ARISTO PHARMACEUTICALS P.LTD, MUMBAI V. ADDL CIT 2(1), MUMBAI

ITA 6679/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2714 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Keywords: Gift; Rectification of order
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS.6678 & 6679/M/2012 ASSESSMENT YEARS: 2006-07 & 2008-09 M/S. ARISTO PHARMACEUTICALS PVT. LTD., MERCANTILE CHAMBERS, 3 RD FLOOR, 12, J.N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 001 PAN: AAACA 4495N VS. ASST. CIT 2(1), 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY KUMAR RASTOGI, A.R. REVENUE BY : SHRI SANJAY SINGH, CIT DR DATE OF HEARING : 23.07.2015 DATE OF PRONOUNCEMENT : 06.11.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE APPEAL ABOVE TITLED APPEALS RELEVANT TO ASSESS MENT YEARS 2006-07 & 2008-09 HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE TWO DIFFERENT ORDERS OF EVEN DATE 24.08.12 OF THE COMMISSIONER OF INCOME TA X (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)]. SINCE THE FACTS AND IS SUES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL, HENCE THE SAME WERE HEARD TO GETHER AND ARE BEING DISPOSED OF WITH THIS COMMON ORDER. FOR THE SAKE O F CONVENIENCE, THE FACTS HAVE BEEN TAKEN FROM ITA NO.6678/M/2012 FOR A.Y. 20 06-07. ITA NO.6678M/2012 FOR A.Y. 2006-07 2. THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER (HEREINAFTER REFERRE D TO AS THE AO) PASSED UNDER SECTION 154 OF THE INCOME TAX ACT WHEREBY THE VALUE OF FRINGE BENEFIT HAS ITA NOS.6678 & 6679/M/2012 M/S. ARISTO PHARMACEUTICALS PVT. LTD. 2 BEEN DETERMINED AT RS.10,44,42,508/- AS AGAINST RS. 9,43,04,283/- DETERMINED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS DA TED 22.11.10 UNDER SECTION 115WE(3) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS A PHARMACEUTICAL COMPANY INVOLVED IN MANUFACTURING OF VARIOUS PHARMACEUTICAL PRODUCTS. THE ASSESSEE FILED FRINGE BENEFIT TAX (F BT) RETURN ON 30.10.06 DECLARING FRINGE BENEFITS AT RS.5,41,64,140/- WHICH INCLUDED GIFT ARTICLES CLASSIFIED AS SALES PROMOTION EXPENSES AMOUNTING TO RS.3,37,94,082/-, FRINGE BENEFITS UPON WHICH WERE VALUED AT THE RATE OF 20% AMOUNTING TO RS.67,58,816/-. THE AO AFTER SCRUTINY ASSESSMENT P ROCEEDINGS ACCEPTED THE AMOUNT AS RETURNED BY THE ASSESSEE. HOWEVER, SUBSE QUENTLY, THE AO ISSUED A NOTICE UNDER SECTION 154/155 OF THE ACT SHOW CAUSIN G THE ASSESSEE AS TO WHY THE EXPENDITURE ON GIFT ARTICLES BE NOT TAXED AT TH E RATE OF 50% OF THE VALUE AS PER THE PROVISIONS OF SECTION 115WB(2)(O) OF THE IN COME TAX ACT. THE ASSESSEE REPLIED THAT SINCE THE EXPENDITURE INCURRE D ON GIFT ARTICLES WAS FOR BUSINESS PROMOTION, HENCE THE FRINGE BENEFITS WERE RIGHTLY ASSESSED BY THE AO AT THE RATE OF 20% DURING THE ASSESSMENT PROCEEDING S. THE AO, HOWEVER, WAS NOT SATISFIED WITH THE REPLY GIVEN BY THE ASSESSEE AND RECOMPUTED THE FRINGE BENEFITS AT THE RATE OF 50% VIDE ORDER DATED 09.08. 11 PASSED UNDER SECTION 154 OF THE ACT HOLDING THAT THERE WAS A MISTAKE APPAREN T ON RECORD IN THE ORIGINAL ASSESSMENT ORDER DATED 25.11.08, WHEREIN, THE FRING E BENEFITS IN RELATION TO GIFT ITEMS HAVE BEEN WRONGLY ASSESSED AT THE RATE OF 20% INSTEAD OF 50%. 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL B EFORE THE LD. CIT(A), BUT THE LD. CIT(A) UPHELD THE RECTIFICATION ORDER P ASSED BY THE AO. THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE GIFT ARTICLES CONSTITUTE THE FREE SAMPLES OF THE PHARMAC EUTICAL PRODUCTS AND OTHER ITA NOS.6678 & 6679/M/2012 M/S. ARISTO PHARMACEUTICALS PVT. LTD. 3 SALE PROMOTION GIFT ARTICLES CARRYING THE NAME AND LOGO OF THE COMPANY AND DID NOT FALL UNDER THE DEFINITION OF GIFT WITHIN THE MEANING OF SECTION 115WB(2)(O) BUT WERE COVERED BY SECTION 115WB(2)(D) AND THE SAME WERE ACCORDINGLY VALUED AT THE RATE OF 20%. THE RETURN WAS SCRUTINIZED BY THE AO AND AFTER VERIFYING THE DETAILS, THE AO HAD ACCEPTE D THE RETURNED FRINGE BENEFITS. THE LD. A.R. HAS FURTHER INVITED OUR ATT ENTION TO THE ORIGINAL ASSESSMENT ORDER DATED 25.11.08 WHEREIN THE AO HAS CATEGORICALLY MENTIONED THAT THE REPRESENTATIVE OF THE ASSESSEE HAS ATTENDE D AND FURNISHED THE NECESSARY EXPLANATION, INFORMATION AND DETAILS AND THEREAFTER THE AO OBSERVED THAT AFTER EXAMINATION OF THE DETAILS OF THE AMOUNTS AS CONSID ERED/FILED BY THE ASSESSEE UNDER VARIOUS HEADS OF FRINGE BENEFITS, WITH SPECIA L REFERENCE TO THE AMOUNTS CLAIMED AS EXPENSES UNDER THE SAME/SIMILAR EXPENSES IN THE P&L ACCOUNT FOR THE YEAR, THE RETURNED FRINGE BENEFITS AS PER RETUR N OF FBT U/S 115 WD(1) IS ACCEPTED AND ASSESSED UNDER SECTION 115WE(3) ACCORD INGLY. THE LD. A.R. HAS FURTHER SUBMITTED THAT THE ISSUE AS TO WHETHER THE GIFTS/FREE SAMPLES GIVEN BY THE ASSESSEE WERE TO BE CONSIDERED AS SALES PROMOTI ON EXPENSES OR AS GIFTS WAS A DEBATABLE ISSUE WHICH REQUIRED DEEP EXAMINATION O F FACTS AND EVIDENCES. THE NECESSARY DETAILS WERE SUBMITTED BEFORE THE AO WHIC H WERE ACCEPTED BY THE AO. THE JURISDICTION OF THE AO UNDER SECTION 154 W AS LIMITED TO THE EXTENT OF RECTIFICATION OF A MISTAKE APPARENT ON RECORD. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. B ALARAM ITO VS. VOLKAT BROTHERS (1971) 82 ITR 50 IN THIS RESPECT. THE LD. D.R., ON THE OTHER HAND, HAS RELIED UPON T HE FINDINGS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. ADMIT TEDLY, THE ISSUE AS TO AT WHAT VALUE THE FRINGE BENEFITS HAVE TO BE ASSESSED IN THIS CASE IS ON THE FACE OF IT IS A DEBATABLE ISSUE. THE ASSESSEE HAD GIVEN EX PLANATION THAT IT WERE VIRTUALLY THE SALE PROMOTION EXPENSES IN THE SHAPE OF FREE SAMPLES AND THE ITA NOS.6678 & 6679/M/2012 M/S. ARISTO PHARMACEUTICALS PVT. LTD. 4 ARTICLES COVERING THE NAME AND LOGO OF THE ASSESSEE COMPANY WHICH WERE GIVEN TO THE DISTRIBUTORS/DOCTORS FOR THE PROMOTION OF TH E PRODUCTS. THE ISSUE WAS EXAMINED BY THE AO AND THE FBT RETURN FILED BY THE ASSESSEE WAS ACCEPTED. A PERUSAL OF THE ASSESSMENT ORDER DATED 25.11.08 DOES NOT REVEAL ANY MISTAKE APPARENT ON RECORD IN THE SAID ORDER. THE JURISDIC TION OF THE AO UNDER SECTION 154 OF THE ACT IS VERY LIMITED TO THE EXTENT OF REC TIFICATION OF MISTAKE APPARENT ON RECORD. HOWEVER, WE FIND THAT THE AO IN FACT EX ERCISING HIS JURISDICTION UNDER SECTION 154 HAS REVIEWED THE ORIGINAL ASSESSM ENT ORDER AND HAS ENHANCED THE ASSESSABLE FRINGE BENEFITS. IT HAS BEEN TIME A ND AGAIN HELD BY THE HIGHER COURTS THAT THE POWER UNDER SECTION 154 OF THE ACT IS A LIMITED POWER TO CORRECT ONLY THOSE MISTAKES WHICH ARE APPARENT ON RECORD. IT IS NOT A POWER OF REVISION OR REVIEW. A MISTAKE IS APPARENT ON THE FACE OF RE CORD WHEN IT IS PATENT, GLARING, OBVIOUS OR SELF EVIDENT. A MISTAKE IS APP ARENT ON THE RECORD IF NO EXTERNAL HELP EITHER ON FACT OR IN LAW IS REQUIRED TO DETECT SUCH MISTAKE. IF THE ALLEGED MISTAKES REQUIRE INVESTIGATION INTO FACTS O R DETERMINATION OF LAW OR DISCUSSION OF DEBATABLE POINTS ARE INVOLVED OR TWO OPINIONS ARE POSSIBLE ON THE ISSUE THEN SUCH POINTED OR MISTAKES CANNOT BE SAID TO BE MISTAKES APPARENT ON RECORD, WHICH CAN BE RECTIFIED UNDER SECTION 154 OF THE INCOME TAX ACT. RELIANCE IN THIS RESPECT CAN BE PLACED ON THE DECIS IONS OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. BALARAM ITO VS. VOLKAT B ROTHERS AND OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIDHRAMAP PA ANDANNAPPA MANVI VS. CIT 21 ITR 333. 7. IN VIEW OF THE ABOVE, THE ENHANCEMENT OF ASSESSA BLE FRINGE BENEFITS BY THE AO IN THE GARB OF RECTIFICATION OF ORIGINAL ASS ESSMENT ORDER CANNOT BE HELD TO BE JUSTIFIED AND THE SAME IS ACCORDINGLY SET ASI DE. ITA NO.6679/M/2012 FOR A.Y. 2008-09 8. SINCE THE FACTS AND ISSUES INVOLVED IN THIS APPE AL ARE IDENTICAL TO THE APPEAL OF THE ASSESSEE I.E. ITA NO.6678/M/2012 FOR A.Y. 2006-07, HENCE ITA NOS.6678 & 6679/M/2012 M/S. ARISTO PHARMACEUTICALS PVT. LTD. 5 FOLLOWING THE SAME VIEW AS TAKEN ABOVE, THIS APPEAL IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.11.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.11.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.