MASICA LTD, V. DCIT CEN CIR 35,

MA 617/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6447 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2001-2002
• Appeal Filed On: 22-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Section: 143(3); 115JB; 263

Judgement Text

1 MA 617/M/2010 M/S MARICO LIMITED. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J BEFORE SHRI D. MANMOHAN, V.P. AND SHRI R.K. PANDA, A.M. MISC. APPLICATION NO. 617/MUM/2010 ARISING OUT OF ITA NO. 3296/MUM/2006 ASSESSMENT YEAR 2001-02 M/S MARICO LIMITED, RANG SHARDA, K.C. MARG, BANDRA (W), MUMBAI 50. PAN AAACM7493G VS. D.C.I.T., CENTRAL -35, AAYAKAR BHAVAN, MUMBAI.20 APPLICANT RESPONDENT APPLICANT BY SHRI P.J. PARDIWALA RESPONDENT BY SHRI ABANI KANTA NAYAK ORDER PER R.K. PANDA A.M. THE ASSESSEE THROUGH THIS MISC. APPLICATION REQUES TS THE TRIBUNAL TO RECALL ITS ORDER DATED 15.06.2007 OR MODIFY THE SAM E IN SO FAR AS IT UPHOLDS THE ACTION OF THE CIT IN DIRECTING THE ASSESSING OFFICE R TO DISALLOW THE INTEREST OF ` 23.39 LAKHS WHILE COMPUTING THE INCOME UNDER THE HE AD PROFITS AND GAIN OF BUSINESS AND TO ADD BACK THE PROVISION OF ` 7.19 CRORES FOR ADVERTISEMENT AND SALES PROMOTION EXPENDITURE WHILE COMPUTING THE BOO K PROFIT. 2. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING T O THE MISC. APPLICATION SUBMITTED THAT THE APPLICANTS ASSESSMENT WAS ORIGI NALLY FRAMED BY AN ORDER UNDER SECTION 143(3) DATED 25.03.2004. THIS ORDER WAS MADE THE SUBJECT MATTER OF PROCEEDINGS U/S.263 AND THE COMMISSIONER OF INCOME TAX BY AN ORDER DATED 30.03.2006 HELD THAT THE ASSESSMENT ORD ER FRAMED ON 25.03.2004 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE INTER ALIA ON THE 2 MA 617/M/2010 M/S MARICO LIMITED. GROUND THAT THE APPLICANTS CLAIM FOR DEDUCTION OF INTEREST OF ` 23.39 LAKHS WAS WRONGLY ALLOWED AND SIMILARLY THE COMPUTATION OF BO OK PROFITS FOR THE PURPOSE OF SECTION 115JB OF THE ACT WAS ERRONEOUS INASMUCH AS NO ADDITION WAS MADE WHILE DETERMINING THE BOOK PROFIT ON ACCOUNT OF A P ROVISION OF ` 7.19 CRORES MADE FOR A LIABILITY FOR ADVERTISEMENT AND SALES PR OMOTION WHICH ACCORDING TO THE COMMISSIONER OF INCOME-TAX WAS IN THE NATURE OF A PROVISION FOR AN UNASCERTAINED LIABILITY. 2.1 HE SUBMITTED THAT THE APPLICANT PREFERRED AN AP PEAL BEFORE THE TRIBUNAL IN WHICH SEVERAL GROUNDS OF APPEAL WERE RAISED. TH E FIRST GROUND THAT WAS RAISED WAS WHETHER THE COMMISSIONER OF INCOME-TAX H AD ASSUMED JURISDICTION U/S.263 AS ACCORDING TO THE APPLICANT THE ORDER THA T WAS PASSED WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. ANOTHER GROUND THAT WAS RAISED CHALLENGED THE SPECIFIC DIRECTION OF THE COMMISSIONER OF INCOME-TAX TO DISALLOW THE INTEREST OF ` 23.39 LAKHS PAYABLE ON THE UNPAID PURCHASE PRICE OF THE BRAND NAME AND TRADEMARKS ACQUIRED DURING TH E YEAR. A GROUND WAS ALSO FILED CHALLENGING THE ADDITION OF THE SUM OF ` 7.19 CRORES WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF LEVY OF TAX U/S. 115JB. 2.2 HE SUBMITTED THAT IN COURSE OF THE HEARING BEFO RE THE TRIBUNAL ARGUMENTS WERE ADVANCED ON THE ISSUE AS TO WHETHER THE COMMISSIONER OF INCOME-TAX HAD VALIDLY ASSUMED JURISDICTION AS THE ORDER OF THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO TH E INTEREST OF THE REVENUE. ANOTHER ARGUMENT THAT WAS URGED WAS THAT THE ORDER OF THE ASSESSING OFFICER HAD MERGED INTO THE ORDER OF THE COMMISSIONER OF IN COME-TAX(APPEALS) IN SO FAR AS THE ISSUE WITH REGARD TO CLAIM FOR DEDUCTION U/S .80IB WAS CONCERNED. ARGUMENTS WERE ALSO ADVANCED ON THE MERITS OF THE D ISALLOWANCES/ADDITION THAT THE COMMISSIONER HAD DIRECTED TO BE MADE. IN SO FAR AS THE CLAIM FOR INTEREST IS CONCERNED THE ARGUMENT IS NOTED IN PARA GRAPH 24 OF THE ORDER AND IN SO FAR AS THE CHALLENGE TO THE DETERMINATION OF THE BOOK PROFITS IS CONCERNED THE 3 MA 617/M/2010 M/S MARICO LIMITED. ARGUMENT IS NOTED IN PARAGRAPH 25 OF THE ORDER. TH E TRIBUNALS DECISION ON THE VARIOUS ISSUES WHICH AROSE FOR CONSIDERATION IS SET OUT IN PARAGRAPHS 26 TO 39 OF ITS ORDER. FROM PARAGRAPH 26 TO PARAGRAPH 37 TH E TRIBUNAL DEALS WITH THE ISSUE AS TO WHETHER THE COMMISSIONER OF INCOME-TAX HAD VALIDLY ASSUMED JURISDICTION IN SO FAR AS THE CLAIM FOR DEDUCTION U /S.80IB IS CONCERNED AND HAS THEREAFTER CONCLUDED THAT THE JURISDICTION WAS NOT PROPERLY ASSUMED AS THE ISSUE WITH REGARD TO THE CLAIM FOR DEDUCTION U/S.80 IB STOOD MERGED WITH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 2.3 AS REGARDS THE DISALLOWANCE OF THE CLAIM FOR IN TEREST AS WELL AS THE ADDITION TO THE BOOK PROFIT, HE SUBMITTED THAT THE TRIBUNAL HAS HELD THAT AS THERE WAS NO DISCUSSION AT ALL EITHER IN THE BODY O F THE ASSESSMENT ORDER OR THE APPELLATE ORDER AND NOTHING WAS BROUGHT TO THE NOTI CE OF THE TRIBUNAL TO INDICATE WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE ISSUE THE ORDER OF THE CIT WAS TO BE UPHELD. 2.4 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAS DISPOSED OF THE AFORESAID TWO ISSUES ON THE ERRONEO US BELIEF THAT THE ONLY ARGUMENT THAT WAS URGED WAS THAT THE CIT HAS NOT VA LIDLY ASSUMED JURISDICTION BECAUSE THE ISSUE HAD MERGED IN THE ORDER OF THE CI T(A) AND THAT IN ANY EVENT THE ASSESSING OFFICER HAS DULY APPLIED HIS MIND WHI LE ALLOWING THE DEDUCTION. HE SUBMITTED THAT IT WAS NOT THE CASE OF THE APPLIC ANT THAT THE CIT COULD NOT HAVE ASSUMED JURISDICTION U/S. 263 IN SO FAR AS THE AFORESAID TWO ISSUES ARE CONCERNED AS THE ORDER OF THE ASSESSING OFFICER STO OD MERGED IN THE ORDER OF THE CIT(A). IT WAS ALSO NOT THE CASE OF THE CIT THAT T HE ORDER WAS ERRONEOUS BECAUSE THE ASSESSING OFFICER HAD FAILED TO APPLY H IS MIND TO THE ISSUE. ACCORDING TO THE CIT THE CLAIM FOR INTEREST WAS WRO NGLY ALLOWED AND LIKEWISE THE DETERMINATION OF THE BOOK PROFITS WITHOUT MAKIN G AN ADDITION ON ACCOUNT OF THE PROVISION FOR ADVERTISEMENT AND SALES PROMOTION EXPENSES WAS ERRONEOUS. HE SUBMITTED THAT THE APPLICANT HAD IN THE COURSE O F HIS ARGUMENTS CHALLENGED 4 MA 617/M/2010 M/S MARICO LIMITED. THESE SPECIFIC FINDINGS OF THE CIT WHEREBY HE HAD D IRECTED THE DISALLOWANCE OF THE INTEREST TO BE MADE AND AS SUCH TO BE MADE TO T HE BOOK PROFITS AS IS APPARENT FROM PARAGRAPH 18 TO 20 OF THE ORDER OF TH E TRIBUNAL. IT IS THIS FAILURE TO DEAL WITH THE SPECIFIC ARGUMENT URGED BEFORE THE TRIBUNAL CHALLENGING THE MERITS OF THE DISALLOWANCE/ADDITION AND TO PROCEED ON THE ERRONEOUS UNDERSTANDING THAT ARGUMENT WAS ON THE ASSUMPTION O F JURISDICTION WAS ERRONEOUS ONLY AS THE ASSESSING OFFICER HAD DULY AP PLIED HIS MIND WHILE FRAMING THE ASSESSMENT THAT DISCLOSED A MISTAKE APP ARENT FROM THE RECORD WHICH NEEDS TO BE RECTIFIED. 2.5 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT WHILE DISPOSING OF THE GROUND WITH REGARD TO THE COMPUTATION OF THE BOOK PROFITS THE TRIBUNAL HAD OVERLOOKED ITS EARLIER DECISION FOR THE ASSESSM ENT YEAR 1996-97 WHERE THE PROVISION FOR ADVERTISEMENT AND SALES PROMOTION EXP ENSES WAS ALLOWED AS A DEDUCTION U/S. 37 WHICH NECESSARILY MEANS THAT THE PROVISION WAS NOT ONE FOR AN UNASCERTAINED LIABILITY. IN PARAGRAPH 20 OF ITS ORDER THE TRIBUNAL WHILE SUMMARIZING THE ARGUMENTS URGED ON BEHALF OF THE AP PLICANT HAS REFERRED TO THE ORDER OF THE TRIBUNAL, BUT UNFORTUNATELY WHILE DEALING WITH THE ISSUE IN PARAGRAPH 39 OF ITS ORDER THE TRIBUNAL HAS FAILED T O CONSIDER THE ORDER OF THE CO-ORDINATE BENCH. 2.6 HE ACCORDINGLY SUBMITTED THAT THE TRIBUNAL MAY BE PLEASED TO RECTIFY ITS ORDER DATED 15.06.2007 AND DISPOSE OF GROUND NO. 3 THAT WAS RAISED BEFORE IT WHEREBY THE APPLICANT HAD SPECIFICALLY CHALLENGED T HE DIRECTION GIVEN BY THE CIT TO THE ASSESSING OFFICER TO DISALLOW THE INTEREST A ND TO ADD BACK THE PROVISION FOR ADVERTISEMENT AND SALES PROMOTION. 5 MA 617/M/2010 M/S MARICO LIMITED. 2.7 THE LD. D.R., ON THE OTHER HAND, WHILE OPPOSING THE M.A. FAIRLY CONCEDED THE GROUNDS OF APPEAL NO. 3(C) 3(D), 5(C) AND 5(D) WERE NOT ADJUDICATED BY THE TRIBUNAL. 3. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. WE FIND THE ASSESSEE HAS SPECIFICALLY TAKEN THE GROUND RELA TING TO DISALLOWANCE OF CLAIM OF INTEREST CHALLENGING THE ORDER OF THE CIT(A) IN SETTING ASIDE THE ASSESSMENT WITH A DIRECTION TO THE A.O. TO DISALLOW THE CLAIM OF INTEREST OF ` 23.39 LACS RELATED TO PURCHASE OF BRAND NAMES AND TRADEMARKS A ND TO, INCLUDE PROVISION OF ` 7.19 CRORES CREATED FOR ADVERTISEMENT AND SALES PR OMOTION AND DISTRIBUTION EXPENSES WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE I.T. ACT. WE FIND THE TRIBUNAL WHILE ADJUDICATING THE APPEAL HAS NOT CONS IDERED THE ABOVE TWO GROUNDS. THEREFORE, A MISTAKE HAS CREPT IN THE ORD ER OF THE TRIBUNAL. WE THEREFORE, DIRECT THE REGISTRY TO FIX THE APPEAL IN DUE COURSE FOR THE LIMITED PURPOSE OF ADJUDICATING THE GROUNDS OF APPEAL NO. 3 (C), 3(D), 5(C) AND 5(D). WE HOLD AND DIRECT ACCORDINGLY. 5. IN THE RESULT, THE MISC. APPLICATION FILED BY TH E ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 20.05.2011. SD/- SD/- (D. MANMOHAN) (R.K. PANDA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 20 TH MAY, 2011. RK 6 MA 617/M/2010 M/S MARICO LIMITED. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -CONCERNED, MUMBAI 4. THE CIT- CONCERNED, MUMBAI 5. THE DR BENCH, J 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 7 MA 617/M/2010 M/S MARICO LIMITED. DATE INITIALS 1 DRAFT DICTATED ON 11.5.11, SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 12.5.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER