M/s. Neo Medichem P. Ltd (Now amalgamated with Auctus Pharma Ltd), Hyderabad V. The DCIT Circle - 16(1), Hyderabad

ITA 60/HYD/2011

• Counselvise Citation: 6022514 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Opportunity of being heard
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.59 & 60/HYD/2011 ASSESSMENT YEARS 2004-05 & 2005-06 NEO MEDICHEM PVT. LTD. (NOW AMALGAMATED WITH AUCTUS PHARMA LTD.) HYDERABAD PANAABCG3468Q DCIT, CIRCLE 16(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.P. RAMASWAMY REVENUE BY : SHRI B. YADAGIRI DATE OF HEARING : 24.12.2013 DATE OF PRONOUNCEMENT : 24.12.2013 O R D E R PER D. MANMOHAN, J.M. : THESE APPEALS ARE FILED AT THE INSTANCE OF THE ASSESSEE-COMPANY AND PERTAIN TO THE ASSESSMENT YEAR S 2004-2005 AND 2005-2006. THE ISSUE INVOLVED IN BOTH THE APPEALS BEING IDENTICAL, WE PROCEED TO DISPOSE OF T HESE APPEALS BY A COMBINED ORDER FOR THE SAKE OF CONVENI ENCE. 2. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BULK DRUGS AND ITS INTERMEDIARIES. FOR THE YEARS UNDER CONSIDERATION I T CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE GROUND THAT IT IS A SMALL SCALE INDUSTRIAL UNIT (IN SHORT 2 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD SSI) AND ITS INVESTMENT IN PLANT AND MACHINERY IS LESS THAN RS.3 CRORES. THE ASSESSING OFFICER ORIGINALLY COMPLETED THE ASSESSMENTS BUT SUBSEQUENTLY, TAKEN-U P FOR SCRUTINY WHEREIN HE NOTICED THAT AS PER THE NOTIFICATION OF THE MINISTRY OF COMMERCE & INDUSTRY DATED 24.12.1999 THE INVESTMENT IN PLANT AND MACHINERY SH OULD NOT EXCEED RS.1 CRORE IN ORDER TO CONSIDER IT AS SM ALL SCALE INDUSTRIAL UNDERTAKING WHEREAS, THE TOTAL INVESTMENT OF THE ASSESSEE IN PLANT AND MACHINERY EXCEEDED TO RS.1 CRORE. IN RESPONSE THERETO, THE AS SESSEE SUBMITTED THAT AS PER THE CLARIFICATION ISSUED BY T HE CENTRAL GOVERNMENT DATED 19.10.2000 (MINISTRY OF COMMERCE & INDUSTRY), THE ASSESSEES INVESTMENT IS LESS THAN RS.3 CRORES AND THEREFORE, IT IS ENTITLED TO T HE PRIVILEGE OF BEING CONSIDERED AS SSI, PROVIDED, IT HAS OBTAINED PROVISIONAL OR PERMANENT REGISTRATION PRIO R TO DECEMBER 1999 AND HAD TAKEN CONCRETE STEPS FOR IMPLEMENTING THE PROJECT, APART FROM THE CLAIM THAT CERTAIN EXPENDITURE REGARDING TOOLS, MISCELLANEOUS ACCESSORIES ETC., WERE WRONGLY TREATED AS PART OF P LANT AND MACHINERY AND UPON EXCLUSION OF THE SAME, ITS INVESTMENT WORKED-OUT TO LESS THAN RS.1 CRORE. IT W AS ALSO CONTENDED THAT EVEN OTHERWISE THE ASSESSEE HAVING OBTAINED PROVISIONAL REGISTRATION PRIOR TO DECEMBER 1999, IT IS ENTITLED TO BE CONSIDERED AS SSI EVEN IF IT E XCEEDS RS.1 CRORE. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED PROOF REGARDING PROVISIO NAL REGISTRATION. HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED BILLS AND VOUCHERS IN SUPPORT OF ITS 3 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD CONTENTION THAT CERTAIN MISCELLANEOUS EXPENDITURE W OULD FALL OUTSIDE THE KEN OF THE EXPRESSION OF PLANT AN D MACHINERY. HE, THEREFORE, CONCLUDED THAT NOTIFICAT ION NO. SO-857(E) DATED 10.12.1997, APPLICABLE TO CONSUMABL E STORES ETC., CANNOT BE EXTENDED TO THE CASE OF THE ASSESSEE IN THE ABSENCE OF ANY PROOF. HE, THEREFORE, CONCLUD ED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IB OF THE ACT. 4. AGAINST THE ORDERS PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE C IT(A), CONTENDING INTER ALIA, THAT THE ASSESSEE-COMPANY IS ENGAGED IN BULK DRUG MANUFACTURE AND THE UNIT HAD COMMENCED COMMERCIAL PRODUCTION ON 15 TH MAY, 2001 BUT IT HAS GOT THE PROVISIONAL AND PERMANENT REGISTRATI ON WITH THE DEPARTMENT OF INDUSTRIES AS SSI UNIT ON 14 TH MAY, 1995 AND 19 TH MAY, 2003 RESPECTIVELY. IT WAS FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 80I B(3) OF THE ACT, A SMALL SCALE INDUSTRIAL UNDERTAKING IS EN TITLED FOR DEDUCTION UP TO 30% OF ITS PROFITS FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS PROVIDED, IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS AT ANY TI ME DURING THE PERIOD BEGINNING ON 1 ST APRIL, 1995 AND ENDING ON THE 31 ST DAY OF MARCH, 2002. SINCE THE ASSESSEES CASE FALLS WITHIN THAT PERIOD, IT IS ENTITLED TO THE BEN EFIT UNDER SECTION 80IB OF THE ACT. RELIANCE WAS ALSO PLACED U PON VARIOUS NOTIFICATIONS/CLARIFICATIONS ISSUED BY THE CENTRAL GOVERNMENT TO SUBMIT THAT SO LONG AS THE INVESTMENT IN PLANT AND MACHINERY DOES NOT EXCEED RS.3 CRORES AND A PROVISIONAL CERTIFICATE IS OBTAINED PRIOR TO 1999 A SSESSEE IS ENTITLED TO THE BENEFIT PRESCRIBED UNDER SECTION 80IB OF 4 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD THE ACT. REFERENCE WAS ALSO MADE TO THE ACTUAL INVE STMENT MADE BY THE ASSESSEE TO HIGHLIGHT THAT CERTAIN CONSUMABLE ARTICLES SHOULD BE EXCLUDED FROM THE VAL UE OF PLANT AND MACHINERY IN WHICH EVENT, THE ULTIMATE INVESTMENT WOULD WORK OUT TO BELOW RS.1 CRORE. COPI ES OF THE PROVISIONAL REGISTRATION CERTIFICATE AS WELL AS PERMANENT REGISTRATION CERTIFICATE WERE PLACED BEFO RE THE CIT(A) TO SUBMIT THAT THE FACTORY LOCATION TO WHICH REGISTRATION CERTIFICATE WAS ISSUED WAS THE SAME IN BOTH THE CERTIFICATES AND THE PROVISIONAL CERTIFICATE HA VING BEEN ISSUED IN 1995, THE ASSESSEE IS ENTITLED TO THE CLA IM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 5. IT DESERVES TO BE NOTICED THAT THERE WAS CHANGE OF NAME AND ADDRESSES OF THE UNIT FROM THE PERIOD W HEN IT OBTAINED PROVISIONAL REGISTRATION TO THE PERIOD WHE N A PERMANENT REGISTRATION WAS GRANTED DESPITE THE FACT THAT THE REGISTRATION CERTIFICATE, WAS ISSUED WITH REGAR D TO THE SAME FACTORY LOCATION I.E., 216, BONTHAPALLI, JINNA RAM MANDAL, MEDAK DISTRICT. 6. THE LEARNED CIT(A) OBSERVED THAT THE ADDRESSES MENTIONED IN BOTH THE CERTIFICATES ARE DIFFERENT AN D THE PRODUCTS LISTED FOR MANUFACTURE ARE ALSO DIFFERENT; AS COULD BE NOTICED FROM THE PROVISIONAL CERTIFICATE A ND THE PERMANENT REGISTRATION CERTIFICATE, THE NAME OF THE ORIGINAL COMPANY WAS M/S. GLOBAL MEDICHEM PARK PVT. LTD. WHICH WAS SET-UP TO PRODUCE MONOCHLORA ACETIC ACID MCA AND ACETYLCHLORIDE WHEREAS, M/S. NEO MEDICOM PRODUCES CETRIZINE DICHCL AND FLUCONAZOLE. BECAUSE OF THIS FUNDAMENTAL DISCREPANCIES, THE LEARNED CIT(A) 5 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD CONCLUDED THAT THE APPELLANT/ASSESSEE HAS NOT BEEN GRANTED PROVISIONAL REGISTRATION BEFORE 1999 AND CONSEQUENTLY ALL THE CONDITIONS MENTIONED IN THE NOTIFICATION OF THE MINISTRY OF COMMERCE & MINISTRY DATED 24.12.1999 WERE NOT FULFILLED. THUS, THE ORDERS PAS SED BY THE ASSESSING OFFICER WERE CONFIRMED. 7. FURTHER AGGRIEVED, THE ASSESSEE-COMPANY IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSES SEE, SHRI C.P. RAASWAMY, SUBMITTED THAT BOTH THE ASSESSI NG OFFICER AS WELL AS THE CIT(A) HAVE NOT APPRECIATED THE FACTS IN THE CORRECT PERSPECTIVE. THEY HAVE OVERLOO KED THE FACT THAT THE UNIT WAS THE SAME BUT AS AND WHEN THE RE WAS CHANGE OF NAME ON ACCOUNT OF AMALGAMATION OR OTHERWISE THE ADDRESSES OF THE REGISTERED OFFICE MA Y HAVE CHANGED BUT THE PLACE OF PRODUCTION I.E., THE FACTO RY PREMISES HAS NOT UNDERGONE ANY CHANGE; IN THE PROVISIONAL REGISTRATION CERTIFICATE AS WELL AS THE PERMANENT REGISTRATION CERTIFICATE THE REGISTERING AUTHORITY HAD TAKEN NOTE OF THE FACT THAT THE FACTO RY LOCATION REMAINED THE SAME AND IT WAS BROADLY ENGAG ED IN THE BUSINESS OF MANUFACTURE OF BULK DRUGS. IN THIS BUSINESS MANUFACTURE OF THE BULK DRUG KEEPS CHANGIN G DEPENDING ON THE DEMAND AND SUPPLY PRINCIPLE BUT TH OSE VARIATIONS SHOULD NOT AFFECT THE GRANT OF DEDUCTION UNDER SECTION 80IB OF THE ACT BECAUSE THIS SECTION IS CON CERNED WITH THE FULFILLMENT OF TWO CONDITIONS I.E., ASSESS EE UNIT SHOULD BE SET-UP AND A PROVISIONAL CERTIFICATE OR PERMANENT CERTIFICATE SHOULD HAVE BEEN OBTAINED BET WEEN 1995 TO 2002 AND IT SHOULD HAVE COMMENCED PRODUCTIO N AT ANY TIME BEGINNING ON 1 ST APRIL, 1995 AND ENDING ON 6 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD 31 ST DAY OF MARCH, 2002. MINISTRY OF COMMERCE HAS ALSO CLARIFIED THAT A PROVISIONAL REGISTRATION CERTIFICA TE IS OBTAINED PRIOR TO 1999 EVEN IF THE INVESTMENT IN PL ANT AND MACHINERY IS ABOVE RS.1 CRORE BUT LESS THAN RS.3 CR ORES SUCH SSI SHOULD ALSO BE CONSIDERED AS A SSI UNIT AN D CONSEQUENTLY, THE SAME WOULD BE ENTITLED TO THE BEN EFIT OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE LEARNE D COUNSEL FOR THE ASSESSEE, STRONGLY SUBMITTED THAT N ONE OF THESE FACTS WERE PROPERLY LOOKED INTO EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A). 8. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIE S. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS NOT IN DI SPUTE THAT IN THE PROVISIONAL REGISTRATION CERTIFICATE AS WELL AS IN THE PERMANENT REGISTRATION CERTIFICATE THE FACTORY LOCATION IS THE SAME. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE-COMPANY IS A DIFFERENT COMPANY ALTOGETHER AND ITS ORIGIN IS NOT CONNECTED TO M/S. GLOBAL MEDICHEM . WE DO NOT FIND ANY SPECIFIC GUIDELINE WITH REGARD TO T HE NEED TO MANUFACTURE THE SAME ITEM WHICH IS MENTIONED IN THE PROVISIONAL CERTIFICATE SO AS TO ENABLE A COMPANY T O CLAIM THE BENEFIT OF DEDUCTION UNDER SECTION 80IB OF THE ACT. AT ANY RATE, SINCE THESE FACTORS WERE NOT PROPERLY EXA MINED BY THE TAX AUTHORITIES, IN THE INTEREST OF SUBSTANT IAL JUSTICE, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO IS DIRECTED TO RE-EXAMINE THE ISSUE IN ACCORDANCE WITH LAW. AS PRONOUNCED IN THE OPEN COUR T, WE HEREBY SET ASIDE THE ORDERS PASSED BY THE ASSESS ING 7 ITA.NO.59 & 60/HYD/2011 NEO MEDICHEM PVT. LTD. HYDERABAD OFFICER AND CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE- CONSIDER THE MATTER AFRESH, AFTER GIVING THE ASSESS EE AN OPPORTUNITY OF BEING HEARD AND BY CALLING UPON THE ASSESSEE TO FURNISH ANY FURTHER DETAILS IN SUPPORT OF ITS PLEA THAT A PROVISIONAL CERTIFICATE WAS OBTAINED BY THE SSI UNIT IN 1995 ITSELF. THERE IS NO CONDITION PRESCRIB ED TO CONTINUE PRODUCTION OF THE SAME PRODUCT SO LONG AS THE ASSESSEE BEGINS MANUFACTURE AND ULTIMATELY COMMENCE S PRODUCTION BEFORE THE STIPULATED PERIOD. NEEDLESS T O OBSERVE THAT THE ASSESSING OFFICER IS FREE TO EXAMI NE THE MATTER AFRESH WITHOUT BEING BOUND BY ANY OBSERVATIO N MADE HEREINABOVE ON MERITS. 10. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PAR TLY ALLOWED FOR STATISTICAL PURPOSES, AS PRONOUNCED IN THE OPEN COURT ON 24.12.2013. SD/- SD/- (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED 24 TH DECEMBER, 2013. VBP/- COPY TO:- 1) NEO MEDICHEM PVT. LTD. (NOW AMALGAMATED WITH AUC TUS PHARMA LTD.), FLAT NO.102, ADITYA TRADE CENTRE, AMEERPET, HYDERABAD PANAABCG3468Q 2) DCIT, CIRCLE 16(1), HYDERABAD. 3) CIT(A)-V, HYDERABAD. 4) CIT-IV, HYDERABAD 5) THE D.R. A BENCH, I.T.A.T., HYDERABAD.