SPC Life Sciences Private Limited, Vadodara V. DCIT Circle 2(1) (1), Vadodara

MA 390/AHD/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5801 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 20-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Keywords: Transfer pricing; Set aside
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICAIL MEMBER) (THROUGH VIRTUAL COURT) M.A. NO: 390/AHD/2019 (IN ITA NO. 203/AHD/2019) (ASSESSMENT YEARS: 2014-15) SPC LIFE SCIENCES PRIVATE LIMITED 284/1,2, 3 G.I.D.C. ESTATE MAKARPURA, VADODARA-390010 PAN NO. AAJCS0610G V/S DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1), VADODARA-390007 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S URENDRA MODIANI, A.R . RESPONDENT BY : SHRI R. R. MAKWANA, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -07-2021 DATE OF PRONOUNCEMENT : 14 -09-2021 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS MISCELLANEOUS APPLICATION HAS BEEN FILED ON BEHALF OF THE ASSESSEE/APPLICANT U/S.254(2) OF THE INCOME TAX ACT FOR ASSESSMENT YEAR 2014-15 ARISING OUT OF ITA NO.203/AHD/2018 ORDER DATED 22/11/2019. M.A. NO. 390/AHD/2019 . A.Y. 2014-15 2 2. THE ASSESSEE HAS BROUGHT FOLLOWING INADVERTENT ERROR IN OUR ORDER DATED 22/11/2019. 1. ERROR IN READING OF THE GROUND OF APPEAL. I) WE REFER TO PAGE 2 OF THE ORDER OF THE HON'BLE APPELLATE TRIBUNAL, WHEREIN GROUND OF APPEAL IS REPRODUCED AS UNDER AT SERIAL NUMBER 3: THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RENT TO THE EXTENT OF RS.17,88,024/- UNDER SECTION 40A(2).....................' II) HOWEVER, BY MISTAKE, AT PAGE 6 OF THE ORDER, WHILE DECIDING THE MATTER, AT SERIAL NO.8, THE GROUND OF APPEAL IS STATED AS UNDER: NOW, WE COME TO GROUND RELATING TO DISALLOWANCE OF RENT TO THE EXTENT OF U/S. 40A(2)...........' FACTUALLY THE AMOUNT OF RS. 79,44,024/- REPRESENTS RENT OF NUMBER OF PROPERTIES AND THE RENT OF PROPERTIES, AND THE RENT OF PROPERTY UNDER CONSIDERATION IS ONLY RS. 31,08,024/- AND THE AMOUNT OF DISALLOWANCE IS ONLY RS. 17,88,024/- AS SEEN FROM PAGES 5 AND 12 OF THE ASSESSMENT ORDER. 2. ERROR IN READING THE FACTS OF THE CASE. I) FACTS OF THE CASE AS SUMMARIZED IN PARA 9 & 10 OF THE ORDER OF THE HONBLE APPELLATE TRIBUNAL ARE BRIEFLY AS UNDER: THAT EXPENSES OF RS. 79,44,024/- ARE DEBITED AS OFFICE RENT, ASSESSEE STATED THAT THE PROPERTY WAS TAKEN ON LEASE FOR MANUFACTURING ACTIVITY FROM AUGUST, 2013 AT A RENT OF RS. 6 LAKHS PER ANNUM. JUSTIFICATION FOR RENT IS GIVEN BY STATING THAT THE REGISTERED OFFICE WAS SHIFTED FROM TORAN COMPLEX VADODARA TO GIDC MAKARPURA. II) HOWEVER, FACTS AS STATED ABOVE HAVE NO RELEVANCE FOR ISSUE UNDER CONSIDERATION WHICH RELATES TO JUSTIFICATION FOR RATE OF RENT OF THE PROPERTY TAKEN ON RENT MORE THAN 2 YEARS EARLIER AND THE FACTS CONSIDERED HAVE RELEVANCE ONLY FOR JUSTIFYING INCREASE IN THE AGGREGATE EXPENDITURE ON RENT OF ALL PROPERTIES AS COMPARED TO LAST YEAR. BY MISTAKE, NO REFERENCE IS MADE TO JUSTIFICATION GIVEN TO THE ASSESSING OFFICER FOR RATE OF RENT OF THE PROPERTY UNDER CONSIDERATION. SUCH JUSTIFICATION IS REPRODUCED ON PAGES 6 TO 9 OF THE ASSESSMENT ORDER. M.A. NO. 390/AHD/2019 . A.Y. 2014-15 3 3. WE HAVE HEARD BOTH THE PARTIES AND THERE IS AN ERROR INADVERTENTLY IN ITAT ORDER IN ITA NO. 203/AHD/2018 ORDER DATED 22/11/2019 AT PARA NO. 8 FIGURE OF THE RENT WAS MENTIONED AS RS. 79,44,024/- U/S. 40A(2). WE RECTIFY THAT INADVERTENT ERROR AND NOW PARA NO. 8 TO BE READ AS FOLLOWS. NOW WE COME TO GROUND RELATING TO DISALLOWANCE OF RENT TO THE EXTENT OF RS. 17,88,024/- U/S. 40A(2) OF THE ACT. 4. IN THE ABOVE SAID INADVERTENT ERROR IT WAS MENTIONED THAT ASSESSEE COULD NOT GIVE ANY EXPLANATION WITH REGARD TO EXCESSIVE RENT PAID TO THE RELATED PARTY AS ASSESSEE DID NOT FILE ANY DETAIL OR ANY COMPARABLE OF NEARBY PROPERTY . TODAY ASSESSEE DRAWN OUR ATTENTION TOWARDS AN ORDER IN ASSESSEES OWN CASE IN PRECEDING YEAR I.E. 2012-13 AND 2013-14 CO-ORDINATE BENCH IN ITA NO. 1578/AHD/2018 AND IN ITA NO. 1628/AHD/2017 WHEREIN BENCH HAS GRANTED RELIEF WITH REGARD TO RENT PAID TO ITS ASSOCIATED ENTERPRISES WITH FOLLOWING OBSERVATIONS: 20. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE CASE ON HAND, THE ASSESSEE HAS PAID THE RENT TO ITS ASSOCIATED ENTERPRISES AMOUNTING TO RS. 29,36,990.00 (NET OF SERVICE TAX ) ONLY. THE AO OUT OF SUCH RENT TREATED THE SUM OF RS.14,79,426.00 AS EXCESSIVE AND UNREASONABLE. THEREFORE HE DISALLOWED THE SAME BY INVOKING THE PROVISIONS OF THE SECTION UNDER SECTION 40A(2) OF THE ACT. THE LEARNED CIT (A) SUBSEQUENTLY CONFIRMED THE ORDER OF THE AO. THE AO IS EMPOWERED TO MAKE THE DISALLOWANCE OF THE EXPENSES CLAIMED BY THE ASSESSEE IF FOUND UNREASONABLE/EXCESSIVE IN COMPARISON TO THE MARKET RATE UNDER SECTION 40A(2) OF THE ACT, THEN HE CAN MAKE THE DISALLOWANCE OF THE SAME. HOWEVER, THE ONUS LIES ON THE REVENUE TO JUSTIFY THAT THE RENT PAID BY THE ASSESSEE IS EXCESSIVE AND UNREASONABLE IN COMPARISON TO THE MARKET RATE. HOWEVER, IN THE CASE ON HAND, WE NOTE THAT NO SUCH EXERCISE HAS BEEN CARRIED OUT BY THE AO/LEARNED CIT (A) BY BRINGING ANY COMPARABLE CASE TO JUSTIFY THAT THE RENT PAID BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISES IS EXCESSIVE/UNREASONABLE. THUS IN OUR CONSIDERED VIEW, IN THE ABSENCE OF THE COMPARABLE CASES AS ENVISAGED UNDER THE PROVISIONS OF UNDER SECTION 40A(2) OF THE ACT, WE ARE NOT INCLINED TO UPHOLD THE FINDING OF THE AUTHORITIES BELOW. ACCORDINGLY, WE SET ASIDE THE ORDER OF M.A. NO. 390/AHD/2019 . A.Y. 2014-15 4 THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 5. WE CORRECT THE INADVERTENT ERROR AT PARA NO. 13 OF ITA NO. 203/AHD/2018 ORDER DATED 22/11/2019 NOW SAID PARA TO BE READ AS FOLLOWS: WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND ASSESSEE HAS CITED AN ORDER OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN PRECEDING YEARS IN SIMILAR FACTS AND CIRCUMSTANCES RELIEF HAS BEEN GRANTED BY THE CO-ORDINATE BENCH TO THE ASSESSEE AS MENTIONED IN THE ABOVE SAID PARA. 6. THUS, IN PARITY WITH THE CO-ORDINATE BENCH ORDER, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND HOLD THAT DISALLOWANCE OF RENT TO THE EXTENT OF RS. 17,88,024/- U/S. 40A(2) TO BE DELETED BY THE ASSESSING OFFICER. 7. IN THE RESULT, MISCELLANEOUS APPLICATION FILED THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 09- 2021 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 14/09/2021 RAJESH COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD