Advance Transfusion Medicine Research Foundation, Ahmedabad V. The ADIT(Exemp.), Ahmedabad

ITA 399/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9946 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Business income; Depreciation; Earning of tax free income; Notional interest; Revenue expenditure; Capital expenditure
• Section: 6; 12

Judgement Text

ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI N.K. BI L LA I Y A , ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD , JUDICIAL MEMBER ITA NO. 399 /AHD/201 3 ASSESSMENT YEAR : 2009 - 10 ADVANCE TRANSFUSION MEDICINE RESEARCH VS. A.D.I.T . (EXEMPTION), FOUNDATION, AHMEDABAD. PRATHAMA BLOOD CENTER, B/H. JIVRAJ MEHTA HOSPIT A L, VASNA, AHMEDABAD 380 007 [ PAN A A BCA 6677 P ] (APP ELLANT ) (RESPONDENT) APPELLANT BY : S HRI T.P. HEMANI, A.R. RESPONDENT BY : S HRI MUDIT NAGPAL, SR. D.R. DATE OF HEARING : 28 . 10 . 20 16 DATE OF PRONOUNCEMENT : 17 . 1 1 .2016 O R D E R PER MAHAVIR PRASAD , J.M. THIS IS AN APPEAL AGAINST THE ORDER OF CIT( A) AND FOLLOWING GROUNDS HAVE BEEN T AKEN BY T HE ASSESSEE : 1. THE ID . CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN HOLDING THAT THE APPELLANT TRUST HAS PROVIDED UNDUE BENEFIT TO THE CONCERN FALLING U/S 13(3)(C) OF THE ACT AND ACCORDINGLY ERRED IN NOT ALLOWING EXEMPTION OF RS.18,63,860/ - CLAIMED U/S 11 & 12 OF THE ACT. 2. THE ID. CIT(A) HAS FURTHER ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT AS A DIRECT BENEFIT IS GIVEN AS PER S.13(L)(C) OF THE ACT, NO EXEMPTION AS ENVISAGED IN S. 11 & 12 COULD BE GR ANTED TO THE APPELLANT, AND ACCORDINGLY, THE ID. CIT(A) HAS FURTHER ERRED IN DISMISSING THE FOLLOWING GROUNDS AS RAISED BY THE APPELLANT IN THE GROUNDS OF APPEAL BEFORE ID. CIT(A) WITHOUT ADJUDICATING ON MERITS : 2. THE LEARNED ASSESSING OFFICER HAS ERR ED IN DISALLOWING DEPRECIATION OF RS.43,99,739/ - AS CAPITAL EXPENDITURE HAS BEEN ALLOWED AS EXPENDITURE IN THE EARLIER YEAR AS APPLICATION OF FUND. ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 2 OF 11 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING 'NET APPLICATION OF INCOME BY PURCHASE OF FIXED A SSETS DURING THE YEAR WORTH' RS.13,09,804/ - CLAIMED BY THE ASSESSEE U/S 11. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING BUSINESS LOSS OF RS.8,23,58,027/ - TO BE CARRY FORWARD AS DEDUCTION U/S 11 HAS BEEN WITHDRAWN.' 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, EVEN IF IT IS HELD THAT THE ALLEGED BENEFIT IS PROVIDE D TO THE CONCERN AS PER S.I3 OF THE ACT, THEN ALSO, ENTIRE EXEMPTION AS CLAIMED U/S 11 OF THE ACT CANNOT BE DECLINED AND IT CAN BE DECLINED ONLY VIS - A - V IS THE ALLEGED TRANSA CTIONS IN VIOLATION OF S.13. 4. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE RAISED GROUNDS, EVEN IF IT IS HELD THAT THE APPELLANT - TRUST IS NOT ELIGIBLE FOR EXEMPTION AS CLAIMED U/S 11 OF THE ACT AND EXEMPT INCOME IS TREATED AS TAXABLE BUSINESS INCOME, A PPROPRIATE DIRECTIONS MAY BE ISSUED TO COMPUTE THE INCOME OF THE APPELLANT ON COMMERCIAL PRINCIPLES. 5. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE RAISED GROUNDS EVEN IF IT IS HELD THAT THE APPELLANT - TRUST IS NOT ELIGIBLE FOR EXEMPTION AS CLAIMED U /S 11 OF THE ACT AND EXEMPT INCOME IS TREATED AS TAXABLE BUSINESS INCOME, APPROPRIATE DIRECTIONS MAY BE GIVEN TO ALLOW THE SET - OFF OF CARRIED FORWARD DEFICIT AMOUNTING TO RS.8,23,58,027/ - AGAINST ALLEGED TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION AND BA LANCE AMOUNT OF UNUTILIZED BROUGHT FORWARD DEFICIT MAY BE ALLOWED TO BE CARRIED FORWARD TO THE SUCCEEDING ASSESSMENT YEAR. 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED IN GROSSLY IG NORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NA TURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 7. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN CHARGING INTEREST U/S 234B/C/D OF THE ACT. 8. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING T HE ACTION OF ID. AO IN INITIATING P ENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 3 OF 11 2. THE F A C T S OF THE CASE ARE THAT THE APPELLANT COMPANY HAD ENTERED INTO BUSINESS TRANSACTION WITH CELESTI A L BIOLOGICALS LIMITED (AN ASSOCIATE OF ASSESSEE COMPANY). DURING THE YEAR UNDER CONSIDERATION, THE TOTAL VALUE OF TRANSACTION A MOUNTING TO RS.30,26,65 2/ - AND T HE NA T URE OF TRANSACTION BEING DISTRIBUTION OF BLOOD COMPONENTS , THE BLOOD COMPONENT BEING FRESH FROZ E N PLASMA (FFP). A S PER THE DETAILS FURNISHED BY THE ASSESSEE COMPANY IN IT S SUBMISSION DA T ED 21.11.2011, THE A SSESSEE HAD SUPPLIED 19950 UNIT S OF FFP T O CELESTIAL BIOLOGICALS LIMITED @ RS.550/ - PER LITRE , TOTALLING TO RS.30,26,652/ - . A S PER THE BILLS/DETAILS FURNISHED BY THE ASSESSEE, NO SERVICE CHARGES HAVE BEEN CHARGED FROM CELESTIAL BIOLOGICALS LIMITED. ON THE OTHER HAND, IT WAS OBSERVED FROM THE REPLY DAT E D 21.11.2011 THAT THE ASSESSEE HAD DISTRIBUTED/SUPPLIED 15,635/ - UNITS OF FFP TO PATIENTS DURING THE Y E AR @ RS.600/ - PER UNIT (EACH UNIT ADMEASURING TO 200 ML. A PPROXIMATELY). APART FROM THAT, AS EVIDENT FROM THE BILLS FURNISHED BY THE A SSESSEE, SERVICE CHARGES AMOUNTING TO RS.80/ - PER UNIT WERE ALSO CHARGED FROM THE PATIENTS. THEREFORE , T HE TOTAL FEE CHARGED FROM T HE PATIENTS PER UNIT (200 ML) OF FFP CAME TO R S .680/ - . CELESTIAL BIOLOGICALS LIMITED, WHICH IS THE ASSOCIATE OF ADVANCED T R A NSFUSION M E DICINE RESEARCH FOUNDATION IS A SUBSIDIARY OF INTAS BIOPHARMAC E UTICALS L IMITED ( AS PER THE RELIABLE DATA A VAILABLE WITH THIS OFFICE, SOURCE OF INFORMATION BEING RED HERRING PROSPECTUS OF IN T AS PHARMACEUTICALS LIMITED). THE BOA R D OF DIR E CTOR S OF CELESTIAL BIOLOGICALS LIMITED INCLUDE DR. URMISH CHUDGAR (ALSO THE M A N A GING DIRECTOR OF THE AS SESSEE C OMPANY) AND MR. NIMISH CHUDGAR (AL S O THE DIRECTOR OF THE ASSESSEE C OMPANY). I N ORDER TO UNDERSTAND THE LOGIC/RATIONALE BEHIND THE BUSINESS TRANSACTI ON BETWEEN ADVANCED TRANSFUSION MEDICINE RESEARCH FOUNDATION AND CELESTIAL BIOLOGICALS LIMITED , THE ASSESSING OFFICER FOUND IT NECESSARY TO UNDERSTAND THE FAMILY PROFILE OF CHUDGAR FAMILY AND ITS BUSINESS IN TERESTS AND IS HAVING 29.8% STAKE IN IN T AS BIOPHA RMACEUTICALS LIMI T ED DIRECTLY AND MORE THAN 95% ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 4 OF 11 STAKE INDIRECTLY (AS TH E CHUDGAR FAMILY IS HAVING 98% SHAREHOLDING IN EQUATORIAL PRIVATE LIMITED, WHICH IS HAVING 30.326% SHAREHOLDING IN INTAS BIOPHARMACEUTICALS LIMITED). SO, THE CHUDGAR FAMILY IS HAVING M UCH MORE THAN 20% SHAREHOLDING IN CELESTIAL BIOLOGICALS LIMITED. BASED ON THE FACTS AND LEGAL PROVISIONS, THE S ECTION 13(1)(C)(II), 13(2)(B), 13(2)(D) AND 13(2)(G) R.W.S. 13(3)(E) AND EXPLANATION - 1 AND EXPLANATION - 3 TO SECTION 13(3) OF THE A CT WERE APPLIC ABLE IN THE INSTANT C A SE. SO, AFTER GOING THROUGH THE R E CORD, THE ASSESSING OFFICE R ISSUED SHOW CAUSE NOTICE ON THE FOLLOWING GROUNDS : - 9. IN THE CONTEXT OF WHAT HAS BEEN DISCUSSED ABOVE, YOU ARE REQUIRED TO SHOW CAUSE ON THE FOLLOWING GROUNDS: * YOU H AVE SUPPLIED 19950 UNITS OF FFP TO CELESTIAL BIOLOGICALS LTD. @ RS.550.00 PER LITER, TOTALING TO RS.30,26,652. AS IS EVIDENT FROM THE BILLS FURNISHED BY YOU, NO SERVICE CHARGES HAVE BEEN CHARGED FROM CELESTIAL BIOLOGICALS LTD. ON THE OTHER HANDS, IT IS OB SERVED THAT YOU HAVE DISTRIBUTED/SUPPLIED 15,635 UNITS OF FFP TO PATIENTS DURING THE YEAR @ RS.600.00 PER UNIT (EACH UNIT ADMEASURING TO 200 ML APPROXIMATELY). APART FROM THAT, AS IS EVIDENT FROM THE BILLS FURNISHED BY YOU, SERVICE CHARGES AMOUNTING TO RS. 80.00 PER UNIT HAVE ALSO BEEN CHARGED FROM THE PATIENTS. THEREFORE, THE TOTAL FEES CHARGED FROM THE PATIENTS PER UNIT (200 ML) OF FFP IS RS.680.00. SO, THE AMOUNT CHARGED PER LITER FROM COMMON PATIENTS IS RS.3,400/ - (I.E., MORE THAN SIX TIMES OF THE RATE CHARGED FROM THE REFERRED COMPANY). AS PER THE INFORMATION AVAILABLE WITH THIS OFFICE, CELESTIAL BIOLOGICALS LTD. IS A C ORPORATE ENTITY (CURRENTLY, ON INDIRECT SUBSIDIARY OF INTAS PHARMACEUTICALS LTD., WHOSE MAIN PROMOTER IS CHUDGAR FAMILY) ENGAGED IN TH E P RODUCTION OF BLOOD PRODUCTS AND BEING A BUSINESS ENTITY, AIMING AT PROFIT MAXIMIZATION. YOU (ADVANCED TRANSFUSION MEDICINE RESEARCH FOUNDATION) HAVE BEEN GRANTED REGISTRATION U/S 12A(A) OF THE I.T. ACT, 1961 WITH THE UNDERSTANDING/RATIONALE THAT THE COM PANY (ADVANCED TRANSFUSION MEDICINE RESEARCH FOUNDATION) WILL CARRY OUT CHARITABLE ACTIVITIES BY VIRTUE OF WHICH THE INCOME OF THE COMPANY WILL BE EXEMPTED FOR INCOME TAX PURPOSES. THE CHARITABLE ACTIVITY QUOTED BY YOU IS DISTRIBUTION OF BLOOD COMPONENTS . NOW, A VERY RATIONAL QUESTION WHICH REMAINS UNANSWERED ON THE BASIS OF ABOVE DISCUSSION IS THAT : HOW CAN DISTRIBUTION OF BLOOD COMPONENTS (FFP) TO A CORPORATE ENTITY (CELESTIAL BIOLOGICALS LTD.), WHICH IS AN ASSOCIATE CONCERN OF THE ASSESSEE, AT HIGHL Y SUBSIDIZED RATES (AS DISCUSSED ABOVE) BE CALLED AS CHARITY WHEN THE ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 5 OF 11 SAME BLOOD COMPONENT (FFP) IS DISTRIBUTED TO NEEDY PATIENTS AT MUCH HIGHER RATES? ON THE BASIS OF ABOVE DISCUSSION, YOU ARE REQUIRED TO SHOW CAUSE AS TO WHY DEDUCTION U/S 11 OF THE AC T BE NOT DENIED AND THE INCOME OF THE COMPANY BE BROUGHT TO TAXATION AS PER NORMAL PROVISIONS OF THE ACT. * ON THE BASIS OF ABOVE DISCUSSION, IT BECOMES VERY CLEAR THAT THE CHUDGAR FAMILY IS HAVING COMPLETE SHAREHOLDING IN THE COMPANY (ADVANCED TRANSFUSIO N MEDICINE RESEARCH FOUNDATION). APART FROM THAT, IT ALSO BECOMES VERY CLEAR THAT CHUDGAR FAMILY IS HAVING MAJORITY SHARE HOLDING IN CELESTIAL BIOLOGICALS LTD. INDIRECTLY (AS THE CHUDGAR FAMILY IS HAVING THE MAJORITY SHAREHOLDING IN INTAS BIOPHARMACEUTICAL S LTD., EQUATORIAL PRIVATE LIMITED AND CYTAS RESEARCH LIMITED AS DISCUSSED IN PARA 7 AND 8 ABOVE). IN THIS CONTEXT, AND IN VIEW OF CONCESSIONAL BENEFIT PROVIDED TO CELESTIAL BIOLOGICALS LTD. AS DISCUSSED IN PRECEDING PARAGRAPHS, YOU ARE REQUIRED TO SHOW C AUSE AS TO WHY DEDUCTION U/S 11 OF THE ACT BE NOT DENIED CONSIDERING THE PROVISIONS OF SECTION 13 OF THE ACT, AND THE INCOME OF THE COMPANY BE BROUGHT TO TAXATION A S PER NORMAL PROVISIONS OF THE ACT. 10. YOU A RE HEREBY REQUESTED TO PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AS PER NORMAL COMMERCIAL PARLANCE AND FURNISH THE SAME BEFORE THE UNDERSIGNED AT THE TIME OF NEXT HEARING. 3.7 THE ASSESSEE FURNISHED A WRITTEN REPLY IN THIS REGARD ON 05.12.2011, WHICH IS REPRODUCED HEREUNDER : - IT SEEMS THE BASIC PREMISE OF YOUR SCRUTINY AND DOUBT LIES IN THE BELIEF THAT PRATHAMA HAS GIVEN PLASMA TO CELESTIAL BIOLOGICAL AT CONCESSIONAL/DISCOUNTED RATES. WE SHARE WITH YOU THE FOLLOWING FACTS BY WHICH YOU WOULD APPRECIATE THAT THIS IS NOT THE CASE. 1) IN A BLOOD BANK, 1 UNIT OF BLOOD IS MADE INTO 3 MAIN COMPONENTS. VIZ. RED CELLS, PLATELETS (PLT), FRESH FROZEN PLASMA (FFP). FRESH FROZEN PLASMA CAN BE CONVERTED IN TO CRYO POOR PLASMA (CPP) AND CRYOPRECIPITATE (CPT). REQUIREMENT OF THESE 3 COMPONENTS DIRECT LY BY THE PATIENTS IS NOT IN THE RATIO OF 1:1:1. 2) THERE IS ALMOST 100% DEMAND FOR RED BLOOD CELLS, WHEREAS PLATELETS ARE DEMANDED ABOUT 30% OF TOTAL BLOOD COLLECTION & FRESH FROZEN PLASMA IS DEMANDED ABOUT 15 - 20% OF TOTAL BLOOD COLLECTION. THIS IS AS PER THE MEDICAL REQUIREMENT ACROSS THE COUNTRY. PLEASE FIND ENCLOSED DATA SINCE INCEPTION (LAST 10 YEARS) WHICH CLEARLY SHOWS DISTRIBUTION OF BLOOD COMPONENTS TO NEEDY PATIENTS DIRECTLY FROM PRATHAMA. THUS, THERE IS SURPLUS OF FRESH FROZEN PLASMA. ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 6 OF 11 3) SU RPLUS PLATELET HAS NO MEDICAL USE AND THEY ARE DESTROYED AFTER DEACTIVATION. FRESH FROZEN PLASMA HAS A PHARMACEUTICAL USE. IT CAN BE CONVERTED INTO DIFFERENT TYPES OF PLASMA FRACTIONATION PROTEINS IN A FACILITY CALLED PLASMA FRACTIONATION FACILITY 4) AT THE BEGINNING OF PRATHAMA'S OPERATION, IN YR - 2000 THERE EXISTED ONLY ONE SEMI - FUNCTIONAL NATIONAL PLASMA FRACTIONATION CENTRE (NPFC) AT KEM HOSPITAL, MUMBAI, WITH A CAPACITY OF ONLY 10,000 LTRS. P.A. PLASMA FRACTIONATION. THERE WAS COMPETITION AMONGS T BLOOD BANK TO GET THEIR PLASMA PICKED UP BY NPFC. WITH GREAT DIFFICULTY AND AFTER STORING PLASMA FOR ALMOST YEAR. THEY ACCEPTED SOME FRESH FROZEN PLASMA FROM US. (PLS. SEE THE ATTACHMENT) NPFC STARTED TAKING OUR PLASMA AT LOW RATES OF RS.600/LTR. AND C RYO POOR PLASMA AT RS.400/LTR. (PLEASE SEE ATTACHED INVOICES). DESPITE THESE LOW RATES, NPFC FAILED TO MAKE PAYMENTS AND WE COULD SECURE ONLY PART PAYMENT THROUGH LITIGATION. PLEASE SEE COURT ORDER. COPY OF COURT ORDER ATTACHED. 5) NPFC PICKED LAS T LOT OF PLASMA IN YEAR JULY 2002. FOLLOWING THAT WE STRUGGLED TO LET ANYONE PICK OUR PLASMA, AS CRITICAL LIFE SAVING FFP WOULD HAVE GONE TO DRAIN. AFTER MANY EFFORTS, RELIANCE LIFE SCIENCE PICKED A LITTLE PLASMA FOR TRIAL PURPOSE, BUT THEY ALSO STOPPED A S THEIR PLANT WAS NOT FUNCTIONAL. LATER, CELESTIAL PICKED UP FIRST LOT OF PLASMA IN YEAR JULY, 2006. BY THIS TIME WE WASTED MANY LITERS OF PLASMA AS THERE WAS NO BUYER. 6) AMIDST, DIFFICULT SITUATION TO DISPOSE PLASMA, CELESTIALS BIOLOGICAL INITIATED OPERATION OF CONTRACT FRACTIONATION. THEY STARTED COLLECTING PLASMA FRONT VARIOUS BLOOD BANKS ACROSS THE COUNTRY AND STARTED PAYING HIGHER THAN NPFC. THEIR PAYMENTS WERE SIGNIFICANTLY MORE SECURED THAN NPFC. BY THIS TIME NPFC HAD ALSO CLOSED THEIR OPERATI ON AND WE HAD ALREADY PROCEEDED WITH LEGAL ACTION AGAINST NPFC. IN FACT GIVE OUR CELESTIAL BECAME THE ONLY OPTION TO SURPLUS PLASMA. 7) AFTER CELESTIAL, RELIANCE LIFE SCIENCES ALSO STARTED COLLECTING PLASMA FROM INDIAN BLOOD BANKS. THIS RESULTED IN COMP ETITION AMONGST THESE TWO COMPANIES AND LED TO RISE IN PRICES OF FRESH FROZEN PLASMA & CPP. AT PRESENT WE ARE ONLY SUPPLYING FFP & CPP TO RELIANCE LIFE SCIENCE. 8) WE KEPT GIVING OUR FFP AND CPP TO THE BUYER, WHO COULD GIVE BEST PRICE. 9) WE A RE GIVING YOU DATA SHEET AND GRAPH OF CPP FIND FFP SENT FOR PLASMA FRACTIONATION ON MONTH WISE BASIS. ANALYZING THIS DATA YOU WOULD REALIZE THE FOLLOWING : - A. FOR FIRST FULL YEAR NO FFP AND CPP WENT FOR FRACTIONATION AS THERE WAS NO BUYER. B. IN 2002 SOME PLASMA WENT TO NPFC (GOVT. ORGANIZATION). AS MENTIONED ABOVE THIS DEAL WENT SOUR AS THEY REFUSED TO PAY. ALSO THEY HAD LIMITED FUNDS FLOW. ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 7 OF 11 C. IN 2003, SOME PLASMA WAS SENT TO RELIANCE LIFE SCIENCES, BUT THIS DID NOT CONTINUE AS THEY DID NOT HAVE FUNCTIONAL PLANTS. D. IN 2004 - 05, SOME PLASMA STARTED GOING TO CELESTIAL. THE PEAK, ACCUMULATED PLASMA WENT TO CELESTIAL IN YEAR 2006 - 07. AS THEY WERE THE BEST PAYERS FOR THE SURPLUS PLASMA. E. FROM JULY 2011, WE STARTED GETTING BETTER DEALS FROM RELIANCE LIFE SCIENCES AND WE HAD SWITCHED OVER TO SUPPLY PLASMA O THEM. 10. HOWEVER, THE PLASMA SENT FOR FRACTIONATION ALWAYS BRINGS LESS REVENUE COMPARED TO THAT GIVEN DIRECTLY TO PATIENTS IT IS CONSIDERED AS BY PRODUCT AND NOT THE MAIN PRODUCT. 11 . SINCE JULY 2011, WE HAVE SHIFTED OUR PLASMA SUPPLY TO RELIANCE LIFE SCIENCE AT PRICES FOR FFP AT RS.1400/LTR. AND CPP RS.600/LTR. (AGREEMENT COPY ATTACHED). 12. CURRENT TESTING CHARGES OF FFP ISSUED DIRECTLY TO PATIENTS ARE AS UNDER: SR. NO. NAME OF PRODUCT GENERAL CHARGES AMC/BPL CHARGES 1. FFP - LARGE RS.650 RS.450 2. FFP - MEDIUM RS.600 RS.420/ - THESE PRICES ARE IN LINE WITH FFP CHARGES APPLICABLE ACROSS THE COUNTRY AND TO HELP US RECOVER COST OF OPERATION. 13) WE HOPE, THIS WOULD MAKE YOU BELIEVE THAT PRICES FOR SURPLUS PLASMA IS TOTALLY MARKET DRIVEN AND HAS NOT BEEN FIXED TO BRING ANY GAINS TO CELESTIAL OR ANY OTHER ORGANIZATION. WE HOPE YOU WOULD FIND TRANSPARENCY IN ALL OUR DEALING WITH CELESTIAL AND NOT DOUBT THE CHARITABLE ACT IVITIES OF PRATHAMA BLOOD CENTRE. WE ALSO WISH TO INFORM YOU THAT PRATHAMA IS UNIQUE, LARGEST AND THE MOST ADVANCED BLOOD BANKING MODEL OF OUR COUNTRY, WHICH HAS COME UP IN COLLABORATION WITH AHMEDABAD MUNICIPAL CORPORATION. WE NO RECEIVE MORE THAN 50,0 00 VOLUNTARY DONATIONS P.A. WE MAKE 100% BLOOD COMPONENTS AND DISTRIBUTE ABOUT 1,25,000 BLOOD COMPONENTS WITHOUT REPLACEMENT TO 35,000 PATIENTS THROUGH 2000 DOCTORS IN AND AROUND AHMEDABAD. ALMOST 50% DONORS AT PRATHAMA ARE REPEAT DONORS. ALL THESE FACT ORS ALONG WITH STRINGENT QUALITY CONTROL MECHANISM HAVE BROUGHT HIGHEST LEVEL OF SAFELY WITH BLOOD AT PRATHAMA. THIS HAS ALSO RESULTED IN POSSIBLY INDIA S LOWEST INFECTIVITY RATE AMONGST DONOR POPULATION. WE ARE ACCREDITED BY NABH AND ISO. IT WOULD BE OU R PLEASURE TO SHOW YOU AROUND PRATHAMA AND IT S CONTRIBUTION. WE WILL BE HAPPY TO ANSWER ANY FURTHER QUERIES FOR THE INCOME TAX DEPARTMENT. ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 8 OF 11 3. AS PER THE ASSESSING OFFICER, CELESTIAL BIOLOGICALS LIMITED IS COVE RE D IN THE DEFINITION OF PERSON UNDER SECT I ON 13(3)(E) READ WITH EXPLANATION - 1 & 3. THE ASSESSEE COMPANY IS A TOOL TO MAXIMISE PROFIT, AND TO WIDEN THE HORIZON OF INTAS GROUP OF COMPANIES HELD BY CHUDGAR FAMILY. THE SAME CAN BE ESTABLISHED BY T HE FA C T THAT BUSINESS TRANSACTIONS OF THE ASSESSEE C OMPANY WITH T HE RELATED COMPANIES, AND HENCE THE CONCESSIONAL BENEFITS H A VE INCREASED IN THE COMING YEA R S. BASED ON THE ABOVE DISCUSSION, THE DEDUCTION UNDER SECTION 11 & 12 OF THE ACT CLAIMED BY THE ASSESSEE WAS DISALLOWED. IT IS SEEN THAT THE A SSES SE E H A S C LAIMED SET - OFF AND C A RRY FORWARD OF U N AB S ORBED DEFICIT PERTAINING TO ASSESSMENT YEARS 2001 - 02, 2002 - 03, 2003 - 04, 2007 - 08 AND 2008 - 09. THE INCOME FOR THE ABOVE ASSESSMENT YEARS HAS BE E N COMPUTED AS A COMPANY REGISTERED U/S. 12A(A) OF THE ACT A ND DEDUCT ION U/S.11 OF THE I.T. ACT H A S BEEN ALLOWED. THE DEFICIT COMPUTED EARLIER IS AS PER S E CTION 11 OF THE I.T. ACT AFTER ALLOWING T HE CL A IM OF THE ASSESSEE OF BOTH THE CAPIT A L AND REVENUE EXPENDITURE. AS THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTIO N 11 OF THE I.T. ACT , THE INCOME OF THE ASSESSE E WAS COMPUT E D IN NORMAL BUSINESS M A NN E R. THE INCOME COMPUTED IN THE EARLIER YEARS DO E S NOT PRESENT THE CORRECT STATE OF AFFAIRS OF THE ASSESSEE AS PER THE ACCOUNTING PRINCIPLES IN THE CASE OF AN ASSESSEE WIT H BUSINESS INCOME. THE CLAIM OF THE ASS E SS E E FOR SET - OFF AND CARRY FORWARD OF DEFICIT OF EARLIER YE A RS WORTH RS.8,23,58,027/ - WAS DISALLOWED AS TH E S A ME WERE NOT BUSINESS LOSS ES AS PER I NCOME TAX ACT. 4. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.43,99,739/ - IN THE INCOME AND EXPENDITURE ACCOUNT. THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH THE PR O FIT & LOSS AC COUNT AND BALANCE SHEET A S PER THE INDIAN ACCOUNTING STANDARDS, BUT THE ASSESSEE HAS FAILED TO DO SO. THE ASSESSEE HAS NOT FURNISHED THE DETAILED WORKING OF DEPRECIATION AS PER INCOME TA X A C T. THE CAPIT A L EXPENDITURE INCURRED ON FIXED AS S E T S H A S BEE N ALLOWED A S EXPENDITURE IN THE EARLIER YEARS AS APPLICATION OF FUND, AND ALLOWING ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 9 OF 11 OF DEPRECIATION AS FURTHER APPLICATION OF RECEIPTS IN S UBSEQUENT Y E AR WOULD APPARENTLY BE DOUBLE DEDUCTION WHICH WOULD BE APPARENTLY INCONSISTENT WITH ACCOUNTING PRINCIPLES A ND NOT SO PROVIDED IN LAW AND HENCE UNTENABLE . IN VIEW OF ABOVE FACTS , THE C LAIM OF DEPRECIATION OF RS.43,99,739/ - IS DISALLOWED AND ADD ED TO THE INCOME OF THE ASSESSEE COMPANY. 5. THE ASSESSEE HAS CLAIMED NET APPLICATION OF INCOME BY PURCHASE OF FIXED ASSET DURING THE YEAR WORTH RS.13,09,804/ - AS APPLICATION/EXPENDITURE. CONSIDERING THE FACTS THAT THE DEDUCTION UNDER SECTION 11 OF T HE ACT HAS BEEN DENIED IN THE INSTANT CASE AND THE ASSESSEE COMPANY NEEDS TO BE TRE A TE D A S A COMPANY FOR TAXATION PROVISIONS, THE CAPI TA L EXPENDITURE PERTAINING TO TH E PU R CHA S E OF FIXED ASSETS IS NOT ALLOWABLE AND , THEREFORE , THE SAME WAS DISALLOWED AND AC CORDINGLY THE TOTAL INCOME WAS ASSESSED A T RS.75,73,403/ - BY T HE ASSESSING OFFICER. 6. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE A SSESSEE PREFERRED STATUTORY APPEAL BEFORE THE CIT(A) BUT THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. THIS IS SEC OND ROUND BEFORE THE ITAT. IN THE FIRST ROUND, A CO - ORDINATE BENCH OF ITAT HA S REMANDED THIS MATTER BACK TO THE FILE OF CI T(A) TO DECIDE THE MATTER AFRESH . 7. WE HAVE GONE THROUGH THE RELEVANT RECORDS, THE IMPUGNED ORDER AND PAPER BOOK FILED BY THE APPELL ANT. IN OUR OPINION , THE AUTHORITIES BELOW OUGHT TO HAVE LOOKED INTO PROCESS ING CYCLE AND GIVEN T HE SAME IMPORTANCE TO THE FFP, RED CELLS AND PLATELETS , WHERE A S T HE F P P IS ACTUALLY A BY - PRODUCT A ND NOT THE PRODUCT. IN OUR OPINION , AUTHORITIES BELOW HAVE N OT UNDERSTOOD THE COSTING PAR T OF PROCESS BECAUSE WHENEVER BY - PRODUCT IS SOLD THEN IT ACTUALLY ADDS TO THE REVENUE AND PROFIT AND THAT IS WHY COST OF THE RED CELLS IS HIGHER AS IT IS THE MAIN PRODUC T . AUTHORITIES BELOW HAVE NOT SEEN THE COMPARATIVE SELL ING PRICE OF THE SAME PRODUCT OF OTHER BLOOD BANKS LIKE RED CROSS ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 10 OF 11 WHICH IS ALSO A TRUST AND OPERATES ON THE SAME BASIS. IN OUR OPINION, THE BALANCE SHEET AND INCOME AND EXPENDITURE ACCOUNT DEALT WITH THE REPORT COMPLY WITH THE APPLICABLE ACCOUNTING ST ANDA RD REFERR E D TO IN SUB - SECTION (3C) OF SECTION 211 OF THE COMPANIES ACT, 1956 WHICH SHOWS TH A T TH E ASSES SEE HA S FOLLOWED ALL THE APPLICABLE INDIAN ACCOUNTING S TANDARD S A ND THE SAME WAS ALSO EXPLAINED TO THE ASSESSING OFFICER BUT THE FACT WAS NOT ACCEPTED AN D THE ASSESSING OFFICER HAS DISALLOWED THE DEP RECIATION OF RS.43,99,739/ - . AUTHORITIES BELOW HAS DENIED DEDUCTION UNDER SECTION 11 AND STATED THAT THE ASSESSEE NEEDS TO BE TREATED AS A COMPANY FOR TAXATION PROVISIONS AND HENCE CAPITAL EXPENDITURE PERTAINI NG TO THE PURCHASE OF FIXED ASSETS IS NOT ALLOWABLE . IN OUR OPINION, THE ASSESSING OFFICER HAS WRONGLY DISALLOWED IN THE ABOVE TWO POINTS AND EFFECT OF THE SAME CANNOT BE GIVEN UNDER SECTION 11 AND BENEFIT OF APPLICATION OF INCOME BY PURCHASE OF FIXE D ASS E TS SH OU LD HAVE B E EN GIVEN. 8. THE ASSESSING OFFICER HAS NOT SEEN THE FACT THAT THERE ARE NO TRANSACTION S BETWEEN ASSESSEE AND CELESTIAL BIOLOGICALS LIMITED IN T HE ASSESSMENT YEARS 2001 - 02 TO 2004 - 05. I T H A S STAR TE D FROM ASSESSMENT YEAR 2005 - 06 AND T H AT TOO IS VERY NEGLIGIBLE COMPARE D TO TOTAL PRODUCTION OF FFP IN THE ASSESSMENT YEARS 2005 - 06, 2006 - 07 & 2007 - 08 AND THE SAME IS BETWEEN 40% TO 50% OF TOTAL PRODUCTION OF FFP D URING THE ASSESSMENT YEA R S 2008 - 09 TO 2011 - 12. FURTHER , THE ASSESSING OFFICER H AS NOT SEEN THE FACT THAT THE ASSESSEE HAS STOPPED TRANSACTION DURING THE ASSESSMENT YE A R 2012 - 13 AS IT GOT SOME BETTER DEAL FROM RELI A NCE WHICH W A S TRIED IN PREVIOUS YEARS ALSO BUT DID NOT WORK OUT. IT A LSO SHOWS THE INT EN TION OF THE ASSESSEE. IF THE AS SESSEE WANTS TO TAKE ANY UNDUE BENEFIT UND E R THE H E ADING OF TRUST THEN TRANSACTIONS MUST HAVE BEEN CONTINU E D IN THE ASSESSMENT YEAR 2012 - 13 . ON PAGE NO.91 AND 92 OF THE PAPER BOOK , THE FPP AT T HE S AME RA T E W A S SOLD TO O T HER BLOO D BANKS ALSO BUT THIS FACT WAS NOT ITA NO. 399 /AHD/2013 A.Y. 2009 - 10 PAGE 11 OF 11 CONSIDERED BY THE ASSESSING OFFICER AS LIFE OF FPP IS ONE Y E AR BECAUSE IT IS A PERISHABLE ITEM AND AF T ER ONE Y E AR IT IS OF NO USE. 9. CONSIDERING THE CHARITABLE NATURE OF ASSESSEE, CELESTIAL BIOLOGICALS LIMITED HAS PROVIDED UNSECURED LOAN TO THE TUNE OF RS.3.43 CRORES SINCE FINANCIAL YEAR 200 3 - 04. IF WE CONSIDER TH E NOTIONAL INTEREST RATE OF 12.5% P.A., THE INTEREST WOULD HAVE BEEN MORE THAN RS.2.50 CRORES TILL 31.03.2009. HOWEVER, NO INTEREST HAS BEEN CHARGED BY CELESTIAL BIOLOGICALS LIMITED AN D ITS PROMOTERS ARE O N LY TRY I NG TO HELP THE ASSESSEE FINANCIALLY. IF TH E PROMOTERS WER E TO TAKE ANY UNDUE ADVANTAGE, THEY WOULD HAVE PREFERRED TO DRAW INTEREST FROM ASSESSEE AND A SK FOR COMPLETE LOAN REPAYMENT . THE ASSESSING OFFICER HAS NOT CONSIDERED TH E FACT THAT THE CELESTIAL BIOLOGICALS LIMITED HAS GIVEN INTEREST FREE UNSECURED LOAN OF RS.3.36 CRORES AND CLOSING BALANCE OF RS.2.26 CRORES AS ON 31.03.2009. SO, IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE APPEAL OF THE ASSESSEE SHOUL D BE ALLOWED . 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRO NOUNCED IN THE OPEN COURT TODAY ON 17 TH DAY OF NOVEMBER , 201 6. SD/ - SD/ - N.K. BIL L AIYA MAHAVIR PRASAD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, T HE 17 TH DAY OF NOVEMBER , 2016 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNA L AHMEDABAD BENCHES, AHMEDABAD