ACIT CIR 7(2)(2), MUMBAI V. NOVARTIS INDIA LTD, MUMBAI

ITA 4255/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8068 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1995-1996
• Appeal Filed On: 20-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IN CIRCUMSTANCES OF CA SE; PROVISIONS OF SECTION C OF ACT
• Keywords: Business income; Opportunity of being heard
• Section: 271(1)(c); 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 4255 / MUM/ 201 6 ( / ASSESSMENT YEAR: 1995 - 96 ) ACIT, CIR - 7(2)(2) ROOM NO. 623, 6 TH FLOOR, AAY AKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 / VS. NOVARTIS INDIA LTD. 7 TH FLOOR, INSPIRE BKC, G BLOCK, BKC MAIN ROAD, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051. ./ ./ PAN/GIR NO. : AAACH 2914 F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 06 . 12 .201 8 / DATE OF PRONOUNCEMENT : 21. 12. 201 8 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 21 .0 3 .2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 13 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 1995 - 96 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT WITHOUT APPRECIATING THE LEGAL MATRIC AND PROVISIONS OF SECTION 271(1)(C) OF THE ACT. REVENUE BY : SHRI B.B. RAJENDRA PRASAD ASSESSEE BY: SHRI NITESH JOSHI . ITA NO. 4255 /M/2016 A.Y.1995 - 96 2 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE CONFIRMED THE ORDER OF THE AO 3 . THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 3 . THE BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 1995 - 96 ON 30 . 11.1995 DECLARING TOTA L INCO ME T O THE TUNE OF RS11,61,72,178/ - UNDER THE HEAD OF PROFIT AND GAINS OF BUSINESS OR PROFESSION AND RS.20,93,92,468/ - UNDER THE HEAD OF CA PITAL GAINS. THEREAFTER, THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT ON 27.03.1998 ASSESSING THE INCOME TO THE TUNE OF RS.58,61,16,253/ - UNDER THE HEAD OF PROFIT AND GAIN AND LONG TERM CAPITAL GAIN WAS ASSESSED TO THE TUNE OF RS.103, 27,21,500/ - . THEREAFTER, THE PENALTY PROCEEDING WAS INITIATED ON THE BASIS OF ENHANCEMENT OF CAPITAL GAINS ON SALE OF THE ORAL HYGIENE BUSINESS, ENHANCEMENT OF CAPITAL GAINS ON SALE OF LAND & ENHANCEMENT OF PROFITS AND GAINS OF BUSINESS BY TREATING THE NON - COMPETE FEES OF RS.31,4 5,00,000/ - AS A REVENUE RECEIPT . A FTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE , T HE PENALTY TO THE TUNE OF RS. 14,46,70,000/ - WAS LEVIED U/S 271(1)(C) OF THE I.T. ACT, 1961. T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED THE PENALTY, THEREFORE , THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1 TO 3 4. ALL THE ISSUES ARE IN CONNECTION WITH THE DELETION OF THE PENALTY BY CIT(A). THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS W RONGLY DELETED THE PENALTY , THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE AND IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE QUANTUM HAS BEEN DELETED ITA NO. 4255 /M/2016 A.Y.1995 - 96 3 BY HONBLE ITAT IN VIEW OF TH E IN ITA. NO. 498/M/2003, CO 183/M/2003 & CO 361/M/2005 DATED 25.09.2013 AND MA. NO. 376/M/2014 DATED 27.02.2015, THEREFORE, IN THE SAID CIRCUMSTANCES, THE CIT(A) HAS RIGHTLY DELETED THE PENALTY, HENCE, THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED. B EFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 3.1 COMING TO THE GROUNDS OF QUANTUM APPELLATE PROCEEDINGS, THE HON'BLE MUMBAI TRIBUNAL HAD GIVEN ITS DECISION VIDE ITS ORDER PASSED ON 26 TH SEPTEMBER 2013 (ITA NO, 498/MUM/2003). IN ITS DETAILED DECISION SPANNING PAGE NOS. 9 TO 15 (PARAGRAPH NOS. 20 TO 27), THE HON'BLE TRIBUNAL HAD CONFIRMED THE DECISION OF THE CIT(A) [COMMISSIONER OF INCOME TAX (APPEALS) WHO HAD CONFIRMED THE ADDITION MADE BY THE AO. HOWEVER, T HIS VERY ISSUE WAS THEN MADE SUBJECT MATTER OF A MISCELLANEOUS APPLICATION (HEREINAFTER REFERRED TO AS THE 'MA') [MA NO. 376/MUM/2014, DATED 27 TH APRIL 2015]. THE HON'BLE TRIBUNAL HAD DECIDED ON THIS ISSUE AS FOLLOWS IN ITS MA ORDER, '8 THE NEXT GRIEVA NCE OF THE ASSESSEE RELATES TO THE NON - COMPETE FEES OF RS.31.45 CRORES.' 9. THE FACTS RELATING TO THIS ISSUE ARE THAT NON - COMPETE FEES RECEIVED BY THE ASSESSEE WERE PART OF THE TOTAL CONSIDERATION AND THE AO TAXED THEM AS INCOME FROM BUSINESS UNDER SEC TION 28 OF THE ACT. THE FIRST APPELLATE AUTHORITY DECIDED THIS ISSUE AGAINST THE ASSESSEE ON THE BASIS THAT SECTION 28(VA) IS RETROSPECTIVE. HOWEVER, THE LEARNED CIT(A) EXPLICITLY UPHELD THE FINDINGS THAT NON - COMPETE FEES OF RS.31.45 CRORES WERE PART OF TH E IOTA! SALE CONSIDERATION OF RS.130.99 CRORES. 10. WHEN THE MATTER TRAVELLED UPTO THE TRIBUNAL, THE TRIBUNAL HELD THAT THE PROVISION OF NON - COMPETE FEES UNDER SECTION 28(VA) IS PROSPECTIVE AND IS W,E.F. 01 - 04.2003, TO THIS EXTENT, THE LEARNED SENIOR CO UNSEL STATED THAT THERE IS NO ERROR BUT THE TRIBUNAL WENT FORWARD AND DECIDED THE TAXABILITY OF THE ISSUE OF NON - COMPETE FEES, IT IS THE SAY OF THE LEARNED SENIOR COUNSEL THAT THE TRIBUNAL FINDING ON THIS ISSUE IS AN ERROR WHICH NEEDS TO BE RECTIFIED. WE F IND FORCE IN THE CONTENTION OF [HE LEARNED SENIOR COUNSEL. ITA NO. 4255 /M/2016 A.Y.1995 - 96 4 11. IT IS AN UNDISPUTED FACT THAT THE LEARNED CIT(A) HAS EXPLICITLY HELD THAT NON - COMPETE FEES OF RS.31.45 CRORES ARE A PART OF THE TOTAL SAFE CONSIDERATION OF RS.130.99 CRORES. THE DEPARTMENT H AS ACCEPTED THIS FINDING OF THE LEARNED CIT(A). ONCE THE TRIBUNAL HAD ACCEPTED THAT THE TOTAL SAID CONSIDERATION WAS INCLUSIVE OF NON - COMPETE FEES AND ONCE THE TRIBUNAL HAS DECIDED THE ISSUE ON THE TOTAL CONSIDERATION TREATING IT AS A SLUMP SALE, THE ISSUE RELATING TO NON - COMPETE FEES BECAME INFRUCTUOUS AND SHOULD HAVE BEEN TREATED AS OTIOSE. MODIFYING THE FINDING OF THE TRIBUNAL, WE DECIDE TO REMOVE PARA - 19 TO PARA - 27 FROM ITA NO. 498/M/03. FINDINGS GIVEN IN THESE PARAS ARE TO BE TREATED AS NON - EST. GROUND NO. 3 OF THE MISCELLANEOUS APPLICATION IS ACCORDINGLY ALLOWED.' FROM A PLAIN READING OF THE ABOVE, IT WOULD BECOME CLEAR THAT THE ISSUE OF NON - COMPETE FEES OF RS.31.45 CRORES HAD BEEN TAKEN AS PART OF THE TOTAL SALE CONSIDERATION OF RS.130.99 CRORES. ONCE THE HON'BLE TRIBUNAL HAD ACCEPTED THAT THE TOTAL SALES CONSIDERATION INCLUSIVE OF NON - COMPETE FEES WAS A CASE OF SLUMP SALE, THERE WOULD BE NO QUESTION OF SEPARATELY CHANGING THE NON - COMPETE FEES TO TAX. BUT IT HAD ALREADY BEEN DEALT WITH IN THE QUANTUM A PPELLATE ORDER. HENCE, MODIFYING THE SAID ORDER, IT WAS DECIDED IN THE MA ORDER THAT PARAGRAPH NOS, 19 TO 27 OF THE ORIGINAL ORDER WOULD BE DELETED AND THE FINDING GIVEN THEREIN WOULD BE TREATED AS NON - EST. IN OTHER WORDS, IT HAD BEEN DECIDED THAT THE NON - COMPETE FEES OF RS.31.45 CRORES CANNOT BE CHANGED TO LAX SEPARATELY. ONCE THE QUANTUM ADDITION IN THIS CASE HAS BEEN DELETED, THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WOULD HAVE NO LEGS TO STAND UP ON. ACCORDINGLY, I HAVE NO HESITATION IN DELETING THE SAID PENALTY OF RS.14,46,70,000/ - . 3.3 COMING TO THE GROUNDS OF APPEAL, ALL THE SIC GROUNDS ARE SEEN TO RELATE TO THE LEVY OF CONCEALMENT PENALTY U/S 271(1)(C) OF THE ACT WHICH HAS NOW BEEN DELETED. ACCORDINGLY, ALL THE SIX GROUNDS VIZ GROUND NOS. 1,2,3,4,5 AND 6 ARE ALLOWED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING , WE NOTICED THAT THE ADDITION ON THE BASIS OF WHICH THE PENALTY WAS LEVIED HAS BEEN ORDER TO BE DELETED BY HONBLE ITAT BY VIRTUE OF ORDER IN ITA. NO.498/M/2003, CO 183/M/20 03 & CO 361/M/2005 DATED 25.09.2013 AND MA. NO. ITA NO. 4255 /M/2016 A.Y.1995 - 96 5 376/M/2014 DATED 27.02.2015. T HE FINDING OF THE CIT(A) HAS BEEN RECORDED ABOVE SPEAKS ABOUT THE DELETION OF THE PENALTY ON THE BASIS OF THIS FACT THAT THE QUANTUM HAS BEEN DELETED. SINCE, THE QUANTUM HAS ORDE RED TO BE DELETED, THEREFORE, THE PENALTY HAS NO LEG TO STAND, THEREFORE, IN THE SAID CIRCUMSTANCES, THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. 6 . IN THE RESULT, THE APPEAL FI LED BY THE REVENUE IS HEREBY ORDERED TO BE D ISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 21. 12 . 2018 SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 21.1 2 . 2018 V IJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY O RDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI