DCIT 10(2), MUMBAI V. BANNER PHARMA CAPS P. LTD, MUMBAI

ITA 5061/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1344 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 11-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA; DR V ANJANEYULU
• Assessee Lawyers: MEENA JAIN
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 5061/MUM/2008 (ASSESSMENT YEAR: 2003-04) DCIT 10(2), ROOM NO.432,4 TH FL, AAYAKAR BHAVAN M K ROAD, MUMBAI-400020 .APPELLANT VS M/S BANNER PHARMA CAPS PVT LTD. NOW UNIVERSAL MEDICARE P. LTD. CAPSULATION PREMISES, DEONAR, SION TROMBAY ROAD MUMBAI-400088. PAN : AAACH1173N RESPONDENT APPELLANT BY : DR.V.ANJANEYULU AND SHR I S S RANA RESPONDENT BY : MS.MEENA JAIN O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 1.11.2006 OF CIT(A) FOR HE ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE ARISES IN THE APPEAL OF THE REVEN UE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE REMISSION OF LIAB ILITY TO THE EXTENT OF RS.43,97,601/- TOWARDS COST OF FIXED ASS ET CANNOT ITA NO. 5061/MUM/2008 (ASSESSMENT YEAR: 2003-04) 2 TREATED AS INCOME UNDER THE PROVISIONS OF SECTION 28(IV) OF THE ACT. 3. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR AND CONSIDERED THE RELEVANT RECORD. THE LEARNED AR OF THE ASSESSEE HAS POINTED OUT THAT THIS ISSUE HAS BEEN C ONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES SISTER C ONCERN M/S BANNER PHARMA CAPS (INDIA) IN ITA NO.7113/MUM/200 8 (AY 2004-05) VIDE ORDER DATED 24.2.2010. 4. AFTER CONSIDERING THE RELEVANT CONTENTIONS, AT T HE OUTSET, WE NOTE THAT THE IDENTICAL ISSUE HAS BEEN CONSIDE RED AND DECIDED BY THIS TRIBUNAL IN THE CASE OF DCIT V/S M /S BANNER PHARMA CAPS (INDIA) PVT LTD, A SISTER CONCERN OF TH E ASSESSEE VIDE ORDER DATED 24.02.2010 AND ADJUDICATED UPON TH E ISSUE IN ASSESSEES FAVOUR VIDE PARAGRAPH 4 THEREIN, WHICH IS AS UNDER: 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING TAXABILITY OF THE SUM OF RS.11,04,426/- RECEIVED BY THE ASSESSEE FROM M/S BANNER PHARMACAPS INC AS REIMBURSEMENT TOWARDS THE CAPITAL EXPENDITURE INCURRED IN CONNECTION WITH THE SETTING UP OF R AND D DIVISION-BANNER PHARMACAPS INC IT IS CLEAR FROM THE ITEM (I) OF THE AUDIT N OTES IN THE SCHEDULE 19 PLACED AT PAGE 5 OF THE PAPER BOOK THAT FOR SETTING UP OF THE RESEARCH AND DEVELOPMENT DIVISION THE ASSESSEE HAD INCURRED EXPENDITURE BOTH THE REVENUE AND CAPITAL IN RESPECT OF WHICH THE ASSESSEE HAD RECEIVED REIMBURSEMENT FROM BANNER PHARMACAPS INC. THE REIMBURSEMENT ON REVENUE ACCOUNT HAD BEEN ADJUSTED AGAINST THE REVENUE EXPENDITURE AND THE REIMBURSEMENT ON CAPITAL ACCOUNT WHICH HAD BEEN CAPITALIZED IN THE BALANCE SHEET HAD BEEN TRANSFERRED TO THE CAPITAL RESERVE ACCOUNT. THERE IS NO DISPUTE THAT THE ITA NO. 5061/MUM/2008 (ASSESSMENT YEAR: 2003-04) 3 AMOUNT HAD BEEN RECEIVED TOWARDS THE COST OF CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE. IN CASE OF MLAHINDRA AND MAHINDS LTD (SUPRA) THERE WAS REMISSION OF LIABILITY ON ACCOUNT OF LOANS TAKEN BY THE ASSESSEE HAD TAKEN FOREIGN CURRENCY LOAN FOR PURCHASE OF TOOLING. SUBSEQUENTLY THE LOANS HAS BEEN WAIVED. THE HONBLE HIGH COURT HELD THAT LOAN WAIVED WAS IN CONNECTION WITH THE PURCHASE OF CAPITAL ASSETS AND THEREFORE PROVISIONS OF SECTION 28(IV) WERE NOT ATTRACTED. IN THIS CASE ALSO. REIMBURSEMENT HAS BEEN RECEIVED IN CONNECTION WITH ACQUISITION OF CAPITAL ASSETS AND THEREFORE FOLLOWING THE SAID JUDGMENT, THE AMOUNT WILL NOT BE ASSESSABLE AS INCOME UNDER SECTION 28(IV). MOREOVER, IN THIS CASE BENEFIT HAS BEEN RECEIVED I N CASH AND ON THIS GROUND ALSO, PROVISIONS OF SECTION 28(IV) WILL NOT BE APPLICABLE. THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION ON THE EXPENDITURE CAPITALIZED WHICH IS CLEAR FROM SCHEDULE OF ASSETS PLACED AT PAGE 12 OF THE PAPER BOOK. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAKING INTO ACCOUNT THE JUDGMENT OF HONBLE HIGH COURT OF MUMBAI (SUPRA). IN OUR VIEW THE REIMBURSEMENT OF EXPENDITURE CANNOT BE TAXED AS INCOME UNDER SECTION 28(IV). WE SEE NO INFIRMITY I N THE ORDER OF CIT(A) DELETING THE ADDITION AND THE SAME IS THEREFORE UPHELD. RESPECTFULLY FOLLOWING THE DECISION OF A CO-ORDI NATE BENCH OF THE TRIBUNAL IN ASSESSEES SISTER CONCERN (SUPR A), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. 5 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 24.06.2010 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M E MBER MUMBAI, DATED 24TH JUNE 2010 SRL:4510 ITA NO. 5061/MUM/2008 (ASSESSMENT YEAR: 2003-04) 4 COPY TO: 1. DCIT 10(2), ROOM NO.432,4 TH FL, AAYAKAR BHAVAN M K ROAD, MUMBAI-400020 2. M/S BANNER PHARMA CAPS PVT LTD. NOW UNIVERSAL MEDICARE P. LTD. CAPSULATION PREMISES, DEONAR, SION TROMBAY ROAD MUMBAI-400088. 3. CIT-(VI), MUMBAI 4. CIT(A)-VI, MUMBAI 5. DR B BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI