Rackitt Benckiser (India) Ltd., Kolkata V. JCIT, Cir-12, Kolkata, Kolkata

MA 73/KOL/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5799 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIDAVID Z CHOWNGTHU ACIT
• Assessee Lawyers: J P KHAITAN
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH KOLKATA BEFORE SHRI N.V. VASUDEVAN, JM &DR. A.L.SAINI, AM M.A NO.73/KOL/2017 (ARISING OUT OF I.T.A NO.33/KOL/2010) & M.A NO.74/KOL/2017 (ARISING OUT OF I.T.A NO.2138/KOL/2009) ( / ASSESSMENT YEAR: 2005-06) RECKITT BENCHISER (INDIA) LTD. 206, AJC BOSE ROAD, BUSINESS TOWERS, UNIT 7C, 7 TH FLOOR, KOLKATA 700 017 VS. J.C.I.T, CIRCLE 12, KOLKATA. P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 ./ ./PAN/GIR NO. : AABCR2655Q (APPELLANT) .. (RESPONDENT) APPELLANTBY :SHRI J. P. KHAITAN, SR. ADVOCATE RESPONDENT BY :SHRIDAVID Z. CHOWNGTHU, ACIT, CIT DR / DATE OF HEARING : 04/08/2017 /DATE OF PRONOUNCEMENT : 15/09/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: BY WAY OF THE CAPTIONED APPLICATION, THE ASSESSEE HAS SOUGHT TO POINT OUT THAT A MISTAKE APPARENT FROM RECORD WITHIN THE MEANING OF SECTION 254(2) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) HAS CREPT IN THE ORDER OF THE TRIBUNAL DATED 06/01/2017. 2. THE CASE OF THE ASSESSEE IN THIS MISCELLANEOUS APPLICATION IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF CONSUMER GOODS AND PHARMACEUTICAL PRODUCTS FOR THE ASSESSMENT YEAR 2005-06, IT HAD CLAIMED DEDUCTION UNDER SECTIONS 80-IB AND 80-IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') IN RESPECT OF INCOME OF THE ELIGIBLE UNITS IN COMPUTING THE INCOME OF THE ELIGIBLE UNITS, THE ASSESSEE DID NOT TAKE INTO CONSIDERATION THE BAD DEBTS WRITTEN OFF BY IT IN ITS CONSOLIDATED ACCOUNTS SINCE SUCH DEBTS RELATED TO THE BUSINESS CARRIED ON BY THE NON-ELIGIBLE UNITS DURING THE FINANCIAL RECKITT BENCHISER (INDIA) LTD M.A NO.73 & 74/KOL/2017 ASSESSMENT YEAR: 2005-06 PAGE | 2 YEARS 2001-02 AND 2002-03 BEFORE THE ELIGIBLE UNITS WERE SET UP IN THE FINANCIAL YEARS 2003-04 AND 2004-05. 3. IT IS THE PLEA OF THE ASSESSEE THAT THE TOTAL EXPENDITURE AS PER ITS PROFIT AND LOSS ACCOUNT FOR THE PREVIOUS YEAR ENDED MARCH 31, 2005 AMOUNTING TO RS.717.26 CRORES INCLUDED RESIDUAL COST OF RS.40.43 CRORES INCURRED AT ITS CORPORATE OFFICE WHICH COULD NOT BE ALLOCATED TO OR IDENTIFIED WITH ANY SINGLE FUNCTION OR UNIT OF ASSESSEE DUE TO ITS GENERAL UTILITY TO ALL THE UNITS AND FUNCTIONS OF THE ASSESSEE. THE MAJOR COMPONENT OF THE SAID RESIDUAL COST WAS EMPLOYEE REMUNERATION AND IT ALSO INCLUDED ESTABLISHMENT EXPENSES LIKE SECURITY SERVICES, OFFICE ELECTRICITY, WATER, RENT, PRINTING AND STATIONERY, ETC. AND EMPLOYEE RELATED BUSINESS EXPENDITURE LIKE TRAVELLING EXPENSES, TRAINING EXPENSES, MOBILE EXPENSES, ETC. THE ASSESSEE, HAVING REGARD TO THE NATURE OF SUCH RESIDUAL COST AND THE FACT THAT IT WAS ENGAGED IN MANUFACTURING AS WELL AS TRADING ACTIVITIES AND WAS IN RECEIPT OF INTEREST INCOME, CONSIDERED APPROPRIATE TO FIRST OF ALL ALLOCATE SUCH CORPORATE OFFICE RESIDUAL COST WITH REFERENCE TO THE NUMBER OF EMPLOYEES AT THE CORPORATE OFFICE WHOSE WORK WAS DIRECTLY LINKED TO THE MANUFACTURING ACTIVITIES. SUCH RESIDUAL COST ALLOCATED TO THE MANUFACTURING ACTIVITIES WAS THEREAFTER FURTHER ALLOCATED TO THE ELIGIBLE UNITS ON THE BASIS OF TURNOVER. 4. THE ASSESSING OFFICER, OVERLOOKING THE FACT THAT THE BAD DEBTS WRITTEN OFF RELATED TO NON-ELIGIBLE UNITS FOR BUSINESS CARRIED ON PRIOR TO THE COMING INTO EXISTENCE OF THE ELIGIBLE UNITS, ALLOCATED SUCH BAD DEBTS ALSO TO THE ELIGIBLE UNITS IN THE RATIO OF SALES. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) AFFIRMED THE SAID ACTION OF THE ASSESSING OFFICER. IN SUCH CIRCUMSTANCES, ASSESSEE IN ITS APPEAL AGAINST THE ORDER DATED SEPTEMBER 23, 2009 OF THE COMMISSIONER OF INCOME TAX (APPEALS), BEING ITA NO.2138/KOL/2009, HAD TAKEN THE FOLLOWING GROUND:- GROUND NO.3:- THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN ALLOCATING BAD DEBTS WRITTEN OFF TO UNITS ELIGIBLE FOR DEDUCTION UNDER SECTIONS 80-IB & 80-IC OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE SAID BAD DEBTS DOES NOT PERTAIN TO THE ELIGIBLE UNITS.' 5. IT IS THE PLEA OF THE ASSESSEE THAT WITH REGARD TO THE CORPORATE OFFICE RESIDUAL COST, THE ASSESSING OFFICER TOOK THE VIEW THAT SUCH COST WAS TO BE ALLOCATED RECKITT BENCHISER (INDIA) LTD M.A NO.73 & 74/KOL/2017 ASSESSMENT YEAR: 2005-06 PAGE | 3 AMONGST THE ELIGIBLE AND NON-ELIGIBLE UNITS IN THE RATIO OF WORKERS OF ELIGIBLE UNITS TO THE TOTAL NUMBER OF WORKERS ACROSS ALL MANUFACTURING LOCATIONS. ACCORDING TO THE ASSESSEE, THE CORPORATE OFFICE LOOKED AFTER ALL THE ACTIVITIES OF THE ASSESSEE INCLUDING MANUFACTURING AND TRADING (THE VOLUME OF WHICH MATCHED MANUFACTURE). THE BASIS ADOPTED BY THE ASSESSING OFFICER ERRONEOUSLY ASSUMED THAT THE CORPORATE OFFICE ONLY LOOKED AFTER MANUFACTURING ACTIVITIES IGNORING THE OTHER ACTIVITIES OF THE CORPORATE OFFICE. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE ASSESSEE'S CONTENTIONS AND DIRECTED THE ASSESSING OFFICER TO ACCEPT THE ALLOCATION OF THE CORPORATE OFFICE RESIDUAL COST AS MADE BY THE ASSESSEE. AGAINST THE SAID DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSING OFFICER IN HIS APPEAL BEING ITA NO.33/KOL/2010 HAD TAKEN THE FOLLOWING GROUND:- GROUND NO. 2: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE RE-COMPUTATION OF DEDUCTION U/S 80IB & 80IC MADE BY THE A.O. THOUGH RE-ALLOCATION IN THE RATIO OF WORKERS OF ELIGIBLE UNDERTAKINGS TO THE TOTAL NUMBER OF WORKERS OF ALL MANUFACTURING UNITS MADE BY THE A.O WAS MORE RELEVANT.' 6. IT IS FURTHER STATED IN THE MISCELLANEOUS APPLICATION THAT AT THE TIME OF HEARING BEFORE THIS HONBLE TRIBUNAL, WITH RESPECT TO GROUND NO.3 OF ASSESSEE'S APPEAL, ON BEHALF OF THE ASSESSEE, ATTENTION WAS INVITED TO THE DETAILS OF BAD DEBTS WRITTEN OFF SUBMITTED TO THE ASSESSING OFFICER IN COURSE OF THE ASSESSMENT PROCEEDINGS INCLUDED IN THE PAPER BOOK AT PAGES 128 AT 129 READ WITH PAGE 145 WHICH WENT TO SHOW THAT THE BAD DEBTS RELATED TO THE BUSINESS OF THE ASSESSEE DURING THE FINANCIAL YEARS 2001-02 AND 2002-03 PRIOR TO THE SETTING UP OF THE ELIGIBLE UNITS IN THE FINANCIAL YEARS 2003-04 AND 2004-05 AND IT WAS SUBMITTED THAT THE AUTHORITIES BELOW HAD WRONGLY IGNORED THE SAID FACT. IT WAS SUBMITTED THAT THE CORRECT FACTUAL POSITION CAN BE VERIFIED BY THE ASSESSING OFFICER. ON BEHALF OF THE REVENUE, THE LEARNED CIT(DR) DID NOT OBJECT TO THE ASSESSEE'S PRAYER FOR VERIFICATION BY THE ASSESSING OFFICER. 7. IN RESPECT OF GROUND NO.2 OF THE REVENUE'S APPEAL REGARDING ALLOCATION OF CORPORATE OFFICE RESIDUAL COST, THE LEARNED CIT(DR) ONLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND DID NOT MAKE ANY OTHER SUBMISSION. AS SUCH, ON BEHALF OF THE ASSESSEE, RELIANCE WAS PLACED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). RECKITT BENCHISER (INDIA) LTD M.A NO.73 & 74/KOL/2017 ASSESSMENT YEAR: 2005-06 PAGE | 4 8. GROUND NO.3 OF THE ASSESSEE'S APPEAL AND GROUND NO.2 OF THE REVENUE'S APPEAL WERE DEALT WITH BY THIS HON'BLE TRIBUNAL IN PARAGRAPH 8 (AND SUB-PARAGRAPHS 8.1 TO 8.4) OF THE ORDER DATED JANUARY 6, 2017 AS IF BOTH THE GROUNDS RELATED TO ALLOCATION OF BAD DEBTS WRITTEN OFF. FURTHER, THE SUBMISSIONS OF THE ASSESSEE WITH REGARD TO BAD DEBTS WRITTEN OFF HAVE GONE DOWN AS SUBMISSIONS OF THE LEARNED CIT(DR) AND THOSE OF THE LEARNED CIT(DR) AS THAT OF THE ASSESSEE. THIS HON'BLE TRIBUNAL WAS PLEASED TO REMIT THE MATTER RELATING TO ALLOCATION OF BAD DEBTS WRITTEN OFF FOR FRESH EXAMINATION BY THE ASSESSING OFFICER AND ON THE BASIS OF SUCH DIRECTION, THE ASSESSEE'S APPEAL AS ALSO THE REVENUE'S APPEAL WERE ALLOWED FOR STATISTICAL PURPOSES. 9. IT IS THE PLEA OF THE ASSESSEE THAT PARAGRAPH 8 INCLUDING ITS SUB-PARAGRAPHS 8.1 TO 8.4 SUFFER FROM THE FOLLOWING ERRORS APPARENT ON THE FACE OF THE RECORDS:- (A) GROUND NO.3 OF THE ASSESSEE'S APPEAL RELATED TO ALLOCATION OF BAD DEBTS WRITTEN OFF AND GROUND NO.2 OF THE REVENUE'S APPEAL RELATED TO ALLOCATION OF CORPORATE OFFICE RESIDUAL COST AND AS SUCH BOTH THE SAID GROUNDS WERE SEPARATE AND DISTINCT AND NOT IDENTICAL. (B) THE SUBMISSIONS RECORDED IN PARAGRAPH 8.1 ARE OF THE LEARNED CIT(DR) AND NOT OF ASSESSEES AUTHORIZED REPRESENTATIVE. (C) THE SUBMISSIONS RECORDED IN PARAGRAPH 8.2 ARE OF THE ASSESSEE AND NOT OF THE LEARNED CIT(DR). (D) THE SUBMISSIONS ADVERTED TO IN PARAGRAPH 8.3 WERE MADE ON BEHALF OF THE ASSESSEE AND NOT BY THE LEARNED CIT(DR). (E) GROUND NO.2 OF THE REVENUE'S APPEAL HAS BEEN ALLOWED BY WAY OF REMAND ON THE ASSUMPTION THAT IT WAS ALSO IN RESPECT OF ALLOCATION OF BAD DEBTS WRITTEN OFF, WHEN IT WAS IN RESPECT OF ALLOCATION OF CORPORATE OFFICE RESIDUAL COST. THE MATERIAL FACTS AND SUBMISSIONS IN RESPECT OF GROUND NO.2 OF THE REVENUE'S APPEAL HAVE ESCAPED ATTENTION OF THE HON'BLE TRIBUNAL AND AS SUCH THERE HAS BEEN NO ADJUDICATION THEREON. NO SUBMISSION WAS MADE BY EITHER SIDE FOR REMAND OF THE ISSUE PERTAINING TO ALLOCATION OF CORPORATE OFFICE RESIDUAL COST AND AS SUCH GROUND NO.2 OF THE REVENUE'S APPEAL SHOULD HAVE BEEN DECIDED AFTER TAKING INTO CONSIDERATION THE MATERIAL FACTS AND SUBMISSIONS. RECKITT BENCHISER (INDIA) LTD M.A NO.73 & 74/KOL/2017 ASSESSMENT YEAR: 2005-06 PAGE | 5 10. THE ASSESSEE THROUGH THIS MISCELLANEOUS APPLICATION WANTS THAT PARAGRAPH 8 INCLUDING SUB-PARAGRAPHS 8.1 TO 8.4 OF THE ORDER OF THE HONBLE TRIBUNAL DATED JANUARY 6, 2017 BE SUITABLY AMENDED ON THE ABOVE ASPECTS. 11. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AS STATED IN THE MISCELLANEOUS APPLICATION, AS NARRATED ABOVE. WE HAVE PERUSED OUR LOG BOOK FOR HEARING ON 29.11.2016 AND WE FOUND THAT THE FACTS NARRATED IN THE SAID MISCELLANEOUS APPLICATION ARE CORRECT. AS ALREADY SUBMITTED BY THE ASSESSEE IN THE M.A PETITION, ALLOCATION OF BAD DEBTS WRITTEN OFF, DOES NOT HAVE ANY LINK WITH THE ALLOCATION OF CORPORATE OFFICE RESIDUAL COST AND BOTH THE GROUNDS ARE SEPARATE AND DISTINCT AND NOT IDENTICAL. THIS ASPECT HAS BEEN OVERLOOKED BY THE ITAT WHILE ADJUDICATING THE GROUND NO.3 OF THE ASSESSEES APPEAL AND GROUND NO.2 OF REVENUES APPEAL. WE ARE OF THE VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS A MISTAKE APPARENT ON THE BASIS OF THE RECORD OF THE TRIBUNAL. WE ARE ALSO OF THE VIEW THAT IT WOULD BE IN THE INTEREST OF JUSTICE THAT THE ORDER OF THE TRIBUNAL DATED 06.01.2017, IN SO FAR AS IT RELATES TO GROUND NO.3 OF THE ASSESSEES APPEAL AND GROUND NO.2 OF THE REVENUES APPEAL SHOULD BE RECALLED. WE ACCORDINGLY RECALL THE ORDER DATED 06.01.2017 IN SO FAR AS IT RELATES TO GROUND NO.3 OF ASSESSEES APPEAL AND GROUND NO.2 OF REVENUES APPEAL. THE REGISTRY IS DIRECTED TO FIX THE APPEAL FOR HEARING IN USUAL COURSE FOR THE SPECIFIC PURPOSE OF ADJUDICATION IN GROUND NO.3 OF THE ASSESSEES APPEAL AND GROUND NO.2 OF THE REVENUES APPEAL, AFRESH. 12. IN THE RESULT, THE MISCELLANEOUS APPLICATION IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15/09/2017. SD/- (N. V. VASUDEVAN) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED 15/09/2017 RS, SPS RECKITT BENCHISER (INDIA) LTD M.A NO.73 & 74/KOL/2017 ASSESSMENT YEAR: 2005-06 PAGE | 6 / COPY OF THE ORDER FORWARDED TO : //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA 1. / THE APPELLANT RECKITT BENCHISER (I) LTD. 2. / THE RESPONDENT-JCIT, RANGE 12, KOLKATA. 3. ( ) / THE CIT(A), :KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE.