Dy.CIT, Central Circle-6,, Hyderabad v. M/s SMS Pharmaceuticals Limited,, Hyderabad

ITA 783/HYD/2014 | 2007-2008
Pronouncement Date: 12-11-2014 | Result: Dismissed

Appeal Details

RSA Number 78322514 RSA 2014
Assessee PAN AADCS2221D
Bench Hyderabad
Appeal Number ITA 783/HYD/2014
Duration Of Justice 6 month(s) 11 day(s)
Appellant Dy.CIT, Central Circle-6,, Hyderabad
Respondent M/s SMS Pharmaceuticals Limited,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 12-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 12-11-2014
Assessment Year 2007-2008
Appeal Filed On 01-05-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO.783/HYD/14 : ASSESSMENT YEAR 2006 - 07 ITA NO.784/HYD/14 : ASSESSMENT YEAR 2006 - 07 DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6 HYDERABAD V/S. M/S. SMS PHARMACEUTICALS LTD. HYDERABAD (PAN AADCS 2221 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRISHNA DR RESPONDENT BY : SHRI K.C.DEVADAS DATE OF HEARING 5 . 11 .2014 DATE OF PRONOUNCEMENT 12.11.2014 O R D E R PER P.M.JAGTAP ACCOUNTANT MEMBER : THESE TWO APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) I HYDERABAD DATED 19.2.2014 WHEREBY HE DELETED THE DISALLOWANCE OF RS.16 80 000 EACH MADE BY THE ASSESSING OFFICER ON ACCOUNT OF I NTEREST ALLEGEDLY ATTRIBUTABLE TO THE INTEREST FREE ADVANCES FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BULK DRUGS AND INTERMEDIATES. THE RE TURN OF INCOME FOR BOTH THE YEARS UNDER CONSIDERATION WERE FILED BY IT DECLARING TOTAL INCOME OF RS.30 35 30 960 AND NIL FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS AD V A N CED A SUM OF RS.1 40 00 000 TO M/S. DIRECT FINANCE AND INVESTMENT LTD. ON WHICH NO I TA NO. 783 - 7 3 4 /H YD/20 14 M/S. SMS PHARMACEUTICALS LTD. HYDERABAD 2 INTER E ST WAS CH A RGED. FOLLOWING THE VIEW TAKEN ON A SIMILAR ISSUE IN THE ASSESSMENTS COMPLETED IN TH E C A S E OF THE ASSESSEE FOR THE EARLI ER YEARS THE ASSESSING OFFICER WORKED OUT THE IN TE R E ST ATTRIBUTABLE TO THE SAID INTER - CORPORATE DEPOSIT A PPLYING A RATE OF 12% AT RS.16 80 000 AND MADE A DISALLO W AN C E OUT OF IN T EREST EXPENDITURE CLAIMED TO THAT E X TENT. I N BOTH THE Y E ARS UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007 - 08 AND 2008 - 09. ON APPEAL THE LEARNED CIT(A) DELETED THE SAID DI S ALLO W ANCES MADE BY THE ASSESSING OFFICER FOLLO W IN G THE ORDERS OF HIS PREDECESSOR IN ASSESSEES OWN CA S E ON A SIMILAR ISSUE DELETING THE DI SALLO W AN C ES MADE ON ACCOUNT OF INTER E ST IN THE EARLIER YEARS. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) R E VENUE HAS P R EFERRED THESE APPEALS BEFORE THE TRIBUNAL. 3 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIA L ON RECORD. IT IS OBSERVED THAT THE INTER - CORPO R ATE DEPOSIT OF R S .1 . 40 CRORES W AS GIVEN BY TH E ASSESSEE IN THE Y E AR 1994 - 95 AND SIMILAR DI SA LLO W ANCE MADE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE S AID INTER - CORPORATE DEPOSIT WAS DELETE D BY TH E LEARNED CIT(A) RIGHT FORM ASSESSMENT YEARS 2002 - 03 TO 2006 - 07. IN O NE OF THE ORDERS PASSED BY THE LEARNED CIT(A) FOR ASSESSMENT YEAR 2006 - 07 SIMILAR DISALLOWANCE MADE BY TH E ASSESSING OFFICER ON ACCOUN T OF INTEREST ALLEGEDLY ATTRIBU T ABL E TO THE INTER - CORPORAT E DEPOSIT GIVEN BY THE ASSESSEE COMPANY TO M/S. DIRECT FINAN C E & INV E STMENT LTD. WAS DELETE D BY THE LEARNED CIT(A) FOR THE FOL L OW I N G R EASONS - FROM THE EARLIER ORDERS OF THE CIT( APPEALS) IN THE APPELLANTS CASE IT IS SEEN THAT IT CANNOT BE DENIED THAT THE SAID ADVANCE HAD BEEN MADE OUT OF THE SHARE APPLICATION MONEY OF RS.5.40 CRORES RECEIVED BY THE APPELLANT ON 13 - 2 - 1995. SINCE THE APPELLANT HAD ESTABLISHED A DIRECT LINK BETWEEN THE INTEREST FREE ICD AND SOURCE THEREOF NO PART OF INTEREST ON BORROWED FUNDS COULD BE DISALLOWED AS HELD BY THE HON'BLE JODHPUR BENCH OF ITAT IN THE CASE OF ITO V/S. NARESH FABRICS (75 TTJ 386) AS ALSO HON'BLE JURISDI C T I ONAL I TA NO. 783 - 7 3 4 /H YD/20 14 M/S. SMS PHARMACEUTICALS LTD. HYDERABAD 3 ITAT IN ASHOK BROS V/ S. ITO(76 TTJ 427). AS REGARDS THE CONTENTION OF THE ASSESSING OFFICER THAT COMMERCIAL EXPEDIENCY OF ADVANCING THE SAID I CD WAS NO T ESTABLISHED I T IS CLEAR THAT THE ICD HAD B E EN INITIALLY GIVEN FOR THE PU R PO S E O F EARNING INTEREST INCOME WHICH IS VERY MUCH A COMMERCIAL TRAN S ACTION. AS PER THE SUBMI S SION S OF THE APPELLANT THE APPELLANT H A D EVEN MADE A PROVIS I ON OF RS.70 LAKHS REPR E SENTIN G INTEREST RECEIVABLE ON THE AMOUNT DUE OF R S .140 LAKH S FROM THE SAID PARTY IN TH E ASSESSMENT YEAR 2003 - 04. SIN C E THE APPE LLANT WAS NO T ABL E TO COLLECT THE SAID AMOUNT AND THE RECOVERY OF PRINCIPLE WAS ITSELF IN DOUBT LATER NO SUCH P R OV I SION WAS MADE FOR ASST. YEAR 20 0 6 - 07. UN D ER THE CIRCUMSTANCES I T CANNOT B E SAID THAT THERE WAS NO COMMERCIAL EXPEDIENCY INVOL V ED IN TH E DEC ISION OF THE APPELLANT COMPANY IN ADVANCING THE FUNDS WHICH WERE NOT IN ANY CASE ADVANCED OUT OF THE BORROWED FUNDS. AGREEING WITH THE DECISION TAKEN ON THIS ISSUE IN EARLI E R YEARS AND CONSI DE RIN G TH E FACT THAT THE SAME FUN D S H A D CONTINUED TO BE ADVANCED DURING THE RELEVANT FINANCIAL Y E AR ALSO THE DISALLOWANCE OF INTEREST R E L A TABL E TO SUCH AD V ANCE IS DELETED. 4 . KEEPING IN VIEW THE REASONS GIVEN ABOVE WHILE DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF IN T EREST FOR ASSESSMENT Y EAR 2006 - 07 AND TAKING NOTE OF THE FACT THAT THE FACTS AND CIRCUMSTANCES INVOLVED IN THE Y E ARS UNDE R CONSIDERATION I.E. ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 ARE SIMIL AR THE LEARNED CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR AND DELETED THE DISALLOWANCE S MADE B Y THE ASSESSING OFFICER ON A SIMI L AR ISSUE IN BOTH THE Y E ARS UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007 - 08 AND 2008 - 09. AT THE TIME OF H E ARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMI TT ED THAT THE TRIBUNAL VIDE ITS COMMON APP ELLATE ORD E R DATED 26.2.2014 PASSED IN ITA NO.355/HYD/2007 AND OTHERS HAS ALREADY UPHELD THE ORDERS OF THE LEARNED CIT(A) FOR ASSESSMENT YEARS 2002 - 03 2004 - 05 2005 - 06 AND 2006 - 07 GIVING RELIEF TO THE ASSESSEE ON A SIMILAR ISSUE BY HOLDIN G THAT THE IN T ER - CORPORATE DEPOSIT S HAVING BEEN GIVEN BY THE ASSESSEE COMPANY TO M/S. D IRECT FINANCE & INVE S TMENT LTD. OUT OF THE INTEREST FREE FUN D S AVAILABLE WITH IT IN THE FORM OF RE SERVES AND N ET P ROFIT NO DISALLOWANCE ON ACCOUNT OF IN T EREST ATT R IBUTABLE TO TH E SAID I TA NO. 783 - 7 3 4 /H YD/20 14 M/S. SMS PHARMACEUTICALS LTD. HYDERABAD 4 INTER - CORPORATE DEPOSITS WAS WARRANTED. ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS MADE AN ATTEMPT TO CONTEND THAT THE RESERV E S AND NET PROFIT CANNOT ALWAYS BE A V A I LABL E TO THE ASSESSEE IN THE FORM OF LIQUID FUNDS WE FIND THAT THIS CONTENTION I S IRRELEVANT IN TH E LIGHT O F THE FACTS OF THE PRESENT CASE WHEREIN THE INTER - C ORPORATE DEPOSIT WAS FOUND TO BE GIVEN BY THE ASSESSEE IN THE Y E AR 1994 - 95 OUT OF THE SHA R E APPLICATION MONEY AND THI S FINDING OF FACT RECORDED BY THE LEARNED CIT(A) HAS NO T B EEN REBUTTED OR CONTROVERTED BY THE REV ENU E AT ANY STAGE. WE TH E R E FORE FIND OURSELVES IN AGREEMENT WITH THE CONTENTION S OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE COMMON ISSUE INVOLVED IN THE PRESENT APPEALS OF THE R E VENUE IS SQU A RELY COVERED IN FAV OUR O F TH E ASSESSEE BY THE ORDER OF THIS T R IBUNAL DATED 26.2.2014 PAS S E D IN ASSESSEES OWN CA S E FOR THE EARLIER YE A RS AND RESPECTFULLY FOLLO W IN G THE SAME WE UPHOLD THE IMPU G N E D ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON AC C OUN T OF IN T ER E ST ALLEGEDLY ATTRIBU T ABLE TO THE INTER - CORPO R ATE DEPOSITS GIVEN BY THE ASSESSEE. 5 . IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12 TH NOVEMBER 2014 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 12 TH NOVEMBER 2014 COPY FORWARDED TO: 1. M/S. SMS PHARMACEUTICALS LTD. PLOT NO.19 - III M A NIKANTA TOWERS OPP. BHARAITYA VIDYA BHAVAN PUBLIC SCHOOL ROAD NO.71 JUBILEE HILLS HYDERABAD 2 . DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6 HYDERABAD I TA NO. 783 - 7 3 4 /H YD/20 14 M/S. SMS PHARMACEUTICALS LTD. HYDERABAD 5 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) I HYDERABAD COMMISSIONER OF INCOME - TAX CENTRAL HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S