Income Tax Appellate Tribunal - Mumbai
Clestra Life Sciences P.Ltd, Mumbai vs Assessee on 11 December, 2014
सी"
सी Ûयायपीठ मुब
आयकर अपीलीय अिधकरण "सी ं ई मɅ।
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C", MUMBAI
᮰ी एच.
एच.एल.
एल. कारवा,
कारवा, अ᭟यᭃ एवं
᮰ी आर.
आर. सी.
सी. शमाᭅ, लेखा सद᭭य के समᭃ ।
BEFORE SHRI H.L. KARWA, PRESIDENT AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. : 4082/Mum/2012
(Assessment year: 2002-03)
ITA No. : 4083/Mum/2012
(Assessment year: 2003-04)
ACIT -CC-40, Vs Clestra Life Sciences Pvt Ltd
Room No. 653, 6th Floor, (Formerly known as M/s Brahma
Aayakar Bhavan, M K Road, Drugs Pvt Ltd),
Mumbai -400 020 9th Floor, 907, Filix,
Commercial Complex
Opp. Asian Paints, LBS Marg,
Mumbai -400 078
ःथायी लेखा सं.:PAN: AAACB 5795 L
अपीलाथȸ(Appellant) ू×यथȸ(Respondent)
Appellant-assessee by : Shri Ramesh Khatiwala
Respondent revenue by : Shri Premanand J
ू×या¢ेप सं. 127/मु/
ं 2013
C.O. No. 127/Mum/2013
Arising out of ITA No. : 4082/Mum/2012, AY 2002-03
ू×या¢ेप सं. 128/मु/
ं 2013
C.O. No. 128/Mum/2013
Arising out of ITA No. : 4083/Mum/2012, AY 2003-04
Clestra Life Sciences Pvt Ltd, Vs ACIT -CC-40,
9th Floor, 907 FIX Commercial Mumbai -400 020
Complex, Opp Asian Paints, LBS Rd.
Bhandup, Mumbai -400 078
(Cross Objector) ू×या¢ेपक ू×यथȸ(Respondent)
ू×या¢ेपक : ौी रमेश खǑटवाला
Cross Objector-assessee by : Shri Ramesh Khatiwala
Respondent revenue by : ौी ूेमानंद जे Shri Premanand J
सुनवाई कȧ तारȣख /Date of Hearing : 09-12-2014
घोषणा कȧ तारȣख/Date of Pronouncement : 11-12-2014
आदे श
ORDER
PER BENCH:
2 Clestra Life Sciences Pvt Ltd (Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013 These are appeals filed by the revenue & Cross Objection by the assessee against the order of CIT(A) for the assessment year 2002-03 & 2003-04.
2. Common grievance of the revenue in both the years relate to disallowance of advertisement and marketing expenditure. The revenue has also taken ground with regard to violation of Rule 46A.
3. In the Cross objection, the assessee has taken ground of validity of reopening u/s 147.
4. Rival contentions have been heard and record perused.
5. Facts in brief are that the assessee is engaged in manufacturing and trading of pharmaceutical products. On the basis of search effected u/s 132 on M/s Genom Biotech Pvt Ltd (GBPL), completed assessment was reopened by issue of notice u/s 143(2) r.w.s. 147 and the AO disallowed expenditure incurred on advertisement on the basis of report of DDIT (Inv.).
6. By impugned order the CIT(A) deleted disallowance after having a following observation:
"7.2 The AO while completing the re-assessment u/s 143(#) read with section 147 disallowed advertisement and marketing expenses Rs. 1,14,34,498/- reimbursed to Osian Trading Ltd., Cyprus with the observation, "The appellant in its letter has asked the AO to consider all the accompaniments and submissions made during the course of regular assessment for the purpose of the current assessment proceedings. The submission of the appellant cannot be accepted as there is nothing on the record to prove that the advertisement expenses claimed by the appellant were genuine. Hence the advertisement expenses to tune of Rs. 1,14,34,498/- is added to the total income of the appellant.
7.3 Before me, the appellant submitted that no opportunity was afforded to the appellant to furnished any details required by the AO. This is so, as already submitted, the 143(2) fixing the hearing on November 09, 2009 did not reach the appellant as the notice dated November 03, 2009 had been sent on the wrong address and had been returned "refused". This 3 Clestra Life Sciences Pvt Ltd (Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013 submission and fact is correct as it has been dealt with in para 3, above, of this appellate order. It was vehemently argued by the appellant that the disallowance of advertisement and the marketing expenses is incorrect and invalid for the following amongst other reasons:-
(a) The advertisement and marketing expenses were reimbursed through proper banking channel. The claims were made through valid invoices and other supporting documents were ever necessary. The same verified by the banker who permitted the remittance.
(b) In the course of original assessment proceedings your appellant produced the following documents before the AO for his verification:
(1) Copy of agreement with distributor; (2) Statement of advertisement and marketing expenses showing details of bills, name of the distributors, amount and date of payment; (3) Invoice of distributor showing nature of advertisement expenses, (4) Supporting materials such as cutting of newspaper, cutting of magazine, photo of auto transport, etc. (5) Bank's outward remittance advice. (6) Transfer Pricing Audit Report dated October 22, 2002 was filed along with the return of income.
(c) The above material was considered by the Transfer Pricing Officer when reference was made to him by the then assessing officer. The Addl. CIT (Transfer Pricing) (1), Mumbai in his order dated January 25, 2005 passed u/s 92CA(3) has examined all material relating to the claim of expenditure incurred in foreign currency pertaining to International transaction with companies in which Shri Binod Singh had a substantial interest namely Osian Trading Ltd., Trigram Gmbh, Trigram Ltd and made no disallowance from the expense claimed as reimbursed. It was for this reason and fact that while completing the original assessment u/s 14(3) vide order dated February 28, 2005. The then AO made no addition or disallowance under this Act.
(d) The AO has not placed any material or evidence on record or confronted the appellant with such material to support his finding that the reimbursement of advertisement and marketing expenses was bogus. It is a settled rule and law, based on plethora of judicial decisions of Apex Court and High Courts that apparent state of affairs is real unless contrary is proved and burden of proving lies on the person who asserts/alleges it. This onus has not been discharged by the AO. On the facts and in the circumstances of the case and the material already on record, the impugned addition/disallowance made on surmise, conjecture and mis-conceived facts cannot be sustained in law.
4 Clestra Life Sciences Pvt Ltd (Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013 7.4 I have considered the submissions of the appellant and the order of the AO. It is an admitted fact on record that the said advertisement and marketing expenses details were filed during the original assessment as well as before Additional CIT (Transfer Pricing) (1), Mumbai. After examination and verification of expenses claimed as reimbursement, both, the then AO and TPO accepted the claim of the appellant and no addition / disallowance was made either in the transfer pricing order dated January 25, 2005 passed u/s 92CA(3) or in the original assessment order u/s 143(3) dated February 28, 2005. At the same time, the AO has not placed any material or evidence either on record or mentioned in the impugned assessment order to support that the expenses are bogus. A mere intimation from the investigation wing cannot be basis for any addition. Consequently, I have no hesitation in agreeing with the appellant that the impugned addition / disallowance have been made on surmised, conjecture and mis- conceived facts. Accordingly, the disallowance of Rs. 1,14,37,498/- is deleted and the AO is directed to modify the assessment order by giving the said relief to the appellant".
However, the CIT(A) confirmed the reopening u/s 147.
7. Against the above order of the CIT(A), the revenue are in appeal before us and the assessee has also raised Cross objection alleging validity of reopening u/s 147.
8. Ld. DR argued that in the course of appellate proceedings, the CIT(A) accepted the additional evidence in contravention of Rule 46A without giving opportunity to the AO. For merit of addition, he relied on the order of the AO. Ld. DR was specifically asked by the Bench to pin point the documents relied on by the Ld. Departmental Representative in violation to Rule 46A. For this purpose, Ld. DR invited our attention to the documents mentioned in sub-para (a) to (d) of Para 7.3 of the CIT(A) order.
9. We have considered rival contentions gone through the orders of the authorities below and found from the record that the documents highlighted by Ld. DR in support of his contention that there was 5 Clestra Life Sciences Pvt Ltd (Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013 violation of Rule 46A, we found that these documents comprises of copies of agreement with distributor, statement of advertisement and marketing expenses showing details of bills, name of the distributors, amount and date of payment. We found that all these documents were submitted by the assessee in the course of original assessment, wherein the assessment was framed u/s 143(3). Before AO during reassessment proceedings assessee vide his letter informed that all these documents were furnished before AO and TPO during original assessment proceedings and by considering the same vide order dated 25th January, 2005 passed u/s 92CA(3) has examined all materials relating to claim of expenditure of advertisement. Similarly AO vide his order dated 23rd February, 2005 advanced assessee's claim after examining all these documents.
10. Thus, it is clear that all these documents, as pin pointed by DR was not additional documents so as to invoke the provisions of section 46A.
11. On merits, we found that claim of such advertisement expenses were made on reimbursement basis, details of which were placed before the original assessment proceedings, completed u/s 143(3) on 28th February, 2005 as well as before Transfer Pricing Officer, who has allowed the assessee's claim vide his order dated 25.01.2005 passed u/s 93A(3). The CIT(A) has also recorded the finding to the effect that the AO has not placed any material or evidence as mentioned in impugned assessment order to support that the expenses were bogus. The CIT(A) observed that a mere intimation from Investigation Wing cannot be basis for any addition. The finding recorded by CIT(A) in para 7.2 has not been controverted, by department by brining any positive materials on record. Accordingly, we do not find any reason to 6 Clestra Life Sciences Pvt Ltd (Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013 interfere with the finding of CIT(A) resulting into deletion of addition on account of advertisement expenses.
12. On the basis of reasoning given hereinabove, we confirm the action of CIT(A) deleting disallowance of Rs. 1,13,50,833/- in AY 2003-
04. ू×या¢ेप सं. 127/ 127/मु/ ं 2013 :
ू×या¢ेप सं. 128/ 128/मु/ ं 2013 :
C.O. No. 127/Mum/2013 :
C.O. No. 128/Mum/2013 :
13. Ground taken in Cross objection regarding validity of reopening was not pressed by Ld. AR, the same are therefore dismissed in limini as not pressed.
14. In the result, both the appeals of the revenue as well as assessee's Cross objection for both the years are dismissed.
Order pronounced in the open Court on 11th December, 2014.
Sd/- Sd/-
एच.
एच.एल.
(एच एल. कारवा)
कारवा आर.
आर. सी.
(आर सी. शमाᭅ)
अ᭟यᭃ लेखा
खा सद᭭य
(H.L. KARWA) (R.C. SHARMA)
PRESIDENT ACCOUNTANT MEMBER
Mumbai, Date: 11th December, 2014
ूित/Copy to:-
1) अपीलाथȸ/The Appellant.
2) ू×यथȸ/The Respondent.
3) The CIT (A)-36, Mumbai.
7 Clestra Life Sciences Pvt Ltd
(Formerly known as M/s Brahma Drugs Pvt Ltd) ITAs 4082 & 4083/Mum/2012 Cos 127 & 128/Mum/2013
4) आयकरआयुƠ -(Central)-IV, Mumbai/The CIT(Central)-IV, Mumbai.
5) ǒवभागीयूितिनिध "C" आयकरअपीलीयअिधकरण,मुंबई The D.R. "C" Bench, Mumbai.
6) गाड[ फाईल Copy to Guard File.
आदे शानुसार/By Order / / True Copy / / [ उप/सहायकपंजीकार आयकरअपीलीयअिधकरण,मुंबई Dy./Asstt. Registrar I.T.A.T., Mumbai *चåहानव.िन.स *Chavan, Sr. PS