Gujarat High Court
The Assistant Commissioner Of Income ... vs Claris Life Science Limited on 18 January, 2022
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SCA/8556/2021 ORDER DATED: 18/01/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8556 of 2021
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THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE
2(1)
Versus
CLARIS LIFE SCIENCE LIMITED
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Appearance:
MR MR BHATT SENIOR COUNSEL WITH MR KARAN SANGHANI
ADVOCATE FOR M R BHATT & CO.(5953) for the Petitioner(s) No. 1
MR SN SOPARKAR, SENIOR COUNSEL WITH MR B S SOPARKAR(6851)
for the Respondent(s) No. 1
NOTICE UNSERVED(8) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 18/01/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 By this writ application under Article 226 of the Constitution of India, the Revenue has prayed for the following reliefs:
"(A) This Hon'ble Court may be pleased to issue a writ of certiorari or any other appropriate writ, order or directions quashing and setting aside the order dated 24.11.2020 passed by the Income Tax Settlement Commission and para 9.7 of the order dated 23.2.2018 and be further pleased to direct the Settlement Commission to decide the issue relating to Product Registration expenses on merits.
(AA) This Hon'ble Court may be pleased to direct the Interim Board for Settlement established under Section 245AA of the Act, to decide the issue relating to the Product Registration Expenses on merits;
(AAA) In the alternative, this Hon'ble Court may be pleased to remit the issue of Product Registration Expenses to the file of assessing officer for adjudication on merits;
(B) That pending hearing and final disposal of petition, this Hon'ble Page 1 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 Court may be pleased to direct the Income Tax Settlement Commission to decide the issue relating to Product Registration expenses on merits;
(C) Any other relief(s) which this Hon'ble Court may be deems it fit in the interest of justice may be granted."
2 It appears from the materials on record that the respondent No.1 herein (assessee) filed a petition before the Income Tax Settlement Commission (for short, "the ITSC") under Section 245C(1) of the Income Tax Act, 1961 (for short, "the Act"). The same came to be admitted by the Commission vide order passed under Section 245D(1) dated 18 th November 2016. In the said petition before the Commission, one of the issues was relating to "product registration expenditure disallowance". The Commission, vide its final order dated 23 rd February 2018, held with respect to the disallowance of product registration expenditure as under:
"9.7 With regard to disallowance of product registration expenditure, income tax department appeal is pending before the ITAT for A.Ys. 2009-10 to 2011-12 as the additions were deleted by CIT(A). With regard to the disallowance of product registration expenditure, for A.Ys. 2009-10 to 2015-16, the following directions u/s. 245D(8) are hereby given:
a. To give effect to the order of the Tribunal / higher authorities for A.Y. 2009-10 to 2011-12.
b. To appropriately consider the disallowance in A.Y. 2012- 13 to 2015-16 if and when the decision of the Hon'ble Gujarat High Court in the assessee's own case for A.Y. 2006-07 is decided in favour of the tax authorities.
The applicant affirms vide letter dated 31.12.2016 in the case of M/s. Clris Lifesciences Ltd. that the above directions u/s. 245D(8) with respect to product registration expenditure will not be contested before any court / authority.
9.8 Taking into account all the facts and material on record, it is concluded that the total additional income offered in the case of above mentioned applicants, as discussed hereinabove, can be accepted with reference to income disclosed in the settlement applications. The CIT(DR) and the Assessing Officer also did not make any further Page 2 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 submissions/ objections. In the light of the above, the cases of the applicants are hereby settled on the following terms and conditions."
3 The Revenue, thereafter, by way of an application filed before the Commission made a request that since the issue of disallowance of product registration expenses has not been decided on merits, the same may be decided accordingly. Such request made by the Revenue before the Commission came to be declined vide the communication dated 24 th November 2020 (Annexure : 'A' to this writ application page : 12). The same reads thus:
"Government of India Ministry of Finance Department of Revenue Income Tax Settlement Commission, Additional Batch-II Second floor, S.K. Rathod Marg, Mahalaxmi Chambers, Mahalaxmi, Mumbai, 400034 Phone : 022-23549504, 022-23548953 (Fax / Email id - [email protected]) ==================================== S.A. No.GJ/AHCC/045/2016-2017/It Date: 24.11.2020 To, The Pr. Commissioner of Income Tax (Central), Room No.318, 3rd floor, Aayakar Bhavan, Ashram Road, Navrangpura, Ahmedabad - 3800009.
Dear Sir, Sub : Request to decide the issue of disallowance of Product Registration expenses on merit in the case of Claris Life Science Ltd for A.Ys. 2012-2013 to A.Y.2015-2016 for Settlement Application No.GH/AHCC/045/2016-2017/IT-Reg.
************** Kindly refer to the subject cited above and also refer to your letter No.Pr.CIT(C)/AHD/ITSC./Claris Life Science/2020-21/1398 dated 12.10.2020 received by this office on 15.10.2020 under which it is requested to decide the issue of disallowance of product registration expenses on merit in the case of M/s.Claris Life Science Ltd. for the Page 3 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 A.Ys.2012-2013 to 2015-2016 under settlement application No.GJ/AHCC/045/2016-2017/IT.
2 In this connection, I am directed to inform you that Hon'ble Settlement Commission vide para No.9.7 of its order dated 23.02.2018 u/s.245D(4) of the Income Tax Act, 1961, has given directions on the issue of disallowance of product registration expenses, as has been mentioned in your above referred letter. Since the decision of Hon'ble Gujarat High Court is not in favour of tax authorities, the Hon'ble Bench did not find any merit to consider your request. Accordingly, your petition is disposed off as "rejected".
Kindly acknowledge the receipt.
Your faithfully, (Ravindra K. Shikhare) Superintendent"
4 It is the aforesaid communication dated 24 th November 2020, which has been made a subject matter of challenge before this Court.
5 Mr. M. R. Bhatt, the learned Senior Counsel appearing for the Revenue laid much stress on para 9.7(b) of the order passed by the Commission as above. According to Mr. Bhatt, the appeal, which the Commission is talking about in the assessees's own case for A.Y. 2006- 07, came to be disposed of by this High Court on the ground of low tax effect. In such circumstances, the High Court had no occasion to determine the question relating to disallowance of product registration expenditure in the said appeal. In the absence of such finding on merits, the issue with regard to the product registration expenditure still remains pending. According to Mr. Bhatt, the question is who is to decide this issue. According to Mr. Bhatt, the issue cannot be left undecided. In such circumstances, there are two fold request made by Mr. Bhatt: first is that since the main order passed by the Commission dated 23rd February 2018 has not been challenged, the Revenue may be permitted to challenge the same in accordance with law, and the second Page 4 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 request in the alternative is to remit the entire issue of product registration expenses to the file of the Assessing Officer for adjudication on merits.
6 On the other hand, this writ application has been vehemently opposed by Mr. S. N. Soparkar, the learned Senior counsel assisted by Mr. Bandish Soparkar, the learned counsel appearing for the assessee. Mr. Soparkar submitted that in the first instance, the present writ application challenging the impugned communication is not maintainable in law. Mr. Soparkar would rely upon the very same paragraph i.e. 9.7(b). He would submit that there is no infirmity in the order of the Settlement Commission. At the time of adjudication of the settlement, the appeal for the A.Y. 2009-10 to 2011-12 involving the question of product registration expenses was already pending, and therefore, for those years, the Settlement Commission held that whatever is decided by the ITAT in those appeals, would be given effect to by the Assessing Officer. According to Mr. Soparkar, there is nothing unusual in such direction and in any case, the same has been carried out; by now the appeals of the Revenue have been disposed of by the Tribunal. The dismissal on the ground of "low tax effect" by way of withdrawal of the Tax Appeal for A.Y. 2006-07 from this Court, has no bearing on the direction for these years. For the A.Y. 2012-13 to 2015- 16, no appeal was pending in the ITAT, however, the issue of product registration expenses was pending in the High Court in the Revenue's Appeal; the assessee having succeeded before the Tribunal for the A.Y. 2006-07. For assessee having succeeded before the ITAT on this issue, the Settlement Commission had no option but to hold in favour of the assessee. However, the Revenue's Tax Appeal was pending before this Court. Therefore, the Settlement Commission, in order to protect the Revenue's interest gave a direction that only if and when the Revenue Page 5 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 would succeed before the High Court, then for A.Y. 2012-13 to 2015-16, the issue would be decided accordingly by the Assessing Officer (otherwise the assessee is to be granted favourable relief by the Assessing Officer). He would submit that the dismissal of the Revenue's appeal in the High Court for the A.Y. 2006-07 would not render the finding of the Settlement Commission unsound. On the contrary, the assessee would have the same legal effect throughout the years and therefore, not only for A.Y. 2006-07, but also for A.Y. 2012-13 to 2015- 16, the issue of product registration would be in favour of the assessee only as adjudicated by the Settlement Commission.
7 Mr. Soparkar further submitted that even otherwise the issue of product registration charges is no longer re integra. The ITAT in the A.Y. 2006-07 followed the two decisions of this High Court (Torrent Pharmaceuticals and Cadila Healthcare) to decide the issue in favour of the assessee. The decision of Torrent Pharmaceuticals has been accepted by the Revenue and no appeal is filed. Therefore, even on merits, the ITAT's order in A.Y. 2006-07 is correct and the same could not have been disturbed by the High Court even if the High Court was to decide on merits instead of low tax effect. The entire Settlement Commission came to be disbanded with effect from 1 st February 2021 vide the Finance Act, 2021 and therefore, the reliefs as prayed for cannot be granted.
8 Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that we should not interfere with the impugned communication dated 24 th November 2020 (Annexure : A to this writ application). However, at the same time, we reserve the liberty for the Revenue to challenge the main order passed by the Commission dated 23 rd February 2018 raising the Page 6 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022 C/SCA/8556/2021 ORDER DATED: 18/01/2022 issue as regards the product registration expenditure by availing appropriate legal remedy in accordance with law. We clarify that we have otherwise not expressed any opinion on the merits of the case. Ultimately, if the main order passed by the Commission is challenged, it shall be open for both the sides to raise all legal contentions available to them in law.
9 The petition is disposed of in the aforesaid terms.
(J. B. PARDIWALA, J) (NISHA M. THAKORE,J) CHANDRESH Page 7 of 7 Downloaded on : Fri Jan 21 20:31:45 IST 2022