOR THE ASSESSMENT YEAR 2010-11 IS CONTRARY TO T HE FACTS AND LAW APPLICABLE IN SO FAR AS IT IS AGAINST THE A SSESSEE. 2. THE LD. CIT(A) OUGHT TO HAVE HELD THAT AS PER THE ORD ER OF THE HON. ITAT IN ITA NO 138, 139/H/13 THAT THE ENTIRE 2 ITA.NO.387/HYD/2015 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD. ADMINISTRATIVE EXPENSES ARE TO BE ALLOWED INSTEAD OF RESTRICTING THEM TO THE 2% GRANT RECEIVED 3. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE ENTIRE GA MUT OF FACTS AND CIRCUMSTANCES OF THE ASSESSEE COMPANY TO ARRIVE AT THE CONCLUSION OF DISALLOWING A PART OF ADMINISTR ATIVE EXPENSES. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ADMINISTRATIVE EXPENSES INCURRED ARE BUSINESS EXPENS ES OF THE ASSESSEE COMPANY AND OUGHT TO BE TREATED ACCORDIN GLY FOR COMPUTING TOTAL INCOME UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 5. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE SUBMISSION S OF THE ASSESSEE AND THE OTHER FACTS AND CIRCUMSTANCES B EFORE CONFIRMING THE DENIAL OF DEPRECIATION. 6. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS FOR THE RELIEF SOUGHT. 7. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND OR D ELETE ANY OTHER GROUNDS. 2. AT THE TIME OF HEARING, LD. COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, SUBMITTED THAT GROUND NOS. 1, 6 AN D 7 ARE GENERAL IN NATURE AND NEED NOT BE CONSIDERED INDEPENDENTLY AND ALSO SUBMITTED THAT ASSESSEE-COMPANY IS NOT PRESSING GRO UND NO.5. THE 3 ITA.NO.387/HYD/2015 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD. LD. D.R. HAS NO OBJECTION IN THIS REGARD. UNDER THE CIRCUMSTANCES, GROUND NOS. 1, 5 TO 7 ARE REJECTED. 3. IT IS NOT OUT OF PLACE TO MENTION THAT AS PER T HE WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE IT WAS ADMITTED THAT THE CIT(A) DENIED THE CLAIM OF DEPRECIATION BASED ON TH E DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR EARLIER YEAR. THUS, EVEN ON MERITS THE ISSUE STANDS COVERED AGAINST THE ASSESSEE. 4. BEFORE CONSIDERING THE OTHER ISSUES, THE BRIEF BACK- GROUND OF THE CASE IS SET-OUT TO APPRECIATE THE ISS UE ON HAND. THE ASSESSEE-COMPANY IS A SPECIAL PURPOSE VEHICLE (IN S HORT SPV) CREATED BY THE DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION (IN SHORT DIPP), MINISTRY OF COMMERCE AND INDUSTRY, G OVERNMENT OF INDIA FOR IMPLEMENTING THE PROJECTS SANCTIONED BY D IPP. IT WAS INCORPORATED IN 2005 WHEREIN THE SUBSCRIBERS ARE TH E REPRESENTATIVES OF THE A.P. INDUSTRIAL INFRASTRUCTU RE CORPORATION (IN SHORT APIIC), COMMISSIONER OF INDUSTRIES, GOVERNM ENT OF A.P. ETC., ITS MAIN OBJECTIVE WAS TO MANAGE THE EFFLUEN TS OF VARIOUS PHARMACEUTICAL COMPANIES AND TO CARRY ON THE BUSINE SS OF DEVELOPMENT, UPGRADATION, OPERATION AND MAINTENANCE OF INFRASTRUCTURAL, TECHNOLOGICAL, RESEARCH AND DEVELO PMENT AND OTHER RELATED FACILITIES IN THE PHARMACEUTICAL INDUSTRIES . THE DIPP HAS APPROVED UPGRADATION OF INFRASTRUCTURE FACILITIES A ND PHARMACEUTICAL CLUSTER AT HYDERABAD UNDER THE INDUS TRIAL INFRASTRUCTURE UPGRADATION SCHEME AT A TENTATIVE CO ST OF RS.66.16 CRORES. THE ASSESSEE WAS GRANTED FUNDS FOR IMPLEMEN TING VARIOUS 4 ITA.NO.387/HYD/2015 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD. PROJECTS. THE POLICY INITIATED BEING INNOVATIVE AND NOVEL AND THE SPVS HAVING NOT BEEN GIVEN GUIDANCE ABOUT THE FUTUR E COURSE OF ACTION AND AREAS OF OPERATION THE MODUS OPERANDI WAS TAKING TIME TO EVOLVE. AS THE ASSESSEE IS AN EXTENSION OF THE G OVERNMENT, IT RELIED MOSTLY ON THE POLICIES AND DIRECTIONS ISSUED BY THE GOVERNMENT FROM TIME TO TIME. AS REGARDS THE ADMINI STRATIVE EXPENDITURE, AS PER SANCTION PROCEEDINGS, THE EXPEN DITURE HAS TO BE MET FROM 3% OF THE INDUSTRIAL GRANT AND IT HAS TO BE INCURRED UNDER THE DIRECTION OF DIPP. ACCORDING TO THE ASSES SEE, THE ADMINISTRATIVE EXPENDITURE CAN BE DESCRIBED AS AN E XPENDITURE TO BE INCURRED TOWARDS DEVELOPMENT OF THE PROJECT PROP OSED, AS WELL AS RE-VALUATION OF THE SCHEME BY A PROFESSIONAL INDEPE NDENT AGENCY, BEST PRACTICES WITHIN/OUTSIDE THE COUNTRY, CLUSTER NET WORKING WITHIN/OUTSIDE THE COUNTRY AND ANY OTHER INCIDENTAL EXPENDITURE. DURING THE MEETING HELD TO REVIEW DEVELOPMENT OF IN DUSTRIAL CLUSTERS ON 09.12.2004 THE THEN CHAIRMAN INDICATED THAT 1% OF THE CENTRAL GRANT HAS TO BE RETAINED BY THE DIPP FOR RE -APPRAISAL AND INDEPENDENT EVALUATION AND 2% SHALL BE MADE AVAILABL E FOR INCURRING ADMINISTRATIVE EXPENSES BY SPV (THE ASSES SEE HEREIN). ACCORDING TO THE ASSESSEE, IT WAS CARVING 2% ONLY OU T OF THE DISBURSEMENT BY TRANSFERRING THE SAME FROM TRUST AN D RETENTION ACCOUNT TO RESERVE FUND ACCOUNT BUT SINCE THE COMPA NY WAS ENTITLED TO 2% OF THE GRANT SANCTIONED. BUT THE SAME HAVING BEEN NOT SANCTIONED IT HAS NOT CONSIDERED IT AS INCOME. IN THE PRECEDING YEARS, THERE WAS A DISPUTE AS TO WHETHER THE INCOME IS TO BE RECOGNISED AND IF SO, WHETHER IT IS 2% OR 3% OF THE C ENTRAL GRANT. SINCE EVEN 2% OF THE GRANT WAS NOT SANCTIONED TO THE ASSESSEE IT 5 ITA.NO.387/HYD/2015 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD. DID NOT TREAT THE SAME AS INCOME. FOR THE A.YS. 2007- 08 AND 2008- 09, THE LD. COUNSEL ISSUED AN ENHANCEMENT NOTICE AN D SOUGHT TO BRING TO TAX 3% OF THE GRANT AS INCOME OF THE ASSESS EE. BASED ON THE SAME LOGIC EVEN IN THIS YEAR THE SAME WAS SOUGH T TO BE TREATED AS INCOME. THE CASE OF THE ASSESSEE WAS THAT OUT OF THE SAME 1% IS TO BE USED AS MISCELLANEOUS EXPENDITURE AND ACCORDI NGLY, THE BALANCE 2% WAS TREATED AS SURPLUS. ON AN APPEAL FILE D BY THE ASSESSEE BEFORE THE CIT(A), THE CIT(A) DIRECTED THE A.O. TO TREAT THE 2% OF THE GRANT SPENT DURING THE YEAR AS INCOME OF T HE ASSESSEE AND SET-OFF THE EXPENDITURE ACTUALLY INCURRED AGAIN ST SUCH INCOME. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE TRIBUN AL, VIDE GROUND NO.2 THAT THE ENTIRE ADMINISTRATIVE EXPENSES SHOULD HAVE BEEN ALLOWED INSTEAD OF RESTRICTING THEM TO 2% OF GR ANT RECEIVED. HOWEVER, IT WAS FAIRLY ADMITTED THAT THE ISSUE STAN DS COVERED BY THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE EARLIER YEAR. CONSISTENT WITH THE VIEW TAKEN THEREIN, I UPHOLD TH E ORDER PASSED BY THE CIT(A) AND REJECT GROUND NO. 2 OF THE ASSESS EE. 6. GROUND NOS. 3 AND 4 ARE ALSO EXTENSION OF THE S AME GROUND. THE LD. COUNSEL FOR THE ASSESSEE, VIDE HIS WRITTEN SUBMISSIONS, SUBMITS THAT IRRESPECTIVE OF ANY LIMIT IMPOSED BY THE DIPP, THE EXPENDITURE ACTUALLY INCURRED WILL BE THE EXPENDITURE ALLOWABLE UNDER THE INCOME TAX ACT SINCE THE NATURE AND QUANTUM OF AN EXPENDITURE WAS NEVER IN DOUBT. IF THE EXPEND ITURE IS MORE THAN THE INCOME THEN THE RESULTING LOSS CAN BE CARR IED FORWARD TO THE FOLLOWING YEARS AND HENCE, RESTRICTING THE EXPE NDITURE TO THE EXTENT OF INCOME IS NOT IN ACCORDANCE WITH THE PROV ISIONS OF THE I.T. 6 ITA.NO.387/HYD/2015 HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LTD., HYDERABAD. ACT. AS I ALREADY MENTIONED HEREINBEFORE, THIS ISSU E STANDS COVERED BY THE ORDER OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE EARLIER YEAR AND BY RESPECTFULLY FOLLOWING THE SAME, I DISM ISS GROUND NOS. 3 AND 4 ALSO. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.07.2016. SD/- (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED 15 TH JULY, 2016 VBP/- COPY TO 1. HYDERABAD PHARMA INFRASTRUCTURE TECHNOLOGIES LIMITED, 7-2-5/D-1, ICWAI BHAVAN, SANATH NAGAR, HYDERABAD 500 018. 3. ACIT, CIRCLE-2(2), 8 TH FLOOR, INCOME TAX TOWERS, A.C. GUARDS, HYDERABAD. 4. CIT(A)-II, HYDERABAD. 5. CIT-II, HYDERABAD 5. D.R. ITAT B (SMC) BENCH, HYDERABAD. 6. GUARD FILE