Sanctus Global Formulations Limited (Formerly known as M/s Crescent Therapeutics Limited), Chandigarh v. Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad

ITA 1792/Hyd/2018 | 2014-2015
Pronouncement Date: 24-03-2021 | Result: Allowed

Appeal Details

RSA Number 179222514 RSA 2018
Assessee PAN ITANO1792O
Bench Hyderabad
Appeal Number ITA 1792/Hyd/2018
Duration Of Justice 2 year(s) 6 month(s) 19 day(s)
Appellant Sanctus Global Formulations Limited (Formerly known as M/s Crescent Therapeutics Limited), Chandigarh
Respondent Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB-A
Tribunal Order Date 24-03-2021
Date Of Final Hearing 18-02-2021
Next Hearing Date 18-02-2021
Last Hearing Date 11-07-2020
First Hearing Date 15-02-2021
Assessment Year 2014-2015
Appeal Filed On 05-09-2018
Judgment Text
ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.1792/HYD/2018 ASSESSMENT YEAR: 2014-15 M/S. SANCTUS GLOBAL FORMULATIONS LTD (FORMERLY KNOWN AS M/S. CRESENT THERAPEUTICS LTD CHANDIGARH PAN:AABCC9421B VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 1(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY : SRI SUNIL KUMAR PANDEY DR DATE OF HEARING: 18/02/2021 DATE OF PRONOUNCEMENT: 24/03/2021 ORDER PER SMT. P. MADHAVI DEVI J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-1 HYDERABAD DATED 10.7.2 018. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMAC EUTICALS FILED ITS E-RETURN OF INCOME DECLARING A TOTAL INC OME OF RS.95 35 990/- UNDER NORMAL PROVISIONS AND BOOK PRO FIT OF RS.1 54 75 998/- U/S 115JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND ACCORDINGLY NOTICES U/S 1 43(2) AND 142(1) WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAME THE ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 2 OF 7 ASSESSEE ATTENDED THROUGH ITS REPRESENTATIVE AND FU RNISHED THE REQUISITE INFORMATION AND CLARIFICATIONS. 3. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERV ED THAT THERE WAS A DIFFERENCE BETWEEN THE RECEIPTS RE PORTED BY THE ASSESSEE IN ITS RETURN OF INCOME AND FORM 26AS. HE FOUND THAT THE RECEIPTS FROM CONVERSION CHARGES ARE RS.2 72 76 026.05 AS AGAINST RS.1 54 11 244/- REPORTED BY THE ASSESSEE I N ITS RETURN OF INCOME. THE ASSESSEE WAS THEREFORE ASKED TO RECONC ILE THE DISCREPANCY. IN RESPONSE THE ASSESSEE FURNISHED A RECONCILIATION STATEMENT WHEREIN THE ASSESSEE HAS STATED THAT THOU GH THE BILLS WERE RAISED BY THE ASSESSEE DURING THE FINANCIAL YE AR 2013-14 EITHER THE CLIENTS DID NOT CONFIRM THE RECEIPT OF T HE INVOICES NOR WAS THE RECONCILIATION DONE WITH THE CLIENTS AFTER THE FINALIZATION OF THE BALANCE SHEET. THE AO WAS HOWEVER NOT CONV INCED BUT HE FOUND THAT THE ASSESSEE HAS PROVIDED RECONCILIATION FOR THE AMOUNT TO THE EXTENT OF ONLY RS.1 64 98 649/- AS AG AINST RS.2 72 76 026.05 APPEARING IN FORM 26AS. THEREFORE THE DIFFERENCE OF RS.1 18 64 782/- WAS TREATED AS INCO ME OF THE ASSESSEE. 4. FURTHER THE AO ALSO OBSERVED THAT THE EMPLOYEE CONTRIBUTION TOWARDS PROVIDENT FUND & ESI OF RS.1 6 1 343/- WERE PAID BEYOND THE DUE DATES. HE THEREFORE BROUGHT IT TO TAX U/S 36(1)(VA) OF THE I.T. ACT. 5. FROM THE P&L A/C THE AO OBSERVED THAT UNDER THE HEAD OTHER MANUFACTURING EXPENSES THE ASSESSEE H AS CLAIMED EXPENDITURE OF RS.3 30 580/- TOWARDS INTEREST ON T DS FOR BELATED REMITTANCE OF TDS INTO GOVT. A/C. THE AO HE LD THAT THIS IS ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 3 OF 7 NOT AN ALLOWABLE EXPENSE AND THEREFORE DISALLOWED IT AND BROUGHT IT TO TAX. 6. THE AO FURTHER OBSERVED THAT UNDER THE HEAD ADMINISTRATIVE EXPENSES THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.8000/- TOWARDS ROC FILING FEE A ND THEREFORE THE DETAILS OF THE SAME WAS CALLED FOR AND ON PERUS AL OF THE SAME THE AO FOUND THAT AN AMOUNT OF RS.8000/- WAS PAID F OR INCREASING THE AUTHORIZED SHARE CAPITAL. AO THEREFO RE HELD THAT IT IS A CAPITAL EXPENDITURE AND DISALLOWED IT AND BROU GHT IT TO TAX. 7. FURTHER THE AO ALSO OBSERVED THAT THE ASSESSEE HAS EARNED AN INCOME OF RS.13 63 190/- FROM ITS TRADING UNIT WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC AND ALSO INCOME OF RS.5 24 127/- FROM OTHER SOURCES WHEREAS THE ASSE SSEE HAS CLAIMED DEDUCTION U/S 80IC ON THE ENTIRE INCOME. TH E ASSESSEE WAS THEREFORE ASKED TO EXPLAIN AS TO WHY THE DEDUC TION U/S 80IC SHOULD NOT BE WITHDRAWN FROM THE INCOME FROM TRADIN G UNIT AND INCOME FROM OTHER UNITS. THE ASSESSEE SUBMITTED THA T PROPORTIONATE NET PROFIT OF TRADING UNIT MAY BE TRE ATED AS INCOME FROM THE TRADING UNIT BUT SINCE THE DETAILS OF EXP ENSES PERTAINING EXCLUSIVELY TO THE TRADING UNIT HAVE NOT BEEN FURNI SHED BY THE ASSESSEE THE AO DISALLOWED THE ENTIRE SUM OF RS.13 63 190/- TREATING IT AS INCOME FROM TRADING UNIT NOT ELIGIB LE FOR DEDUCTION U/S 80IC. FURTHER HE ALSO DENIED DEDUCTION U/S 80I C ON INCOME FROM OTHER SOURCES FOR RS.5 24 127/-. AGGRIEVED TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHICH WAS DI SMISSED BY THE CIT (A). AGGRIEVED THE ASSESSEE IS IN SECOND APPEA L BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 4 OF 7 (APPEALS)-L HYDERABAD IS PERVERSE ILLEGAL AND UNSUSTAINABLE ON FACTS AND IN LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ACTION OF THE ASSESSING OFFICER IN TREATING THE ALL EGED DIFFERENCE OF RS.1 18 64 782 BETWEEN THE INCOME ADMITTED BY THE APPELLANT AND THE INCOME REFLECTED IN FORM 26AS AS UNREPORTED TURNOVER OF THE APPELLANT. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT TH E ABOVE DIFFERENCE IS ON ACCOUNT OF MISTAKE COMMITTED BY M/S. ALEMBIC PHARMACEUTICALS LIMITED IN TREATING TH E PRODUCT SALE MADE BY THE APPELLANT AS JOB WORK AND IN MAKING TDS FROM THE PAYMENT MADE TO THE APPELLANT. 3. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING ADDITION OF RS.1 98 429 BASED ON INCOME REFLECTED I N FORM 26AS OF THE APPELLANT. THE COMMISSIONER (APPEA LS) FAILED TO APPRECIATE THAT THE APPELLANT HAS ALREADY REPORTED SUCH AMOUNT AS CONVERSION CHARGES IN THE PERVIOUS YEAR 2012-13 BASED ON THE INVOICES RAISED ON M/S. BIOCON LIMITED DURING LAST WEEK OF MARCH 2013 AND THE SAID PARTY HAS ACCOUNTED SUCH INVOICES ON RECEIPT OF THE SAME IN APRIL 2013 IN THE PREVIOUS Y EAR 2013-14 AND MADE THE PAYMENTS AFTER DEDUCTING TAXES FOR AY 2014-15. 4. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THE MATERIAL FILED BEFORE HER AND SIMPLY HAS GONE BY FO RM 26AS WHICH CANNOT BE THE BASIS FOR MAKING ADDITION. 5. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ADDITION OF RS.11 57 700 BEING THE LOAN AMOUNT OF RS.11 57 700 RECEIVED BY THE APPELLANT FROM M/ S. AJANTA PHARMA LIMITED AS UNREPORTED TURNOVER OF THE APPELLANT. INSPITE OF THE FACT THAT APPELLANT PRODU CED CONFIRMATION LETTER IN SUPPORT OF LOAN TRANSACTION FROM M/S.AJANTHA PHARMA LIMITED THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THE SAME. 6. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING ADDITION OF RS.49 015 AS ALLEGED UNREPORTED TURNOVE R IN THE HANDS OF THE APPELLANT. THE COMMISSIONER (APPEA LS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD AL READY ADMITTED SUCH INCOME IN ITS BOOKS AND THE ADDITION MADE IS UNWARRANTED. 7. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE ADDITION OF RS. 1 61 343 BEING THE EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND INSPITE OF THE SETTL ED POSITION OF LAW THAT THE SAME IS ALLOWABLE IF THE S AID PAYMENT IS MADE BEFORE THE DUE DATE FOR FILING OF R ETURN OF INCOME. ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 5 OF 7 THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE ACTION OF THE AO IN NOT CONSIDERING THE AMOUNT OF RS.5 24 127 FOR THE PURPOSE OF ALLOWING DEDUCTION U NDER SECTION 801C OF THE ACT. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT OUT OF INTEREST INCOME OF RS.5 24 127/- RS.4 70 890 IS FROM THE MARGIN MONEY MAINTAINED BY THE APPELLANT FOR OBTAINING LETTERS O F CREDIT AND BANK GUARANTEES WHICH WERE FOR BUSINESS PURPOSE S. 9. THE COMMISSIONER (APPEALS) FURTHER FAILED TO APPRECIATE THAT THE BALANCE AMOUNT OF RS.42 398 IS RECEIVED ON THE SECURITY DEPOSIT GIVEN TO HP STATE ELECTRICITY BOARD FOR OBTAINING POWER CONNECTION FO R THE MANUFACTURING PLANT. 10. WITHOUT PREJUDICE TO GROUNDS 8 & 9 THE COMMISSIONER (APPEALS) OUGHT TO HAVE DIRECTED FOR S ET OF INTEREST INCOME AGAINST THE INTEREST EXPENDITURE IN CURRED BY THE APPELLANT. 11. THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING T HE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF TRADING DONE OF RS.13 63 190. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT TH ERE WAS NO INCOME FROM THE SALES MADE TO H.O. OF RS.13 63 190 AND THAT THE ACTION OF THE AO IN DISALLOWING THE TRADING RECEIPT OF RS.13 63 190 IN ENTIRETY FROM THE INCOME ELIGIBLE FOR DEDUCTION UND ER SECTION 801C OF THE ACT IS INCORRECT. 12. WITHOUT PREJUDICE TO THE ABOVE GROUND THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED TH AT IN THE ABSENCE OF SEPARATE ACCOUNT FOR TRADING THE AMOUNT THAT COULD HAVE BEEN DISALLOWED IS ONLY RS.1 19 386 WHICH IS THE GROSS PROFIT IN RESPECT OF TRAD ING WITH H.O. THE COMMISSIONER (APPEALS) OUGHT NOT TO HAVE DISALLOWED THE ENTIRE TRADING RECEIPT OF RS.13 63 1 90 FROM THE ELIGIBLE INCOME FOR DEDUCTION. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING IT IS PRAYED THAT THE HON'BLE TRIB UNAL MAY BE PLEASED TO ALLOW THE APPEAL. 8. AT THE OUTSET THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING GROUND NO.7 IN VIEW OF THE AMENDMENT BROUGHT IN FINANCE ACT OF 2021 ON THE PROVISIONS RELATING TO SECTION 36(1)(VA) AND SECTIO N 43B OF THE ACT. THE SAID GROUND IS REJECTED AS NOT PRESSED. ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 6 OF 7 9. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 10. AS REGARDS GROUNDS 2 TO 6 ARE CONCERNED WE FIN D THAT THE ASSESSEE HAD FILED DETAILED SUBMISSIONS BEFORE THE CIT (A) EXPLAINING THE DISCREPANCIES BETWEEN THE INCOME REP ORTED BY THE ASSESSEE AND AS NOTICED BY THE AO IN FORM NO.26-AS. THE CIT (A) HAS REPRODUCED THE SUBMISSIONS OF THE ASSESSEE IN P ARA 5.2 OF HER ORDER. HOWEVER IN PARA 5.3 SHE HAS HELD THAT THE A SSESSEE HAS NOT SUBMITTED ANY FURTHER INFORMATION BESIDES WHAT HAS BEEN SUBMITTED BEFORE THE AO AND THAT THE APPEAL WITH RE GARD TO THE CLAIM OF CONVERSION CHARGES WERE NOT SUBMITTED AND NO FRESH EVIDENCE OR INFORMATION WAS SUBMITTED BY THE ASSESS EE INSPITE OF SEVERAL OPPORTUNITIES. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PAGES 22 TO 48 OF THE PAPER BOOK WHEREIN ALL THE DETAILS HAVE BEEN GIVEN BY THE ASSESSEE. TH E INVOICES AND ALSO THE LEDGER A/C OF THE PARTIES ARE SUBMITTED BE FORE US AND THE CERTIFICATE IS ALSO GIVEN THAT THESE DOCUMENTS HAVE BEEN FILED BEFORE THE AO AND THE CIT (A) EXCEPT FOR THE INFORM ATION FROM M/S. ALEMBIC PHARMACEUTICALS LTD AND M/S. AJANTA PH ARMA LTD BEFORE THE CIT (A). WE FIND THAT THE CIT (A) HAS FA ILED TO CONSIDER THE SAME NOR HAS SHE CALLED FOR A REMAND REPORT FRO M THE AO FOR THE EVIDENCE FILED BY THE ASSESSEE. IN VIEW OF THE SAME WE DEEM IT FIT AND PROPER TO REMAND THE GROUNDS 2 TO 6 TO THE FILE OF THE AO FOR VERIFICATION AND RECONSIDERATION IN ACCORDANCE WITH LAW. THEREFORE GROUNDS 2 TO 6 ARE ALLOWED FOR STATISTIC AL PURPOSES. 11. AS REGARDS GROUNDS 8 TO 9 ALSO WE FIND THAT TH E ASSESSEE HAD SUBMITTED DETAILED SUBMISSIONS BEFORE THE CIT (A) BUT WITHOUT VERIFYING THE SAME THE CIT (A) HAS CO NFIRMED THE ORDER OF THE AO. THE ASSESSEE HAS PLEADED THAT THE INCOME FROM ITA NO 1792 OF 2018 SANCTUS GLOBAL FORMULATIONS LT D CHANDIGARH PAGE 7 OF 7 TRADING UNIT ALONE MAY BE DISALLOWED U/S 80IC BUT T HE CIT (A) HAS CONFIRMED THE ASSESSMENT ORDER ON THE GROUND THAT T HE ASSESSEE HAS NOT SUBMITTED ANY PROOF THAT THE EXPENSES ARE N OT EXCESSIVE AND ALSO HELD THAT THE ASSESSEE IS IN TRADING BUSIN ESS AND NOT MANUFACTURING BUSINESS. WE FIND THAT IN THE PAPER B OOK FILED BEFORE THE TRIBUNAL IN PAGES 49 TO 55 ARE THE ACCOU NT DETAILS OF THE H.O TRADERS. THE CIT (A) HAS NOT CONSIDERED TH IS EVIDENCE ALSO NOR CALLED FOR A REMAND REPORT ALSO. THEREFORE WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE AO FOR DENOVO CONSIDERATION IN ACCORDANCE WITH LAW. 12. IN THE RESULT ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD DATED 24 TH MARCH 2021. VINODAN/SPS COPY TO: 1 SANCTUS GLOBAL FORMULATIONS LTD C/O AV RAGHURAM & P.VINOD ADVOCATES 610 BABUKHAN ESTATE BASHEERBAGH HYDERA BAD -1 2 DY. CIT CIRCLE 1(2) IT TOWERS AC GUARDS HYDERA BAD 500004 3 CIT (A)-1 HYDERABAD 4 PR. CIT 1 HYDERABAD 5 THE DR ITAT HYDERABAD 6 GUARD FILE BY ORDER