DCIT, New Delhi V. M/s Wings Pharmaceuticals Pvt. Ltd., New Delhi

ITA 925/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77743 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 27-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S MEENA
• Section: 80C; 14A; 132

Judgement Text

ITA NO. 925/DEL/13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: H NEW DELHI BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI B. R. JAIN, ACCOUNTANT MEMBER I.T.A .NO. 925 /DEL/2013(AY-2009-1 0) DCIT CENT. CIRCLE 2 NEW DELHI (APPELLANT) VS WINGS PHARMACEUTICALS PVT. LTD. J-3, UDYOG NAGAR, INDUSTRIAL AREA NEW DELHI AAACW0963B (RESPONDENT) APPELLANT BY SH. ANIL KUMAR JAIN, CA RESPONDENT BY SH. R. S. MEENA, CIT DR ORDER PER B. R. JAIN, AM THIS APPEAL BY REVENUE AGAINST THE ORDER DATED 11/ 12/2012 OF LD. CIT(A) III, NEW DELHI, RAISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) IS ERRED IN DELETING THE DISALLOWANCE OF RS.12,80,69,194/- MADE BY THE ASSESSING OFFICER ON DEDUCTION U/S 80 IC OF THE INCOME TAX A CT , 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) IS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE T O RS.9,65,779/- OUT OF TOTAL DISALLOWANCE OF RS.15,96,007/- MADE BY THE AO I U/S 14A OF THE INCOME TAX ACT, 1961. 3. THE ORDER OF THE CIT (A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 2. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRODUCING AND MARKETING MEDICINAL FORMULATIONS. IT HAD CLAIMED DEDUCTION U/S 80 IC OF THE ACT FOR RS.12,80,69,194/-. IN THE EARLIE R YEARS FOR ASSESSMENT YEAR 2006- ITA NO. 925/DEL/13 2 07 TO 2008-09 THE SIMILAR DEDUCTION CLAIMED STOOD I NITIALLY DISALLOWED AS AN ACTION U/S 132 OF THE ACT CARRIED AT BUSINESS PREMISES OF THE ASSESSEE AS WELL AS A SURVEY PROCEEDINGS ON THAT DATE REVEALED THAT THE ASSESSEE HAD RAISED BOGUS BILLS ON VARIOUS CONCERNS WITHOUT FACTUALLY SUPPLYING ANY MATERIAL T O THEM. THE INVESTIGATION BY EXCISE AND CUSTOMS AUTHORITIES ALSO REVEALED SIMILA R FINDINGS. IT WAS ALSO FOUND THAT THE ASSESSEE HAD SHIFTED OLD MACHINERY AT ITS UNIT AT BADDI. THE PLANT AND MACHINERY SHOWN AS PURCHASED FOR ITS BADDI UNIT DUR ING EARLIER YEARS WERE FOUND TO BE IN THE NATURE OF ACCOMMODATION ENTRY ONLY. THE ISSUE OF VALUATION OF PLANT AND MACHINERY INSTALLED AT BADDI WAS REFERRED TO THE AP PROVED VALUER/CHARTERED ENGINEERS WHO AFTER ELUCIDATION REPORTED THAT THE O LD MACHINERY (MORE THAN 3 TO 5 YEARS OLD) IS 88.72% AND NEW MACHINERY IS ONLY 11.2 8% OF THE TOTAL MACHINERY. THAT APART THE REPORT SUBMITTED IN PRESCRIBED FORM 10CCB FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT WAS FOUND TO BE DEFECTIVE. ACCORDI NGLY, THE ACCOUNTS WERE REJECTED IN THE EARLIER YEARS AND THE CLAIM OF DEDUCTION ALS O STOOD DENIED. THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION RESTED ITS FINDINGS ON SIMILAR BASIS AS WERE TAKEN IN ASSESSMENT YEARS 2006-07 TO A.Y 2008-09 AN D HELD THAT THE CLAIM FOR DEDUCTION U/S 80C IS WRONG AND NOT IN ACCORDANCE WI TH PROVISIONS OF THE ACT. THE SAME, THEREFORE, STOOD DISALLOWED. 3. THE LD. CIT(A) WAS OF THE VIEW THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES ON THIS PARTICULAR ISSUE UNDER CONSID ERATION FOR THE YEAR UNDER APPEAL WITH THAT IN A.Y 2006-07 TO 2008-09. HIS PREDECESSO R HAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IC OF THE ACT. HE, THE REFORE, FOUND NO REASON TO DISAGREE WITH HIM. HE, THEREFORE, ALLOWED THE GROUND RAISED IN APPEAL BEFORE HIM. 4. IN APPEAL BEFORE APPELLATE TRIBUNAL, THE PARTIES HAVE LAID ON RECORD A COPY OF TRIBUNAL ORDER DATED 7 TH DAY OF FEBRUARY 2014 IN ASSESSEES OWN CASE IN ITA NO. 3287, 4072 & 4073/DEL/2012 FOR A. YS 2006-07 TO 200 8-09 AND MADE REFERENCE TO ITA NO. 925/DEL/13 3 PARA 45 TO 54 THEREOF. THE APPELLATE TRIBUNAL HAS FOUND ITSELF IN AGREEMENT WITH THE LD. CIT(A) THAT THE VALUE OF OLD MACHINERY IS LESS THEN 20%. SINCE THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND A REPORT IN PRESCRIBED FORM HAS BEEN SUBMITTED, THE ASSESSEE CAN BE SAID TO HAVE COMPLIED WITH THE PROV ISIONS OF THE ACT FOR ITS CLAIM OF DEDUCTION. HENCE, IT HAS UPHELD THE ORDER OF LD. C IT(A) IN ALLOWING DEDUCTION U/S 80 IC OF THE ACT FOR A.Y 2006-07 TO 2008-09. 5. THE LD. DEPARTMENTAL REPRESENTATIVE, HOWEVER, AD MITS THAT THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES OR IN LAW DURING THE YEA R UNDER CONSIDERATION AS COMPARED TO THE EARLIER YEARS AND MAINTAINS THAT ON THE PECU LIAR FACTS AND FINDINGS RETURNED BY ASSESSING OFFICER IN ASSESSMENT ORDER AS WELL AS AU THORIZED OFFICER DURING SEARCH AND SURVEY PROCEEDINGS, DEDUCTION U/S 80 IC OF THE ACT CANNOT LEGALLY BE ALLOWED TO THE ASSESSEE. 6. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE EARLIER BENCH OF THE APPELLATE TRIBUNAL BY ITS ORDER DATED 7/2/20 14 IN A. Y 2006-07 TO 2008-09 ON THE SIMILAR FACTS HAS FOUND THAT THE VALUE OF OLD M ACHINERY IS NOT MORE THAN 20%. IT HAS ALSO RETURNED A FINDING THAT THE ASSESSEE HAS C OMPLIED WITH THE PROVISIONS OF THE ACT FOR ITS CLAIM OF DEDUCTION U/S 80 IC OF THE ACT . IT HAS, THEREFORE, UPHELD THE DECISION OF LD. CIT(A) IN ALLOWING DEDUCTION U/S 80 IC OF THE ACT. BEFORE US NO CHANGE IN FACTS OR LAW HAS BEEN POINTED OUT. WE TH EREFORE, FOR THE SAKE OF CONSISTENCY, ARE NOT INCLINED TO INTERFERE WITH TH E DECISION REACHED BY LD. CIT(A) IN THE YEAR UNDER CONSIDERATION AS WELL IN ALLOWING DE DUCTION U/S 80 IC OF THE ACT. ACCORDINGLY, GROUND IN APPEAL RAISED BY REVENUE STA NDS REJECTED. 7. IN GROUND NO-2 IN APPEAL, THE ASSESSING OFFICER DISALLOWED RS.15,96,077/- U/S 14A OF THE I. T ACT 1961 READ WITH RULE 8D OF I . T RULES 1962 FOR EXPENDITURE ITA NO. 925/DEL/13 4 DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PAR T OF TOTAL INCOME AS PER WORKING GIVEN IN PARA 4.6 OF THE ASSESSMENT ORDER AS UNDER: - 4.6 THE WORKING OF RULE 8D OF INCOME TAX RULES, 1 962 IS AS UNDER:- THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NO T FROM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWING AMOUNTS NAMELY: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME (DELAY PAYMENT CHARGES ON SHARES) 5,69,615/- (II) IN A CASE WHERE THE ASSESSEE HA S INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YE AR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR I NCOME OR RECEIPT AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: A. INTEREST EXPENSES 6,07,962/- B. AVERAGE INVESTMENT 16,86,77,860/- C. AVERAGE ASSETS 56,01,57,824/- A X B/C 1,83,073/- (III) AN AMOUNT EQUAL TO ONE-HALF PERCENT OF T HE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, A S APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 0.5% OF AVERAGE OF INV ESTMENT I.E. B 8,43,389/- 15,96,077 TOTAL[(I) +(II)+(III) 8. THE LD. CIT(A) FOUND THT THE ASSESSEE ON ITS OWN HAS ALREADY ADDED A SUM OF RS.8,008,78/- TO ITS INCOME IN TERMS OF SECTION 14A OF THE ACT. IT WAS FURTHER FOUND BY HIM THAT A SUM OF RS. 5,69,615/-ON ACCOUNT OF DE LAYED PAYMENT WHICH FORMS PART OF THE AFORESAID DISALLOWANCE OF RS.8,008,78/- HAS AGAIN BEEN DISALLOWED BY THE ASSESSING AUTHORITY. HE, THEREFORE, DELETED THE SA ID DISALLOWANCE OF 5,69,615/-. THE LD. CIT(A) FURTHER FOUND THAT INTEREST AMOUNTIN G TO RS.38,346/- PERTAINS TO INTEREST ON CAR LOAN AND RS. 406580/- IS THE INTERE ST PAID ON UNSECURED LOANS FOR ITA NO. 925/DEL/13 5 MAKING PROPORTIONATE DISALLOWANCE TO INTEREST COMPO NENT AND THUS WORKED OUT THE DISALLOWANCE AT RS.1,22,460/- ONLY. IN SO FAR AS T HE ASSESSEES CLAIM THAT THE INVESTMENT IN SHARES HAS BEEN MADE OUT OF THEIR OWN FUNDS, HE FOUND NO MERIT IN SUCH CLAIM FOR LACK OF EVIDENCE BEFORE HIM AND THUS UPHELD DISALLOWANCE AT RS.4,06,580/-. THE ASSESSEE ALSO AGREED TO THE DIS ALLOWANCE ON ACCOUNT OF ADMINISTRATIVE CHARGES. THE AGGREGATE DISALLOWANCE THUS STOOD UPHELD AT RS.9,65,849/- ONLY. 9. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE ASSESSEE IS FOUND TO HAVE MADE A DISALLOWANCE OF RS.8,08,078/- IN RETURN ING ITS INCOME. THE SAID DISALLOWANCE WAS WORKED OUT IN TERMS OF SECTION 14A OF THE ACT. THE ASSESSING AUTHORITY MADE TOTAL DISALLOWANCE OF RS.15,96,077/- WHICH ALSO INCLUDED THE AFORESAID DISALLOWANCE MADE BY THE ASSESSEE HIMSELF . IN RESULT THE LD. CIT(A) IS FOUND TO HAVE UPHELD THE DISALLOWANCE AT RS.9,65,84 9/- IN ADDITION TO THE DISALLOWANCE ALREADY MADE BY THE APPELLANT HIMSELF IN THE COMPUTATION OF INCOME FILED WITH THE RETURN OF INCOME. THE ASSESSEE IS NEITHER IN CROSS-APPEAL NOR HAS FILED ANY CROSS-OBJECTIONS. NO INFIRMITY HAS BEEN POINTE D OUT BY THE REVENUE IN APPEAL IN THE FINDINGS RETURNED AND CONCLUSION REACHED BY LD. CIT(A). ACCORDINGLY, NO INTERFERENCE IS CONSIDERED NECESSARY IN THE WELL-RE ASONED ORDER OF LD. CIT (A) ON THIS GROUND. GROUND IN APPEAL BY REVENUE, THEREFOR E, STANDS REJECTED. 10. IN THE RESULT, APPEAL BY REVENUE STANDS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH MAY 2014. SD/- SD/- (U. B. S. BEDI) (B. R. JAIN) JUDICIAL MEMBER ACCO UNTANT MEMBER ITA NO. 925/DEL/13 6 DATED: 29/05/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTA NT REGISTRAR ITAT NEW DELHI