The DCIT, Circle-4(1)(1), Ahmedabad V. Schutz Dishman Biotech Ltd., Ahmedabad

ITA 525/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8187 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TALWANI
• Assessee Lawyers: T P HEMANI
• Keywords: Unexplained investment; Depreciation; Cost of acquisition
• Section: 271(1)(c); 10B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMTMADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.525/AHD/2015 & CROSS APPEAL NO.49/AHD/2015 ( / ASSESSMENT YEAR :2009-10) DCIT, CIRCLE 4(1)(1), AHMEDABAD. / VS. SCHUTZ DISHMAN BIOTECH LTD., BHADRARAJ CHAMBERS, NR. SWASTIK CROSS ROAD, NAVRANGPURA, AHMEDABAD 380 009. ./ ./ PAN/GIR NO. :AACCS 0988 C ( / APPELLANT ) .. ( / RESPONDENT )/CROSS OBJECTOR / APPELLANT BY : SHRI VINOD TALWANI, SR. D.R. / RESPONDENT BY : SHRI T.P. HEMANI , A.R. / DATE OF HEARING 29/10/2018 !'# / DATE OF PRONOUNCEMENT 01/01/2019 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THISAPPEAL BY THE REVENUE ALONG WITH A CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINSTTHE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS)8, AHMEDABAD[CIT(A) IN SHORT] VIDE AP PEAL NO.CIT(A)- 8/DCIT C-8/89/2013-14DATED 15.12.2014 ARISING IN TH E MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3)OF THE INCOME TAX ACT, ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 2 - 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 11.03.2013RELEVANT TO ASSESSMENT YEAR (AY)2009-10. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE AR E AS UNDER:- 1). WHETHER THE LD. COMMISSIONER OF INCOME-TAX (A PPEALS) IS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITIO N OF RS.1,70,77,868/- MADE ON ACCOUNT OF UNEXPLAINED INV ESTMENT IN PURCHASES OF RAW MATERIALS AND RS.69,55,191/- ON AC COUNT OF INFLATION OF PURCHASES OF RAW MATERIALS U/S.69 OF T HE ACT.' 2). 'WHETHER THE LD. COMMISSIONER OF INCOME-T AX (APPEALS) IS RIGHT IN LAW AND ON FACTS IN ENHANCING THE CLAIM OF DED UCTION U/S.10B OF THE ACT MADE BY THE ASSESSEE.' 3). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4). IT IS THEREFORE, PRAYED THAT THEORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE SET-A -SIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTO RED. 3. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT LD .CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS.1,70,77 ,868/- AND RS.69,55,191/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PURCHASE OF RAW MATERIALS AND INFLATION OF PURCHASES RESPECTIVE LY. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND ENGAGED IN THE MANUFACTURING BUSINESS OF PHARMACEUT ICALS AND FINE CHEMICALS. THE AO DURING THE ASSESSMENT PROCEEDING OBSERVED THE ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 3 - CERTAIN DIFFERENCE BETWEEN THE ACTUAL CONSUMPTION O F RAW MATERIAL VIS-- VIS STANDARD CONSUMPTION PRESCRIBED UNDER THE EXIM INPUT-OUTPUTNORMS (DUTY EXEMPTION SCHEMES) 2002-2008. ON THE QUESTION BY THE AO ABOUT THE DIFFERENCE AS DISCUSSED ABOVE, THE ASSESSEE VID E REPLY DATED 28.12.2012 SUBMITTED AS UNDER: '1. STATEMENT SHOWING CONSUMPTION OF RAW-MATERIALS AS PER OUR BOOKS OF ACCOUNTS VIZ-A-VIZ AS PER THE INPUT OUTPUT NORMS. AS REQUIRED BY YOU, WE HAVE WORKED OUT THE CONSUMPT ION OF RAW- MATERIAL FOR EACHITEM OF OUR FINISHED GOODS AS PER OUR BOOKS OF ACCOUNTS AND THAT AS PER THE INPUT OUTPUT NORMS OF MINISTRY OF COMMERCE. GOVT. OF INDIA. PLEASE NOTE THAT DURING THE YEAR UNDER REVIEW, WE H AD PRODUCED AND SOLD THE FOLLOWING FINISHED GOODS. A. CHLOREXDINE ACETATE B, GHLOREXDINE BASE C. CHLOREXDINE GLUCONATE 20% SOLUTION D, CHLOREXDINE HYDRO CHLORIDE E.PROGUNAIL HCL F. FLUPIRTINE MALEATE OUT OF THE ABOVE PRODUCTS, THE MINISTRY OF COMMERCE HAS FIXED NORMS IN RESPECT OF FIRST FOUR PRODUCTS ONLY. THE TWO REMAIN ING PRODUCTS NAMELY, PROGUNAIL HCL & FLUPIRTINE MALEATE ARE SUCH PRODUCT S FOR WHICH NO NORMS HAVE BEEN FIXED. WE ENCLOSE BY WAY OF ANNEXUR E-1 HERETO, THE COPIES OF RELEVANT PAGES OF INPUT-OUTPUT NORMS (DUT Y EXEMPTION SCHEMES) 2004-2009. WE HAVE WORKED OUT CONSUMPTION AS PER BOOKS AND AS PER NORMS AS REQUIRED BY YOU. WE ENCLOSE THE FOLLOWING PAPERS IN THIS CONNECTION. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 4 - A) A STATEMENT GIVING PRODUCTION OF A/I FINISHED GO ODS ITEMS AS ANNEXURE-2. B) A STATEMENT SHOWING ACTUAL CONSUMPTION OF RAW-MATERIAL AS PER BOOKS OF ACCOUNTS AS ANNEXURE-3. C) A STATEMENT SHOWING MONTH WISE DETAILS OF CONSUMPTION OF RAW- MATERIAL AS PER INPUT OUTPUT NORMS AND COMPARISON O F CONSUMPTION AS PER BOOKS AND AS PER NORMS AS ANNEXU RE-4. D) A SUMMARY OF TOTAL CONSUMPTION AS PER BOO KS AND AS PER NORMS AS ANNEXURE-5. 2. EXPLANATION REGARDING VARIATION IN CONSUMPTION WE OFFER OUR DETAILED EXPLANATION REGARDING VARIATI ON IN CONSUMPTION AND REASONS FOR REQUEST OF NOT ADDING THE DIFFERENC E IN CONSUMPTION TO OUR TAXABLE INCOME BY WAY OF ANNEXURE-6 HERETO. WHILE WE HAVE DEALT WITH THE ABOVE ISSUE AT LENGTH IN ANNEXURE-6, WE SUMMARISE OUR CONTENTION /SUBMISSION ON THIS AS FOL LOWS. 1. DIFFERENCES DUE TO CHANGES IN FORMULA/COMPOSITIO N OF RAW- MATERIALS 2. HAZARDOUS MATERIAL NO LONGER USED 3. USE OF CATALYST MATERIALS NOT CONSIDERED IN FIXING NORMS 4. USE OF POLLUTION CAUSING MATERIALS IS BANNED 5. OUR FINISHED PRODUCTS DETAILS 6. REASONS FOR NON-APPLICABILITY OF NORMS TO US 7. DIFFERENCE DUE TO OUR R&D EFFORTS 8. OUR SUBMISSION FOR NOT DISALLOWING THE DIFFERENCES 9. ACCEPTANCE OF CONSUMPTION AS PER BOOKS BY THE E XCISE AUTHORITIES 10. ACCEPTANCE OF CONSUMPTION AS PER BOOKS BY THE SALES TAX VAT AUTHORITIES 11. MAINTENANCE OF QUANTITATIVE RECORDS BY THE COM PANY 12. ACCEPTANCE OF CONSUMPTION AS PER BOOKS BY STAT UTORY AUDITORS 13. NO SUCH REQUIREMENT AS PER ACCOUNTING STANDARDS 14. POSITION OF PAST ASSESSMENTS, APPEALS AND ACCE PTANCE OF OUR CONTENTIONS BY APPELLATE AUTHORITIES. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 5 - IN THE LIGHT OF THE ABOVE DISCUSSION, WE HEREBY REQ UEST YOU NOT TO MAKE ADDITION TO OUR TOTAL INCOME ON ACCOUNT OF VARIATIO N IN CONSUMPTION OF RAW-MATERIAL.' HOWEVER, THE AO DISAGREED WITH THE SUBMISSION OF TH E ASSESSEE AND WORKED OUT THE VALUE OF SHORT CONSUMPTION OF RAW MA TERIAL OF RS.1,70,77,868/- WHICH WAS TREATED AS AN UNDISCLOSE D INVESTMENT. SIMILARLY, THE AO ALSO WORKED OUT EXCESS CONSUMPTIO N OF RAW MATERIAL OF RS.69,55,191/- WHICH WAS TREATED AS INFLATED PURCHA SES MADE BY THE ASSESSEE. THUS, THE AO MADE THE ADDITION OF RS.2,40 ,33,059/- TO THE TOTAL INCOME OF THE ASSESSEE FOR UNDISCLOSED INVESTMENT A ND INFLATED PURCHASES. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD.CI T(A) WHO HAS DELETED THE ADDITION MADE BY THE AO. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US SUBMITTED THAT IN THE IDENT ICAL FACTS AND CIRCUMSTANCES IN THE OWN CASE OF THE ASSESSEE IN IT A NO.954 & 1229/AHD/2012 PERTAINING TO THE A.Y. 2007-08 DELETE D THE ADDITION MADE BY THE AO. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 6 - 6.1 THE LD. AR ALSO SUBMITTED THAT THE ORDER PASSED BY THE HONBLE ITAT WAS SUBSEQUENTLY CONFIRMED BY THE HONBLE GUJA RAT HIGH COURT PERTAINING TO THE A.Y. 2002-03 IN TAX APPEAL NO.118 2 OF 2008 VIDE ORDER DATED 12.08.2016. 7. ON THE OTHER HAND LD. DR VEHEMENTLY SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT TH E IDENTICAL ISSUE WAS DECIDED BY THIS TRIBUNAL IN THE CASE OF THE ASSESSE E IN ITA 1229/AHD/2012 FOR THE AY 2007-08 VIDE ORDER DATED 5 TH JUNE 2018. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: 13. BRIEF FACTS IN THIS REGARD ARE THAT THE ID.AO NOTICED THAT THERE WAS A VARIATION IN ACTUAL CONSUMPTION OF RAW-MATERI AL AND STANDARD CONSUMPTION OF MATERIAL. TO THE SHOW CAUSE, ASSESS, -E EXPLAINED REASONS FOR THE VARIATIONS IN THE CONSUMPTION OF TH E RAW MATERIAL AS ALSO EXTENT OF AND HOW THE VARIATIONS ARISEN. HOWEV ER, THE LD.AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND BUSING H IS EARLIER ORDER FOR THE ASSESSMENT YEAR 2002-03 TO 2006-07, AN ADDITION OF RS.62,63.591/- ON ACCOUNT OF ITEMS CONSUMED LESS THAN THE STANDARD NORMS AND FURTHER ADDITION OF RS. 1,43,79,263/- ON ACCOUNT OF ITEMS C ONSUMED MORE THAN THE STANDARD NORMS WERE MADE. THESE TWO ADDITIONS W ERE CHALLENGED BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO FOLLO IWNG HIS ORDER OF THE ASSESSMENT YEAR 2006-07 WHILE FOLLOWING THE ORDER I F THE TRIBUNAL IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004- 05 DELETED THE IMPUGNED ADDITIONS. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 7 - 14. AT THE OUTSET. LD. COUNSEL FOR THE ASSESSEE HA S PLACED ON RECORD COPY OF THE ORDER OF THE TRIBUNAL PASSED IN THE ASS ESSMENT YEAR 2005-06 AN 2006-07 IN ITA NO.2060/AHD/2009 AND 3L41/AHD/201 1 WHEREIN SIMILAR ADDITION HAS BEEN DELETED. THE LD. FIRST AP PELLATE AUTHORITY HAS FOLLOWED THE ORDER OF THE TRIBUNAL PASSED IN THE AS SESSMENT YEARS 2002- 03, 2003-04 AND 2004-05. THE RELEVANT OBSERVATION O F THE LD.CIT(A) READS AS UNDER: '4.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE ADDITION WA S MADE BY THE A. O. BY FOLLOWING THE ORDER OF THE A.O. FOR A. Y. 2002-03. THE SIMILAR ADDITION WAS ALSO MADE BY THE A.O. FOR A. Y. 2006-07 WHILE DECIDING OF THE APPELLANT FOR THAT YEAR. THE ADDITION HAVE BEEN DELETED BY ME BY FOLLOWING THE ORDER OF THE IT AT, AHMEDABAD IN THE CASE OF THE APPELLANT FOR A. YS. 2 002-03, 2003- 04 & 2004-05. ACCORDINGLY, THE ADDITION MADE BY THE A. O. IN THIS YEAR IS ALSO DIRECTED TO BE DELETED. THEREFORE , THE ADDITIONS OF RS.1,43,79,263/-ON ACCOUNT OF INFLATION OF PURCH ASE OF RAW MATERIALS AND RS.62,63,591/- U/S. 69 OF THE ACT IS DIRECTED TO BE DELETED. THE GROUNDS OF APPEAL ARE ACCORDINGL Y ALLOWED.' 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE THROUGH THE RECORD. WE FIND DIAL THE TRIBUNAL HAS DISCUSSED THI S ISSUE FROM PARA 4 TO 4.1 IN THE ASSESSMENT YEAR 2005-06 AND IN PARA 9 IN ASSESSMENT YEAR 2006-07. BASICALLY, THE TRIBUNAL HAS FOLLOWED ORDER PASSED IN THE ASSESSMENT YEAR 2003-04 AND 2005-06 ON THIS ISSUE A ND CONFIRMED THE ORDER OF THE LD.CIT(A). CONSIDERING THE SIMILARITY OF THE ISSUE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 8.1 WE FURTHER FIND THAT THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF THE ASSESSEE HAS ALSO DECIDED THE ISSUE IN ITS FAVO R IN TAX APPEAL NO.1182 OF 2008 PERTAINING TO THE A.Y. 2002-03 VIDE ORDER DATED 12.08.2016. THE RELEVANT EXTRACT OF THE ORDER IS RE PRODUCED BELOW: ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 8 - 7. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. INVIEW OF THE OBSERVATIONS MADE BY THE TRIBUNAL, WE ARE OF THEOPI NION, THAT THE ASSESSEE WAS MANUFACTURING PHARMACEUTICAL, MEDICINE S, WHICH ARE BEING EXPORTED. THE ASSESSEE WAS MAINTAININ G THE NORMS WHICH ARE PRESCRIBED BY THE GOVERNMENT OF INDIA FOR A PARTICU LAR PHARMACEUTICAL MEDICINE WHICH IS TO BE EXPORTED. SINCE THERE WAS A VARIATION IN THE RATIO, THE ASSESSING OFFICER MADE ADDITION BASED ON THE STATEMENT OF THE GENERAL MANAGER, IN-CHARGE PRODUCTION. IN OUR VIEW, THE ASSESSING OFFICER HAS BASED HIS ADDITION ON THE BASIS OF THE DOCUMENTS WHICH ARE NOT AVAILABLE ON THE RECORD AND BASED ON THE STATEM ENT OF THE GENERAL MANAGER, IN-CHARGE PRODUCTION. WHETHER THE ASSESSEE HAS FOLLOWED THE PRESCRIBED NORMS IS NOT WITHIN THE PURVIEW OF THE I NCOME-TAX AUTHORITY, IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY HELD THAT THE CIT(A) WAS WRONG IN RELYING ON THE INPUT OUT CONSUMPTION RATIO. IN OUR VIEW, THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS ) HAVE GONE ON DIFFERENT DIRECTIONS. THEREFORE, THE VIEW TAKEN BY THE TRIBUNAL IS REQUIRED TO BE ACCEPTED. IN THAT VIEW OF THE MATTER , WE ANSWER ISSUE NO. 1 IN TAX APPEAL NO.1182 OF 2008 IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. IN VIEW OF THE ABOVE, AND RESPECTFULLY FOLLOWING TH E SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. THE SECOND ISSUE RAISED BY THE REVENUE IS THAT L D. CIT(A) ERRED IN ENHANCING THE CLAIM OF DEDUCTION U/S 10B OF THE ACT FOR RS.28,50,411/-. 10. THE ASSESSEE DURING THE YEAR HAS CLAIMED A DEDU CTION OF RS.28,50,411/- ON ACCOUNT OF FOREIGN EXCHANGE FLUCT UATION LOSS IN THE FOREIGN CURRENCY LOAN TAKEN BY THE ASSESSEE. AS SUC H, THE ASSESSEE HAS ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 9 - CLAIMED LOSS OF RS.28,50,411/- DUE TO CURRENCY FLUC TUATION AS ON 31-03- 2009. AS PER THE ASSESSEE, SUCH LOSS WAS INCURRED A S PER THE ACCOUNTING STANDARD AS WELL AS THE MERCANTILE SYSTEM OF ACCOUN TING AT THE END OF THE FINANCIAL YEAR DUE TO FLUCTUATION IN THE FOREIGN CU RRENCY. THE ASSESSEE ALSO CLAIMED THAT SIMILAR LOSSES WERE ALSO CLAIMED IN THE EARLIER YEARS AND THE GAINS WERE OFFERED TO TAX IN THE EARLIER YEARS. HOWEVER, THE AO DISAGREED WITH THE SUBMISSION OF TH E ASSESSEE AND TREATED THE IMPUGNED LOSS AS CAPITAL IN NATURE. THU S, THE SAME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD.C IT(A). THE ASSESSEE BEFORE THE LD.CIT(A) AMONG OTHER ARGUMENTS HAS MADE AN ALTERNATE CLAIM THAT EVEN THE DISALLOWANCES ARE MAD E ON ACCOUNT OF FLUCTUATION IN THE FOREIGN CURRENCY LOAN THE SAME W ILL BE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. THE LD.CIT(A) AFTER C ONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MAD E BY THE AO IN PART BY OBSERVING AS UNDER: WITH REGARD TOFURTHER SUBMISSION THAT LOST DISALLO WED SHOULD BE CONSIDEREDFOR THE PURPOSE OF ALLOWING DEDUCTION UND ER SECTION 10B, IT IS SEEN THAT ASSESSING OFFICER HAS OBJECTED TO ADMISSI ON OF THIS ADDITIONAL GROUND BY CITING DECISION OF SUPREME COURT IN CIT V S GOETZ INDIA LTD 157 TAXMANN 1(SC). 1 AM OF THE VIEW THAT THE ADDITI ONAL GROUND CAN BE ADMITTED IN APPEAL PROCEEDINGS BASED ON DECISION OF SUPREME COURT IN THE CASE OF NTPC LTD 229 ITR 383 (SC), ESPECIALLY W HEN ALL THE RELEVANT MATERIAL IS ALREADY AVAILABLE ON RECORD. T HIS GROUND OF APPEAL ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 10 - IS THEREFORE THE ADMITTED. FROM THE WORKING OF SECT ION 10B, IT IS SEEN THAT OUT OF THE TOTAL FOREX LOSS OF RS. 2850411, AN AMOUNT OF RS.2780464 WAS CLAIMED AGAINST EOU AND SI NCE THIS IS DISALLOWED THE ASSESSEE IS DEDUCTION UNDER SECTION 10 B WILL INCREASE BY AMOUNT OF RS. 2780464 AND BALANCE ADDITION OF RS . 69947 IS HEREBY CONFIRMED. THUS THIS GROUND IS PARTLY ALLOWED. BEING AGGRIEVED BY THE ORDER OFTHE LD.CIT(A) BOTH T HE REVENUE AND ASSESSEE ARE BEFORE US. 12. THE REVENUE IS IN APPEAL BEFORE US AGAINST ENHA NCEMENT OF EXEMPTION ALLOWED BY THE LD. CIT(A) ON ACCOUNT OF L OSSES IN THE FOREIGN CURRENCY LOAN WHEREAS THE ASSESSEE IS IN APPEAL AGA INST THE ORDER OF LD.CIT(A) WHEREIN THE IMPUGNED LOSS WAS TREATED AS CAPITAL IN NATURE. FIRST, WE TAKE UP REVENUES GROUND OF APPEAL: 13. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AO . ON THE OTHER HAND THE LD.AR SUPPORTED THE ORDER OF LD.CIT(A). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO AMBIGUITY ABOUT TH E ELIGIBILITY OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 10B OF THE AC T. THUS, IF ANY DISALLOWANCE IS MADE IN RESPECT OF THE UNIT ELIGIBL E FOR DEDUCTION U/S 10B OF THE ACT, THEN THE ASSESSEE WILL BE ENTITLED TODE DUCTION ON THE AMOUNT OF PROFIT ENHANCED BY SUCH DISALLOWANCE. IN THIS RE GARD, WE FIND RELEVANT ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 11 - TO REPRODUCE THE NECESSARY PORTION OF CIRCULAR NO.3 7 OF 2016 ISSUED BY CBDT DATED 02.11.2016 WHICH IS REPRODUCED BELOW:- 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED T HE SETTLED POSITION THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, 40(A )(IA), 40A(3), 43B, ETC. OF THE ACT AND OTHER SPECIFIC DISALLOWANCES, R ELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION H AS BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBL E BUSINESS, AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON THE P ROFITS SO ENHANCED BY THE DISALLOWANCE. IN VIEW OFTHE ABOVE, WE DO NOT FIND ANY REASON TO D ISTURB THE FINDING OF LD.CIT(A). HENCE THE GROUND OF APPEAL OF THE REVENU E IS DISMISSED. COMING TO ASSESSEES GROUND OF CO: 15. THE LEARNED AR BEFORE US SUBMITTED THAT THE ISS UE IS COVERED IN FAVOR OF THE ASSESSEE BY CBDT CIRCULAR NO. CIRCULAR NO.37 OF 2016 ISSUED BY CBDT DATED 02.11.2016. THEREFORE, THE LD. AR WITHOUT GOING INTO THE CONTROVERSY WHETHER THE IMPUGNED LOSS IS C APITAL IN NATURE RELIED ON THE CBDT CIRCULAR AS DISCUSSED ABOVE. ON THE OTH ER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW . 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT TH E IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOR OF THE ASSESSEE BY US VIDE PA RAGRAPH NO.14 OF THIS ORDER IN THE APPEAL OF THE REVENUE. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 12 - 16.1 AS THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT IN SUPPORT OF HIS GROUND OF APPEAL ON THE REASONING THAT HIS CASE IS ALREADY COVERED IN ITS FAVOR BY THE CBDT CIRCULAR AS DISCUSSED ABOVE. THER EFORE, WE ARE NOT INCLINED TO ADJUDICATE THE ISSUE RAISED IN THE CO. BY THE ASSESSEE. HENCE, WE DISMISS THE SAME AS INFRUCTUOUS. NOW COMING TO CROSS OBJECTION FILED BY THE ASSESSEE : 17. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL IN HIS CROSS OBJECTION: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.43,68 9/- U/S 36(1)(VA) R.W.S 2(24)(X) ON ACCOUNT OF ALLEGED LATE PAYMENT OF EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND, ESI , ETC. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, NO SUCH DI SALLOWANCE IS REQUIRED TO BE MADE. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF RS.28,50,411/- IN RESPECT OF FOREX LOSS BY HOLDING THE SAME TO BE CAPITAL IN NATURE. UNDER THE FACTS AND CIRCUMSTANCE S OF THE CASE, NO SUCH ADDITION IS REQUIRED TO BE MADE. 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE , LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN NOT GRANTI NG DEPRECIATION ON ENHANCED COST OF ACQUISITION ON ACCOUNT OF ADDIN G FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.28,50,411/- TO THE COST OF ASSETS. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND O N FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 13 - 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF ID. AO IN INITIATING PENALTY P ROCEEDINGS U/S 271(1)(C) OF THE ACT. 18. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 36(1)(VA) R.W.S. 2( 24)(X) OF THE ACT FOR RS.43,689/-. 19. THE AO DURING ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ASSESSEE FAILED TO DEPOSIT THE EMPLOYEE'S CONTRIBUTION TO PF /ESI WITHIN THE DUE DATE AS SPECIFIED UNDER THE RELEVANT ACT, RULE OR N OTIFICATION ISSUED THEREUNDER. THEREFORE, THE AO DISALLOWED THE SAME A FTER HAVING A RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH CO URT, IN THE CASE OF CIT VS. GSRTC REPORTED IN 41TAXMANN.COM 100 AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD.C IT(A) WHO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY ORDER OF THELD.CIT(A) ASSESSEE I S IN THE SECOND APPEAL BEFORE US. 21. THE LD. AR BEFORE US CONCEDED THE FACT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. GSTRC REPORTED IN 41TAXMANN.COM 100. HOWEVE R, THE LD. AR ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 14 - BEFORE US FURTHER SUBMITTED THAT THE DUE DATE FOR T HE DEPOSITING THE AMOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF/ESI IS TO BE SEEN FROM THE RELEVANT MONTH, IN WHICH SALARY WAS PAID TO THE EMP LOYEES AND NOT FROM THE MONTH IN WHICH SALARY BECAME DUE. THE LD. AR IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF THIS JURISDICTIONAL TR IBUNAL IN THE CASE OF SUZLON ENERGY LTD. VS. DCIT REPORTED IN 764 & 765/A HD/2018 VIDE ORDER DATED 27.06.2018, WHEREIN IT WAS HELD AS UNDER: WE MAY, HOWEVER, ADD THAT A CO-ORDINATE BENCH OF T HIS TRIBUNAL, IN THE CASE OF RAJJRATNA METAL INDUSTRIES LTD VS. ACIT (IT A NO.940/AHD/2015; ORDER DATED 22.09.2017), HAS OBSERVED AS FOLLOWS:- '3. ASSESSEE'S LATTER SUBSTANTIVE GROUND CHALLENGE S CORRECTNESS OF BOTH THE LOWER AUTHORITIES' ACTION DISALLOWING/ADDING A SUM OF RS.3,85,810/- U/S. 36(1 )(VA) R.W.S. 2(24) OF THE ACT ON ACCOUNT LATE PAYMENT OF EMPLOYE ES' CONTRIBUTION TO PF & ESI IN QUESTION. THERE IS NO D ISPUTE THAT HON'BLE JURISDICTIONAL HIGH COURT'S DECISION IN CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (2014) 366 ITR 170 (GUJ) UPHOLDS SUCH A DISALLOWANCE IN PRINCIPLE. THE ASSES SEE'S CASE HOWEVER IS THAT RELEVANT DUE DATE HAS TO BE SEEN NO T FROM THE RELEVANT MONTH OF SALARY BUT THE ONE PERTAINING TO ITS PAYMENT. HE THEN FILES A COMPUTATION CHART INDICATING IT TO HAVE PAID ABOVE EMPLOYEES' PF/ESI CONTRIBUTIONS ON 22.05.2009 AND 28.05.2009 AS AGAINST THE DUE DATES THEREOF FOLLOWI NG ON 20.06.2009. THE REVENUE FAILS TO DISPUTE THIS FACTU AL POSITION. WE THEREFORE QUOTE THIS TRIBUNAL'S CO-ORDINATE BENCH D ECISION IN KANOI PAPER & INDUSTRIES LTD. VS. ACIT 75 TTJ 448 T HAT THE RELEVANT DATE IN SUCH CASE IS THAT OF MONTH OF THE ACTUAL PAYMENT OF WAGES/SALARIES. WE THEREFORE RELY ON THE ABOVE C O-ORDINATE BENCH DECISION AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE AS WELL. 4. IN EFFECT THUS WHILE ANY DELAYED DEPOSIT OF PF/ ESI IS TO BE DISALLOWED, IN TERMS OF HON'BLE GUJARAT HIGH COURT' S JUDGMENT IN THE ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 15 - CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (S UPRA), THE QUESTION AS TO WHETHER THERE IS A DELAY OR NOT MAY BE DECIDE D BY THE ASSESSING OFFICER IN THE LIGHT OF ABOVE OBSERVATIONS BY THE C OORDINATE BENCH. THE ASSESSEE WILL GET RELIEF, IF FOUND ADMISSIBLE, ON T HAT BASIS. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALL OWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE, THE LD. AR OF THE ASSESSEE BE FORE US SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN TERMS OF THE ABOVE. 22. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E JURISDICTIONAL ITAT IN THE CASE OF SUZLON ENERGY LTD. (SUPRA) HAS RELIED ON THE ORDER OF HONBLE ITAT, KOLKATA BENCHES IN THE CASE OF KANOI PAPER & INDUSTRIES LTD. VS. ACIT REPORTED IN 75 TTJ 448, WHEREIN, THE ISSUE WAS DECIDEDABOUT EMPLOYEES PROVIDENT FUND. AS SUCH, THE RE WAS NO ISSUE ABOUT THE PAYMENT OF EMPLOYEES CONTRIBUTION TOWARD S ESI. THEREFORE, THE DISALLOWANCE OF THE CONTRIBUTION TOWARDS ESI SH OULD BE SEEN FROM THE MONTH IN WHICH IT BECAME DUE. THEREFORE, THE CLAIM OF THE ASSESSEE IN THE CASE OF DELAY IN THE PAYMENT OF EMPLOYEES CONTRIBU TION TOWARDS ESI, CANNOT BE DECIDED/ ALLOWED BY THE DATE OF PAYMENT. 22.1 THE LD. DR FURTHER SUBMITTED THAT THE PAYMENT OF WAGES ACT, 1936 REQUIRES THAT THE PAYMENT SHOULD BE MADE BEFOR E THE EXPIRY OF THE 7 TH DAY AFTER THE LAST DAY OF THE WAGE PERIOD, WHERE T HE SALARY IS LESS THAN ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 16 - THOUSAND RUPEES AND IN OTHER CASES, IT SHOULD BE TH E 10 TH DAY. THE PAYMENT OF WAGES ACT REQUIRES THAT THE PAYMENT SHOU LD BE MADE WITHIN THE PERIOD AS SPECIFIED. THUS, IF THE ASSESSEE CAN CLAIM A DEDUCTION OF THE EMPLOYEES CONTRIBUTION TOWARDS PF/ESI ON THE PAYME NT BASIS, THEN THERE IS A POSSIBILITY THAT THE ASSESSEE WILL DELAY IN TH E PAYMENT OF WAGES TO THE WORKERS. THUS, IF THE DEDUCTION FOR CONTRIBUTION TO WARDS PF / ESI IS ALLOWED TO THE ASSESSEE BY DATE OF PAYMENT OF SALAR Y, THEN THE PURPOSE OF WAGE ACT, 1936 WILL BE DEFEATED. THE LD. AR IN HIS REJOINDER SUBMITTED THAT NO REFER ENCE SHOULD BE MADE TO THE PAYMENT OF WAGES ACT WHILE DECIDING THE ISSU E UNDER THE INCOME TAX ACT. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE HAS DELAYED IN MAKING THE PAYMENT OF EMPLOYEES CONTRIBUTION OF PF / ESI AS SPECIFIED UNDER THE RELEVANT ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO U/S 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. THE LD. C IT-A SUBSEQUENTLY CONFIRMED THE VIEW TAKEN BY THE AO. THE LD. AR BEFO RE US HAS NOT CHALLENGED THE PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GSRTC (SUPRA), WHEREIN IT WA S HELD AS UNDER: IN VIEW OF THE ABOVE AND FOR THE REASONS STATED AB OVE, AND CONSIDERING SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961 READ WITH SUB-CLAUSE (X) OF CLAUSE 24 OF SECTION 2, IT IS HELD THAT WITH RES PECT TO THE SUM RECEIVED ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 17 - BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB- CLAUSE (X) OF CLAUSE (24) OF SECTION (2) APPLIES, T HE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTING THE INCOME REFER RED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE T O THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(1)(VA).CONSE QUENTLY, IT IS HELD THAT THE LEARNED TRIBUNAL HAS ERRED IN DELETING RES PECTIVE DISALLOWANCES BEING EMPLOYEES' CONTRIBUTION TO PF ACCOUNT / ESI A CCOUNT MADE BY THE AO AS, AS SUCH, SUCH SUMS WERE NOT CREDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEVANT FUND OR FUNDS (IN THE PRESENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR BEFORE TH E DUE DATE AS PER THE EXPLANATION TO SECTION 36(1)(VA) OF THE ACT I.E . DATE BY WHICH THE CONCERNED ASSESSEE WAS REQUIRED AS AN EMPLOYER TO C REDIT EMPLOYEES' CONTRIBUTION TO THE EMPLOYEES' ACCOUNT IN THE PROVI DENT FUND UNDER THE PROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. HOWEVER, THE LD. AR BEFORE US HAS SUBMITTED THAT TH E DUE DATE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TOWARDS PF/E SI SHOULD BE SEEN FROM THE DATE OF THE PAYMENT AND NOT FROM THE DUE D ATE. IN THIS REGARD, WE NOTE THAT THE JURISDICTIONAL TRIBUNAL IN THE IDE NTICAL FACTS AND CIRCUMSTANCE IN THE CASE OF SUZLON ENERGY LTD.(SUPR A) HAS RESTORED THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ARE INCLINED TO RESTORE THE ISSUE ON THE HAND TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE TO THE PROVISION OF LAW AS WELL AS AFTER CONSIDERING THE ORDER OF THIS TRIBUNA L IN THE CASE OF SUZLON ENERGY LTD. (SUPRA). THUS, THE ISSUE RAISED BY THE ASSESSEE IN ITS CO I S ALLOWED FOR STATISTICAL PURPOSE. ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 18 - 24. THE SECOND ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LD.CIT(A) ERRED IN TREATING THE FOREX LOSS OF RS.28 ,50,411/- AS CAPITAL IN NATURE. 25. THE ABOVE ISSUE HAS ALREADY BEEN DECIDED IN FAV OR OF THE ASSESSEE VIDE PARA NO.16 OF THIS ORDER WHEREIN WE HAVE HELD THAT THE GROUND RAISED BY THE ASSESSEE IS INFRUCTUOUS AND DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. THUS, WE DISMISS THE SAME. 26. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, AND CO OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . THIS ORDER PRONOUNCED IN OPEN COURT ON 01/01/2019 SD/- SD/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/01/2019 PRITI YADAV, SR.PS ITA NO.525/AHD/2015& CO.49-AHD-2015 SCHUTZ DISHMAN BIOTECH LTD. A.Y. 2009-10 - 19 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-8, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// / !'# ( DY./ASSTT.REGISTRAR) #$ %, / ITAT, AHMEDABAD 1. DATE OF DICTATION 01/11/2018 (DICTATION PAGE-6) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER :18/12/2018 3. OTHER MEMBER.. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S19/12/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT.. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 10. DATE OF DESPATCH OF THE ORDER