DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6(1), MUMBAI V. INDOCO REMEDIES LIMITED, MUMBAI

ITA 4590/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0913 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Rectification of order; Principle of natural justice; Block assessment; Tax effect; Set aside
• Section: 143(3); 115JB; 80IB; 37(1); 80IC; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, MUMBAI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI RAJESH KUMAR ACCOUNTANT MEMBER ITA NO. 4590/MUM/2017 (ASSESSMENT YEAR: 2010-11) DCIT-CENT. CIR-6(1), ROOM NO.1905,19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 VS M/S INDOCO REMEDIES LTD, INDOCO HOUSE, 166 CST ROAD, SANTACRUZ (EAST) MUMBAI-400 098 PAN : AAACI0380C APPELLANT RESPONDEDNT ITA NO. 4538/MUM/2017 (ASSESSMENT YEAR: 2010-11) ITA NO. 4627/MUM/2017 (ASSESSMENT YEAR: 2010-11) M/S INDOCO REMEDIES LTD, INDOCO HOUSE, 166 CST ROAD, SANTACRUZ (EAST) MUMBAI-400 098 PAN : AAACI0380C VS DCIT-CENT. CIR-6(1), ROOM NO.1905,19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 APPELLANT RESPONDEDNT ASSESSEE BY SHRI MADHUR AGGARWAL WITH FENIL BHATT ARS REVENUE BY SHRI ASHISH POPHARE SR DR DATE OF HEARING 20.08.2019 DATE OF PRONOUNCEMENT 27.08.2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS GROUP OF THREE APPEALS, OUT OF WHICH TWO CROSS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) HEREINAFTER CALLED LEARNED ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 2 COMMISSIONER (APPEALS)-54 MUMBAI, DATED 20 MARCH 20 17. THIRD APPEAL BY REVENUE ARISES OUT OF ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 154, DATED 29 TH JULY 2015, WHICH WAS SET ASIDE BY LEARNED COMMISSI ONER (APPEALS) VIDE ORDER DATED 20 MARCH 2017. ALL APPEA L RELATES TO SAME ASSESSMENT YEAR, THEREFORE, ALL THE APPEALS WERE CL UBBED, HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER FOR THE SAKE OF BREVITY AND TO AVOID THE CONFLICTING DECISION. THE ASSESSEE IN ITS APPEAL IN ITA NO. 4538/M/2017 HAS RAISED FOLLOWING GROUNDS OF APPEAL: (1)(A) THE COMMISSIONER OF INCOME TAX (APPEALS) MUM BAI ERRED IN HOLDING THAT AO WAS RIGHT IN RELOCATING CERTAIN EXPENSES TO BADDI U NIT (80IC UNIT), TOTAL AMOUNTING TO 5,92,70,207/- THE APPELLANT SUBMITS THAT ALLOCATION OF EXPENSES I S IN ACCORDANCE WITH THE PROVISION OF SECTION 80IC AND AO HAS BEEN CONSISTENTLY FOLLOW ED AND ACCEPTED IN THE EARLIER YEARS. THE APPELLANTS THEREFORE PRAY THAT AO BE DIRECTED T O ACCEPT THE ALLOCATION OF EXPENSES BY THE APPELLANTS. (1)(B) WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE AO MADE AN ARITHMETICAL ERROR IN COMPUTING THE REALLOCATION OF EXPENSES. THE AO COMP LETED THE AMOUNT AT 5,92,70,207/- AS AGAINST 2,88,77,337/- 2. THE REVENUE IN ITS CROSS APPEAL HAS RAISED FOLLOWIN G GROUNDS OF APPEAL: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCES OF GIFTS, BEING IN THE N ATURE OF FREEBIES GIVEN TO DOCTORS WITHOUT CONSIDERING THAT HONBLE HIMACHAL PRADESH H IGH COURT IN CASE OF CONFEDERATION OF INDIAN PHARMACEUTICAL INDUSTRIES V ERSUS CBDT & OTHERS (CWP NO. 10793 OF 2013) HAS UPHELD THE CONSTITUTIONAL VALIDI TY OF CBDT CIRCULAR NO. 5/2012, WHICH HAS IN TURN LAID DOWN THAT CLAIM OF ANY EXPEN SES INCURRED IN PROVIDING FREEBIES ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 3 IN VIOLATION OF THE PROVISIONS OF INDIAN MEDICAL CO UNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATION 2002 SHALL BE INA DMISSIBLE UNDER 37(1) OF THE INCOME TAX ACT BEING AN EXPENCES PROHIBITED BY LAW. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCES OF GIFTS, BEING IN TH E NATURE OF FREEBIES GIVEN TO DOCTORS EVEN THOUGH INDIAN MEDICAL COUNCIL (PROFESSIONAL CO NDUCT, ETIQUETTE AND ETHICS) REGULATION 2002 MANDATE THAT A PHYSICIAN SHALL NOT GIVE, SOLICIT OR RECEIVE NOR SHALL HE OFFER TO GIVEN, SOLICIT OR RECEIVE, AND GRATUIT Y COMMISSION OR BONUS IN CONSIDERATION OF ALL RETURN FOR REFEREEING, RECOMME NDING OR PROCURING OF ANY PATIENT FOR MEDICAL, SURGICAL OR OTHER TREATMENT. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND A LAW, LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF GIFTS, BEING IN THE NA TURE OF FREEBIES GIVEN TO DOCTORS AFTER OBSERVING THAT PROHIBITION BY INDIAN MEDICAL COUNCIL (IMC) REGULATIONS (IMC), 2009 IS APPLICABLE ON MEDICAL PRACTITIONER AND NOT ON PHARMACEUTICAL COMPANIES WITHOUT APPRECIATING THAT THE AIM OF IMC REGULATION S 2002 AND 2009 IS TO CURB THE MALPRACTICES IN THE MEDICAL PROFESSION AND FOR THE BENEFIT OF PUBLIC AND PATIENT AND EQUALLY BINDING ON BOTH MEDICAL PRACTITIONER AND PH ARMACEUTICAL COMPANIES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCES OF GIFTS, BEING IN THE N ATURE OF FREEBIES GIVEN TO DOCTORS AFTER OBSERVING THAT PROHIBITION BY INDIAN MEDICAL COUNCIL (IMC), REGULATIONS (IMC) 2009 IS APPLICABLE ON MEDICAL PRACTITIONER AND NOT ON PHARMACEUTICAL COMPANIES WITHOUT APPRECIATING THAT APEX COURT IN CASE OF MAD DI VENKATRAMAN & COMPANY PRIVATE LIMITED VERSUS CIT[1998] 229 ITR 534 HAS AD JUDICATED THAT IT WOULD BE AGAINST THE PUBLIC POLICY TO ALLOW UNDER ONE STAT UE THE BENEFIT OF DEDUCTION OF EXPENDITURE INCURRED IN VIOLATION OF THE PROVISIONS OF ANOTHER STATUE. 3. BRIEF FACTS OF THE CASE AS EXTRACTED FROM THE ORDER OF LOWER AUTHORITIES ARE THAT ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING OF PHARMACEUTICALS AND TRADING OF BULK DRUGS AND FORMULATIONS FILED IT S RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 6 TH OCTOBER 2010, DECLARING TOTAL INCOME AT RS. ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 4 NILL UNDER NORMAL PROVISIONS AND BOOK PROFIT UNDER SECTION 115JB AT 42,99,79,822/-. SUBSEQUENTLY, THE ASSESSEE FILED RE VISED RETURN DECLARING TOTAL INCOME AT RS. NILL UNDER NORMAL PROVISIONS AN D BOOK PROFIT UNDER SECTION 115 JB AT 43,00,60,245/- IN THE RETURN OF INCOME THE ASSESSE E CLAIMED DEDUCTION UNDER SECTION 80IC IN RESPECT OF PROFITS OF THE ELIGIBLE UNIT. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 IC AFTER ALLOCATING COMMON EXPENSES ON ACCOUNT OF PACKAGING AND DELIVER Y CHARGES, ANALYTICAL EXPENSES AND ADVERTISEMENT AND SALE PROMOTION EXPEN SES. NO ALLOCATION ON ACCOUNT OF DEPRECIATION ON HEAD OFFICE ASSETS AND R ESEARCH AND DEVELOPMENT EXPENSES ON THE GROUND THAT NO PARTS OF THE SAME WE RE ATTRIBUTABLE FOR EARNING THE PROFIT OF UNIT ELIGIBLE FOR DEDUCTION U NDER SECTION 80IC. THE ASSESSING OFFICER REJECTED THE AFORESAID CLAIM OF A LLOCATION OF THE EXPENSES AND AFTER REALLOCATING THE COMMON EXPENDITURE AS W ELL AS ALLOCATING EXPENSES TO HEAD OFFICE (HO) ASSET AND RESEARCH AND DEVELOPMENT (R&D) EXPENSES REDUCE THE CLAIM OF DEDUCTION UNDER SECTIO N 80IC BY 5,92,70,207/-. THE ASSESSEE ALSO CLAIMED EXPENSES O N ACCOUNT OF PRESENTATION ARTICLES AT 1,06,75,897/-. ON PERUSAL OF DETAILS FURNISHED BY ASSESSEE THE ASSESSING OFFICER TOOK HIS VIEW THAT S UCH EXPENSES ARE IN CONTRAVENTION OF CLAUSE 6.4.1 OF CHAPTER 6 OF INDIA N MEDICAL COUNCIL REGULATIONS, WHEREIN IT HAS BEEN PRESCRIBED THAT MA KING SUCH PROFESSIONAL ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 5 GIFTS TO DOCTORS IS AN UNETHICAL ACT AND RECEIPT OF SUCH GIFTS BY PROFESSIONAL IS BARRED UNDER REGULATION OF INDIAN MEDICAL COUNCIL A ND DISALLOWED THE SAME. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEALS) THE ACTION OF ASSESSING OFFICER IN DISALLOWANCE ON EXPENSES ON PRESENTATIO N OF ARTICLES WAS REVERSE/ ALLOWED, HOWEVER, DISALLOWANCE OF REALLOCATION OF E XPENSES WAS UPHELD. THEREBY, AGGRIEVED BY THE ORDER OF LEARNED COMMISSI ONER (APPEALS) BOTH THE PARTIES HAVE FILED THEIR RESPECTIVE APPEAL RAIS ING THE GROUNDS OF APPEAL WHICH WE HAVE REFERRED ABOVE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF LEARNED AUTH ORIZED REPRESENTATIVE (AR) OF ASSESSEE AND LEARNED DEPARTMENTAL REPRESENT ATIVE (DR) FOR REVENUE AND ALSO GONE THROUGH THE ORDERS OF LOWER AUTHORITI ES. 5. AT THE OUTSET OF HEARING THE LEARNED AR FOR ASSESSE E SUMMITS THAT THE TAX EFFECT INVOLVED IN THE APPEAL FILED BY THE REVENUE IS LESS THAN 50 LAKH, THEREBY THE APPEAL OF THE REVENUE IS NOT MAINTAINAB LE IN VIEW OF CBDT CIRCULAR NO. 17 OF 2019 DATED 8 TH AUGUST 2019. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE AFTER GOING THROUGH THE GROUNDS OF APPEAL FAIRLY SUBMITS THAT THE ADDITIONS/DISALLOWANCES MADE ON AC COUNT OF THE PRESENTATION OF GIFT OF ARTICLES OF 1,06,75,897/- ONLY AND TAX EFFECT ON SUCH DISALLOWANCE IS LESS THAN 50 LAKHS. CONSIDERING THE SUBMISSION OF BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE APPEAL FILED B Y REVENUE IS NOT ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 6 MAINTAINABLE AS THE REVENUE IS PRECLUDED FROM FILIN G APPEAL BEFORE THE TRIBUNAL WHEREIN TAX EFFECT INVOLVED IN THE APPEAL IS LESS THAN 50 LAKHS. 6. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. 7. IN RESPECT OF GROUNDS OF APPEAL IN ASSESSEES APPEA L. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE CLAIMED DEDUCTIO N UNDER SECTION 80IC IN RESPECT OF PROFITS OF THE UNITS ELIGIBLE FOR DEDUCT ION, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 IC AFTER ALLOCATING COMM ON EXPENSES ON ACCOUNT OF PACKAGING AND DELIVERY CHARGES, ANALYTICAL EXPEN SES AND ADVERTISEMENT AND SALE PROMOTION EXPENSES. NO ALLOCATION ON ACCOU NT OF DEPRECIATION ON HEAD OFFICE ASSETS AND RESEARCH AND DEVELOPMENT EXP ENSES AS NO PART OF THE SAME WERE ATTRIBUTABLE FOR EARNING THE PROFIT OF UN IT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC. THE ASSESSING OFFICER REJECTED THE AFORESAID CLAIM (STAND) OF ALLOCATION OF THE EXPENSES AND AFTER REALLOCATIN G THE COMMON EXPENDITURE AS WELL AS ALLOCATING EXPENSES TO HEAD OFFICE (HO) ASSET AND RESEARCH AND DEVELOPMENT (R&D) EXPENSES, REDUCE THE CLAIM OF DED UCTION UNDER SECTION 80 IC BY 5,92,70,207/-. THE LD. AR FOR THE ASSESSEE SUBMITS THAT FOLLOWING WORKING OF REALLOCATION. EXPENSES % APPLIED TOTAL EXPENSES ALLOCATION TO BUT THE UNIT BY AO EXPENSES ARE ALLOCATED BY THE ASSESSEE (EXCESS) SHORT ALLOCATION PACKAGING AND DELIVERY CHARGES 39% 1468999842/- 57290938/- 52126085/- 51,64,853/- ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 7 ANALYTICAL EXPENSES 39% 32787107/- 12786972/- 7053988/- 57,32,984/- ADVERTISEMENT ON SALE PROMOTION EXPENSES 39% 121863844/- 47526899/- 77919769/- (30392870) THE AO HAS TAKEN IT NILL TOTAL (A) (1,94,95,033) DEPRECIATION ON HO ASSESTS 39% 21805765/- 8504248/- 0 8504248/- R&D EXPENSES 39% 102225954/- 39868122/- 0 39868122 SUB TOTAL (B) 48372370/- GROSS TOTAL A+B 28877337/- AS PER AO ORDER 59270207/- 8. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMIT THAT THE ALLOCATION MADE BY ASSESSING OFFICER IN RESPECT OF PACKAGING AND DELIV ERY CHARGES, ANALYTICAL EXPENSES AND ADVERTISEMENT ON SALE PROMOTION EXPENS ES RESULTS IN INCREASING THE PROFIT OF ELIGIBLE UNDERTAKING BY 1,94,95,033/-. THE LEARNED AR FOR ASSESSEE SUBMIT THAT IF THE BASIS OF ALLOCATION MAD E BY ASSESSING ACING OFFICER IS UPHELD, THE SAME SHOULD BE FOLLOWED IN R ESPECT ALL THE ITEMS AND NOT ON SELECTIVE BASIS AS HAS BEEN DONE BY HIM BY N OT REALLOCATION OF THE EXPENSES TO THE EXTENT OF PACKAGING & DELIVERY CHAR GES, ANALYTICAL EXPENSES AND ADVERTISEMENT ON SALE PROMOTION EXPENSES. THERE FORE, THE LEARNED AR SUBMITS THAT RELOCATION OF THE EXPENSES TO THE EXTE NT OF PACKAGING DELIVERY CHARGES, ANALYTICAL EXPENSES ARE AND ADVERTISEMENT ON SALE EXPENSES SHOULD BE DELETED. THE LEARNED AR FURTHER SUBMITS THAT ISS UE OF REALLOCATION OF ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 8 PACKAGING AND DELIVERY CHARGES, ANALYTICAL EXPENSES AND ADVERTISEMENT ON SALE PROMOTION EXPENSES HAS BEEN DECIDED IN ASSESSE ES OWN CASE IN ASSESSEES FAVOUR BY TRIBUNAL IN ASSESSMENT YEAR 20 08-09 IN ITA NO. 7373/MUMBAI/2011, DATED 23.10.2012.. AND THE ISSUE OF REALLOCATION OF DEPRECIATION ON HEAD OFFICE ASSERTS AND R&D EXPENSE S HAS BEEN REMANDED BACK TO THE FILE OF ASSESSING OFFICER BY THE TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.4478/MUMBAI/2 012 DATED 09.10.2013, THE LEARNED AR FURTHER SUBMITS THAT TO THAT EXTENT THE MATTER MAY BE RESTORED TO THE ASSESSING OFFICER WITH SIMILAR D IRECTIONS. 9. ON THE OTHER HAND THE LEARNED AR FOR THE REVENUE SU PPORTED THE ORDER OF ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. PERUSAL OF THE ORDER OF THE TRIBUNAL ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 SHO WS THAT ON SIMILAR ISSUE OF REALLOCATION OF PACKAGING AND DELIVERY CHARGES, ANALYTICAL EXPENSES AND ADVERTISING AND SALE PROMOTION EXPENSES, THE ISSUE WAS DECIDED IN FAIR OF ASSESSEE. 11. AS REGARDS THE ISSUE RAISED IN GROUND NO.2 REL ATING TO ALLOCATION OF OVERHEAD EXPENSES TO BADDI UNIT ENTITLED FOR DEDUCT ION U/S 80IC, IT IS OBSERVED THAT THE BASIS ADOPTED BY THE ASSESSEE FOR APPORTIO NMENT OF HO AND OTHER COMMON EXPENSES OF BADDI UNIT WAS NOT FOUND TO BE A CCEPTABLE BY THE AO. ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 9 ACCORDING TO HIM, THE COMMON EXPENSES SHOULD BE APP ORTIONED ON PRORATE BASIS IN THE RATIO OF SALES AND ACCORDINGLY ADOPTIN G THE SAID BASIS, ADDITIONAL EXPENSES ATTRIBUTABLE TO THE BADDI UNIT WERE WORKE D OUT BY THE AO AT RS.5,63,14,836/- AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IC WAS RESTRICTED BY HIM. ON APPEAL, THE LEARNED CIT(APPEA LS) ACCEPTED THE BASIS ADOPTED BY THE ASSESSEE FOR APPORTIONMENT OF COMMON EXPENSES TO BADDI UNIT FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEE' S OWN CASE FOR ASSESSMENT YEA 2007-08 AS WELL AS THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2003-04 ON A SIMILAR ISSUE. 12. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR HE ASSESSEE HAS FILED A COPY OF THE ORDER OF THE TRIBUNAL DATED 11T H SEPT., 2009 PASSED IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2001-02 TO 2004-05 AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE WAS CONSIDERED AND DECIDED BY THE TRIBUNAL IN PARAGRAPH NO. 45 OF THE SAID ORDER. AS NOTED BY THE TRIBUNAL THEREIN, THE REALLOCATION OF EXPENSES WAS MADE BY THE AO FOR THE REASONS STATED IN THE BLOCK ASSESSMENT COMPLETED IN THE CASE OF THE ASSES SEE ON 27-02-2004. AS FURTHER NOTED BY THE TRIBUNAL, THE SAID BASIS ADOPT ED BY THE AO IN THE BLOCK ASSESSMENT FOR ALLOCATION OF EXPENSES, HOWEVER, WAS NOT ACCEPTED BY THE LEARNED CIT(APPEALS) WHILE DISPOSING OF THE APPEAL FILED BY THE ASSESSEE AGAINST THE BLOCK ASSESSMENT ORDER AND THE ADDITION MADE BY THE AO BY RESTRICTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB WAS DELETED. SINCE THE SAID ORDER OF THE LEARNED CIT(APPEALS) GIVING R ELIEF TO THE ASSESSEE ON THIS ISSUE WAS NOT CHALLENGED BY THE REVENUE AND HAD BEC OME FINAL, THE TRIBUNAL ACCEPTED THE BASIS OF ALLOCATION ADOPTED BY THE ASS ESSEE AND DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. AS THE ISSUE INVOL VED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS REL EVANT THERETO ARE SIMILAR TO THAT OF THE EARLIER YEARS DECIDED BY THE TRIBUNAL VIDE I TS ORDER DATED 11TH SEPT., 2009, WE RESPECTFULLY FOLLOW THE SAID ORDER AND UPH OLD THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) GIVING RELIEF TO THE ASSE SSEE ON THIS ISSUE. ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 10 11. FURTHER ON SIMILAR SET OF FACTS THE ISSUE OF REALLO CATION OF DEPRECIATION ON HEAD OFFICE ASSETS AND RESEARCH UNDER DEVELOPMENT E XPENSES HAS BEEN RESTORED BACK TO THE FILE OF ASSESSING OFFICER IN A PPEAL FOR ASSESSMENT YEAR 2009 -10. THE COORDINATE BENCH PASSED THE FOLLOWING ORDER; 15. WE HAVE HEARD THE RIVAL ARGUMENTS AND HAVE PER USED THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND THE FACTS AS NOTED BY T HE AO AND AS SUBMITTED BY THE DR. 16. ON GOING THROUGH THE VARIOUS DETAILS AND SUBMIS SIONS, WE ARE OF THE CONSIDERED VIEW THAT THOUGH THE ASSESSEE HAS ALLOCA TED PACKING & DELIVERY CHARGES AND ANALYTICAL EXPENSES, THERE IS A DIFFERE NCE IN THE ALLOCATION MADE BY THE ASSESSEE AND THE AO. ALSO WE FIND THAT R&D EXPE NSES AND DEPRECIATION HAVE NOT BEEN ALLOCATED AT ALL BY THE ASSESSEE. WE ARE AWARE THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS FOR HO AND BADDI UNIT , AND R&D UNIT, WHICH WOULD BENEFIT THE BUSINESS AS SUCH, LIKE WISE DEPRE CIATION WOULD ALSO HAVE SOME ELEMENT OF COMMONALITY OF THE HO AND R&D UNIT AND E LIGIBLE UNIT AT BADDI. WE ARE ALSO AWARE, CONSISTENTLY THE COORDINATE BENCHES HAVE BEEN ALLOWING THE CLAIM OF THE ASSESSEE, BUT TO IRON OUT THE DOUBTS I N THE MIND OF THE AO, IT IS NECESSARY THAT THE AO MUST FACTUALLY GET SATISFIED THAT THE ASSESSEE HAS ALLOCATED EXPENSES WHEREVER NECESSARY AND NOT ALLOCATED WHERE VER IT WAS NOT FOUND TO BE NOT NECESSARY. BOTH THE PARTIES HAVE NO OBJECTION I F THE MATTER IS RESTORED TO THE AO FOR VERIFICATION. WE, THEREFORE, RESTORE THE ISS UE TO THE FILE OF THE AO, WHO SHALL EXAMINE THE ALLOCABILITY OF EXPENSES OF R&D A ND DEPRECIATION IF AT ALL, RELYING ON THE BOOKS AS MAINTAINED BY THE VARIOUS U NITS. 17. GROUND NO. 2 IS THEREFORE, ALLOWED FOR STATISTI CAL PURPOSES . ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 11 12. THEREFORE, CONSIDERING THE DECISION OF TRIBUNAL ON SIMILAR SET OF THE ISSUE RAISED BY ASSESSEE IN THE PRESENT APPEAL IS RESTORE D BACK TO THE FILE OF ASSESSING OFFICER TO ALLOW THE REALLOCATION OF PACK AGING AND DELIVERY CHARGES, ANALYTICAL EXPENSES AND ADVERTISEMENT & SALE PROMOT ION EXPENSES AS PER THE ORDER OF TRIBUNAL IN ASSESSMENT YEAR 2008-09. THE A SSESSING OFFICER IS ALSO DIRECTED TO VERIFY THE FACT AND PASS THE ORDER IN A CCORDANCE WITH THE DIRECTION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2009-10 ON REALLOCATION OF DEPRECIATION OF HEAD OFFICE AND R&D EXPENSES. NEEDLESS TO ORDER THAT BEFORE PASSING THE ORDER THE ASSESSING O FFICER SHALL GRANT OPPORTUNITY OF HEARING TO ASSESSEE AND TO FURNISH I TS DOCUMENTS AND SUBMISSIONS AND PASS THE ORDER IN ACCORDANCE WITH L AW. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 4627/MUM/2017 BY REVENUE ( ARISING ON ORDER U/S 154) 14. THE FACTS LEADING TO FILE THE PRESENT APPEAL IS TH AT THE ASSESSMENT FOR ASSESSMENT YEAR 2010-11 WAS COMPLETED UNDER SECTION 143(3) ON 28 TH MARCH 2013. THE ASSESSING OFFICER WHILE PASSING THE ASSES SMENT ORDER MADE REALLOCATING OF R&D EXPENSES OF 10,22,25,954 /-DEBITED TO THE PROFIT AND LOSS ACCOUNT, BETWEEN 80IC AND KNOWN 80 IC UNIT, TH EREBY REDUCE THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC BY 3,98,68,122/-. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE SAID ACTION OF AS SESSING OFFICER WAS ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 12 CONFIRMED. SUBSEQUENTLY, THE ASSESSING OFFICER ISSU ED NOTICE UNDER SECTION 154 DATED 15 TH NOVEMBER 2014, FOR PROPOSING TO RECOMPUTE THE DEDU CTION UNDER SECTION 35 (2AB), ON THE BASIS OF INFORMATION AVAILABLE FROM DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH (D SIR) WEBSITE CONCERNING THE EXPENDITURE INCURRED ON R&D ACTIVITIES BY ASSES SEE. THE ASSESSEE FILED ITS REPLY DATED 4 TH DECEMBER 2014, WHICH WAS DULY ACCEPTED BY ASSESSIN G OFFICER. HOWEVER, THE ASSESSING OFFICER RECOMPUTED THE ALLOCATION OF R&D EXPENSES OF BADDI UNIT WHICH WAS ELIGIBLE FOR DEDUC TION UNDER SECTION 80IC, ON THE GROUND THAT THE REALLOCATION OUGHT TO HAVE B EEN MADE ON THE BASIS OF WEIGHTED DEDUCTION CLAIMED UNDER SECTION 35 (2AB) A ND NOT ON THE BASIS OF AMOUNT DEBITED/CHARGED TO THE PROFIT AND LOSS ACCOU NT. ACCORDINGLY THE ASSESSING OFFICER REDUCE THE CLAIM OF DEDUCTION UND ER SECTION 80IC BY 3,93,39,283/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER THE ASSESSEE FILED APPEAL BEFORE LEARNED COMMISSIONER (APPEALS) WHEREI N IT WAS HELD THAT ASSESSING OFFICER ERRONEOUSLY EXERCISE JURISDICTION UNDER SECTION 154. THUS, AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER (APP EALS) THE REVENUE HAS FILED PRESENT APPEAL BEFORE THE TRIBUNAL. 15. WE HAVE HEARD THE SUBMISSION OF LEARNED DR FOR THE REVENUE AND THE LEARNED AR OF THE ASSESSEE AND GONE THROUGH THE ORDER OF TH E LOWER AUTHORITIES. THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF A SSESSING OFFICER. THE ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 13 LEARNED DR FURTHER SUBMITS THAT MATTER OF APPORTION MENT WAS NOTE A DEBATABLE ISSUE AS HELD BY LEARNED COMMISSIONER (AP PEALS). 16. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SU PPORTED THE ORDER OF COMMISSIONER (APPEALS). THE LEARNED AR FURTHER SUBM IT THAT ISSUE OF A ALLOCATION OF R& D EXPENSES OF BADDI UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC HAS BEEN REMANDED BACK TO THE ASSESSIN G OFFICER IN EARLIER YEARS TO DETERMINE AS TO WHETHER R&D EXPENSES IS RELATABL E TO BADDI UNIT. THEREFORE, THE QUESTION OF THE QUANTUM OF ALLOCATIO N ITSELF BECOME A DEBATABLE ISSUE AND, HENCE, OUTSIDE THE PURVIEW OF SECTION 154. THE LEARNED AR FURTHER SUBMIT THAT EVEN IF ALLOCATION OF R&D EX PENSES HAS TO BE MADE TO BADDI UNIT, THE ALLOCATION SHOULD BE AS PER THE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT OR AS COMPUTED UNDER SECTIO N 35(2AB) ITSELF DEBATABLE. THE LEARNED AR FURTHER SUBMIT THAT ISSUE OF REALLOCATION OF R&D EXPENDITURE BEING CONSIDERED BY APPELLATE AUTHORITY , THE SAME WAS OUTSIDE THE PURVIEW OF SECTION 154. IN SUPPORT OF HIS SUBMI SSION THE LEARNED AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE G AUHATI HIGH COURT IN P DAS & CO. VS DCIT (217 ITR 29 GAU HC) AND CIT VERS US SHRI EKLINGI TRUST (250 ITR 699 RAJ HC). THE LEARNED AR FURTHER SUBMITS THAT ISSUE OF ALLOCATION OF R& D EXPENSES WAS NOT RAISE IN THE SH OW CAUSE NOTICE OR DURING THE COURSE OF HEARING OF PROCEEDINGS UNDER S ECTION 154. THE LEARNED ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 14 AR SUBMITTED THAT THE SHOW CAUSE NOTICE TO THE ASSE SSEE WAS IN RESPECT OF R&D EXPENSES AS PER INFORMATION AVAILABLE ON THE D SIR WEBSITE AND NOT FOR ALLOCATION OF R&D EXPENSES TO THE BADDI UNIT. THERE FORE, THE ORDER PASSED UNDER SECTION 154 IS ERRONEOUS BEING CONTRARY TO TH E PRINCIPLE OF NATURAL JUSTICE. 17. WE HAVE CONSIDERED THIS RIVAL SUBMISSION OF PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES. WE HAVE ALSO DELIBERATED ON VARI OUS CASE LAW RELIED BY LEARNED AR OF THE ASSESSEE. WE HAVE NOTED THAT THE ISSUE ON WHICH ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 154 FOR RECTIFI CATION, WAS THE SUBJECT MATTER OF APPEAL BEFORE LEARNED COMMISSIONER (APPEA LS). WE ARE FURTHER NOTED THAT THE ALLOCATION/REALLOCATION OF VARIOUS E XPENSES OF ELIGIBLE UNIT WAS UPHELD BY LEARNED COMMISSIONER (APPEALS). HOWEVER, ON FURTHER APPEAL BEFORE THE TRIBUNAL WE HAVE ALLOWED CERTAIN EXPENSE S AND RESTORED THE TWO COMPONENTS OF THIS ISSUE TO THE ASSESSING OFFICER B Y FOLLOWING THE ORDER OF TRIBUNAL IN EARLIER YEARS. THE LEARNED AR OF THE AS SESSEE VEHEMENTLY ARGUED BEFORE US THAT THE ISSUE OF THE QUANTUM OF ALLOCATI ON ITSELF BECOME A DEBATABLE ISSUE AND, HENCE, OUTSIDE THE PURVIEW OF SECTION 154. WE FIND MERIT IN THE SUBMISSION OF LEARNED AR OF THE ASSESS EE AS THE SIMILAR ISSUE WAS RESTORE BACK TO THE FILE OF ASSESSING OFFICER I N THE APPEAL OF EARLIER YEARS. ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 15 18. THE LEARNED AR FOR ASSESSEE IN HIS OTHER SUBMISSION HAS ALSO VEHEMENTLY SUBMITTED THAT THE HONBLE GAUHATI HIGH COURT IN CA SE OF P. DAS & CO. (SUPRA) WHEREIN IT WAS HELD THAT WHEN APPEAL IS FIL E RELATING TO A MATTER AND SAME WAS CONSIDERED OR DECIDED TO BE TREATED TO HAV E BEEN CONSIDERED OR DECIDED BY APPELLATE AUTHORITY, IT IS NO LONGER OPE N FOR ASSESSING OFFICER TO REOPEN OR REAGITATE OR RECTIFY THE SAID ISSUE, WHIC H WE CONCUR. 19. FURTHER THE HONBLE RAJASTHAN HIGH COURT IN CIT VER SUS SHRI EKLINGJI TRUST (SUPRA) HELD THAT SECTION 154(1A) DOES NOT PERMIT R ECTIFICATION OF THE ORIGINAL ORDER IN RESPECT OF WHICH APPEAL HAS BEEN TAKEN TO THE SUPERIOR AUTHORITY AND THAT MATTER HAS BEEN SUBJECTED TO APPELLATE DECISIO N. MOREOVER, WE HAVE NOTED THAT THE LEARNED COMMISSIONER (APPEALS) WHILE GRANTING RELIEF TO THE ASSESSEE HELD THAT A LOW CONCERN OF COMMON EXPENSES INCURRED TO VARIOUS UNITS, ITSELF IS A DEBATABLE ISSUE AND THE ISSUE AS CONSIDERED BY ASSESSING OFFICER IN THE IMPUGNED RECTIFICATION ORDER UNDER S ECTION 154 OF THE ACT OF ALLOCATION OF CLAIM UNDER SECTION 35 OF THE ACT TO VARIOUS UNITS IS ALSO DEBATABLE, PARTICULARLY WHEN ASSESSING OFFICER WHIL E COMPUTING THE GEN ASSESSMENT HAD NOT WON ANY FINDING ON SUCH ISSUE TH EREFORE THE SAME IS BEYOND THE PURVIEW OF PROVISION OF SECTION 154 OF T HE ACT. THE LEARNED COMMISSIONER (APPEALS) HAS CLEARED THE HELD THAT CO NCEPT OF ALLOCATION OF COMMON EXPENSES TO VARIOUS UNITS IS TO COMPUTE CORR ECT AND TRUE PROFIT OF ITA NO. 4538,4590&4627/M/2017 INDOCO REMEDIES LTD 16 VARIOUS UNIT TO ENSURE THAT ASSESSEE DOES NOT GET E XCESS CLAIM BY INFLICTING THE PROFIT OF ELIGIBLE UNIT AND DEFLATING THE PROF IT OF THE UNIT WHICH ARE NOT ELIGIBLE FOR DEDUCTION. CONSIDERING THE ABOVE FACTU AL AND LEGAL POSITION, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDE R PASSED BY LEARNED COMMISSIONER (APPEALS), WHICH WE ARE AFFIRMS. IN TH E RESULT THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 20. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 27-08-2019. SD/- SD/- (RAJESH KUMAR) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE : 27 TH AUGUST, 2019 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI