Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (9) TMI 402 - AT - Income TaxRectification u/s 154 - Deduction u/s 80IC on re–allocation of certain expenditure - HELD THAT:- while completing the assessment under section 143(3) of the Act, the Assessing Officer has allocated the common expenditure including R&D expenditure to different units on pro rata basis. It is also a fact that in the assessment order, the Assessing Officer has never given any finding that the eligible deduction under section 35 of the Act has to be allocated to various units. Thus, when the Assessing Officer after applying his mind to the facts and material on record in the course of assessment proceedings has computed deduction under section 80IC of the Act on re–allocation of certain expenditure, proceedings under section 154 of the Act could not have been initiated only because it is felt that certain expenditure has been improperly allocated. When the facts on record show that the assessee was maintaining separate books of account in respect of its various units, allocation of common expenses to different units by itself is a debatable issue. That being the case, the Assessing Officer having dealt with such debatable issue in the assessment order, it cannot be dealt with again in rectification proceedings under section 154 of the Act which is only meant to rectify mistakes apparent on the face of record. - Decided against revenue. Disallowance of deduction claimed u/s 80IC - HELD THAT:- Similar allocation of R&D expenses and depreciation on Head Office assets were made in assessee’s own case in assessment year 2009–10. The Tribunal while deciding the issue [2013 (10) TMI 1541 - ITAT MUMBAI] restored the issue to the Assessing Officer. Further, while considering identical issue in assessee’s own case in the assessment year 2010–11, the Tribunal following its order in assessment year 2009–10 also restored the issue to the AO for re–adjudication. Facts being identical, respectfully following the consistent view of the Tribunal in assessee’s own case as noted above, we restore the issue to the Assessing Officer for re–adjudication after due opportunity of being heard to the assessee. Ground is allowed for statistical purposes. Disallowance of expenditure incurred towards gifts/freebies given to the doctors - claim disallowed by the Assessing Officer purely on the ground that as per MCI Regulations, 2002, doctors/medical practitioners are debarred from accepting any gift, travel facility, hospitality/cash or monetary grant from pharmaceutical and allied health sector industries - HELD THAT:- The Co–ordinate Bench in PHL Pharma Ltd. [2017 (1) TMI 771 - ITAT MUMBAI] has held that MCI Regulations are applicable only to the doctors/medical practitioners and not to pharmaceutical companies. MCI Regulations cannot be brought into play to invoke Explanation to section 37(1) of the Act for disallowing expenditure claimed by the assessee. Bench has also held that CBDT circular no.5 of 2012 dated 1st August 2012, cannot enlarge the scope of MCI Regulations de hors any enabling provision either under the Act or the MCI Regulations. Though, CBDT can tone down the rigors of law in order to ensure a fair enforcement of the provisions by issuing circulars for clarifying the statutory provisions, however, it is divested of all its power to create a new impairment adverse to an assessee or to a class of assessees without any sanction or authority of law. Thus neither the MCI Regulations 2002 nor the CBDT circular no.5 of 2012 dated 1st August 2012, would be applicable to the pharmaceutical companies. That being the case, the expenditure incurred by the assessee cannot be disallowed alleging infraction of law in terms of Explanation–1 to section 37(1) of the Act. Bogus purchase - CIT-A restricted the disallowance to 12.5% of the alleged non–genuine purchases - HELD THAT:- As rightly observed by Commissioner (Appeals), AO has not rejected the books of account. Further, he has not raised any doubt with regard to the consumption of goods and turnover of sales. Therefore, the only doubt which remains is with regard to the actual source of purchase - As per the settled principle of law, the profit element embedded in such purchases can be considered for addition - we are of the considered opinion that the disallowance @ 12.5% is reasonable, hence, does not require any interference. Part disallowance of deduction claimed under section 80IC by re–allocating certain expenditure to Baddi unit which is eligible to claim deduction u/s 80IC - HELD THAT:- Tribunal while deciding assessee’s appeal for the assessment year 2010–11 has directed the Assessing Officer to allow the expenditure incurred towards packing and delivery charges, analytical expenses, advertisement and sales promotion expenses, whereas, directed him to re–adjudicate afresh the issue of reallocation of R&D expenses and depreciation on Head Office assets to the Baddi unit. Facts being identical, respectfully following the consistent view of the Tribunal in assessee’s own case as noted above, we allow assessee’s claim of expenses with regard to packing and delivery charges, analytical expenses, advertisement and sales promotion expenses. Whereas, the issue relating to re–allocation of depreciation on Head Office assets and R&D expenses are restored back to the Assessing Officer for fresh adjudication after providing due opportunity of being heard to the assessee. Ground is partly allowed.
|