The ACIT, (OSD), Range-1, Ahmedabad V. Cadila Health Care Ltd., Ahmedabad

ITA 611/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5802 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: JIGAR M PATEL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , ! ' BEFORE SHRI R.P. TOLANI, VICE PRESIDENT & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.611/AHD/2014 ( / ASSESSMENT YEAR : 2006-07) THE ACIT (OSD) RANGE-1 AHMEDABAD / VS. CADILA HEALTHCARE LTD. ZYDUS TOWER OPP. ISCON TEMPLE SATELLITE CROSS ROAD AHMEDABAD !% ./ ./ PAN/GIR NO. : AAACC 6253 G ( %( / APPELLANT ) .. ( )%( / RESPONDENT ) %( * / APPELLANT BY : SHRI R.I. PATEL, CIT-DR )%( + * / RESPONDENT BY : SHRI JIGAR M.PATEL, AR , + / DATE OF HEARING 29/05/2017 -./ + / DATE OF PRONOUNCEMENT 31/05/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: AS PER THE CAPTIONED APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI , AHMEDABAD [CIT(A) IN SHORT] DATED 09/12/2013 FOR THE ASSESSMENT YEAR (AY) 2006-07 IN GRANTING RELIEF AGAINST PENALTY OF RS.2 .84 CRORES LEVIED BY THE ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 2 - ASSESSING OFFICER (AO) UNDER S.271(1)(D) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE PENALTY OF RS.2.84 CRORES LEVIED U/S.271(1)(D) DESPITE THE FAC T THAT THE CORRESPONDING QUANTUM ADDITION WAS ALREADY CONFIRME D BY THE CIT(A). 2. THE CIT(A) HAS NOT APPRECIATED THE FACT THAT TH E ASSESSEE HAD NOT ACCOUNTED FOR FRINGE BENEFITS TO THE EXTENT OF RS.8 .45 CRORES IN THE RETURN OF FRINGE BENEFITS WHICH TANTAMOUNT TO FURNI SHING OF INACCURATE PARTICULARS OF FRINGE BENEFITS LIABLE TO PENALTY U/ S.271(1)(D). 3. AT THE TIME OF HEARING, THE LD.AR FOR THE ASS ESSEE, IN THE CAPTIONED APPEAL OF THE REVENUE, SUBMITTED AT THE OUTSET THAT THE AO IMPOSED PENALTY OF RS.2,84,75,998/- UNDER S.271)(D) OF THE ACT FOR NOT INCLUDING THE VALUE OF CERTAIN TAXABLE FRINGE BENEFITS TOTA LLING TO RS.8,45,98,925/- WHILE COMPUTING THE CHARGE OF FRINGE BENEFITS TAX U NDER S.115WA OF THE ACT. IT WAS POINTED OUT BY THE LD.AR THAT THE ITAT IN ITA NO.179/AHD/2011 FOR AY 2006-07 VIDE ORDER DATED 17/ 04/2015 HAD GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE IN THE QUANTUM PROCEEDINGS. HOWEVER, IT WAS SIMULTANEOUSLY POINTED OUT THAT TH E HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.888/2015 ORDER DATED 17 /03/2017 HAS REVERSED THE RELIEF GRANTED BY THE ITAT. CONSE QUENTLY, THE QUANTUM ADDITIONS TOWARDS VALUE OF FRINGE BENEFIT HAVE BEEN CONFIRMED. IT WAS SUBMITTED THAT NOTWITHSTANDING THE AFFIRMATION OF Q UANTUM ADDITIONS BY THE HONBLE GUJARAT HIGH COURT, IT MAY BE NOTICED T HAT THE ASSESSEE HAD ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 3 - PROVIDED TRUE AND FULL DISCLOSURE OF FACTS AND ITS SUPPORTING LEGAL CONTENTIONS AS PER NOTES FORMING PART OF ITS FRI NGE BENEFITS TAX RETURN FOR AY 2006-07. THUS, THERE WAS NO SUPPRESSION OF ANY PARTICULARS OF FACTS PER SE . CONSEQUENTLY, THE CASE OF THE ASSESSEE IS SQUARE LY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. REPORTED AT 322 ITR 158 (SC). THE LD.AR FOR THE ASSESSEE ALSO ADVERTED OUR ATTENTION TO THE NOTES ANNEXED TO THE FRINGE BENEFITS TAX RETURN SHOWING PROPER DI SCLOSURE OF THE FACTS AND THEREAFTER ADVERTED OUR ATTENTION TO NOTE NO.5 WITH REFERENCE TO WHICH IT WAS SUBMITTED THAT THE IMPUGNED AMOUNT OF FBT OF RS.2.85 CRORES WAS DEPOSITED IN A SEPARATE BANK ACCOUNT KEE PING IN VIEW THE DIRECTIONS OF THE HONBLE GUJARAT HIGH COURT IN AN INTERIM ORDER. THE LD.AR ACCORDINGLY SUBMITTED THAT IN VIEW OF THESE G LARING FACTS, THE CIT(A) WAS RIGHT IN DELETING THE PENALTY IMPOSED BY AO UNDER S.271(1)(D) OF THE ACT AND ACCORDINGLY NO INTERFERE NCE IS CALLED FOR. 4. THE LD.DR, ON THE OTHER HAND, SUPPORTED THE ACTI ON OF THE AO IN IMPOSING THE PENALTY IN THE LIGHT OF THE DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE QUANTUM PROCEEDINGS. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SHORT ISSUE FOR ADJUDICATION IN THE PRESENT APPEAL IS DE TERMINATION OF CORRECTNESS IMPOSITION OF PENALTY UNDER S.271(1)(D) OF THE ACT IN RESPECT ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 4 - OF NON-INCLUSION OF CERTAIN EXPENDITURE FOR THE PUR POSE OF FBT LIABILITY AS PER PROVISIONS OF SECTION 115WB OF THE ACT. 5.1. BEFORE WE PROCEED FURTHER, IT WILL BE APT TO REPRODUCE THE RELEVANT ORDER OF THE CIT(A). 3.2. IN THE ORDER LEVYING PENALTY U/S.271(L)(D), AO OBSERVED THAT IN THE ASSESSMENT ORDER U/S,115WE(3) DTD. 26.12.2008 ADDIT ION OF RS.8,45,98,925/- WAS MADE TO THE FRINGE BENEFIT; CI T(APPEALS) CONFIRMED THE ADDITION AND THEREFORE PENALTY WAS BE ING LEVIED ON THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF F RINGE BENEFIT. 3.3. THE CONTENTIONS OF THE ID. A.R. ARE THAT A.O. DID NOT FIND OUT EVEN A SINGLE INACCURATE PARTICULAR; APPELLANT HAD TAKEN A CATEGORICAL STAND IN THE NOTES FORMING PART OF ITS RETURN THAT THE EXPEN DITURE IN DISPUTE WAS NOT INCURRED ON THE EMPLOYEES AND THEREFORE IT DID NOT ATTRACT LEVY OF FRINGE BENEFIT TAX; IN VIEW OF THE DECISIONS RELIED ON, ANY EXPENDITURE INCURRED BY AN EMPLOYER IN THE COURSE OF BUSINESS O R PROFESSION, WHICH IS NOT IN CONSIDERATION FOR EMPLOYMENT CANNOT BE C ONSIDERED AS FRINGE BENEFIT; THE HON'BLE JURISDICTIONAL GUJARAT HIGH CO URT STAYED THE LEGALITY AND VALIDITY OF THE CIRCULAR NO.8/2005 DTD . 29.08.2005 DIRECTING THE ASSESSEES TO DEPOSIT THE DISPUTED FRINGE BENEFI T TAX IN A SEPARATE BANK ACCOUNT TO BE OPENED IN THE EMPLOYER'S NAME WI TH A SCHEDULED BANK TILL FURTHER ORDERS; IN THE STATEMENT OF COMPU TATION OF TAXABLE FRINGE BENEFITS ACCOMPANYING THE RETURN APPELLANT C ONSPICUOUSLY MADE THE CLAIM THAT THE DISPUTED EXPENDITURE WAS NOT CHA RGEABLE TO FRINGE BENEFIT TAX; MERE REJECTION OF THE APPELLANT'S CLAI M DOES NOT ATTRACT THE PENAL PROVISIONS AND THEREFORE LEVY OF IMPUGNED PEN ALTY IS NOT IN ACCORDANCE WITH LAW. 3.4. I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE F ACTS OF THE MATTER. IN THE CASE OF DCIT VS. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD., 134 ITD 388 (MUM) (2011), IT WAS HELD THAT SECTION 115WB(2) APPLIES ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 5 - ONLY WHEN THE EXPENDITURE IS FOR EMPLOYMENT. IN THE CASE OF DESAI BROTHERS LTD. VS. ADDL.CIT 32 TAXMANN.COM (2013)(PU NE), IT WAS HELD THAT 'THE INTERPRETATION SOUGHT TO BE ADVANCED BY T HE REVENUE IS NOT BORNE OUT OF THE STATUTORY PROVISIONS. OSTENSIBLY, THE CLARIFICATION ISSUED BY THE CBDT VIDE QUESTION NO. 14 IN CIRCULAR NO. 8 OF 2005 (SUPRA) SEEKS TO ENLARGE THE SCOPE OF LEVY OF FBT, WHICH IS NOT SUPPORTED BY THE LANGUAGE OF THE STATUTE. THE HON 'BLE SUPREME COURT IN THE CASE OF KERALA FINANCIAL CORPN. V. CIT (1994) 210 ITR 129/ 75 TAXMAN 573 (SC) HAS CLEARLY OPINED THAT THE CIRCULARS ISSUED B Y CBDT CANNOT OVERRIDE THE PROVISIONS OF THE ACT. IN ANY CASE, IT IS QUITE WELL-SETTLED THAT AN EXECUTIVE INSTRUCTION/CIRCULAR CANNOT CREAT E ANY ADDITIONAL LIABILITY ON THE ASSESSEE. SECONDLY IT IS ALSO TO B E APPRECIATED THAT THE STAND OF THE REVENUE IS ALSO NOT IN CONSONANCE WITH THE LEGISLATIVE INTENT. THE IMPORT AND INTENT OF INTRODUCING CHAPTE R XL1-H WAS TO TAX SUCH BENEFITS WHICH ARE COLLECTIVELY ENJOYED BY THE EMPLOYEES AND CANNOT BE ATTRIBUTED TO ANY INDIVIDUAL EMPLOYEE. SU CH BENEFITS ESCAPE TAXATION AS PERQUISITE IN THE HANDS OF THE INDIVIDU AL EMPLOYEES AS THEY ARE NOT ATTRIBUTABLE TO ANY INDIVIDUAL EMPLOYEE. TH EREFORE, SUCH BENEFITS WERE SOUGHT TO BE TAXED IN THE HANDS OF THE CONCERN ED EMPLOYER. THOUGH THE SPEECH OF THE HON'BLE FINANCE MINISTER M AY NOT BE A DECISIVE TEST, SO HOWEVER, IT IS INDEED A RELEVANT AND CONTEMPORANEOUS EXPOSITION OF THE LEGISLATIVE INTENT AND CAN BE REL IED UPON, AS PROPOUNDED BY THE HON'BLE SUPREME COURT IN THE CASE OF K.P, VARGHESE V. ITO [1981] 131 ITR 597/7 TAXMAN 131. CONSIDERED IN THAT LIGHT TOO, WE FIND THAT THE INTERPRETATION SOUGHT TO BE MADE O UT BY THE REVENUE WITH REGARD TO THE MEANING OF THE EXPRESSION 'FRING E BENEFITS' FOR THE PURPOSE OF SECTION 115WB(2) OF THE ACT IS QUITE MIS PLACED. CONSIDERING THE AFORESAID, WE THEREFORE DO NOT SUBSCRIBE TO THE INTERPRETATION SOUGHT-TO BE PLACED BY THE REVENUE ON SECTION 115WB (2) OF THE ACT AND INSTEAD, HOLD THAT THE EXPENSES PRESCRIBED THEREIN ARE LIABLE TO BE CONSIDERED AS FRINGE BENEFITS ONLY TO THE EXTENT TH E SAME ARE INCURRED IN CONSIDERATION FOR EMPLOYMENT. TO THE SAME EFFECT IS ALSO THE VIEW OF OUR CO-ORDINATE BENCH IN THE CASE OF DY. CIT V. KOTAK M AHINDRA OLD MUTUAL LIFE INSURANCE LTD. [2012] 134 ITD 388 / [20 11] 16 TAXMANN.COM 395 (MUM) '. AS CONTENDED BY THE ID. A.R. THE OPERATIO N OF CBDT'S CIRCULAR NO.8/2005 DTD. 29.08.2005 HAS BE EN STAYED BY THE ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 6 - JURISDICTIONAL GUJARAT HIGH COURT WITH CERTAIN DIRE CTIONS TO THE ASSESSES. 3.5. LEAVING ASIDE THE APPLICABILITY OF THE PROVISI ONS OF SECTION 115WB(2) TO THE DISPUTED EXPENDITURE INCURRED BY TH E APPELLANT, IT IS TO BE NOTED THAT WHILE FILING THE RETURN IN THE COMPUT ATION OF FRINGE BENEFIT APPELLANT HAD CONSPICUOUSLY HIGHLIGHTED THAT DISPUT ED EXPENDITURE WAS NOT BEING OFFERED TO FRINGE BENEFIT TAX. IT CANNOT BE SAID THAT APPELLANT HAD CONCEALED FRINGE BENEFITS OR FURNISHED INACCURA TE PARTICULARS OF FRINGE BENEFITS WITHIN THE MEANING OF SECTION 271(D ). MERE REJECTION OF A CLAIM DOES NOT ATTRACT PENAL PROVISIONS. I AM OF THE CONSIDERED VIEW THAT LEVY OF PENALTY IS NOT IN ACCORDANCE WITH LAW. IMPUGNED PENALTY ORDER IS CANCELLED. THESE GROUNDS OF APPEAL ARE AL LOWED. 5.2. WE STRAIGHTWAY NOTICE THE OSTENSIBLE FACT THAT THE ASSESSEE HAS COME OUT WITH COMPLETE DISCLOSURE OF DISPUTED ITEMS OF EXPENDITURE NOT INCLUDED FOR THE PURPOSE OF DETERMINATION OF FRINGE BENEFITS TAX LIABILITY IN THE RETURN OF INCOME. THUS, THE BONAFIDES OF TH E ACTION OF THE ASSESSEE CANNOT BE TAINTED WITH ANY DOUBT. NOTICEABLY, THE ASSESSEE SECURED SUBSTANTIAL RELIEF FROM THE COORDINATE BENCH OF ITA T IN QUANTUM PROCEEDINGS ALBEIT REVERSED BY THE HONBLE GUJARAT HIGH COURT. CLEARLY, THUS, THE ISSUE INVOLVED WAS NOT ENTIRELY FREE OF C ONTROVERSY. WE ALSO NOTE THE ATTENDANT FACT THAT THE ASSESSEE HAS EAR-M ARKED THE QUANTUM OF FRINGE BENEFIT TAX IN THE SEPARATE ESCROW ACCOUNT P ENDING RESOLUTION OF THE CONTROVERSY. THUS, THERE ARE SUFFICIENT INDICA TORS EXISTING IN THE CASE THAT THE ASSESSEE HAS ACTED ON BONAFIDE CONSIDERATI ONS. NEEDLESS TO SAY A FINDING IN THE QUANTUM PROCEEDINGS THAT A PARTICULA R EXPENDITURE IS SUSCEPTIBLE TO PROVISIONS OF FBT CANNOT AUTOMATICAL LY BE ADOPTED FOR THE ITA NO.611/AHD/ 2014 ACIT VS. CADILA HEALTH CARE LTD. ASST.YEAR 2006-07 - 7 - PURPOSES OF S.271(1)(D) OF THE ACT. THE ASSESSEE H AS SUCCESSFULLY DISCHARGED THE INITIAL ONUS PLACED ON IT FOR REBUT5 TING PRESUMPTION AGAINST IT. THEREFORE, WE ARE UNABLE TO SEE ANY E RROR IN THE ACTION OF THE CIT(A) IN DELETING THE PENALTY IMPOSED BY THE AO UN DER S.271(1)(D) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2017 SD/- SD/- ( ..) ( ) ! ( R.P. TOLANI ) ( PR ADIP KUMAR KEDIA ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED 31/ 05 /2017 3.., .4../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )%( / THE RESPONDENT. 3. 567 8 / CONCERNED CIT 4. 8 ( ) / THE CIT(A)-VI, AHMEDABAD 5. 9:; 4467 , 67/ , 5 / DR, ITAT, AHMEDABAD 6. ; =, / GUARD FILE. / BY ORDER, )9 4 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD