Income Tax Appellate Tribunal - Hyderabad
Concord Drugs Limited, Hyderabad vs Deputy Commissioner Of Income Tax, ... on 31 January, 2020
ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad 'B' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri A. Mohan Alankamony, Accountant Member
ITA No.1904/Hyd/2017 & SA No.5/Hyd/2020
Assessment Year: 2011-12
M/s. Concord Drugs Ltd Vs. Dy. Commissioner of
Hyderabad Income Tax, Circe 1(2)
PAN:AAACC8171D Hyderabad
(Appellant) (Respondent)
Assessee by: Sri P. Murali Mohana Rao
Revenue by: Sri Kiran Katta, DR
Date of hearing: 21/01/2020
Date of pronouncement: 31/01/2020
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is assessee's appeal for the A.Y 2011-12 against the order of the CIT (A)-1, Hyderabad, dated 31-07-2017.
2. Brief facts of the case are that the assessee company, engaged in the business of manufacturing and trading of pharmaceuticals, filed its e-return of income for the A.Y 2011-12 on 29.11.2011 declaring a total income of Rs.15,30,930/- under normal provisions of the I.T. Act and Rs.2,12,97,502/- u/s 115JB of the Act. Subsequently, the case was selected for scrutiny under CASS and during the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee is in receipt of Rs.2,78,00,000/- towards share application money during the financial year 2010-11. The assessee was, therefore, directed to Page 1 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
explain the sources of the share application money. Since the assessee failed to furnish the relevant information, the AO treated the sum of Rs.2,78,00,000/- as unexplained cash credit u/s 68 of the Act and brought it to tax.
3. Further, from the P&L A/c drawn as on 31/03/2011 furnished by the assessee, the AO noticed that huge amounts were debited to P&L A/c which appeared to him to be suspicious. The assessee was therefore, asked to furnish the relevant information, but since the assessee failed to submit any information, the AO disallowed the entire expenditure of Rs.3,00,78,172/- and brought it to tax u/s 69C of the Act.
4. The AO also found from the balance sheet furnished by the assessee, that there were unsecured loans of Rs.55,46,619/-. The assessee was directed to furnish documentary evidence such as books, confirmation letters and supporting documents in support of unsecured loans taken. Since the assessee failed to furnish any evidence, the AO brought the same to tax u/s 68 of the Act.
5. Thereafter, the AO also found that the assessee has claimed deduction u/s 10AA of the Act but failed to furnish Form 56F in support of the same. For failure to submit the prescribed form 56F, the AO disallowed the claim of deduction u/s10AA of the Act and brought the sum of Rs.1,90,03,801/- to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) along with evidence in support of its claim. The CIT (A) called for a remand report from the AO and thereafter confirmed the additions made by the AO except for part relief in respect of disallowance of Page 2 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
expenditure is concerned. Against the order of the CIT (A), the assessee is in second appeal before us by raising the following grounds of appeal:
"1. The order of the Ld. Commissioner of Income Tax (Appeals) is erroneous both on facts and in law.
2. Ld. CIT (A) erred in confirming the addition of Rs. 2,78,00,000/- towards share application money.
3. The Ld. CIT (A) ought to have considered the details of PAN, address, Income Tax Return & Confirmation Letters filed in respect of the each party to the share application money and ought to have deleted the addition.
4. The Ld. CIT (A) ought to have deleted the addition of Rs. 2,78,00,000/ - made u/s 68 of the Act for the appellant has discharged its prima facie burden cast on it by submitting the details of share application money along with confirmation 7ts, return of income and ledger accounts.
5. The Ld. CIT (A) ought to have appreciated that merely because source to source was not explained in respect of the share application money of Rs. 2,78,00,000 the addition u/ s 68 of the Act, cannot survive.
6. The Ld. CIT (A) ought to have followed the ratio laid down in the case of CIT v. Lovely Exports (P).Ltd. (2008) 216 CTR 195 (S.C) and ought to have deleted the additions made u/s 68 of the Act in the hands of the assessee-company.
7. The Ld. CIT (A) erred in upholding the addition of Rs. 1,48,77,995/- out of Rs. 3,00,78,172/ - towards unexplained expenditure.
8. The Ld. CIT (A) ought to have appreciated the fact that the appellant is a listed company and got it books of account audited both under companies act as well as Income Tax Act, 1961.
9. The Ld. CIT(A) out to have considering the ledger copies and vouchers submitted by the appellant.
10. The Ld. CIT (A) ought to have appreciated the fact that any expenditure cannot be disallowed merely because it is incurred in cash unless provision of sec. 40A(3) are violated.
11. The Ld. CIT(A) out to have appreciated that the business promotion expenses, transport expenses, salaries & professional charges & factory expenses are incurred in the natural course of business.Page 3 of 10
ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
12. The Ld. CIT(A) erred in confirming the addition of Rs. 55,46,619/ - made towards unsecured loans.
13. The Ld. CIT(A) ought to have appreciated that that the appellant's duty stands discharged by providing the details of party from whom the loan has been taken along the conformation letter.
14. The Ld. CIT(A) erred in confirming the disallowance of Rs. 1,90,03,801/- u/ s 10 AA of the Act.
15. The Ld. CIT(A) ought to have considered the Form 10 CCB and certificate of registration submitted before him.
16. The Ld. CIT(A) erred in not adjudicating the impugned addition for the want of additional grounds of appeal which is not correct.
17. The appellant may add or alter or modify of substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal".
6. In addition to the above grounds, the assessee has filed the additional grounds vide letter dated 25.03.2018 which are as under:
"18. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine any question of law though not raised before the CIT (A) but is raised before the ITAT for the first time.
20. The Ld. CIT(A) ought to have appreciated that the assessee has claimed deduction U/s 10AA instead of rightly claiming Vis 80lB wherein form 10CCCB is already produced them.
21. The Ld. CIT(A) ought to have appreciated that the assessee fulfilled all the other conditions necessary for the purpose of claiming deduction under section 80rB though he has not specifically mentioned the section while claiming the deduction.
22. The Ld. CIT(A) ought to have appreciated that wrongly quoting of section does not invalidate the assessee's claim U/s 80lB, which can be evidenced from Form 10CCB already produced before the CIT(A) validating the legitimate claim of deduction U Is 80IB.
23. The appellant may add or alter or amend or modify or substitute or delete or rescind all or any of the grounds of Page 4 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
appeal at any time before or at the time of hearing of the appeal".
7. Subsequently, vide letter, dated 04.06.2018, the assessee has raised further additional grounds of appeal:
"24. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine any question of law though not raised before the CIT (A) but is raised before the ITAT for the first time .
25. The Ld.CIT(A) ought to have appreciated that the expenditure incurred for personnel cost is towards employee cost of the appellant company which has been incurred wholly and exclusively for business purpose.
26. The Ld. CIT (A) ought to have appreciated that the appellant company has not been treated as the assessee in default under S. 201(1) of the Act for its failure to deduct tax at source from the payments made and therefore, no disallowance can be made on account of non-deduction of TDS, as per the second proviso to S. 40(a)(ia).
27. The Ld. CIT (A) ought to have appreciated that provisions of section 40(a)(ia) shall not be applicable for expenditure incurred towards salary and wages. Therefore, addition on non-deduction of TDS towards such expenses shall not be permissible as per the provisions of the Income Tax Act,1961
28. The Ld. CIT(A) ought to have appreciated that no disallowance shall be made in the hands of appellant when the payee has rightly offered such income in their individual hands.
29. The Ld. CIT(A) ought to have appreciated that no disallowance shall be made in the hands of appellant when the statutory liability towards PF is rightly paid through banking channel on or before the due date of filling of return of income as per the provisions of section 139(1) The appellant may add or alter or amend or modify or substitute or delete or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal".
8. Vide letter dated 8.11.2018, the assessee has raised the following further additional grounds of appeal:
Page 5 of 10ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
"31 As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine any question of law though not raised before the CIT (A) but is raised before the IT AT for the first time.
32 The Ld. CIT (A) ought to have considered CBDT circular No. 37/2016, wherein any such disallowance made, shall enhance the claim of the assessee for deduction V/s 80lB of the Income Tax Act,1961 33 The Ld. CIT (A) has erred in disallowing the expenses such as personnel costs such as salary expenses, Wages, Allowances & Bonus, Provident Fund and ESI expenses to the tune of Rs. 22,63,869/ -. The Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB .
34 The Ld. CIT (A) has erred in disallowing the Factory expenses to the tune of Rs. 70,63,725/ -, However the Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB.
35 The Ld. CIT (A) has erred in disallowing the Transport expenses to the tune of Rs. 1,88,874/-, However the Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB.
36 The Ld. CIT (A) has erred in disallowing the Business Promotion expenses to the tune of Rs. 28,84,493/ -, However the Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB.
37 The Ld. CIT (A) has erred in disallowing the Professional & Consultancy expenses to the tune of Rs. 8,72,653/-, However the Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB.
38. The Ld. CIT (A) has erred in disallowing the expenses incurred towards Interest on working capital expenses to the tune of Rs. 16,04,281/-, However the Ld. CIT(A) ought to have considered that the said disallowance would enhance the deduction u/s 80IB.
39 The appellant may add or alter or amend or modify or substitute or delete or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal".
9. The learned Counsel for the assessee submitted that all the additional grounds raised by the assessee are the Page 6 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
alternative grounds to the regular grounds raised by the assessee along with Form No.36 and are all with regard to the issues raised in the assessment order and prayed for admission of additional grounds and adjudication of the same, while the learned DR objected to the admission of the additional grounds.
10. Having regard to the rival contentions and the material on record, we find that as regards Grounds 2 to 5 relating to share application money and also unsecured loans which are raised in Grounds 12 & 13, it is the case of the assessee that the assessee has filed confirmation letters from the relevant parties before the CIT (A) to prove the identity of the persons and genuineness of the transaction but without examining the details so furnished, the CIT (A) has held that the creditworthiness of the people is not proved. Further, he submitted that the assessee has subsequently allotted shares in the names of these people and therefore, once the shares have been allotted, the share application money and unsecured loans cannot be treated as bogus. He relied upon certain case law in support of his contention. He has also filed additional evidence to prove that the shares have subsequently been allotted to the persons who have allegedly advanced share application money and unsecured loans.
11. The learned DR submitted that this is nothing but an afterthought as the shares have been allotted subsequent to the order of the CIT (A) and therefore, such evidence has no relevance to the issue on hand.
12. The learned Counsel for the assessee submitted that the assessee, being a listed company, had to follow the procedures Page 7 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
for allotment of shares and therefore, there was certain delay in allotment of the shares and the same should be considered for deleting the additions made by the AO.
13. Having regard to the rival contentions and the material on record, we find that the additional evidence is likely to prove that the assessee has allotted the shares to the applicants who have allegedly invested in the assessee company and advanced unsecured loans to the assessee company. All this information needs verification by the AO. Therefore, we deem it fit and proper to admit and remand the additional evidence to the file of the AO for de novo consideration in accordance with law. The assessee's grounds of appeal on this issue are treated as allowed for statistical purpose.
14. The next issue is the disallowance of expenditure. It is the case of the AO that the assessee has not filed the details such as bills and vouchers, whereas the learned Counsel for the assessee submitted that he has submitted all the details before the CIT (A) but the CIT (A) has only allowed part of expenditure and what has been disallowed is also interest on working capital allowance, factory expenses, professional and consultancy charges etc., He submitted that the assessee has submitted the necessary bills and vouchers in support of expenditure.
15. The learned Counsel for the assessee also submitted that grounds 31 to 38 are alternate grounds to Grounds 11 & 12 wherein it is submitted that if the expenditure is disallowed and added to the returned income, it would increase the income of the assessee and therefore, the said income is eligible for deduction Page 8 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
u/s 80IB of the Act which is the alternate claim of the assessee to the claim of deduction u/s 10AA of the Act.
16. The learned DR was also heard, and we are of the opinion that the assessee's claim of expenditure is to be considered by the AO afresh. In view of the same, we deem it fit and proper to remand the issue to the file of the AO for de novo consideration afresh. Further, we also make it clear that if the expenditure is disallowed, which would in turn increase the income of the assessee, the same is allowable as deduction which is allowable to the assessee u/s 80IB of the Act.
17. Further, with regard to the disallowance of expenditure, the assessee submitted that there is a disallowance of salaries and professional charges on the ground that there was no TDS made by the assessee and therefore, the disallowance was proposed to be upheld u/s 40(a)(ia) of the Act. He submitted that the assessee has not been treated as "assessee in default" u/s 201(1) of the Act for such an amount and therefore, the disallowance u/s 40(a)(ia) is not to be upheld. Since we have set aside the entire issue to the file of the AO, we direct the AO to consider the assessee's arguments on this issue as well.
18. The only other issue on which the assessee is in appeal is against the disallowance u/s 10AA of the Act. The learned Counsel for the assessee submitted that the assessee in its return of income had claimed deduction u/s 10AA of the Act but alternatively has filed the revised computation of income making the alternative claim u/s 80IB of the Act. He submitted that since the assessee is eligible for deduction u/s 80IB, the Page 9 of 10 ITA No 1904 of 2017 and SA No.5 of 2020 Concord Drugs Ltd Hyderabad.
assessee's claim should be considered and the additional grounds of appeal raised by the assessee are towards this alternate claim.
19. After hearing both the parties, we deem it fit and proper to admit the additional grounds on this issue and remand the same to the file of the AO with a direction to consider the assessee's claim of deduction u/s 80IB of the Act and if the assessee satisfies all the conditions for allowance of deduction u/s 80IB, we direct the AO to allow the same. In view of the same, the assessee's appeal is treated as allowed for statistical purposes.
20. In the result, assessee's appeal is treated as allowed for statistical purposes and the Stay Application is dismissed as infructuous.
Order pronounced in the Open Court on 31st January, 2020.
Sd/- Sd/-
(A. MOHAN ALANKAMONY) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 31st January, 2020.
Vinodan/sps
Copy to:
1 P. Murali & Co. C.A, 6-3-655/2/3 1st Floor, Somajiguda, Hyderabad 500082 2 Dy. CIT, Circle 1(2) Hyderabad 3 CIT (A)-1 Hyderabad 4 Pr. CIT - 1, Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 10 of 10