ASST. CIT CEN CIR 18 & 19, MUMBAI V. MARKSANS PHARMA LTD, MUMBAI

ITA 6905/MUM/2010

• Counselvise Citation: 690519914 RSA 2010
• Duration Of Justice: 4 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 12-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 153A; 80IB; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA NO. 7095 / MUM/20 1 0 ( ASSESSMENT YEAR : 2006 - 07 ) M/S MARKSONS PHARMA LTD., 21 ST FLOOR, LOTUS BUSINESS PARK, OPP. NEW LINK ROAD, ANDHERI(WEST), MUMBAI - 53 VS. ACIT, CENTRAL CIRCLE - 18&19, MUMBAI PAN/GIR NO. : A A A CT 3153 G ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 6905/ MUM/20 10 ( ASSESSMENT YEAR :2006 - 07 ) ACIT, CENTRAL CIRCLE - 18&19, MUMBAI VS. M/S MARKSONS PHARMA LTD., 21 ST FLOOR, LOTUS BUSINESS PARK, OPP. NEW L INK ROAD, ANDHERI(WEST), MUMBAI - 53 PAN/GIR NO. : A AACT 3153 G ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA /REVENUE BY : SHRI S.D.SRIVASTAVA DATE OF HEARING : 22 ND JANUARY , 201 5 DATE OF PRONOUNCEMENT 20/02/2015 O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) DATED 12 - 7 - 2010, FOR THE A.Y.2006 - 07 IN THE MATTER OF ORDER PASSED/S.143(3) R.W.S.153A OF THE ACT. ITA NO S . 7095 & 6905 / 1 0 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING BULK DRUGS AND FORM ULATIONS AND TRADING IN CHEMICAL AND SOLVENTS. EARLIER IT WAS KNOWN BY THE NAME M/S GLENMARK LABORATORIES LTD. M/S. GLENMARK LABORATORIES WAS MERGED WITH M/S. TASC PHARMACEUTICALS LTD. W.E.F. 1.4.2004. THE MERGED COMPANY CARRIED OUT ITS BUSINESS IN THE NAM E OF M/ S. TASC PHARMACEUTICALS LTD. AND WITH EFFECT FROM 10.10.2005, THE NAME OF M/ S. TASC PHARMACEUTICALS LTD. WAS CHANGED TO M/ S. MARKSANS LTD. SEARCH ACTION U/ S 132 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED ON MARKSANS GROUP OF CASES INCLUDING THE A SSESSEE COMPANY ON 26.4.2007 . 3 . DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W. S . 153A OF THE ACT, THE ,A.O. VERIFIED THE PURCHASES MADE BY THE ASSESSEE AND MADE ADDITION OF RS.1,08,618/ - ON ACCOUNT OF DIFFERENCE. 4 . THE AO ALSO MADE AD DITION BY DISALLOWANCE U/S.40(A)(IA) ON ACCOUNT OF REMITTANCE OF FEEB ISSUE EXPENSES. CLAIM OF DEDUCTION U/S.80IB WAS ALSO PARTLY DISALLOWED. 5 . BY THE IMPUGNED ORDER THE CIT(A) DELETED THE ADDITION OF RS. 1,08,618/ - MADE ON ACCOUNT OF DISCREPANCIES IN PURC HASES. THE CIT(A) ALSO DELETED PART OF ADDITION MADE U/S.40A (IA) ON ACCOUNT OF REMITTANCE OF FEEB, ISSUE EXPENSES TO A NON - RESIDENT. THE CIT(A) ALSO DIRECTED THE AO TO ALLOW DEDUCTION OF RS. 4,87, 62,058/ - U/S.80IB AS AGAINST DEDUCTION OF RS. 3,59,79,941/ - WO RKED OUT BY THE AO FOR DETERMINING THE PROFIT OF GOA UNIT. AGAINST THE ABOVE ORDER OF CIT(A), BOTH ASSESSEE AND ITA NO S . 7095 & 6905 / 1 0 3 REVENUE ARE IN APPEALS BEFORE US, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN LAW AND FACTS IN PASSING THE ORDER U/S 250 OF THE ACT IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND EQUALITY. 2. THE HON'BLE COMMISSIONER OF LNCOME TAX (APPEALS) HAS WRONGLY UPHELD ADDITION OF RS.57,062/ - BEING JOB WORK CHARGE S FROM ULTRA FLEX WHICH WERE ACCOUNTED IN SUBSEQUENT YEAR. IT IS RESPECTFULLY SUBMITTED THAT THE JOB WORK CHARGES WERE GENUINE, CONFIRMED AND RECONCILED. HENCE MERELY BECAUSE IT IS ACCOUNTED IN SUBSEQUENT YEAR, THE SAME SHOULD NOT BE DISALLOWED ARBITRARI LY. 3. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) HAS PARTIALLY DISALLOWED 80IB CLAIM BY AD - HOC ALLOCATION OF COMMON EXPENSES OF ENTIRE COMPANY. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOCATED ENTIRE COMMON EXPENSES ON AD - HOC PERCENT AGE BASIS. ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNTS FOR EACH DIFFERENT UNIT SEPARATELY AND ALL THE RELEVANT EXPENSES ARE BOOKED IN THE RESPECTIVE UNITS. 4. AS PER THE PROVISIONS OF SECTION 80IB GOA UNIT PROFIT IS TO BE COMPUTED AS IF IT IS A DISTINC T AND SEPARATE ENTITY. IT IS THE STANDALONE PROFIT OF GOA UNIT WHICH IS TO BE CONSIDERED AND NOT ARBITRARY PROFIT ARRIVED. 5. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN CHA RGING INTEREST U/S 234 B AND 234 C OF THE ACT. THE REVENUE IN ITS APPEAL HAS TAKEN FOLLOWING GROUNDS : - A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF R S. 1,08,618 / - MADE ON ACCOUNT OF DISCREPANCIES IN PURCHASES, WITHOUT CALLING FOR A REMAND REPORT WHICH IS IN VIOLATION OF RULE 46A OF THE I. T. RULES, WHICH PROVIDES THE ASSESSING OFFICER A REASONABLE OPPORTUNITY TO EXAMINE THE EVIDENCE OR DOCUMENTS OR TO CROSS - EXAMINE THE WITNESS PRODUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE CIT(A). B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 5,65,30,211/- MADE U/S. 40(A) ON ACCOUNT OF REMITTANCE OF FCCB ISSUE EXPENSES TO A NON - RESIDENT WITHOUT DEDUCTING TAX. ITA NO S . 7095 & 6905 / 1 0 4 C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW A DEDUCTION OF RS. 4,87,62,058 / - U/S. 80LB AS AGAINST THE DEDUCTION OF RS. 3,59,79,941 / - CORRECTLY WORKED OUT T:JY THE ASSESSING OFFICER FOR DETERMINING THE PROFIT OF THE GOA U NIT. 6 . AT THE OUTSET, BOTH LD. A.R. AND LD. D.R. AGREED THAT ALL THE ABOVE ADDITIONS HAVE BEEN DECIDED BY TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 2 - 0 3, 2003 - 04 & 2004 - 05 VIDE ORDER DATED 30 - 9 - 2014 AND VIDE ORDER DATED 8 - 10 - 2014 FOR A.Y.2008 - 09 . PRE CISE OBSERVATION AND CONCLUSION OF TRIBUNAL IN A.Y.2008 - 09 WITH REGARD TO ALLOCATION OF EXPENSES IN CASE OF UNIT ELIGIBLE FOR DEDUCTION U/S.80IB WAS AS UNDER : - 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELO W AND THE MATERIAL AVAILABLE ON RECORD. THE BASIS ON WHICH THE ASSESSING OFFICER HAS REJECTED THE BOOKS IS NOT CORRECT, BECAUSE HE HAS TRIED TO JUSTIFY THE ALLOCATION OF EXPENSES BASED ON GROSS PROFIT RATIO WHICH CANNOT BE HELD TO BE A REASONABLE BASIS OR SCIENTIFIC BASIS FOR THE REASON THAT THE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED SEPARATELY AND DIRECT EXPENDITURES HAVE BEEN DEBITED IN EACH AND EVERY UNIT. THE GROSS PROFIT RATIO IS THE BALANCING FIGURE OF THE SALES FIGURE AND DIRECT EXPENSES. THUS, THIS C ANNOT BE THE BASIS OF ALLOCATION OF EXPENSES OR REJECTION OF THE BOOKS OF ACCOUNT. THE LEARNED COMMISSIONER (APPEALS) HAS ANALYSED VERY MINUTELY EACH AND EVERY EXPENDITURE AND HAS SHORTLISTED CERTAIN COMMON EXPENSES AND THE EXPENSES DEBITED IN THE HEAD OFF ICE. THEREAFTER, HE HAS TAKEN A REASONABLE BASIS OF 500/0 OF SUCH COMMON EXPENSES DEBITED IN THE MUMBAI UNIT TO BE ALLOCATED ON A PROPORTIONATE BASIS TO ALL THE THREE UNITS. THEREAFTER, HE HAS ALLOCATED 1/3RD OF SUCH COMMON EXPENSES TO THE GOA UNIT. NOT ON LY THAT HE HAS ALSO PROCEEDED TO ANALYSE INTEREST AND FINANCE EXPENSES ON TERM VARIOUS LOAN OF VARIOUS UNITS AND THEREAFTER ALLOCATED THE INTEREST ON THE BASIS OF WORKING CAPITAL LOAN. HE HAS ALSO INCLUDED THE ALLOCATION OF THE DEPB INCOME. THE ENTIRE ALLO CATION AS DONE BY THE LEARNED COMMISSIONER (APPEALS) APPEARS TO BE NOT ONLY REASONABLE BUT ALSO BASED ON PROPER APPRECIATION OF FACTS. THUS, WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH A FINDING WITHOUT ANY PROPER REBUTTAL BY THE REVENUE AND MATERIAL O N RECORD. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7 . SIMILARLY, DELETION OF ADDITION MADE ON ACCOUNT OF DISCREPANCY IN PURCHASES WAS CONFIRMED BY TRIBUNAL VIDE ORDER DATED 30 - 9 - 2014, RELEVANT OBSERVATION OF TRIBUNAL ARE AT PAGES 33 TO 39. AS THE FACTS AND ITA NO S . 7095 & 6905 / 1 0 5 CIRCUMSTANCES ARE PARI - MATERIA DURING THE YEAR, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL, WE CONFIRM THE ACTION OF THE CIT(A) FOR DELETING ADDITION OF RS.1,08,618/ - ON ACCOUNT OF DISCREPANCY IN PURCHASES. 8 . WE HAVE CONSIDERED T HE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE ORDER OF THE TRIBUNAL DATED 8 - 10 - 2014 FOR A.Y. 200 8 - 0 9 IN ASSESSEES OWN CASE AND FOUND THAT THE ADDITIONS CONFIRMED AND DELETED DURING THE YEAR UNDER CONSIDERATIO N WITH REGARD TO ALLOCATION OF EXPENSES FOR COMPUTING DEDUCTION U/S.80IB HAVING BEEN DEALT BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y.2008 - 09 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2008 - 09, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) WITH REGARD TO ALLOCATION OF EXPENSES. WITH RESPECT TO THE EACH EVERY ADDITIONS CONFIRMED/DELETED , THE LD. CIT(A) HAS GIVEN DETAILED FINDINGS AND DELE TED PART OF THE ADDITION MADE U/S 40(A)(IA) ON ACCOUNT OF REMITTANCE OF FEEB ISSUE EXPENSES TO A NON - RESIDENT ON ACCOUNT OF UNDER WRITING COMMISSION TO DEUTSCHE BANK AG BY RELYING ON ITAT MUMBAI DECISION IN CASE OF RAYMOND LTD. 86 ITD 791 , AND GUJARAT AMBU JA CEMENT 2 SOT 784 . HOWEVER, THE LD. CIT(A) HAS CONFIRMED THE ADDITION ON ACCOUNT OF JOB WORK CH ARGES RECEIVED FROM ULTRA FLEX AND PARTLY DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. WE FOUND THAT THE LD. CIT(A) HAS DEALT WITH EACH AND EVERY I SSUE AND AFTER RECORDING DETAIL ED FINDINGS FROM PAGES 11 TO 44 OF HIS APPELLATE ORDER , PARTLY ALLOWED THE ASSESSEES APPEAL AS DISCUSSED ABOVE. WE FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 200 2 - 0 3, 2003 - 04, 2005 - 06 & 2008 - 09 , WHEREIN THE ORDER OF THE LD. CIT(A) WAS CONFIRMED BY DISMISSING REVENUES APPEAL AS WELL AS THE C.O. FILED BY THE ASSESSEE. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER ITA NO S . 7095 & 6905 / 1 0 6 CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ABOVE ORDER S OF THE TRIBUN AL, WE DISMISS BOTH THE APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE. 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 7095/M/2010 AND THE APPEAL FILED BY THE REVENUE IN ITA NO. 6905/M/2010 ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 20/02 201 5 . 20/02 / 201 5 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIA L MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 20/02 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//