GLAXO SMITHKLINE PHARMACEUTICALS LTD, MUMBAI V. ASST CIT 6(3), MUMBAI

ITA 684/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2599 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 26-10-2015
• Assessment Year: 1994-1995
• Appeal Filed On: 02-02-2012
• Court: TRIBUNAL
• Department Lawyers: SHARSHAD S VENHURLEKAR
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 43B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.684/MUM./2012 ( ASSESSMENT YEAR : 1994 95 ) GLAXCO SMITHKLINE PHARMACEUTICALS LTD. DR. ANNIE BESANT ROAD, WOR LI MUMBAI 400 030 PAN AAACCG4414B .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE 4(3), AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI NIRAJ SETH REVENUE BY : SHR I SHARSHAD S. VENHURLEKAR DATE OF HEARING 26 . 10 .2015 DATE OF ORDER 30.10.2015 O R D E R PER SAKTIJIT DEY , J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25 TH OCTOBER 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS) - 1 2 , MUMBAI, FOR THE ASS ESSMENT YEAR 1994 95 . 2. THE ASSESSEE IN TOTAL RAISED 11 GROUNDS OF APPEAL. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE RAISED IN GROUNDS NO.6 AND 7, NO LONGER SURVIVE AS THE ASSESSEE HAS GOT DESIRED RELIEF IN AN OR DER PASSED UNDER SECTION 154 OF THE ACT GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 2 BY THE ASSESSING OFFICER. COPY OF THE SAID ORDER WAS PLACED AT PAGE 86 OF THE PAPER BOOK. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE, GROUNDS NO.6 AND 7 ARE DISMISSED AS INFRUCTUOUS. 3. AS FAR AS GROUND NO.8 IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE HENCE, HE DOES NOT WANT TO PRESS THIS GROUND. THUS, GROUND NO.8 IS DISMISSED AS NOT PRESSED . 4. FURTHER, THE LEARNED COUNS EL FOR THE ASSESSEE DID NOT WANT TO CONTEST THE ISSUE RAISED IN GROUNDS NO.10 AND 11. THEREFORE, THESE TWO GROUNDS ARE ALSO DISMISSED AS NOT PRESSED . 5. GROUNDS WHICH SURVIVE FOR CONSIDERATION ARE GROUND NO.1, 2, 3, 4 AND 5 AND GROUND NO.9, WHICH ARE RELAT E TO THE SOLITARY ISSUE OF DISALLOWANCE OF DEDUCTION CLAIMED ON ACCOUNT OF INTEREST ON DPEA LIABILITY AMOUNTING TO ` 1076.73 LAKH. WHILE IN GROUND NO.1, 2, 3, 4 AND 5, THE ASSESSEE HAS MAINLY RAISED THE ISSUE OF LACK OF OPPORTUNITY BY THE ASSESSING OFFICER TO REPRESENT ITS CASE. GROUND NO.9 IS ON THE MERITS OF THE DISALLOWANCE. 6. BRIEFLY STATED THE FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAS GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 3 CLAIMED DEDUCTION ON ACCOUNT OF INTEREST ON DEPA LIA BILITY. WHEN CALLED UPON TO EXPLAIN , THE ASSESSEE IN LETTER DATED 11 TH DECEMBER 1997, SUBMITTED THAT INTEREST RELATABLE TO A PERIOD FROM 1 ST APRIL 1993 TO 31 ST MARCH 1994, AMOUNTING TO ` 1076.73 LAKH IS ALLOWABLE AS DEDUCTION IN THE ASSESSMENT YEAR UNDER C ONSIDERATION. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT THE ORIGINAL AS WELL AS ENHANCED DEMAND FOR DPEA LIABILITY HAVE BEEN CHALLENGED IN A WRIT PETITION FILED IN HONBLE DELHI HIGH COURT AND RECOVERY OF DEMAND INCLUDING THE INTEREST COMPONENT HAVE BE EN STAYED. HE OBSERVED THAT NEITHER ANY AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT TOWARDS INTEREST NOR ANY AMOUNT WAS PAID TO THE GOVERNMENT. HE, THEREFORE, CONCLUDED THAT WHEN THE ASSESSEE IS DISPUTING THE INTEREST LIABILITY, IT CANNOT BE SAID THAT THE LIABILITY HAS ACCRUED OR ARIS E N DURING THE PREVIOUS YEAR. AT BEST, IT CAN BE CONSIDERED AS A CONTINGENT LIABILITY. HENCE, IT CANNOT BE ALLOWED IN VIEW OF THE PROVISIONS CONTAINED UNDER SECTION 43B. THOUGH THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY BUT HE WAS UNSUCCESSFUL. THEREFORE, THE MATTER WAS CARRIED IN APPEAL BEFORE THE TRIBUNAL. 7. THE TRIBUNAL, WHILE DISPOSING OF ASSESSEES APPEAL IN ITA NO.4494/MUM./1999 AND OTHERS IN ORDER DATED 28 TH JULY 2008, RESTORED THE MAT TER BACK TO THE FILE OF THE ASSESSING OFFICER FOR GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 4 DECIDING AFRESH BY FOLLOWING THE DIRECTIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 1994 95 AND 1986 87 TO 1988 89. AFTER THE MATTER WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER BY THE TRIBUNAL, THE ASSESSING OFFICER INITIATED PROCEEDINGS IN TERMS WITH THE DIRECTION OF THE TRIBUNAL. T HE ASSESSING OFFICER OBSERVED , IN RESPONSE TO THE NOTICE ISSUED BY HIM, NEITHER THE ASSESSEE APPEARED NOR ANY DETAILS OR EVIDENCES WERE SUBMITTED. HE , THEREFORE, SUSTAINED THE DISALLOWANCE OF INTEREST PAYMENT T O DPEA AS MADE IN THE ORIGINAL ASSESSMENT ORDER. BEING AGGRIEVED, THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 8. THE FIRST APPELLATE AUTHORITY ALSO CONFIRMED THE DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAS NOT SUBMITTED NECESSARY DETAILS / EVIDENCES IN SUPPORT OF ITS CLAIM CASE IN COMPLIANCE TO THE DIRECTIONS OF THE TRIBUNAL. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSING OFFICER IN THE COURSE OF THE RE ASSESSMENT PROCEEDINGS, HAS ISSUED ONLY ONE NOTICE AND IN RESPONSE TO THE SAID NOTICE , THOUGH , THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND SOUGHT ADEQUATE TIME AND REASONABLE OPPORTUNITY TO REPRESENT ITS CASE, BUT THE ASSESS ING OFFICER WITHOUT AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE HAS DISALLOWED THE DEDUCTION CLAIMED BY MERELY FOLLOWING THE GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 5 ORIGINAL ASSESSMENT ORDER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WHEN THE TRIBUNAL HAS SPECIFICALLY DIRECTED THE ASSESSIN G OFFICER TO EXAMINE ASSESSEES CLAIM AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD, THE DISALLOWANCE OF ASSESSEES CLAIM WITHOUT PROPER OPPORTUNITY IS IN VIOLATION OF DIRECTION OF TRIBUNAL. CONTESTING THE CLAIM OF THE FIRST APPELLATE AUTHORITY THA T ASSESSEE HAS NOT FURNISHED ANY EVIDENCE EITHER BEFORE HIM, THE FIRST APPELLATE AUTHORITY, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT ITSELF THE ASSESSEE HAS SUBMITTED THE GOVERNMENT ORDER DEMANDING INTEREST OF ` 117 6.64 CRORE WITH COMPUTATION DETAILS . THEREFORE, THE DEPARTMENTAL AUTHORITIES CANNOT SAY THAT NO EVIDENCE IS AVAILABLE BEFORE THE ASSESSING OFFICER REGARDING ASSESSEES CLAIM OF INTEREST. THE LEARNED C OUNSEL FOR THE ASSESSEE REFERRING TO THE SUBMISSIONS MAD E BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS SUBMITTED THAT THE ASSESSEE HAS REPEATEDLY EXPLAINED THE NATURE OF DEDUCTION CLAIMED WITH DOCUMENTARY EVIDENCE. HE SUBMITTED , AS FAR AS THE ALLEGATION OF THE ASSESSING OFFICER THAT T HE ASSESSEE IS DISPUTING ITS INTEREST LIABILITY , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED IN THE MEAN TIME ASSESSEES WRIT PETITION HAS NOT ONLY BEEN DISMISSED BY THE HIGH COURT BUT THE SPECIAL LEAVE PETITION FILED BY THE ASSESSEE HAS ALSO BEEN DISMI SSED BY THE HON'BLE SUPREME COURT. HE, THEREFORE, SUBMITTED , AS GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 6 THE INTEREST LIABILITY HAS ALREADY ACCRUED IN TERMS WITH SECTION 43B(F), THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFORE US , THERE IS NO SUBSTANCE IN THE CLAIM OF THE ASSESSEE AS THE TRIBUNAL IN EARLIER ASSESSMENT YEARS, HAS HELD THAT ONLY PAYMENTS IN THE NATURE OF TAX, DUTY AND CESS IS ALLOWABLE AS DEDUCTION. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO SERIOUS OBJECTION IF THE MATTER IS RESTORED TO THE FILE O F THE ASSESSING OFFICER FOR VERIFYING ASSESSEES CLAIM. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE MAIN THRUST OF THE LEARNED COUNSELS ARGUMENT, AS IT APPEARS, IS THE ASSESSING OFFICER WITHOUT AFFORDING REASONABLE OPPORTUNITY, HAS DISALLOWED ASSESSEES CLAIM, HENCE, THERE IS A VIOLATION OF RULES OF NATURAL JUSTICE. BEFORE EXAMINING THE AFORESAID CONTENTION OF THE LEARNED COUNSEL, IT IS NECESSARY TO OBSERVE THAT WHEN THIS PARTICULAR ISSUE WAS CONTESTED BY THE ASSESSEE IN THE EARLIER ROUND OF LITIGATION BEFORE THE TRIBUNAL, THE CO ORDINATE BENCH OF THE TRIBUNAL REFERRING TO ITS EARLIER ORDERS HELD AS UNDER: 44. AFTER HEA RING THE LEARNED DR, WE NOTICE THAT THE ITAT HAS DECIDED THE ISSUE VIDE ITS ORDER DATED 6 TH DECEMBER 2006 IN ITA NO.959/BOM/90, 4308/BOM/91 AND 4908/MUM./03 (ASSESSESS GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 7 APPEAL) AND ITA NO.1481/BOM/90, 6451/BOM/91 AND 5253/BOM/ 93 (REVENUES APPEALS) IN A.Y . 1986 87 TO 1988 89 RECORDED FINDINGS BY FOLLOWING THE ORDER IN A.Y. 1984 85 IN ASSESSEES OWN CASE ORDER DATED 10.03.06, WHICH ARE AS UNDER: A) . B) REGARDING APPLICABILITY OF SECTION 43B, WE AGREE WITH THE FINDING OF THE LEARNED CIT(A) FOR THE ASSESS MENT YEAR 1988 89 THAT THIS LIABILITY IS NOT A TAX, DUTY, CESS OR FEE UNDER ANY LAW LEVIABLE. THEREFORE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE FOR THE ASSESSMENT YEAR 1988 89. C) D) E) F) INTEREST LIABILITY ACCRUES FROM YEAR TO YEAR AND, THEREFORE, SUCH LIABILITY MAY BE ALLOWED ON THIS BASIS DURING EACH ASSESSMENT YEAR. 45. FROM THE ABOVE FINDING OF THE ITAT WHEREIN THE [FAT HAS HELD THAT THIS LIABILITY IS NOT A TAX, DUTY, CESS OR FEE UNDER ANY LAW LEVIABLE. THEREFORE, INTERE ST PAIT IS ALSO OF THE SAME NATURE AND THE SAME IS NOT PART OF TAX, DUTY, CESS OR FEE UNDER ANY LAW LEVIABLE. ACCORDINGLY, THE CLAIM OF THE ASSESSEE U/S 43B IS NOT ALLOWABLE. HOWEVER, IN RESPECT OF INTEREST, THE ITAT NOTED THAT INTEREST LIABILITY ACCRUES F ROM YEAR TO YEAR AND, THEREFORE, SUCH LIABILITY MAY BE ALLOWED ON THE BASIS DURING EACH ASSESSMENT YEAR. FOLLOWING THAT ORDER OF THE ITAT, WE FIND IT APPROPRIATE TO SEND THE FILE BACK TO THE AO WITH A DIRECTION TO CONSIDER THE ASSESSEE'S INTEREST ALLOWABI L I TY CLAIM IN THE LIGHT OF THE DECISION OF THE ITAT(SUPRA) AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS COULD BE SEEN, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A SPECIFIC DIRECTION TO VERIFY WHETHER INTEREST LIABILITY H AS ACCRUED FROM YEAR TO YEAR AND IF THAT IS SO SUCH LIABILITY SHOULD BE ALLOWED IN EACH ASSESSMENT YEAR IN WHICH SUCH LIABILITY HAS ACCRUED. THE TRIBUNAL ALSO DIRECTED THE ASSESSING OFFICER TO CONSIDER ASSESSEES CLAIM A FTER PROVIDING REASONABLE OPPORTUNITY OF GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 8 BEING HEARD TO THE ASSESSEE. ON A PERUSAL OF THE LETTER PURPORTEDLY ISSUED BY THE UNDER SECRETARY, DEPARTMENT OF CHEMICALS AND PETRO CHEMICALS, A COPY OF WHICH IS AT PAGE 67 OF ASSESSEES PAPER BOOK, IT IS NOTICED , IN THE SAID LETTER, THE GOVERNMENT HAS QUANTIFIED THE INTEREST ON RECOVERY OF DPEA ACCOUNT IN RESPECT OF BETA METHASONE AND ITS FORMUATIONS AND HAS QUANTIFIED THE INTEREST PAYABLE BY THE ASSESSEE ON ACCOUNT OF DPEA LIABILITY AT ` 1176.646 CRORE. IN THE SAI D LETTER, THE GOVERNMENT HAS ALSO PROVIDED THE COMPUTATION OF INTEREST ON ACCOUNT OF DPEA LIABILITY. IT IS THE SUBMISSION OF THE LEARNED COUNSEL BEFORE US THAT AFTER DISMISSAL OF ASSESSEES WRIT PETITION AND SPECIAL LEAVE PETITION, THE LIABILITY ON ACCOUNT OF INTEREST HAS ALREADY ACCRUED IN THE RELEVANT ASSESSMENT YEAR BEGINNING FROM 1 ST JULY 1981 TO 17 TH OCTOBER 1996. T HEREFORE, IT IS REQUIRED TO BE DECIDED WHETHER INTEREST PAYMENTS ARE ALLOWABLE IN TERMS WITH SECTION 43B(F). IN OUR VIEW, WHEN THE TRIBUNAL HAS SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO EXAMINE ASSESSEES CLAIM PERTAINING TO INTEREST ON DPEA, HE SHOULD HAVE GIVEN A REASONABLE OPPORTUNITY TO THE ASSESSEE TO JUSTIFY ITS CLAIM WITH PROPER EVIDENCE. AS IT APPEARS, THE ASSESSING OFFICER HAS C OMPLETED THE ASSESSMENT AFTER ISSUING ONLY ONE LETTER TO THE ASSESSEE . T HEREFORE, WITHOUT ENTERING INTO THE CONTROVERSY AS TO WHETHER THE ASSESSEE APPEARED IN RESPONSE TO THE SAID LETTER BEFORE THE ASSESSING OFFICER , WE THINK IT APPROPRIATE TO RESTORE THE MATTER GLAXCO SMITHKLINE PHARMACEUTICALS LTD. 9 BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE RELATING TO ASSESSEES CLAIM OF INTEREST ON DPEA AFTER CONSIDERING ALL FACTS AND MATERIAL ON RECORD AND IN ACCORDANCE WITH LAW AFTER PROVIDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HOWEVER, WE MAKE IT CLEAR THAT WE HAVE NOT EXPRESSED ANY OPINION WITH REGARD TO ALLOWABILITY OR OTHERWISE OF ASSESSEES CLAIM WHICH HAS TO BE DECIDED ON MERIT BY CONSIDERING THE MATERIAL BROUGHT ON RECORD BY THE ASSESSEE WITH REFERENCE TO THE STA TUTORY PROVISIONS. IN VIEW OF OUR DECISION, THERE IS NO NECESSITY TO ADJUDICATE GROUND NO.9 SEPARATELY. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2015 SD/ - ASHWANI TAEAJA ACCOUNTANT MEMBER SD/ - SAKTIJ IT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.10.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI