ACIT, Circle-17(1), Hyderabad, Hyderabad v. Divi's Laboratories Limited, Hyderabad, Hyderabad

ITA 596/HYD/2017 | 2011-2012
Pronouncement Date: 29-11-2017 | Result: Dismissed

Appeal Details

RSA Number 59622514 RSA 2017
Assessee PAN AAACD6745J
Bench Hyderabad
Appeal Number ITA 596/HYD/2017
Duration Of Justice 7 month(s) 26 day(s)
Appellant ACIT, Circle-17(1), Hyderabad, Hyderabad
Respondent Divi's Laboratories Limited, Hyderabad, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-11-2017
Last Hearing Date 21-11-2017
First Hearing Date 21-11-2017
Assessment Year 2011-2012
Appeal Filed On 03-04-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NO. 596/HYD/2017 ASSESSMENT YEAR: 2011-12 ASST. COMMISSIONER OF INCOME-TAX CIRCLE 17(1) HYDERABAD. VS. DIVIS LABORATORIES LTD. HYDERABAD. PAN AAACD 6745 J APPELLANT RESPONDENT REVENUE BY: SRI J. SIRI KUMAR ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 21/11/2017 DATE OF PRONOUNCEMENT: 29/11/2017 O R D E R PER S. RIFAUR RAHMAN AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) - 5 HYDERABAD DATED 30/01/2016 RELATES TO T HE AY 2012-13 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN HOLDING THAT THE SURCHAR GE AND EDUCATION CESS IS TO BE CALCULATED AFTER DEDUCT ING THE MAT CREDIT U/S 115JAA FROM THE TAX ON ASSESSED INCOME. 2. LD. CIT(A) ERRED IN IGNORING THE LAW THAT FOR TH E PURPOSE OF TAX CREDIT U/S 115JAA OF THE IT ACT TAX DOES NOT INCLUDE SURCHARGE AND EDUCATION CESS. 2. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURING OF ACTIVE PHARMA INGREDIENTS & INTERM EDIATES FILED ITS ORIGINAL RETURN OF INCOME FOR THE AY 2011 -12 ON 24/11/2011 DECLARING AN INCOME OF RS. 129 04 21 440 /- WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND A NOTICE U /S 143(2) I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 2 WAS ISSUED DT. 07/09/2012. AFTER DUE PROCEDURE THE AO PASSED THE ORDER U/S 143(3) R.W.S. 92CA(4) OF THE A CT ASSESSED THE INCOME OF THE ASSESSEE AT RS. 1 29 66 84 479/- AS AGAINST THE RETURNED INCOME AT RS. 1 29 04 21 44 0/-. 3. THE ISSUE BEFORE US IS WHILE COMPUTING THE TOTA L ASSESSED INCOME TAX AND INTEREST AO HAS CALCULATE D THE TAX DUE AFTER CHARGING SURCHARGE AND EDUCATION CESS TH EN ALLOWED THE TAX CREDIT AVAILABLE U/S 115JAA. AGGRIE VED ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT T HE AO ERRED IN CALCULATING SURCHARGE AND CESS ON THE TAX ON ASSESSED INCOME BEFORE DEDUCTING MAT CREDIT. IT WAS ARGUED THAT SURCHARGE AND EDUCATION CESS IS TO BE COMPUTED AFTER DEDUCTING MAT CREDIT U/S 115JAA FROM TAX LIABILITY I.E. TAX PAYABLE IS TO BE ARRIVED AT BY DEDUCTING CREDIT U/S 115JAA FROM GROSS TAX PAYABLE AND ON THIS AMOUNT OF TAX PA YABLE SURCHARGE AND EDUCATION CESS ARE TO BE COMPUTED. TH E ASSESSEE IN THIS CONNECTION RELIED ON THE DECISION OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. VACM ENT INDIA [2015] 55 TAXMANN.COM 314 (ALL.) 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS REFERRING TO THE PROVISIONS OF SECTION 115JB AND FOLLOWING THE DECISIONS OF THE TRIBUNAL I NCLUDING THE ITAT HYDERABAD IN THE CASE OF VIRTUSA (INDIA) PVT. LTD. IN ITA NO. 146/HYD/2015 (WHERE BOTH THE MEMBERS ARE PARTY ) DIRECTED THE AO TO FOLLOW THE OBSERVATIONS OF THE J URISDICTIONAL ITAT AND DECIDE THE ISSUE. 6. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 3 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORD INATE BENCH OF HYDERABAD (SUPRA) WHEREIN THE BENCH HAS HELD AS UNDER: 9. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON THE RECORD. THE PROVISIONS OF SECTION 115JB IN BRIEF ARE: EVERY ASSESSMENT YEAR TWO PARALLEL COMPUTATIONS ARE CONTEMPLATED. ONE COMPUTA TION OF TOTAL INCOME IN ACCORDANCE WITH THE NORMAL PROVI SIONS OF THE I.T. ACT AND ANOTHER IS THE COMPUTATION OF B OOK PROFIT AS STIPULATED U/S 115JB. IF THE INCOME TAX P AYABLE ON THE TOTAL INCOME IS LESS THAN 18.5% OF THE BOOK PROFIT COMPUTED U/S 115JB THEN THE BOOK PROFIT SO COMPUTE D SHALL BE DEEMED TO BE THE TOTAL INCOME THEN THE BO OK PROFIT SO COMPUTED SHALL BE DEEMED TO BE THE TOTAL INCOME AND THE COMPANY SHALL PAY TAX @ 18.5% THEREON. THE AMOUNT SO PAID AS THE MAT SHALL BE AVAILABLE TO THE CREDIT OF THE COMPANY TO BE SET OFF AS CONTEMPLATED U/S 115JAA WITHIN A PERIOD OF 10 AYS. SURCHARGE AT 5% S HALL BE LEVIED IF BOOK PROFIT EXCEEDS 1 CRORE. EDUCATION CESS @ 3% SHALL BE ADDED ON THE AGGREGATE OF INCOME TAX AND SURCHARGE. AT THE SAME TIME SECTION 115JAA PROVID ES THAT WHERE ANY AMOUNT OF TAX IS PAID UNDER SECTION 115JB(L) BY A COMPANY FOR ANY ASSESSMENT YEAR CRED IT IN RESPECT OF THE TAXES SO PAID FOR SUCH ASSESSMENT YE AR SHALL BE ALLOWED ON THE DIFFERENCE OF THE TAX PAID UNDER SECTION 115JB AND THE AMOUNT OF TAX PAYABLE BY THE COMPANY ON ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE OTHER PROVISIONS OF THE ACT. IN OTHER WORDS MA T CREDIT SHALL BE COMPUTED AS UNDER: MAT CREDIT AVAILABLE = TAX PAID U/S 115JB - TAX PAYABLE ON THE TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 9.1 THE AMOUNT OF TAX CREDIT SO DETERMINED SHALL BE ALLOWED TO BE CARRIED FORWARD AND SET OFF IN A YEAR WHEN THE TAX BECOMES PAYABLE ON THE TOTAL INCOME COMPUTE D UNDER THE REGULAR PROVISIONS. HOWEVER NO CARRY FOR WARD SHALL BE ALLOWED BEYOND THE TENTH ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR IN WHICH THE TAX CREDIT BECOMES ALLOWABLE. THE SET OFF IN RESPEC T OF THE BROUGHT FORWARD TAX CREDIT SHALL BE ALLOWED FOR ANY ASSESSMENT YEAR TO THE EXTENT OF THE DIFFERENCE BET WEEN THE TAX ON THE TOTAL INCOME AND THE TAX WHICH WOULD HAVE I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 4 BEEN PAYABLE UNDER SECTION 115JB FOR THAT ASSESSMEN T YEAR. 9.2 IN OTHER WORDS MAT CREDIT WILL BE ALLOWED ONLY IN THAT PREVIOUS YEAR IN WHICH TAX PAYABLE ON THE TOTA L INCOME AS PER NORMAL PROVISIONS OF THE INCOME TAX A CT IS MORE THAN TAX PAYABLE UNDER SECTION 115JB AND IT SH ALL BE ALLOWED TO THE EXTENT OF THE FOLLOWING: TAX PAYABLE ON TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT TAX PAYABLE UNDER SECTION 115JB = MAT CREDIT TO BE ALLOWED. 9.3 ON CAREFUL READING THE SUB-SECTION 2A THE TAX CREDIT TO BE ALLOWED SHALL BE THE DIFFERENCE OF TAX PAID FOR ANY AY UNDER SUB-SECTION (1) OF 115JB AND THE AMOUN T OF TAX PAYABLE ON HIS TOTAL INCOME COMPUTED IN ACCORDA NCE WITH THE OTHER PROVISIONS OF THIS ACT. THE IMPORTA NT WORD USED IS TAX PAID AND AS PER THE HONBLE APEX COURT DECISION IN THE CASE OF K. SRINIVASAN (SUPRA) THE TERM TAX INCLUDES SURCHARGE. 9.4 IT IS ALSO IMPORTANT TO EVALUATE SUB-SECTION (5 ) OF SECTION 115JAA. SET OFF IN RESPECT OF BROUGHT FOR WARD TAX CREDIT SHALL BE ALLOWED FOR ANY AY TO THE EXTE NT OF DIFFERENCE BETWEEN TAX ON HIS TOTAL INCOME AND THE TAX WHICH WOULD HAVE BEEN PAYABLE U/S 115JB AS THE CAS E MAY BE FOR THAT AY. ON CAREFUL READING THE TERM USED ARE TAX NOT INCOME T AX OR ANY OTHER TERM. NEEDLESS TO SAY THE TERM TAX INCLUD ES SURCHARGE. 9.5 THE SUB-SECTION (5) OF SECTION 115JAA ARE APPLI ED AS IT IS IN THE ITR 6. THE ITR-6 FORM IS DESIGNED AND APPROVED BY THE APEX BODY CBDT AND THIS FORM IS UNIVERSALLY USED BY ALL THE COMPANY ASSESSEES. IN P ART A OF THE ITR-6 THE ASSESSEES ARE REQUIRED TO FILL TH E BALANCE SHEET AND P&L A/C. FROM THE DATA OF PART A ALL THE RELATED CALCULATIONS ARE CARRIED OUT IN OTHER P ARTS OF THE ITR-6 I.E. PART B AND OTHER RELATED SCHEDULES . NONE OF THE COLUMNS IN THE PART B ARE MANUALLY ENTERED THESE ARE AUTO FILLS AND THE DATAS ARE EXTRACTED FROM PA RT A. IT IS PERTINENT TO ANALYSE THE TOTAL TAX LIABILITY CAL CULATIONS DESIGNED BY THE CBDT FOR THE AY 2012-13. THEY ARE A S BELOW: I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 5 9.6 THE TAX LIABILITIES FOR NORMAL PROVISIONS AS WE LL AS MAT ARE CALCULATED WITH SURCHARGE AND CESS. THE MAT CREDIT IN ROW 7 ARE CALCULATED AUTOMATICALLY USIN G THE PRESCRIBED ALGORITHM THIS IS NOTHING BUT BALANCING FIGURE I.E. THE DIFFERENCE BETWEEN TAX LIABILITY AS PER NORMAL PROVISIONS AND MAT PROVISIONS. BOTH THE ABOVE TAX LIABILITIES ARE CALCULATED WITH SURCHARGE AND CESS. THESE ARE THE STANDARD FORMAT WHICH ARE EXPECTED TO BE FOLLOWED BY ALL THE ASSESSEES AND ALSO IMPORTANT TO NOTE PART B - TTI COMPUTATION OF TAX LIABILITY ON TOTAL INCOME COMPUTATION OF TAX LIABILITY 1 1A TAX PAYABLE ON DEEMED TOTAL INCOME UNDER SECTION 11 5JB (7 OF SCHEDULE MAT) 1A 0 1B SURCHARGE ON (A) ABOVE 1B 0 1C EDUCATION CESS ON (1A+1B) ABOVE 1C 0 1D TOTAL TAX PAYABLE U/S 115JB (1A+1B+1C)MAT) 1D 0 2 TAX PAYABLE ON TOTAL INCOME A TAX AT NORMAL RATES 2A 0 B TAX AT SPECIAL RATES (11 OF SCHEDULE-SI) 2B 0 C TAX PAYABLE ON TOTAL INCOME (2A + 2B) 2C 0 3 SURCHARGE ON 2C 3 0 4 EDUCATION CESS INCLUDING SECONDARY AND HIGHER ED UCATION CESS ON (2C + 3) 4 0 5 GROSS TAX LIABILITY (2C+3+4) 5 0 6 GROSS TAX PAYABLE (HIGHER OF 5 AND 1D) 6 0 7 CREDIT UNDER SECTION 115JAA OF TAX PAID IN EARLIER YEARS (IF 5 IS MORE THAN 1D) ( 5 OF SCHEDULE MATC) 7 0 8 TAX PAYABLE AFTER CREDIT UNDER SECTION 115JAA [ ( 6 7)] 8 0 9 TAX RELIEF A SECTION 90/90A(1B1 OF SCHEDULE TR) 9A 0 B SECTION 91(1B2 OF SCHEDULE TR) 9B 0 C TOTAL (9A + 9B) 9C 0 10 NET TAX LIABILITY (8 9C) 10 0 11 INTEREST PAYABLE A FOR DEFAULT IN FURNISHING THE RETURN (SECTION 234A) 11A 0 B FOR DEFAULT IN PAYMENT OF ADVANCE TAX (SECTION 234B) 11B 0 C FOR DEFERMENT OF ADVANCE TAX (SECTION 234C) 11C 0 D TOTAL INTEREST PAYABLE (11A+11B+11C) 11D 0 12 AGGREGATE LIABILITY (10 + 11D) 12 0 TAXES PAID 13 TAXES PAID A ADVANCE TAX (FROM SCHEDULE-IT) 13A 0 B TDS (COLUMN 7 OF SCHEDULE-TDS) 13B 0 C TCS (COLUMN 5 OF SCHEDULE-TCS) 13C 0 D SELF ASSESSMENT TAX (FROM SCHEDULE-IT) 13D 0 E TOTAL TAXES PAID (13A+13B+13C + 13D) 13E 0 14 AMOUNT PAYABLE (ENTER IF 12 IS GREATER THAN 13E ELSE ENTER 0) 14 0 15 REFUND (IF 13E IS GREATER THAN 12 ALSO GIVE THE BA NK ACCOUNT DETAILS IN SCHEDULE-BA) 15 0 I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 6 THAT THE ABOVE FORMAT OF ITR 6 WAS AMENDED W.E.F. A Y 2012-13 BY CBDT. MOREOVER THIS IS MORE RELEVANT F OR THE DEPARTMENT ALSO. THESE FORMATS ARE REGULATED BY CBD T. ASSESSING OFFICER CANNOT OVERLOOK THESE FORMATS AND (INTERPRET IT IN HIS OWN METHOD OF CALCULATING TAX CREDIT WHILE MAKING ASSESSMENT U/S 143(1) OF THE ACT.) PR OCEED TO CALCULATE THE MAT CREDIT TO COMPUTE ASSESSMENT U /S 143(1) APPLYING DIFFERENT METHODS WHEN THE PROPER A ND CORRECT METHOD AS PROPOSED BY CBDT IN ITR-6. THE ASSESSING OFFICER IS EXPECTED TO FOLLOW THE ITR-6 F ORMAT TO COMPLETE THE ASSESSMENT U/S 143(1) OR 143(3) OF THE ACT. 9.5 LET US ALSO ANALYSE THE CASE LAW OF RICHA GLOBA L EXPORTS PVT. LTD. WHICH WAS APPLIED BY CIT(A) THE DELHI ITAT OPINED THAT SECTION 115JAA APPLIED ONLY TO INC OME TAX NOT OF INCOME TAX AS INCREASED BY SURCHARGE AN D EDUCATION CESS. WE ARE OF THE VIEW THAT THE APEX CO URT DECISION IN THE CASE OF K. SRINIVASAN (SUPRA) MAY N OT HAVE BEEN BROUGHT TO THE KNOWLEDGE OF THE ITAT DE LHI. MOREOVER THE EXPLANATION 2 OF SECTION 115JB IS APPLICABLE TO CALCULATE TAX LIABILITY U/S 115JB AND THE SAME EXPLANATION SHOULD ALSO BE APPLIED FOR GIVING CREDIT U/S 115JAA. THE TAX LIABILITIES CALCULATED U/S 115 JB BY APPLYING THE EXPLANATION 2 THE TAX LIABILITY SO CO MPUTED ARE REMITTED BY THE ASSESSEE AND THEN THE SAME WAS CARRIED FORWARD FOR FUTURE MAT CREDIT. IN OUR VIEW WHILE CALCULATING THE MAT CREDIT U/S 115JAA THE SAME EXPLANATION 2 IN SECTION 115JB MUST BE APPLIED. 9.6 THE EARLIER JUDGMENTS IN THE CASES OF UNIVERSAL MEDICARE VALMET INDIA AND WYETH LIMITED ARE DECIDE D RELYING ON THE ITR 6 AS APPLICABLE IN THOSE AYS. SIMILARLY WE ALSO APPLY THE ITR 6 FORMAT AS APPLIC ABLE TO AY 2012-13 AS STATED ABOVE. ASSESSEE HAS RELIED ON THE ITR 6 FORMAT TO ARRIVE AT THE TOTAL LIABILITY AS WELL AS THE MAT CREDIT CALCULATIONS AND PAID TAX ACCORDINGLY. I N OUR VIEW THE ASSESSEE HAD FOLLOWED THE PROCEDURE PROPE RLY AND THE ASSESSING OFFICER HAD MADE THE CALCULATIONS APPLYING HIS OWN INTERPRETATION OR RELIED ON THE PROGRAMME WE ARE NOT SURE WHETHER IT IS PROGRAMME HITCH OR THE INTERPRETATION OF ASSESSING OFFICER WA S NOT IN LINE WITH THE CALCULATIONS PROPOSED IN ITR-6. THERE FORE WE DELETE THE ADDITION MADE. AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDEN TICAL TO THAT OF THE SAID CASE WE UPHOLD THE ORDER OF THE CIT(A) AS THE I.T.A. NO. 596/HYD/2017 DIVIS LABORATORIES LTD. HYD. 7 ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE ORDER OF THE ITAT (SUPRA) AND DISMISS THE GROUNDS RAISED BY THE REVEN UE. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER 2017 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD DATED 29 TH NOVEMBER 2017 KV COPY FORWARDED TO: 1. ACIT CIRCLE 17(1) 9 TH FLOOR SIGNATURE TOWERS KONDAPUR HYDERABAD. 2. M/S DIVIS LABORATORIES LTD. 7-1-77/E/1/303 AM EERPET HYDERABAD. 3. CIT(A) - 5 HYDERABAD 4 PR. CIT - 5 HYDERABAD 5 THE DR ITAT HYDERABAD