ACIT CEN CIR 2, MUMBAI V. CIPLA LTD, MUMBAI

ITA 5529/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83768 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 03-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DILIP P BAPAT
• Keywords: Bogus purchase; Opportunity of being heard
• Section: 80IB

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI VIJAY PAL RAO, JM AND N.K. BILLAIYA, AM , . . , !./ I.T.A. NO.5336 /MUM/2012 ( / ASSESSMENT YEAR : 2010-11 CIPLA LIMITED, MUMBAI CENTRAL, MUMBAI- 400 008. / VS. ACIT CC - 2, CGO BUILDING, 9 TH FLOOR, M.K. MARG, MUMBAI 400 020. # ! ./ PAN : AAACC1450B ( #$ / APPELLANT ) .. ( %&#$ / RESPONDENT ) !./ I.T.A. NO.5529 /MUM/2012 ( / ASSESSMENT YEAR : 2010-11 ACIT CC - 2, R. NO. 904, PRATISTHA BHAVAN, MARINE LINES, MUMBAI 400 020. / VS. CIPLA LIMITED, MUMBAI CENTRAL, MUMBAI- 400 008. # ! ./ PAN : AAACC1450B ( #$ / APPELLANT ) .. ( %&#$ / RESPONDENT ) ASSESSEE BY SHRI DILIP P. BAPAT DEPARTMENT BY A.C. TEJPAL ' ( ) * + / DATE OF HEARING : 4-9-2014 ,-./ ) * + / DATE OF PRONOUNCEMENT : 10-09-2014 [ 0 / O R D E R PER N.K. BILLAIYA, A.M . : . . , THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) 36, MUMBAI DATE D 20-06-2012 PERTAINING TO ITA 5336/M/12 & 5529/M/12 2 A.Y. 2010-11. THESE APPEALS ARE HEARD TOGETHER AND DISPOSE OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. ITA NO. 5336/MUM/12 (ASSESSEES APPEAL FOR A.Y. 201 0-11). 2. THE ASSESSEE HAS RAISED THE FOLLOWING SIX SUBSTA NTIVE GROUNDS OF APPEAL:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS)-36, MU MBAI, [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRED IN UP HOLDING THAT RECEIPTS BY WAY OF DEPB CREDITS DO NOT QUALIFY TO BE INCLUDE D IN THE PROFIT DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECT ION 80IB/80IC/80IE/10B OF THE ACT. 2. THE LEARNED CIT(A) HAS FURTHER ERRED IN HOLDING THAT RECEIPTS BY WAY OF INSURANCE CLAIMS DO NOT QUALIFY TO BE INCLUD ED IN THE PROFITS DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECT ION 80IB/80IC/80IE/10B OF THE ACT AND THE SAME CLAIM IS RESTRICTED TO THE COST OF GOODS. 3. THE LEARNED (CIT) HAS ERRED IN UPHOLDING DENIAL OF DEDUCTION FROM THE INCOME OF THE APPELLANT OF A SUM OF RS.28, 44,74,457/- BEING THE AMOUNT OF CREDIT UNDER DEPB SCHEME WHICH WAS NO T ACTUALLY UTILIZED BEFORE THE CLOSE OF THE RELEVANT PREVIOUS YEAR FOR PAYMENT OF DUTY ON THE IMPORTATION OF GOODS. 4. THE LEARNED CIT(A) HAS FURTHER ERRED IN UPHOLDIN G DISALLOWANCE OF ALLEGED BOGUS PURCHASES IN THE AMOUNT OF RS.21,3 9,414/- 5. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DE NIAL OF WEIGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE INCOME TAX A CT READ WITH THE EXPLANATION THERETO WITH REFERENCE TO THE EXPENDITU RE OF RS.4032.54 LACS INCURRED ON SCIENTIFIC RESEARCH, NOT BEING EXP ENDITURE IN THE NATURE OF COST OF LAND OR BUILDING, ON IN-HOUSE RESEARCH A ND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY. 6. THE LEARNED CIT(A) ERRED IN DENYING DEDUCTION OF RS.104,97,93,011/- FOR THE DISALLOWANCE MADE IN A.Y .2009-10 FOR THE EXCHANGE FLUCTUATIONS PERTAINING TO OUTSTANDING FOR WARD CONTRACTS AS ON 31 ST MARCH 2009 ENTERED INTO FOR HEDGING FOREIGN CURREN CY FLUCTUATION RISKS ARISING FROM THE TRANSACTIONS OF EXPORT OF GOODS AND SERVICES. IT IS SUBMITTED THAT THIS AMOUNT HAS BEEN CREDITED TO THE PROFIT & LOSS ACCOUNT OF A.Y.2010-11. SINCE THE SAM E HAS BEEN ITA 5336/M/12 & 5529/M/12 3 DISALLOWED ALREADY IN A.Y.2009-10, TAXING IN AGAIN IN A.Y.2010-11 WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME AMOUNT. THEREFORE, IT IS PRAYED THAT AO BE DIRECTED TO ALLOW THE SAME AS A D EDUCTION FOR A.Y.2010-11. 3. AT THE OUTSET, THE LD. REPRESENTATIVES OF BOTH T HE SIDES AGREED THAT THE ISSUES RAISED BY THE ASSESSEE HAVE BEEN DECIDED EIT HER IN FAVOUR OF THE ASSESSEE OR IN FAVOUR OF THE REVENUE. 4. GROUND NO. 1 RELATES TO THE EXCLUSION OF THE REC EIPT BY WAY OF DEPB CREDIT AS THEY ARE NOT QUALIFY TO BE INCLUDED IN TH E PROFITS DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECTION 80IB/80IC/80I E/10B OF THE INCOME TAX ACT, 1961. 5. THE ISSUE RAISED VIDE THIS GROUND HAS BEEN DECID ED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD., 317 ITR 218. AS THE RECEIPTS DO NOT HAVE A FI RST DEGREE NEXUS WITH THE PROFIT DERIVED FROM THE UNDERTAKING, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT, GROUND NO. 1 IS DISMISSE D. 6. GROUND NO. 2 IS NOT PRESSED AND IS DISMISSED ACC ORDINGLY. 7. GROUND NO. 3 RELATES TO THE DENIAL OF DEDUCTION FROM THE INCOME OF THE ASSESSEE OF A SUM OF RS. 28,44,74,457/- BEING AMOUN T OF CREDIT UNDER DEPB SCHEME. 8. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNA L IN ASSESSEES OWN CASE IN ITA NO. 6471/MUM/2010 FOR A.Y. 2008-09. WE FIND THAT THE TRIBUNAL HAS DECIDED THIS ISSUE AT PARA NO. 5 OF ITS ORDER W HEREIN IT HAS FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. EXCEL INDUSTRIES LIMITED (258 ITR 294). RESPECTFULLY FOLLOWING THE D ECISION OF THE CO-ORDINATE BENCH, GROUND NO. 3 RAISED BY THE ASSESSEE IS ALLOW ED. ITA 5336/M/12 & 5529/M/12 4 9. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF ALLE GED BOGUS PURCHASES IN THE AMOUNT OF RS. 21,39,414/-. 10. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUN AL IN ASSESSEES OWN CASE IN ITA NO. 5813/M/2011 FOR A.Y. 2009-10. WE FI ND THAT THE TRIBUNAL HAS CONSIDERED THIS ISSUE AT PARA 28 OF ITS ORDER WHERE IN IT HAS FOLLOWED THE DECISION FOR A.Y. 2008-09 AND ACCORDINGLY THE TRIBU NAL HAS REMANDED THIS MATTER TO THE FILE OF THE A.O. FOR FRESH ADJUDICATI ON AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS NO D ISTINGUISHING FACT HAS BEEN BROUGHT BEFORE US, RESPECTFULLY FOLLOWING THE FINDI NGS OF THE CO-ORDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O . FOR FRESH ADJUDICATION AFTER HEARING THE ASSESSEE. GROUND NO. 4 IS ACCORDINGLY A LLOWED FOR STATISTICAL PURPOSE. 11. GROUND NO. 5 RELATES TO THE DENIAL OF WEIGHTED DEDUCTION U/S 35(2AB) OF THE INCOME TAX ACT, 1961. 12. THIS ISSUE WAS ALSO BEFORE THE TRIBUNAL IN A.Y. 2009-10 IN ITA NO. 5813/M/2011 ORDER DATED 25-7-14. THE TRIBUNAL HAS C ONSIDERED THIS ISSUE AT PARA 29 OF ITS ORDER WHEREIN IT HAS REMANDED THIS M ATTER TO THE FILE OF THE A.O. FOR ADJUDICATING THE ISSUE AFRESH AFTER AFFORDING R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS NO DISTINGUISHING F ACT HAS BEEN BROUGHT TO OUR NOTICE, WE RESTORE THIS ISSUE TO THE FILE OF TH E A.O. FOR ADJUDICATING THE ISSUE AFRESH AS PER THE PROVISIONS OF LAW AFTER AFF ORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 5 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 13. THE ISSUE RAISED VIDE GROUND NO. 6 AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE HAS BECOME INFRUCTUOUS AS MARK TO MARK LOS SES HAVE BEEN ALLOWED BY THE TRIBUNAL IN ITA NO. 6558/M/2011 FOR A.Y. 200 9-10 ORDER DTD. 25-7-14. GROUND NO. 6 IS ACCORDINGLY DISMISSED AS INFRUCTUOU S. ITA 5336/M/12 & 5529/M/12 5 14. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 533 6/M/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 5529/MUM /2012 (REVENUES APPEAL FOR A.Y. 2010-11) 15. THE REVENUE HAS RAISED FOUR SUBSTANTIVE GROUNDS OF APPEAL WHICH READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT CONFIRMING THE BASIS ADOPTE D BY ASSESSING OFFICER FOR COMPUTING 80IB DEDUCTION ADMISSIBLE TO THE ELIG IBLE UNITS AND IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN INVOKING THE PROVISIONS OF SECTION 80IB(13) R.W. PROVISO TO SECT ION 80IA(8) OF THE ACT, WHEN THE ASSESSEE WAS UNDER THE OBLIGATION OF LAW T O ADOPT THE MARKET VALUE FOR THE GOODS TRANSFERRED TO AND FROM THE 80 IB UNDERTAKING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS EL IGIBLE FOR CLAIMING DEDUCTION U/S 80IB ON THE PROFITS DERIVED FROM THE WORK/MANUFACTURING GOT DONE THROUGH LEASE AND LICEN SE MANUFACTURERS (LLMS). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT MISCEL LANEOUS RECEIPTS, SALE OF SCRAP, MISCELLANEOUS SALES/PROCESSING CHARGES AR E ELIGIBLE FOR COMPUTATION OF PROFITS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO MAKE ADJUSTMENT TO VALUE OF OPENING STOCK IN A.Y. 2010-11 IN CONSONANC E WITH ADJUSTED VALUATION OF CLOSING STOCK IN A.Y. 2009-10 WITHOUT APPRECIATING THE FACT THAT : (A) NO DIRECTION TO MAKE ADJUSTMENT TO CLOSING STOCK HA S BEEN ISSUED (B) THE RESULTANT EFFECT OF MAKING ADJUSTMENT TO OPENIN G STOCK WOULD RESULT IN THE ASSESSED INCOME BEING LOW ER THAN RETURNED INCOME, WHICH IS NOT PERMISSIBLE IN V IEW OF DECISION IN THE CASE OF GOETZ INDIA LTD. 16. THE FIRST GROUND RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) ERRED IN NOT CONFIRMING THE BASIS ADOPTED BY THE A.O. FOR COMPUT ING 80IB DEDUCTION ADMISSIBLE TO THE ELIGIBLE UNIT. ITA 5336/M/12 & 5529/M/12 6 17. THIS ISSUE HAS BEEN DECIDED AGAINST THE REVENUE BY THE TRIBUNAL IN ITA NO. 6558/M/2011 FOR A.Y. 2009-10. THE TRIBUNAL HAS CONSIDERED THIS ISSUE AT PARA 32 OF ITS ORDER WHEREIN IT HAS FOLLOWED THE FINDING GIVEN IN A.Y. 2008- 09 IN ITA NO. 6299/M/2010. WE FIND THAT IN ITA NO. 6299/M/2010, THE TRIBUNAL HAS FOLLOWED THE DECISIONS OF THE CO-ORDIN ATE BENCHE IN ITA NO. 7412/M/05 FOR A.Y. 2003-04, ITA NO. 4320/M/2006 FOR A.Y. 2004-05 AND ITA NO. 4321/M/2006 FOR A.Y. 2005-06. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA ), GROUND NO. 1 OF THE REVENUE IS DISMISSED. 18. GROUND NO. 2 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 ON THE PROFIT DERIVED FROM THE WORK/MANUFACTURING GOT DONE THROUGH LEASE AND LICENCE MANUFACTURERS. 19. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUN AL IN ITA NO. 6299/M/2010 FOR A.Y. 2008-09 VIDE GROUND NO. 2 OF T HAT APPEAL AND HAS CONSIDERED THIS ISSUE AT PARA 17 OF ITS ORDER AND D ECIDED THE GROUND AGAINST THE REVENUE. THE FACTS AND ISSUE BEING IDENTICAL, R ESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL (SUPRA), GROUND NO. 2 IS D ISMISSED. 20. GROUND NO. 3 RELATES TO ALLOWING THE CLAIM OF D EDUCTION U/S 80IB OF THE ACT ON MISCELLANEOUS RECEIPTS, SALE OF SCRAP, MISCE LLANEOUS SALES/PROCESSING CHARGES. 21. A SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ITA NO. 6299/M/2010 FOR A.Y. 2008-09 VIDE GROUND NO. 4 OF T HAT APPEAL AND HAS DISCUSSED THIS ISSUE AT PARA 22 OF ITS ORDER. IN S O FAR AS THE PROCEEDS FROM SALE OF SCRAP IS CONCERNED, THE TRIBUNAL HAS SET AS IDE THE ISSUE TO THE FILE OF THE A.O. TO BE DECIDED AFRESH WHETHER THE SALE OF S CRAP HAS ARISING DURING THE MANUFACTURING ACTIVITY OR IT RELATES TO OTHER SCRAP PROCEED AND OTHER RECEIPTS WAS ACCEPTED TO BE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE FACTS AND ITA 5336/M/12 & 5529/M/12 7 ISSUE BEING IDENTICAL, WE ACCORDINGLY SET ASIDE THE ISSUE RELATING TO THE SALE OF SCRAP TO THE FILE OF THE A.O. THE A.O. IS DIRECTED TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF DIRECTION GIVEN IN A.Y. 2008-09. IN S O FAR AS THE OTHER RECEIPTS ARE CONCERNED, RESPECTFULLY FOLLOWING THE DECISION OF T HE TRIBUNAL IN A.Y. 2008-09, THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTIO N U/S 80IB OF THE ACT. GROUND NO. 3 IS ACCORDINGLY ALLOWED IN PART FOR STA TISTICAL PURPOSE. 22. GROUND NO. 4 RELATES TO THE DIRECTION TO MAKE A DJUSTMENT TO VALUE OF OPENING STOCK IN A.Y. 2010-11 IN CONSONANCE WITH TH E ADJUSTED VALUATION OF CLOSING STOCK IN A.Y. 2009-10. THE FACT OF THIS ISS UE IS THAT THE A.O. HAS ENHANCED THE CLOSING STOCK OF A.Y. 2009-10 WHICH WA S NOT CONTESTED BY THE ASSESSEE. THE ONLY POINT RAISED BY THE ASSESSEE WA S THAT CORRESPONDING EFFECT SHOULD BE GIVEN TO THE OPENING STOCK OF A.Y. 2010-1 1 WHICH THE LD. CIT(A) DIRECTED TO THE A.O. WE DO NOT FIND ANY ERROR OR I NFIRMITY IN THIS DIRECTION OF THE LD. CIT(A) AS THE VALUE OF THE CLOSING STOCK OF ONE YEAR HAS TO BE TAKEN AS THE VALUE OF OPENING STOCK OF THE IMMEDIATELY SUCCE EDING YEAR. THIS GROUND IS ACCORDINGLY DISMISSED. 23. IN THE RESULT, REVENUES APPEAL IN ITA NO. 5529 /M/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 24. IN THE RESULT, APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH SEPTEMBER, 2014. 0 ) ,-./ ' 1 2!3 10-9-2014 - ) 4( SD/- SD/- (VIJAY PAL RAO) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER ' !( MUMBAI ; 2! DATED 10-09-2014 [ ITA 5336/M/12 & 5529/M/12 8 .../ R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. ' @* ( ) / THE CIT(A) 36, MUMBAI 4. ' @* / CIT- CENTRAL I, MUMBAI 5. C4 %*DE , + DE / , ' !( / DR, ITAT, MUMBAI C BENCH 6. 4FG H( / GUARD FILE. ! ( / BY ORDER, &* %* //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , ' !( / ITAT, MUMBAI