DCIT,Cir.9, Pune V. HINDUSTAN ANTIBIOTICS LTD, Pune

ITA 751/PUN/2008

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2654 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 02-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Depreciation; Business expenditure; Revenue expenditure
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 751 /PN/20 08 / ASSESSMENT YEAR : 20 0 2 - 03 THE ASST. COMMISSIONER OF INCOME TAX , CIRCLE 8, PUNE . / APPELLANT VS. M/S.HINDUSTAN ANTIBIOTICS LTD., PIMPRI, PUNE 411018 . / RESPOND ENT PAN: AAACH5155L . / ITA NO. 75 2 /PN/20 08 / ASSESSMENT YEAR : 20 0 3 - 0 4 / THE DY . COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE . / APPELLANT VS. M/S.HINDUSTAN ANTIBIOTICS LTD., PIMPRI, PUNE 411018 . / RESPONDENT PAN: AAACH5155L . / ITA NO. 75 3 /PN/20 08 / ASSESSMENT YEAR : 20 0 4 - 0 5 THE INCOME TAX OFFICER , WARD 9(4), PUNE . / APPELLANT VS. M/S.HINDUSTAN ANTIBIOTICS LTD., PIMPRI, PUNE 411018 . / RESPONDENT PAN: AAACH5155L ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 2 . / ITA NO. 36 7 /PN/20 0 9 / ASSESSMENT YEAR : 200 5 - 0 6 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 9 , PUNE . / APPELLANT VS. M/S.HINDUSTAN ANTIBIOTICS LTD., PIMPRI, PUNE 411018 . / RESPONDENT PIMPRI, PUNE 411018 . / RESPONDENT PAN: AAACH5155L . / ITA NO. 2433 /PN/20 12 / ASSESSMENT YEAR : 2007 - 08 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE . / APPELLANT VS. M/S.HINDUSTAN ANTIBIOTIC S LTD., PIMPRI, PUNE 411018 . / RESPONDENT PAN: AAACH5155L / APPELLANT BY : SHRI DHEERAJ KUMAR JAIN / APPELLANT BY : SHRI DHEERAJ KUMAR JAIN / RESPONDENT BY : SHRI ASHOK N. KOTHARY / DATE OF HEARING : 03 . 0 3 .201 6 / DATE OF PRONOUNCEMENT: 10 . 0 3 .201 6 ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 3 / ORDER PER SUSHMA CHOWLA, JM: OUT OF T HIS BUNCH OF FIVE APPEAL S , THREE APPEALS FILED BY THE REVENUE ARE AGAINST SEPARATE ORDER S OF C I T (A) - III , PUNE , ALL DATED 28 . 0 2 .20 08 RELATING TO ASSESSMENT YEAR S 200 2 - 0 3 TO 200 4 - 05 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT) . FURTHER, THE REVENUE ALSO FILED TWO APPEALS AGAINST SEPARATE ORDERS OF CIT(A) - III, PUNE, DATED 01.12.2008 AND CI T(A) - V, PUNE, DATED 20.09.2012 RELATING TO ASSESSMENT YEARS 2005 - 06 AND 2007 - 08 AGAINST RESPECTIVE ORDERS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT) . 2. THIS BUNCH OF APPEALS FILED BY THE REVENUE RELATE TO THE SAME ASSESS EE ON IDENTICAL ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED IDENTICAL ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUE IN ITA NO. 751 /PN/20 08 TO ADJUDICATE THE ISSUE. 3. THE REVENUE IN I TA NO. 75 1 /PN/20 08 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW THE CIT(A) ERRED IN TREATING THE SALES PROMOTION EXPENSES AS REVENUE EXPENDITURE THOUGH THESE TREATING THE SALES PROMOTION EXPENSES AS REVENUE EXPENDITURE THOUGH THESE EXPENSES ARE RELATED TO LAUNCHING OF A NEW PROD UCT OF THE COMPANY WHICH IS EXPECTED TO GIVE ENDURING BENEFIT TO THE ASSESSEES BUSINESS AND THEREFORE CAPITAL IN NATURE. 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD , AMEND OR ALTER ANY O F THE ABOVE GROUNDS OF APPEAL . 4 . BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF DIFFERENT LIFE SAVING ANTIBIOTICS IN THE FORM OF TABLETS, CAPSULES, ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 4 INJECTABLES, ETC. THE ASSESSEE WAS A GOVERNMENT COMPANY. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED SALES PROMOTION EXPENSES OF RS. 1,40,19,000/ - . IN THE NOTES TO THE ACCOUNTS, THE ASSESSEE DECLARED THAT IT HAD CLAIMED THESE EXPENSES AS DEFERRED REVENUE EXPENDITURE OVER A PERIOD OF FIVE YEARS. HOWEVER, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD CLAIMED THE DEDUCTION ON ACCOUNT OF ENTIRE EXPENDITURE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE TREATED AS DE FERRED REVENUE EXPENDITURE. IN REPLY, THE ASSESSEE POINTED OUT THAT THE SAID EXPENSES WERE INCURRED ON SALES PROMOTION OF NEW / RE - LAUNCHED PRODUCTS COMPRISING OF PHYSICIAN SAMPLES, ADVERTISEMENT, SALARY AND OTHER RELATED EXPENSES. THE ASSESSEE COMPANY H AD TREATED THE SAID EXPENSES AS DEFERRED REVENUE EXPENDITURE AS IT WAS FOLLOWING THE SAID PRACTICE OF ACCOUNTING FOR THE LAST MANY YEARS. HOWEVER, THE ASSESSEE CLAIMED THAT MUCH OF THESE EXPENSES WERE OF REVENUE NATURE AND KEEPING IN VIEW THE LARGE AMOUNT OF EXPENDITURE INVOLVED, THE PRACTICE OF CHARGING EXPENSES OVER A PERIOD OF 5 TO 10 YEARS WAS CONSIDERED AS APPROPRIATE BY THE MANAGEMENT. THIS PRACTICE WAS FOLLOWED KEEPING IN VIEW THE LARGE LOSSES INCURRED BY THE ASSESSEE FOR THE LAST SEVERAL YEARS. I T WAS THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT NO CAPITAL NATURE OF EXPENSES WERE INVOLVED IN THE ABOVE SAID SALES PROMOTION EXPENSES AND ALL THE ITEMS OF EXPENSES INCLUDED THEREIN OF REVENUE NATURE. FURTHER, THE ABOVE SAID EXPENSES SO C LAIMED HAD BEEN ALLOWED IN ALL THE PAST ASSESSMENT YEARS AND ALSO THE INCOME TAX ACT DOES NOT RECOGNIZE THE CONCEPT OF DEFERRED REVENUE EXPENDITURE AND THE SAID EXPENSES WERE ALLOWABLE UNDER SECTION 37 (1) OF THE ACT, WAS THE PLEA OF THE ASSESSEE. THE ASSE SSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE SINCE IT ITSELF HAD DEFERRED EXPENDITURE OVER A PERIOD OF 5 YEARS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THOUGH THE DEFERRED REVENUE EXPENDITURE WAS IN THE NATURE OF REVENUE EXPENDITURE, BUT BECAU SE OF ITS SPECIAL FEATURES, IT WAS SPREAD OVER NUMBER OF YEARS, DURING WHICH THE BENEFIT OF EXPENDITURE ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 5 WAS EXPECTED TO ARISE TO THE BUSINESS AND IN VIEW THEREOF, THE CLAIM OF ENTIRE EXPENDITURE UNDER SECTION 37(1) OF THE ACT WAS REJECTED AND 1/5 TH OF THE EXPENDITURE WAS ALLOWED DURING THE YEAR AT RS. 26,28,755/ - AND THE BALANCE AMOUNT OF RS.1,12,15,200/ - WAS DISALLOWED. 5 . THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE IN ENTIRETY IN LINE WITH THE ORDER OF CIT(A) RELATING TO ASSESSMENT YEAR 2001 - 02 . 6 . THE REVE NUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE APPEAL OF THE REVENUE RELATING TO ASSESSMENT YEAR 2001 - 02 WAS DISMISSED BY THE TRIBUNAL BECAUSE OF LACK OF COD APPROVAL. IT WAS FURTHER POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT THOUGH THE MISCELLANEOUS APPLICATION WAS MOVED AGAINST THE ORDER OF TRIBUNAL, BUT THE SAME WAS ALSO DISMISSED BECAUSE OF IT BEING TIME BARRED. HOWEVER, THE ALLOWANCE OF EX PENDITURE IN THE PRESENT YEAR WAS CHALLENGED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. DURING THE COURSE OF HEARING OF THE APPEAL, IT WAS PUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AS TO WHAT WAS THE STATUS OF THE ASS ESSEE COMPANY. IT WAS POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT THE ASSESSEE COMPANY WAS BEFORE BIFR AND HAD HUGE LOSSES. THE PERUSAL OF THE ASSESSMENT ORDER ITSELF REFLECTS THE CARRIED FORWARD LOSSES TO THE TUNE OF RS.1 08.90 CRORES. 8 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND, POINTED OUT THAT THE NATURE OF SAID EXPENSES ITSELF REFLECTS THAT THE SAME WAS ALLOWABLE UNDER SECTION 37(1) OF THE ACT , THOUGH IN THE BOOKS OF ACCOUNT, THE SAME WE RE TREATED AS DEFERRED REVENUE EXPENDITURE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 6 ASSESSEE DREW OUR ATTENTION TO THE NOTES OF ACCOUNTS UNDER THE HEAD DEFERRED REVENUE EXPEN SES AND THE EXPENSES ON SALES PROMOTION IN THIS REGARD. 9 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS A GOVERNMENT COMPANY ENGAGED IN THE MANUFACTURE OF DIFFERENT LIFE SAVING ANTIBIOTICS IN THE FORM OF TABLETS, CAPSULES, INJECTABLES, ETC. HOWEVER, THE ASSESSEE COMPANY HA D OVER A PERIOD OF YE ARS SHOWN HUGE LOSSES AND HAS GONE INTO LIQUIDATION. THE CASE OF THE ASSESSEE IS BEFORE THE BIFR FOR RESOLUTION. THE PERUSAL OF THE ASSESSMENT ORDER ITSELF REFLECTS THAT THE GROSS TOTAL INCOME OF THE ASSESSEE AT RS. 13.74 CRORES HAS BEEN ADJUSTED AGAINST BROUGHT FORWARD LOSSES OF ASSESSMENT YEAR S 1997 - 98 AND 1998 - 99 . FURTHER, BUSINESS LOSSES OF ASSESSMENT YEAR 1998 - 99 PENDING ADJUSTMENT TO THE TUNE OF RS.5.49 CRORES AND DEPRECIATION LOSSES TOTALING RS. 103.40 CRORES. THE ISSUE ARISING BEFORE US IS IN RESP ECT OF SALES PROMOTION EXPENSES OF RS.1,40,19,000/ - . IN THE FIRST INSTANCE, THE ALLOWABILITY OR DISALLOWABILITY OF THE SAID EXPENSES IS OF ACADEMIC NATURE BECAUSE OF THE LOSSES INCURRED BY THE ASSESSEE COMPANY FROM YEAR TO YEAR. HOWEVER, IN THE INTEREST OF JUSTICE, WE DECIDE THE ISSUE ON MERITS ALSO. THE ASSESSEE HAD BEEN CLAIMING THE AFORESAID EXPENSES ON ACCOUNT OF SALES PROMOTION FROM YEAR TO YEAR, WHICH HAS BEEN ALLOWED IN THE HANDS OF ASSESSEE DESPITE THE ACCOUNTING TREATMENT IN THE BOOKS OF ACCOUNT . THE ASSESSEE WAS INCURRING THE AFORESAID EXPENDITURE ON NEW / RELAUNCHED PRODUCTS AND IT COMPRISED OF THE SAMPLES OF MEDICINES GIVEN TO THE PHYSICIANS, ADVERTISEMENT IN RESPECT THEREOF, SALARY AND OTHER RELATED EXPENSES. THE ASSESSEE WAS TREATING THE S AID EXPENSES AS DEFERRED REVENUE EXPENSES IN ITS BOOKS OF ACCOUNT AND THIS PRACTICE WAS BEING FOLLOWED FROM YEAR TO YEAR . IN THE BOOKS OF ACCOUNT, THE ASSESSEE WAS CHARGING REVENUE OVER A PERIOD OF 5/10 YEARS BEGINNING THE FIRST YEAR OF ACCUMULATION. ACC ORDINGLY, THE EXPENSES WERE BOOKED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT. HOWEVER, IN THE COMPUTATION OF INCOME, THE ENTIRE EXPENDITURE WAS CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER HAS NOT FOUND FAULT WITH THE ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 7 CLAIM OF EXPE NDITURE IN THE HANDS OF ASSESSEE. HOWEVER, IN VIEW OF THE TREATMENT GIVEN BY THE ASSESSEE ITSELF IN ITS BOOKS OF ACCOUNT I.E. TREATING THE SAID EXPENSES AS DEFERRED REVENUE EXPENSES, THE ASSESSING OFFICER WAS OF THE VIEW THAT ONLY 1/5 TH OF THE EXPENDITURE WAS ALLOWABLE IN THE HANDS OF ASSESSEE AND THE BALANCE HAD TO BE ALLOWED IN THE SUCCEEDING YEARS. ON THE OTHER HAND, THE CLAIM OF THE ASSESSEE WAS IRRESPECTIVE OF THE ACCOUNTING TREATMENT OF THE ENTRIES IN THE BOOKS OF ACCOUNT, THE SAID EXPENDITURE WAS A LLOWABLE AS REVENUE EXPENDITURE IN ENTIRETY BECAUSE OF THE NATURE OF EXPENDITURE UNDER THE INCOME TAX ACT, SINCE THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE. THE ACT ONLY TALKS ABOUT THE EXPENDITURE BEING CAPITAL IN NATURE OR REVENUE IN NATURE. ONCE EX PENDITURE IS HELD TO BE ALLOWABLE IN THE HANDS OF ASSESSEE THOUGH TO THE EXTENT OF 1/5 TH OF THE TOTAL EXPENDITURE, IT IS NO DOUBT THAT THE SAID EXPENDITURE IS REVENUE IN NATURE. ONCE THE CONCEPT OF EXPENDITURE BEING ALLOWABLE AS REVENUE , IS ACCEPTED BY TH E ASSESSING OFFICER THOUGH TO THE EXTENT OF 1/5 TH OF THE EXPENDITURE, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN RESTRICTING THE ALLOWANCE TO 1/5 TH OF THE EXPENDITURE. IN THE ABSENCE OF THE CONCEPT OF DEFERRED REVENUE EXPENSES BEING RECOGNIZED BY THE INCOME TAX ACT, WE FIND NO MERIT IN THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE EXPENSES IF REVENUE IN NATURE IS TO BE ALLOWED AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. THE NATURE OF EXPENDITURE ITSELF REFLECTS THAT IT IS FOR SALES PROMOTI ON AND ADVERTISEMENT , AND IS DULY ALLOWABLE IN THE HANDS OF ASSESSEE AS BUSINESS EXPENDITURE UNDER SECTION 37(1) OF THE ACT. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO S LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. CITI FINANCIAL CONSUMER FIN. LTD. (2011) 335 ITR 29 (DEL) AND IN CIT VS. SALORA INTERNATIONAL LTD. (2009) 308 ITR 199 (DEL) I.E. THE CASES RELIED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. 10. IT IS NOT THE CASE OF ASSESSING OFFICER THAT THE EXPENDITURE IN QUES TION IS CAPITAL IN NATURE AND HENCE NOT ALLOWABLE . THE ASSESSING OFFICER HA D DISALLOWED THE CLAIM OF ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 8 ASSESSEE IN VIEW OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. THE ASSESSEE THOUGH HAD MADE THE ENTRIES IN THE BOOKS OF ACCOUNT, BUT SAID ENTRIES ARE NOT CONCLUSIVE IN ORDER TO DECIDE THE MERITS OF CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER HIMSELF HAS ALLOWED PART OF THE EXPENDITURE AND HA D DIRECTED TO ALLOW THE BALANCE IN THE SUCCEEDING YEARS . IN THE ABSENCE OF CONCEPT OF DEFERRED REVENUE EXPENDITURE BEING RECOGNIZED BY THE INCOME TAX ACT, WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN THIS REGARD. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF ASSESSEE IN ENTIRETY . THE PERUSAL OF ORDER PASSED BY THE CIT(A) RELATING TO ASS ESSMENT YEAR 2001 - 02 REFLECTS THAT THE CIT(A) HAD OBSERVED THAT THE INCOME TAX ACT RECOGNIZED ANY EXPENDITURE EITHER AS CAPITAL OR REVENUE EXPENDITURE AND THE CONCEPT OF DEFERRED REVENUE EXPENDITURE WAS NOT SUPPORTED BY PROVISIONS OF THE INCOME TAX ACT, HE NCE THE TOTAL EXPENDITURE WAS ALLOWED IN THE HANDS OF ASSESSEE IN ASSESSMENT YEAR 2001 - 02. THE CIT(A) WHILE DECIDING THE PRESENT APPEAL RELATING TO ASSESSMENT YEAR 2002 - 03 HAS FOLLOWED THE SAID DECISION. WE FIND NO ERROR IN THE AFORESAID OBSERVATIONS OF CIT(A) AND UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUND OF APPEAL RELATING TO SALES PROMOTION EXPENSES RAISED BY REVENUE IN THE APPEALS RELATING TO ASSESSMENT YEARS 2002 - 03 , 2003 - 04 AND 2004 - 05 BEFORE US. 1 1 . NOW, COMING TO THE SECOND ISSUE RAISED BY THE ASSESSEE IN ASSESSMENT YEARS 2003 - 04 , 2004 - 05 , 2005 - 06 AND 2007 - 0 8 . THE GROUND OF APPEAL NO.2 RAISED IN ITA NO.752/ PN/2008 READS AS UNDER: - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW THE CIT(A) ERRED IN DELETING THE DISALLOWANCE FO R POWER AND FUEL EXPENSES MADE BY THE AO FOR BEING NON - RELATED TO BUSINESS BY HOLDING THAT NO DISALLOWANCE CAN BE MADE IN THE CASE OF THE ASSESSEE - COMPANY SIMPLY BECAUSE THE PERQUISITE VALUE HAS NOT BEEN TAXED IN THE HANDS OF THE EMPLOYEES. 1 2 . BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED SUM OF RS. 28.41 CRORES TOWARDS POWER EXPENSES. THE ASSESSING OFFICER NOTED THAT THE SAID AMOUNT WAS INCLUSIVE OF EXPENDITURE PERTAINING TO THE RESIDENTIAL COLONY OF RS. 73.29 ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 9 LAKHS . THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE SAID EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT DIRECTLY RELATED TO THE BUSINESS ACTIVITY AND SINCE THERE WAS NO EVIDENCE TO SUGGEST THAT THE SAID FACILITY WAS BEING TAXED IN THE HANDS OF BEN EFICIARIES IN THE FORM OF PERKS, ETC., THEREFORE THE SAID EXPENDITURE WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 1 3 . THE CIT(A) WAS OF THE VIEW T HAT NON - INCLUSION OF THE VALUE OF PERQUISITE S IN THE INCOME OF THE EMPLOYEES WOULD NOT BE GROUND FOR DISALLOWANCE OF EXPENDITURE IN THE HANDS OF THE COMPANY. IN CASE THE AMOUNT HAD NOT BEEN TAXED IN THE HANDS OF EMPLOYEES OF THE COMPANY AS PERQUISITE, NECESSARY ACTION HAD TO BE TAKEN FOR BRINGING THE SAME IN TAX NET. HOWEVER, NO DISALLOWANCE COULD BE MADE IN THE CASE OF ASSESSEE COMPANY SIMPLY BECAUSE THE PERQUISITE VALUE HAD NOT BEEN TAXED IN THE HANDS OF EMPLOYEES. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE AS THE SAID EXPENDITURE WAS IN THE FORM OF SUBSIDY TO THE EMPLOYEES AND HENCE, WAS ALLOWABLE IN THE HANDS OF ASS ESSEE. 1 4 . THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD. 1 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 1 6 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE O N THE OTHER HAND, POINTED OUT THAT THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER SINCE WHATEVER WAS BEING PAID TO THE EMPLOYEES , THE SAME WAS BEIN G RECOVERED FROM THE EMPLOYEES. HE FURTHER POINTED OUT THAT PART OF EXPENDITURE WAS SPENT ON PROVIDING L IGHTING TO THE RESIDENTIAL COLONY AND ALSO TO THE COMMON FACILITIES TO THE EMPLOYEES OF THE ASSESSEE COMPANY IN THE SAID COLONY, WHICH EXPENDITURE WAS TO BE BORNE BY THE ASSESSEE COMPANY. ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 10 1 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ASPECT OF THE ISSUE IS THE DETERMINATION OF LOSS IN THE HANDS OF ASSESSEE, WHICH IN TURN, HAS BEEN ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES, WHICH AT THE CLOSE OF THE YEAR ARE ALSO FURTHER AVAILABLE TO THE ASSESSEE FOR ADJUSTMENT. SECONDLY, WE F IND MERIT IN THE CLAIM OF THE ASSESSEE VIS - - VIS THE DEDUCTION ON ACCOUNT OF POWER EXPENSES. THE RESIDENTIAL COLONY ESTABLISHED BY THE ASSESSEE COMPANY HAS BEEN PROVIDED TO ITS EMPLOYEES AND IT IS INCUMBENT UPON THE ASSESSEE TO PROVIDE POWER FACILITIES TO THE SAID AREA. ON ONE HAND, THE RESIDENTIAL COLONY COMPRISES FIRST THE RESIDENTIAL ACCOMMODATION PROVIDED TO THE EMPLOYEES AND IT IS THE CASE OF ASSESSEE BEFORE US THAT IN CASE ANY EXPENDITURE IS INCURRED VIS - - VIS RESIDENTIAL QUARTERS OF THE EMPLOYEES, THE SAME IS RECOVERED FROM THEM. EVEN IN CASE THE SAME IS NOT RECOVERED FROM THEM, DOES NOT MERIT THE DISALLOWANCE MADE IN THE HANDS OF ASSESSEE. FURTHER, PART OF POWER AND FUEL EXPENSES WERE INCURRED ON PROVIDING LIGHTS TO THE RESIDENTIAL COLONY AND ALS O TO THE COMMON FACILITIES PROVIDED BY THE ASSESSEE TO ITS EMPLOYEES, WHICH WAS THE OBLIGATION OF THE ASSESSEE COMPANY AND HENCE, EXPENDITURE INCURRED TOWARDS DISCHARGE OF SAID OBLIGATION IS BUSINESS EXPENDITURE OF THE ASSESSEE COMPANY AND IS DULY ALLOWABL E IN THE HANDS OF ASSESSEE. FURTHER, THE EXPENDITURE RELATABLE TO RESIDENTIAL QUARTERS IS NO DOUBT TO BE RECOVERED FROM THE EMPLOYEES OR IS TO BE INCLUDED AS PERK IN THE HANDS OF EMPLOYEES OF THE ASSESSEE COMPANY, BUT MERELY BECAUSE NO SUCH EXERCISE WAS C ARRIED ON, DOES NOT MERIT THE DISALLOWANCE OF EXPENDITURE IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD AND DISMISS THE GROUND OF APPEAL RELATING TO POWER AND FUEL EXPENSES RAISED BY THE REVENUE. 1 8 . THE REVENUE IN ITA NO.753/PN/2008 RELATING TO ASSESSMENT YEAR 2004 - 05 HAS RAISED TWO ISSUES I.E. AGAINST THE ALLOWANCE OF SALES PROMOTION EXPENSES AND POWER & FUEL EXPENSES. IN LINE WITH OUR DECISION IN THE PARAS HEREINABOVE, THE FACTS BEING IDENTICAL, WE DISMISS BOTH THE GROUNDS OF APPEAL . ITA NO S. 751 TO 753 /PN/20 08 ITA NO.367/PN/2009 ITA NO.2433/PN/2012 M/S. HINDUSTAN ANTIBIOTICS L TD. 11 1 9 . I N ITA NO. 367/PN/2009, RELATING TO ASSESSMENT YEAR 2005 - 06 AND ITA NO. 2433/PN/2012, RELATING TO ASSESSMENT YEAR 2007 - 08 , THE ISSUE RAISED IS ONLY AGAINST THE ALLOWANCE OF POWER AND FUEL EXPENSES RELATABLE TO RESIDENTIAL COL ONY. THE ISSUE RAISED IS IDENTICAL TO THE ISSUE RAISED IN ITA NO.752 & 753 /PN/2008 AND FOLLOWING THE SAME PARITY OF REASONING, WE DISMISS THE GROUND OF APPEAL RAISED IN BOTH THE YEARS. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ALL THE APPEALS ARE TH US, DISMISSED. 20 . IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 10 TH DAY MARCH , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 10 TH MARCH , 201 6 . / PUNE ; D ATED : 10 MARCH , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELL ANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - III/ V , PUNE ; 4. / THE C I T - III/ V , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE