GILLETTE INDIA LIMITED, Alwar V. ACIT, Alwar

ITA 701/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5124 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 22-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI CIT DHK
• Keywords: Gift; Depreciation; Corroborative evidences; Scheme of amalgamation; Unabsorbed depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 701/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2004-05. M/S. GILLETTE INDIA LIMITED, 65-A, INDUSTRIAL AREA, BHIWADI. CUKE VS. THE ACIT CIRCLE-2, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. A AACI 3924 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.S. KOTHARI (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05.08.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), ALWAR DATED 04.08.2015 PERTAINING TO ASSESSMENT YEA R 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ADDITION OF RS. 33,50,60,730/- (AMOUNT INCORRECTLY STATED AT RS. 45,50,30,319/-) BY WITHDRAWING THE SET OFF OF LOSS AND DEPRECIATION OF AMALGAMATED COMPANY WILKINSON SWORD INDIA LTD. A LLOWED IN EARLIER YEARS U/S 72A(3). HE HAS FURTHER ERRED IN M AKING VARIOUS INCORRECT AND IRRELEVANT OBSERVATIONS IN CONFIRMING THE ADDITION. 1.1. THE LD. CIT (A) HAS FURTHER ERRED ON FACTS AND IN L AW IN CONFIRMING THE ADDITION IN THE YEAR UNDER CONSIDERA TION EVEN WHEN IN ORIGINAL ASSESSMENT ORDER, A FINDING IS GIV EN THAT THE ASSESSEE HAS NOT SATISFIED THE CONDITION OF SECTION 72A(II) IN EARLIER YEARS. 2 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE LUMP SUM DISALLOWANCE OF RS. 22,20,000/- OUT OF ADVERTIS EMENT AND RS. 24,30,000/- OUT OF SALES PROMOTION EXPENSES BY INCO RRECTLY HOLDING THAT ASSESSEE HAS FAILED TO PRODUCE EVEN SOME VOUCH ERS FOR DIFFERENT DATE TO SUBSTANTIATE ITS CLAIM WITHOUT CO NTROVERTING THE VARIOUS CONTENTIONS RAISED BEFORE HIM IN SUPPORT OF THE GENUINENESS AND THE REASONABILITY OF THE EXPENDITURE INCURRED. 3. THE ASSESSEE CRAVES TO AMEND, ADD, ALTER OR MODIFY ANY OF THE GROUND OF APPEALS. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. THERE ARE ONLY TWO EFFECTIVE GROUNDS. GROUND NO. 3 & 4 ARE GENERAL IN NATURE, SAME NEEDS NO SEPARATE ADJUDICATION. 2. THIS IS SECOND ROUND OF LITIGATION BEFORE THE TR IBUNAL. IN EARLIER ROUND, ISSUES OF SET OFF OF LOSS AND UNABSORBED DEPRECIATION UNDE R SECTION 72A(2) AND ALLOWABILITY OF EXPENDITURE ON ADVERTISEMENT AND SALES PROMOTION REACHED TO THE STAGE OF TRIBUNAL AND THE TRIBUNAL IN ITA NO. 180/JP/2009 AN D ITA NO. 276/JP/2009 VIDE ORDER DATED 27.05.2011 WAS PLEASED TO RESTORE THE I SSUE TO THE FILE OF THE AO FOR FRESH DECISION. THE AO YET AGAIN DISALLOWED THE CLA IM OF SET OFF LOSS AND UNABSORBED DEPRECIATION, EXPENDITURE ON SALES PROMOTION AND AD VERTISEMENT. ON APPEAL, LD. CIT (A) CONFIRMED THE ORDER OF AO. THUS THE ASSESSEE IS IN APPEAL AGAINST THIS ORDER. 3. GROUND NO. 1 IS AGAINST WITHDRAWING THE SET OFF OF LOSS AND DEPRECIATION OF AMALGAMATED COMPANY M/S. WILKINSON SWORD INDIA LTD. THE TRIBUNAL IN FIRST ROUND OF LITIGATION IN ITA NO. 180/JP/2009 WAS PLEASED TO RESTORE THE ISSUE TO THE FILE OF THE AO BY OBSERVING AS UNDER :- 4.6 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE CO MPANY AMALGAMATED M/S WILKINSON SWORD INDIA LTD. W.E.F. 01.01.2000. T HE PROVISIONS AS THEY STOOD FOR TAX CONCESSION IN THE CASE OF AMALGAMATIO N WAS THE SET OFF OF 3 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. CARRIED FORWARD LOSS AND DEPRECIATION AND THAT WAS AVAILABLE IF A COMPANY OWNED AN INDUSTRIAL UNDERTAKING OR A SHIP. IF THE A MALGAMATING COMPANY DOES NOT POSSESS SUCH UNDERTAKING OR SHIP THEN PROV ISIONS OF SECTION 72A WILL NOT BE APPLICABLE. SECTION 72A WAS SUBSTITUTED BY F INANCE ACT 1999 W.E.F. 1.4.2000 BUT THE REQUIREMENT OF AMALGAMATING COMPAN Y HAVING INDUSTRIAL UNDERTAKING OR SHIP REMAINED THE SAME. THE OBJECTIV E OF SECTION 72 A WAS TO TACKLE THE SICKNESS OF AN INDUSTRIAL UNDERTAKING AS CLOSURE OF AN UNDERTAKING ENTAILS SOCIAL COST AS WELL AS LOSS OF EMPLOYMENT A ND PRODUCTION. THE GOVT. CAN NOT TAKE OVER SUCH UNITS. TAX CONCESSION WAS AV AILABLE IF AMALGAMATING COMPANY WAS NOT FINANCIALLY VIABLE. IT IS TRUE THAT IN THE APPEAL OF THE AMALGAMATING COMPANY, IT WAS NOTED BY BANGALORE TRI BUNAL THAT EMPLOYEES WERE RETRENCHED AND ASSETS WERE SCRAPPED. WE ARE NO T HAVING THE BALANCE SHEET OF AMALGAMATING COMPANY BEFORE IT WAS AMALGAM ATED. IT IS SEEN THAT AT PAGE 513 OF THE PAPER BOOK THE LD. A/R HAS SHOWN AC TUAL PRODUCTION OF WSIL FOR THE MONTHS FROM JAN, 2000 TO MARCH, 2000. WHETH ER SUCH PRODUCTION IS FROM THE EXISTING ASSETS OF THE COMPANY OR WAS FROM THE ASSETS OF THE AMALGAMATING COMPANY. THE ACT REQUIRES THAT THREE F OURTHS OF THE BOOK VALUE OF FIXED ASSETS IS HELD FOR A MINIMUM PERIOD OF THREE YEARS. RULE 9C PROVIDES FOR THE AMALGAMATED CO. TO ACHIEVE 50% OF THE INSTALLED CAPACITY. CERTIFICATE WAS FILED BY THE COMPANY JUST BEFORE TH E LAST DATE OF LIMITATION OF PASSING THE ASSESSMENT ORDER. IF THE INSPECTOR HAS VESTED THE PREMISES THEN REPORT IF ANY GIVEN BY HIM MAY BE MADE AVAILABLE TO ASSESSEE. WITHOUT LIMITING THE ENQUIRY TO BE MADE BY THE A.O, WE SUGG EST THE FOLLOWING THINGS MAY BE KEPT IN MIND. (A) BALANCE SHEET OF AMALGAMATING COMPANY AS ON 3 1.12.99. (B) ASSTT. ORDER OR RETURN OF INCOME OF AMALGAMATIN G COMPANY UPTO A.Y.99-00. (C) WHAT WAS THE INSTALLED CAPACITY OF AMALGAMATED COMPANY AND AMALGAMATING COMPANY. (D) WHAT WAS THE BUSINESS OF AMALGAMATING COMPANY A ND WHETHER SUCH BUSINESS IS CONTINUED. (E) BEFORE, AMENDMENT FROM 1.4.2000, THE REQUIREMEN T WAS THAT BUSINESS OF AMALGAMATING COMPANY COULD NOT BE MODIF IED OR RE- ORGANISED. SUCH CONDITION HAS BEEN REMOVED & HENCE ONE SHOULD SEE THAT BUSINESS OF AMALGAMATING COMPANY IS TO BE CARR IED ON. (F) COMPANIES ARE REQUIRED TO HAVE A REGISTER OF FI XED ASSETS AND THE A.O. CAN VERIFY REQUIREMENT OF SECTION 72A (2) (I). 4 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 4.7 IT IS DESIRABLE THAT PROCEEDINGS FOR VERIFICATI ON ARE INITIATED AT THE EARLIEST SO THAT A DECISION CAN BE TAKEN AFTER CONS IDERING OF ALL FACTUAL ASPECTS AND ENQUIRIES. HENCE THE ISSUE OF SETTING OFF OF DE PRECIATION AND BUSINESS LOSS OF AMALGAMATING COMPANY I.E. M/S. WILKINSON SWORD I NDIA LTD. IS RESTORED BACK ON THE FILE OF THE A.O. TO MAKE A FRESH DECISI ON. 3.1. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSION AS ARE MADE IN THE WRITTEN SUBMISSION AS UNDER :- 1. AT THE OUTSET, IT MAY BE NOTED THAT IN COURSE O F THE ORIGINAL ASSESSMENT PROCEEDINGS ASSESSEE HAS EXPLAINED IN DE TAIL THAT IT HAS SATISFIED ALL THE CONDITIONS OF SEC. 72A(2) R.W.R. 9C. HOW THESE CONDITIONS ARE SATISFIED IS REPRODUCED BY HONBLE ITAT AT PAGE 13-22 OF THE ORDER (PB 26-35). AFTER CONSIDERING THE SAME, HONBLE ITA T HAS SET ASIDE THE ISSUE TO THE AO FOR FRESH CONSIDERATION WITH CERTAI N OBSERVATION. IN THE SET ASIDE ASSESSMENT PROCEEDINGS, ASSESSEE VIDE LETTER DT. 11.02.2013 (PB 51-69), IN RESPONSE TO THE QUERIES RAISED FILED THE STATEMENT OF TOTAL INCOME AND THE AMOUNT OF BUSINESS LOSS AND UNABSORB ED DEPRECIATION OF WSIL FOR AY 00-01 ALONG WITH ITS AUDITED ACCOUNTS. AGAIN VIDE LETTER DT. 11.03.2013, IT WAS EXPLAINED THAT THE FIXED ASSET R EGISTER OF WSIL AS ON THE DATE OF AMALGAMATION AND THAT OF THE ASSESSEE F OUR YEAR SUBSEQUENT TO THE DATE OF AMALGAMATION IS ALREADY PRODUCED IN ASSESSMENT PROCEEDINGS FOR AY 00-01, 03-04 AND 04-05. THE AO A FTER CONSIDERING THESE DETAILS HAVE NOT FOUND ANYTHING ADVERSE TO TH E CLAIM OF THE ASSESSEE THAT IT HAS FULFILLED ALL CONDITIONS OF SE C. 72A(2) R.W.R. 9C BUT STILL HE DID NOT ALLOWED THE SET OFF OF BUSINESS LOSS AND UNABSORBED DEPRECIATION OF WSIL FOR THE REASON THAT ASSESSEE F AILED TO PRODUCE THE REGISTER OF FIXED ASSETS. IN HOLDING SO, HE IGNORED THAT ASSESSEE VIDE LETTER DT. 24.12.2006 HAS FILED THE DETAILS OF THE BOOK VA LUE OF THE FIXED ASSETS OF WSIL ON THE DATE OF THE AMALGAMATION I.E. 01.01. 2000 AND THE FIXED ASSET REGISTER OF THE ASSESSEE SHOWING THAT MORE TH AN 3/4 TH OF THE BOOK VALUE OF THE FIXED ASSET OF WSIL CONTINUED WITH THE ASSESSEE FOR A MINIMUM PERIOD OF 5 YEARS FROM THE DATE OF AMALGAMA TION I.E. BY 31.12.2004. COPY OF THE LETTER DT. 24.12.2006 IS AT PB 70-109. ON THE ISSUE OF CONTINUOUSLY HOLDING AT LEAST 3/4 TH OF THE VALUE OF THE FIXED ASSETS OF THE AMALGAMATING COMPANY, SPECIFIC REPLY WAS GIV EN WHICH IS AT PB 78. THE SAME IS NOT CONTROVERTED BY THE LOWER AUTHORITI ES. THEREFORE, THE LOWER AUTHORITIES ARE INCORRECT IN HOLDING THAT ASS ESSEE HAS NOT PRODUCED THE DESIRED DETAIL WHEN ALL THESE DETAILS ARE AVAIL ABLE ON RECORD. 2. OTHERWISE ALSO, AS PER THE DIRECTION OF HONBLE ITAT, ASSESSEE HAS FILED THE BALANCE SHEET OF WSIL AS ON 31.12.1999, RETURN OF WSIL FOR AY 00-01 5 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. (PERIOD ENDING 31.12.99) AND THE STATEMENT OF UNABS ORBED BUSINESS LOSSES AND DEPRECIATION OF WSIL. FURTHER, IT WAS EX PLAINED THAT THE INSTALLED CAPACITY OF WSIL WAS 60 MILLION BLADES WH ICH THE ASSESSEE CONTINUED TO MANUFACTURE AND THAT ASSESSEE HAS SATI SFIED ALL THE CONDITIONS OF SEC. 72A(2) R.W.R. 9C. IN THE SET ASI DE ASSESSMENT PROCEEDINGS, THE AO HAS NOT GIVEN ANY ADVERSE FINDI NGS ON THE SATISFACTION OF CONDITION STATED IN SEC. 72A(2). TH EREFORE, THE WITHDRAWAL OF THE UNABSORBED LOSSES AND DEPRECIATION ALREADY A LLOWED TO THE ASSESSEE IN AY 00-01, 01-02 AND 03-04, BY THE AO, I N THE YEAR UNDER CONSIDERATION IS INCORRECT AND UNJUSTIFIED. 3. THE LD. CIT(A) HAS HELD THAT THE EVIDENCE OF THE CONTINUATION OF THE FACTORY OF THE AMALGAMATION COMPANY M/S WILKINSON S WORD INDIA LTD. AT MYSORE IS NOT PRODUCED BY THE ASSESSEE. IT IS SUBMI TTED THAT THIS IS NOT THE REQUIREMENT OF LAW THAT IN CASE OF AMALGAMATION THE FACTORY SHOULD RUN AT THE SAME PREMISES OR STATION. WHAT IS REQUIRED U/S 72A(2)(B)(II) IS THAT THE AMALGAMATED COMPANY CONTINUES THE BUSINESS OF AMALG AMATING COMPANY FOR A MINIMUM PERIOD OF 5 YEARS FROM THE DATE OF AM ALGAMATION. THIS CONDITION IS SATISFIED BY THE ASSESSEE COMPANY IN A S MUCH AS THE ASSESSEE CONTINUED THE PRODUCTION OF WSIL BRAND BLADES & RAZ ORS FROM BHIWADI WHERE THE PLANT & MACHINERY OF THE AMALGAMATING COM PANY WAS SHIFTED. THIS FACT WAS ALSO GOT VERIFIED TO THE AO WITH REFE RENCE TO THE EXCISE RETURNS (PB 77). THUS, IT IS EVIDENT THAT THE BUSIN ESS OF AMALGAMATING COMPANY WAS THE PRODUCTION OF WSIL BRAND BLADES/RAZ ORS WHICH AFTER AMALGAMATION WAS CONTINUED BY THE ASSESSEE COMPANY AND THEREFORE THE DIRECTIONS MENTIONED BY THE ITAT ORDER AT POINT NO. (D) IS SATISFIED. SO FAR AS POINT NO. (E) & (F) OF THE ITAT ORDER IS CONCERN ED THEY ARE GENERAL OBSERVATIONS AND THE ASSESSEE HAS ESTABLISHED THAT THE BUSINESS OF THE AMALGAMATING COMPANY IS CARRIED ON AND 3/4 TH OF THE BOOK VALUE OF THE FIXED ASSETS OF THE AMALGAMATING COMPANY IS CONTINU OUSLY HELD FOR A MINIMUM PERIOD OF 5 YEARS BY THE ASSESSEE. IN VIEW OF ABOVE, THE ASSESSEE HAS SATISFIED ALL TH E CONDITIONS OF SECTION 72A(2) AND THEREFORE THE WITHDRAWAL OF SET OFF OF U NABSORBED DEPRECIATION AND LOSSES DURING THE YEAR WHICH WAS ALLOWED IN EAR LIER YEARS IS BAD IN LAW. 3.2. ON THE CONTRARY, THE LD. CIT D/R SHRI D.S. KOT HARI VEHEMENTLY OPPOSED THE SUBMISSIONS OF THE ASSESSEE AND PLACED RELIANCE ON THE JUDGMENT OF HONBLE ORISSA HIGH COURT RENDERED IN THE CASE OF INDIAN METALS & FERRO ALLOYS LTD. VS. UNION OF INDIA, 262 ITR 553 (ORISSA). HE SUBMITTED THAT IT WAS INCUMBENT UPON THE ASSESSEE TO PROVE THAT THE CONDITIONS AS EMBEDDED IN SECTION 72A(2)(I) ARE SATISFIED. 6 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. IN THE EARLIER ROUND OF LITIGATION, THE ISSUE WAS RESTORED TO THE FILE OF T HE AO FOR MAKING ENQUIRY WITH REGARD TO THE SATISFACTION OF THE CONDITIONS AS EMBEDDED U NDER SECTION 72A(2)(B)(III). THE AO WAS REQUIRED TO DECIDE THE ISSUE IN THE LIGHT OF THE OBSERVATIONS MADE BY THE TRIBUNAL IN ITA NO. 180/JP/2009 (SUPRA). WE FIND TH AT THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BY OBSERVING AS UNDER : - THE REPLY FILED BY THE ASSESSEE COMPANY THROUGH IT S AR IS FOUND TO BE ROUTINE IN NATURE. THEREFORE, THE REPLY OF THE ASSE SSEE COMPANY IS NOT FOUND CONVINCING AT ALL. THE ASSESSEE COMPANY HAS F AILED TO PRODUCE THE REGISTER OF FIXED ASSETS, WHICH CLEARLY MEANS T HAT THE ASSESSEE COMPANY DOES NOT MAINTAIN ANY SUCH RECORD. THE ASSESSEE COMPANY VIDE THIS OFFICE LETTER NO. 14 54 DATED 04.03.2013 WAS ASKED TO FURNISH :- 1. THE REGISTER OF FIXED ASSETS MAINTAINED BY M/S. WILKINSON SWORD INDIA LTD., AS ON DATE OF AMALGAMATION. 2. THE REGISTER OF FIXED ASSETS MAINTAINED BY THE M/S. GILLETTE INDIA LIMITED, FOR THE FOUR SUBSEQUENT FINANCIAL YEARS FR OM THE DATE OF AMALGAMATION. IN RESPONSE TO ABOVE MENTIONED QUERY THE REPLY OF T HE ASSESSEE COMPANY WAS RECEIVED IN DAK ON 11.03.2013 WHEREIN T HE ASSESSEE HAS STATED THAT THE REGISTERS HAD ALREADY BEEN PRODUCED IN THE ASSESSMENT PROCEEDINGS OF THE A.Y. 2004-05, A.Y. 2003-04 AND A .Y. 2000-01. THE ASSESSEE HAS FAILED TO PRODUCE THE REGISTER OF FIXE D ASSETS. THE ASSESSEE WAS GIVEN ADEQUATE OPPORTUNITY OF PRODUCE THE DESIRED DETAILS BUT IT HAS FAILED TO PROVIDE THE SAME. IN V IEW OF ABOVE THE ASSESSEE COMPANY IS NOT ALLOWED THE SET OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF M/S. WILKINSON SWORD IND IA LTD. THE LD. CIT (A) HAS DECIDED THE MATTER BY OBSERVING IN PARA 4.6 TO 4.8 OF HIS ORDER AS UNDER :- 7 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 4.6. I FIND THAT AO HAD DURING THE COURSE OF SET ASIDE PROCEEDINGS GIVEN OPPORTUNITY TO THE APPELLANT TO PRODUCE THE E VIDENCE WITH REGARD TO THE ISSUED RAISED ABOVE. THE APPELLANT HAS REITE RATED THE SAME FACTS WHICH WERE PLACED BEFORE THE ITAT, WHEN THESE DIREC TIONS WERE ISSUED. AO HAD GIVEN SPECIFICALLY AN OPPORTUNITY TO PRODUCE THE FIXED ASSET REGISTER MAINTAINED BY M/S. WILKINSON SWORD INDIA L TD. AS ON THE DATE OF AMALGAMATION AND ALSO OF THE APPELLANT (M/S. GIL LETTE INDIA LTD.) MAINTAINED FOR FOUR SUBSEQUENT FINANCIAL YEARS FROM THE DATE OF AMALGAMATION. HOWEVER, THE APPELLANT COULD NOT PROD UCE THE SAME AND ACCORDINGLY THE CLAIM OF BROUGHT FORWARD LOSSES /DEPRECIATION WAS DISALLOWED. 4.7. IN THE COURSE OF PRESENT PROCEEDINGS, THE APPE LLANT HAS REITERATED THE SUBMISSIONS FILED EARLIER BUT FAILED TO PRODUCE THE FIXED ASSETS REGISTER OF THE AMALGAMATING COMPANY M/S. WI LKINSON SWORD INDIA LTD. AS ON THE DATE OF AMALGAMATION AND OF TH E AMALGAMATED COMPANY, NAMELY THE APPELLANT, FOR THE FOUR SUBSEQU ENT YEARS FROM THE DATE OF AMALGAMATION. FURTHER, THE EVIDENCE OF THE CONTINUATION OF THE FACTORY OF THE AMALGAMATING COMPANY M/S. WILKIN SON SWORD INDIA LTD. AS MYSORE COULD NOT BE PRODUCED. THE SUBMISSIO NS MADE BY THE APPELLANT THAT ASSETS WERE SHIFTED FROM MYSORE TO B HIWADI FALLS SHORT OF REALISM IN THE ABSENCE OF FACTUAL EVIDENCE. 4.8. FURTHER, I FIND THAT AS REGARDS THE DIRECTIONS GIVEN BY THE ITAT ARE CONCERNED, THE APPELLANT HAS BEEN ABLE TO COMPL Y WITH ONLY THREE DIRECTIONS AS STATED ABOVE AT POINT NO. (A), (B) AN D (C) ONLY AND HAS FAILED TO FURNISH ANY EVIDENCE WITH REGARD TO THE R EMAINING ISSUES LISTED AT POINT NO. (D), (E) AND (F) IN PARA 4.5 ABOVE. IT MAY BE APPRECIATED THAT THE ISSUES CONTAINED IN DIRECTIONS LISTED AT ( D) TO (F) ARE MATERIAL IN NATURE AND NO SUBSTANTIATING EVIDENCE COULD BE FURN ISHED EITHER BEFORE THE AO OR IN THE COURSE OF PRESENT PROCEEDINGS BY T HE APPELLANT. THEREFORE, I HOLD THAT FINDINGS GIVEN BY THE AO AT THE STAGE OF ORIGINAL ASSESSMENT PROCEEDINGS STILL HOLD GOOD AS NO CONTRO VERTING EVIDENCE COULD BE BROUGHT ON RECORD BY THE APPELLANT IN THE INTERVENING PERIOD. ACCORDINGLY, I HOLD THAT AO WAS JUSTIFIED AND CONFI RM THE DISALLOWANCE OF RS. 45,50,30,319/- ON ACCOUNT OF BROUGHT FORWARD LOSSES &UNABSORBED DEPRECIATION OF THE AMALGAMATING COMPAN Y M/S. WILKINSON SWORD INDIA LTD. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE R IVAL CONTENTIONS OF THE RESPECTIVE REPRESENTATIVES OF THE PARTIES. THE CONTENTION OF THE REVENUE IS THAT MYSORE UNIT OF THE ASSESSEE COMPANY WAS CLOSED. THE WORKERS WERE R ETRENCHED AND THE ASSESSEE 8 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. HAS NOT PRODUCED THE REGISTER OF FIXED ASSETS. THER EFORE, THE ASSESSEE WAS NOT ELIGIBLE FOR SETTING OFF OF LOSS AND UNABSORBED DEP RECIATION. THE CONTENTION OF THE ASSESSEE IS THAT THE ISSUE WAS RECOGNIZED IN EARLIE R YEARS. ALL THE EVIDENCES WERE PLACED BEFORE THE AO AND EVEN THE REGISTER OF FIXED ASSETS WAS PRODUCED. ON THE BASIS OF THE AOS FINDING, THE ASSESSEE IS ELIGIBLE FOR SETTING OFF OF LOSS AND UNABSORBED DEPRECIATION. WE FIND THAT THE AUTHORITI ES BELOW HAVE NOT GIVEN SPECIFIC FINDINGS WITH REGARD TO THE ELIGIBILITY FOR SETTING OFF BUSINESS LOSSES AND UNABSORBED DEPRECIATION WHICH WAS DESIRED BY THE TRIBUNAL IN I TA NO. 180/JP/2009. WE, THEREFORE, DEEM IT PROPER TO RESTORE THIS ISSUE ONC E AGAIN TO THE FILE OF THE AO TO GIVE CLEAR FINDING ON THE SUBMISSIONS OF THE ASSESS EE SINCE IT IS CONTENDED BY THE ASSESSEE THAT AS PER BALANCE SHEET OF M/S. WILKINSO N SWORD INDIA LTD. AS ON 31.12.1999 FILED BEFORE THE AO ALONG WITH STATEMENT OF UNABSORBED BUSINESS LOSS AND DEPRECIATION. IT IS CONTENDED THAT THE INSTALLE D CAPACITY OF M/S. WILKINSON SWORD INDIA LTD. IS 60 MILLION BLADES WHICH THE ASSESSEE CONTINUED TO MANUFACTURE AND THAT ASSESSEE HAS SATISFIED ALL THE CONDITIONS OF SEC. 7 2A(2) READ WITH RULE 9C INCOME TAX RULES 1962. AS PER SECTION 72A(2) NOTWITHSTANDING ANY CONTAINED IN SUB-SECTION (1), THE ACCUMULATED LOSS SHALL NOT BE SET OFF OR CARRIE D FORWARD AND THE UNABSORBED DEPRECIATION SHALL NOT BE ALLOWED IN THE ASSESSMENT OF AMALGAMATED COMPANY UNLESS (B) THE AMALGAMATED COMPANY (I) HOLDS CONTINUOUSL Y FOR A MINIMUM PERIOD OF FIVE YEARS FROM THE DATE OF AMALGAMATION AT LEAST THREE- FOURTHS OF THE BOOK VALUE OF FIXED ASSETS OF THE AMALGAMATING COMPANY ACQUIRED I N A SCHEME OF AMALGAMATION; (II)CONTINUES THE BUSINESS OF THE AMALGAMATING COMP ANY FOR A MINIMUM PERIOD OF FIVE YEARS FROM THE DATE OF AMALGAMATION; (III) FUL FILLS SUCH OTHER CONDITIONS AS MAY 9 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. BE PRESCRIBED (RULE 9C) TO ENSURE THE REVIVAL OF TH E BUSINESS OF THE AMALGAMATING COMPANY OR TO ENSURE THAT THE AMALGAMATION IS FOR G ENUINE BUSINESS PURPOSE. THE CONTENTION OF THE ASSESSEE IS THAT THE PRODUCTION W AS CARRIED OUT FROM THE BHIWADI UNIT OF THE AMALGAMATED COMPANY. IT IS THE CONTENTI ON OF THE ASSESSEE THAT IT HAS FULFILLED ALL THE THREE CONDITIONS. THERE IS NO DIS PUTE WITH REGARD TO THE PROPOSITION THAT THE ONUS IS ON ASSESSEE TO DEMONSTRATE THAT IT SATISFIES THE REQUIREMENT OF LAW FOR CLAIMING SET OFF BROUGHT FORWARD LOSSES AND UN ABSORBED DEPRECIATION BY BRINGING ON RECORD THE SUPPORTING EVIDENCES. IN THE CASE IN HAND, THE CONTENTION OF THE ASSESSEE IS THAT IT HAD FURNISHED ALL EVIDENCES DUR ING THE ORIGINAL ASSESSMENT PROCEEDINGS INCLUDING THE REGISTER OF FIXED ASSETS. IT IS ALSO CONTENTION OF THE ASSESSEE THAT THIS MATERIAL WAS AVAILABLE WITH THE AO INCLUDING REGISTER FOR FIXED ASSETS. THEREFORE, WE HEREBY DIRECT THE AO TO VERI FY FROM THE MATERIAL PLACED BEFORE HIM (1) WHETHER THE ASSESSEE COMPANY CONTINUOUSLY H ELD FOR A MINIMUM PERIOD OF FIVE YEARS FROM THE DATE OF AMALGAMATION AT LEAST T HREE-FOURTHS OF THE BOOK VALUE OF THE FIXED ASSETS OF THE AMALGAMATED COMPANY ACQUIRE D IN THE SCHEME OF AMALGAMATION; (2) WHETHER THE ASSESSEE COMPANY CONT INUED THE BUSINESS OF AMALGAMATED COMPANY FOR A MINIMUM PERIOD OF FIVE YE ARS FROM THE DATE OF AMALGAMATION; (3) FULFILLED SUCH OTHER CONDITIONS A S PRESCRIBED UNDER RULE 9C OF THE IT RULES TO ENSURE THE REVIVAL OF THE BUSINESS OF T HE AMALGAMATED COMPANY OR TO ENSURE THAT AMALGAMATION IS FOR GENUINE BUSINESS PU RPOSES. THE ASSESSEE IS DIRECTED TO FURNISH THE EVIDENCES IN SUPPORT OF ITS CLAIM FOR SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIA TION. WITH THESE DIRECTIONS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 10 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 4. GROUND NO. 2 OF THE ASSESSEES APPEAL RELATES TO LUMP SUM DISALLOWANCE OF ADVERTISEMENT AND SALES PROMOTION EXPENSES. 4.1. THE TRIBUNAL IN FIRST ROUND OF LITIGATION WAS PLEASED TO DIRECT THE AO AS UNDER :- 7.6 WE HAVE HEARD BOTH THE PARTIES ADVERTISEMENT EX PENSES VERY FROM RS.46,39,086/- TO 3,32,33,75/- IN DIFFERENT MONTHS. PAPER BOOK DO CONTAIN THE DETAILS OF VOUCHERS FROM PAGES 282 TO 445. BUT SUCH VOUCHERS DO NOT SHOW SUBSTANTIAL AMOUNT. THE A.O. MAY VERIFY THE EXPENSE S FOR A PARTICULAR MONTH TO SEE THAT EXPENSES ARE FOR THE BUSINESS OR NOT AN D THEN CAN TAKE AN EQUITABLE DECISION IN RESPECT OF EXPENSES FOR THE F ULL YEAR. ISSUE IS RESTORED BACK ON THE FILE OF A.O. 4.2. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. THE LD. COUNSEL SUBMITTED THAT THE - 1. DURING THE YEAR, ADVERTISEMENT AND SALES PROMOTION EXPENSES HAVE INCREASED FROM RS. 30.39 CRORES IN THE PREVIOUS YEA R TO RS. 46.50 CRORES IN THE YEAR UNDER CONSIDERATION. ASSESSEE VIDE ITS LETTER DATED 12.12.2006 IN COURSE OF ORIGINAL ASSESSMENT PROCEED INGS, SUBMITTED THAT THERE WERE NEW PRODUCTS WHICH WERE LAUNCHED AND WHI CH NEEDED HUGE ADVERTISEMENT EXPENSES. AMONG THE NEW LAUNCHES WERE PORTABLE BATTERIES (ULTRA M 3 AA BATTERIES), POWER ORAL CARE TOOTHBRUSHES, AND ORAL B CLASSICS. THE NEW LAUNCHES ARE EVIDENT FROM THE RELEVANT EXTRACT OF DIRECTORS REPORT, WHICH WAS REPRODUCED ALONG WI TH THE SAID SUBMISSION. THE INCREASE IN EXPENSES IS TO ACHIEVE AUGMENTATION IN BUSINESS ACTIVITIES AND ALSO TO CREATE AWARENESS AB OUT THE NEW LAUNCHES. THE EXPENSES UNDER THE HEAD ADVERTISEMENT INCLUDE ADVERTISEMENT IN PRINT MEDIA, PRIME TELEVISION AD, POSTERS, RADIO AD, SPONSORSHIPS, PUBLIC RELATIONS, DISPLAY UNITS, CONT ESTS, DEMONSTRATIONS ETC. SALES PROMOTION EXPENSES INCLUDE TRADE GIFTS, PROMOTION CAMPAIGNS, MERCHANDISING, SALES INCENTIVES ETC. 2. THE EXPENSES CLAIMED BY THE ASSESSEE ARE FULLY VERI FIED WITH SUPPORTED VOUCHERS, BILLS, DOCUMENTS, AUTHORIZED BY RESPONSIB LE OFFICER AND HAS BEEN CORRECTLY REFLECTED IN BOOKS OF ACCOUNTS. THES E EXPENSES HAVE BEEN CORRECTLY ACCOUNTED FOR AND DULY AUDITED BY AU DITOR. THERE IS NO ADVERSE REMARK AS TO NON-VERIFIABILITY OF THE EXPEN SES IN THE AUDITORS REPORT. 11 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 3. IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, T HE DETAILS SUBMITTED BY THE ASSESSEE FOR PERUSAL OF THE AO HAD BEEN ON S AMPLE BASIS TO SATISFY HIM ABOUT THE AUTHENTICITY OF THE EXPENDITU RE INCURRED AND CLAIMED. THE ASSESSEE VIDE ITS LETTER 21.12.2006 FI LED MORE THAN 225 PAPER OF VOUCHER/BILLS IN RESPECT OF ADVERTISEMENT/ SALES PROMOTION EXPENSES. THESE VOUCHERS/ BILLS REPRESENT THE COMPL ETE NATURE OF EXPENSES DEBITED UNDER THESE HEADS. AGAIN ASSESSEE VIDE ITS LETTER DATED 28.12.2006 FILED AROUND 50 VOUCHER BOOKS IN O RIGINAL FOR VERIFICATION AND REQUESTED AO TO TAKE COPIES OF SUC H VOUCHERS AS MAY BE DESIRED. ASSESSEE ALSO SUBMITTED THAT EACH VOUCHER BOOKS HAD VOUCHERS FROM 10 TO 100 TO EXPLAIN THE VOLUME OF TRANSACTION S INVOLVED AND REQUESTED AO TO DEPUTE INSPECTOR TO VERIFY THE VOLU MINOUS VOUCHERS, WHICH WAS NOT CONSIDERED BY AO. THE AO HAS INCORREC TLY OBSERVED THE NON-PRODUCTION OF COPY OF ACCOUNTS AND BOOKS OF ACC OUNTS THOUGH THE DETAILED STATEMENTS HAVE BEEN PRODUCED BEFORE HIM D URING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THE LOWER AUTHORITIES DID NOT CONSIDER THE FACT THA T ASSESSEES ACCOUNTS ARE AUDITED. THE SYSTEM OF INTERNAL CONTROL IS SUCH THAT NO EXPENSES ARE BOOKED WITHOUT APPROPRIATE APPROVAL AND EVIDENCE OF EXPENSES. THERE IS NO ADVERSE COMMENT FROM THE AUDITORS ON THE EXPENSE S INCURRED UNDER THIS HEAD. IN THESE CIRCUMSTANCES THE DISALLOWANCE MADE IS UNJUSTIFIED AND THE SAME BE DELETED. 5. IT MAY BE POINTED OUT THAT IN AY 2002-03 AND 2003-0 4, NO SUCH AD-HOC DISALLOWANCE WAS MADE BY THE AO. FURTHER, IN SUBSEQ UENT AY 05-06 ONWARDS TILL DATE, NO SUCH AD-HOC DISALLOWANCE WAS MADE/ SUSTAINED IN APPEALS. CONSIDERING THE SAME, THE VOLUME OF THE TR ANSACTIONS AND THE REPLY DATED 28.12.2006 WHEREIN 50 VOUCHER FILES WER E PRODUCED AND IT WAS SPECIFICALLY REQUEST TO POINT OUT ANY SPECIFIC VOUCHER WHICH IS REQUIRED BY THE AO, AD-HOC DISALLOWANCE IS UNJUSTIF IED. THE LD. CIT(A) ALSO DID NOT REQUIRE THE ASSESSEE TO PRODUCE THE VO UCHERS FOR ANY PARTICULAR MONTH/PERIOD AND THEREFORE HIS FINDING T HAT EVEN AT THE APPELLATE STAGE, THE SAME IS NOT PRODUCED IS MISPLA CED. 6. IT IS ALSO SUBMITTED THAT IN THE SET ASIDE PROCEEDI NGS, AO HAS NOT PROVIDED ADEQUATE TIME TO PRODUCE VOUCHER OF ANY PA RTICULAR MONTH EVEN WHEN REQUESTED BY THE ASSESSEE. FURTHER, THE H ONBLE ITAT HAVE GIVEN A DISCRETION TO THE AO TO VERIFY THE EXPENSES OF A PARTICULAR MONTH BUT THE AO HAVING NOT EXERCISED SUCH DISCRETION, TH E DISALLOWANCE AGAIN MADE BY HIM BY IGNORING THE MATERIAL ON RECORD IS U NJUSTIFIED. 12 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD. 4.3. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS. 4.4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO HAS NOT BASED HIS FINDI NGS ON THE BASIS OF A PARTICULAR MONTH TO SEE THAT EXPENSES ARE FOR THE BUSINESS OR NOT AND THEN CAN TAKE AN EQUITABLE DECISION IN RESPECT OF EXPENSES FOR THE F ULL YEAR, AS DIRECTED BY THE TRIBUNAL. THE LD. CIT (A) ALSO CONFIRMED THE SAME W ITHOUT VERIFYING THE ONE MONTHS SALARY EXPENSES. THEREFORE, WE HEREBY SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFR ESH AFTER TAKING INTO ACCOUNT ONE MONTHS EXPENDITURE ON ADVERTISEMENT AND SALES PROM OTION AND DECIDE THE ISSUE AFRESH AS THE ASSESSEE HAS DEMONSTRATED THAT IT HAS PRODUCED VOUCHERS IN SUPPORT OF SUCH EXPENSES. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09/09/2016 . SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 09/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. GILLETTE INDIA LTD., BHIWAD I. 2. THE RESPONDENT- THE ACIT CIRCLE-2, ALWAR. 3. THE CIT 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 701/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 13 ITA NO. 701/JP/2015 M/S. GILLETTE INDIA LTD.