Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (10) TMI 249 - ITAT CHENNAI

2015 (10) TMI 249 - ITAT CHENNAI - TMI - Expenditure incurred towards the drugs consumed for quality control disallowed - Held that:- On evidence put forth by the assessee-company, the Assessing Officer is not justified in making observation that the assessee was not required to act as a drug/medicine testing agency. The Assessing Officer has to verify the evidence produced by the assessee and find out whether the assessee has acted as a testing agency or not. It is not for the Assessing Officer .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessing Officer has to examine the matter afresh after considering the necessary material that may be filed by the assessee to support the claim of damaged drugs, unusable drugs and drugs consumed for quality control. In other words, the assessee has to produce necessary details with regard to damaged drugs, unusable drugs and drugs consumed for quality control, liquidated damages, if any, claimed from the respective companies for the damaged and unusable drugs. In view of the above discussion, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y to the assessee.

Cost of blood pressure checking apparatus said to be supplied to the members of the State Legislative Assembly - Held that:- This Tribunal is of the considered opinion that the cost of blood pressure checking apparatus cannot be considered to be a marketing expense. The assessee-company was expected to procure the drugs, medicines, equipments etc. and supply the same to the Government Hospitals. Supply of any machinery or equipment including blood pressure checking .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ecided partly in favour of assessee for statistical purposes. - ITA Nos. 1553 to 1558/Mds/2015 - Dated:- 4-9-2015 - N. R. S. Ganesan, JM And Chandra Poojari, AM For the Appellant : Shri P Radhakrishnan, JCIT For the Respondent : Shri K Meenatchi Sundaram, CA ORDER Per N R S Ganesan, Judicial Member All these appeals of the Revenue are directed against the respective orders of the Commissioner of Income-tax (Appeals)-11, Chennai, for assessment years 2006-07 to 2011-12. Since common issue arises .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and drugs consumed for quality control. The Assessing Officer found that the assessee was maintaining separate system of accounting which is outside books of account in respect of damaged drugs and unusable drugs and drugs consumed for quality control. Referring to the assessment order, the ld. DR pointed out that the assessee was not required to act as a drug/medicine testing agency. The expenditure on damaged drugs, according to the ld. DR, is not incidental to its business. The ld. DR pointed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssee, the CIT(A) found that the accounts of the assessee was subjected to audit by Comptroller & Auditor General of India u/s 619(3)(b) of the Companies Act, 1956 and they have not made any comments. On the basis of the certificate issued by the C&AG, the CIT(A) deleted the addition without making any investigation. The ld. DR further submitted that the certificate said to be issued by the C&AG was not available before the Assessing Officer. According to the ld. DR, in the absence of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. According to the ld. DR, the cost of blood pressure checking apparatus which were supplied to the members of the State Legislative Assembly cannot be treated as a business expenditure. Referring to the assessment order, the ld. DR pointed out that the assessee's business is procuring and supplying of drugs, medicines etc. to Government Hospitals in the State of Tamilnadu. In fact, the assessee was acting as an agent for Government of Tamilnadu for supplying of medicines. Therefore, supply .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enditure regularly from assessment year 2004-05. In assessment year 2004-05, the Assessing Officer himself allowed the claim of the assessee by an order passed u/s 143(3) of the Act. Similarly, for assessment year 2005-06, even though the Assessing Officer disallowed the claim of the assessee, on appeal by the assessee, the CIT(A) allowed the claim of the assessee and the Department has not filed any appeal against the order of the CIT(A). For the assessment year 2006-07, similar disallowance wa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. However, the assessee was claiming liquidity damages from the respective companies. As and when the assessee received liquidity damages for damaged drugs and unusable drugs, the same was taken as income in the Profit & Loss Account. 5. Referring to the contention of the ld. DR that the assessee is not required to act as a drug/medicine testing agency, the ld. Representative pointed out that the assessee is a State Government Company. The activity of the assessee was procuring and supplying .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DR, only after checking the quality of the drugs procured, the same will be supplies to the Government Hospitals. In view of the above, it may not be correct on the part of the Assessing Officer to say that the assessee was not required to act as a testing agency. Therefore, the CIT(A) has rightly allowed the claim of the assessee on the basis of the certificate issued by C&AG. 6. Referring to the cost of blood pressure checking apparatus supplied to the members of the State Legislative Asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Assembly. On a query from the bench, the ld. Representative very fairly clarified that the CIT(A) deleted the addition made by the Assessing Officer after placing reliance on the decision of this Tribunal in assessee's own case for assessment year 1999-2000 in I.T.A.No. 1716/Mds/2008 dated 29.10.2010. The ld. Representative has filed a copy of the above order of this Tribunal and clarified that this issue of supply of blood pressure checking apparatus to the members of the State Legislativ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

high end medical equipments to Government Hospitals, management of CT and MRI scans etc. During the course of its activity, the assessee has procured various drugs, equipments, surgical materials, napkins etc. for supplying to the Government Hospitals in the State of Tamilnadu. In the course of its business activity, the assessee claimed before the Assessing Officer that some of the drugs were damaged and some of them became unusable. The assessee has also consumed certain drugs for quality chec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

found that the assessee has not filed any evidence with regard to damaged drugs and unusable drugs. The so called damaged drugs were not destroyed by following FDA procedure. Admittedly, the assessee was entrusted by the Government of Tamilnadu to procure medicines, surgical materials, napkins, medical equipments etc. The assessee being a Government Company, is expected to ensure supply of quality drugs to the Government Hospitals. Therefore, it may not be correct to say that the assessee was no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s procured. It is also stated that the samples drawn from various batches are tested in the empanelled analytical laboratories, which were selected through open tender system, to ensure quality of drugs. In view of the above evidence put forth by the assessee-company, the Assessing Officer is not justified in making observation that the assessee was not required to act as a drug/medicine testing agency. The Assessing Officer has to verify the evidence produced by the assessee and find out whethe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unusable drugs, in the course of handling of drugs, it is natural that some of the drugs may be damaged and some of the materials like surgical material and napkins cannot be used after expiry of the prescribed period. These are the items the cost of which has to be deducted while computing the total income. The assessee also claims that liquidated damages received from respective companies from whom the drugs were procured was credited in the Profit & Loss Account as income. Therefore, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

instead of destroying the drugs, if the assessee keeps the same in their godown still the cost of such drugs has to be allowed as deduction since the damaged goods and unusable goods cannot be used for supplying to the Government Hospitals. Therefore, irrespective of the procedure laid down by FDA for destroying the damaged drugs, this Tribunal is of the considered opinion that the cost of the damaged drugs and unusable drugs has to be allowed as deduction. 10. We have also gone through the ord .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

see. The audit conducted by the C&AG u/s 619(3)(b) of the Companies Act, 1956, is for a different purpose i.e to ensure the Government Company to maintain the books of account as required under the Companies Act. The Income-tax Act, 1961 is a special enactment for the purpose of computing the total income and levying tax thereof and collecting taxes. Therefore, the authorities established under the Income-tax Act, 1961 has to examine the material available on record for the purpose of comput .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee, the Assessing Officer has also to take into consideration the certificate issued by the C&AG. In the case before us, the CIT(A) simply deleted the addition without examining the material available on record. Even though the claim of the assessee towards the damaged drugs, unusable drugs, drugs consumed for quality control is allowable while computing the total income, the assessee has to produce necessary evidence to support the claim before the Assessing Officer. The assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

In other words, the assessee has to produce necessary details with regard to damaged drugs, unusable drugs and drugs consumed for quality control, liquidated damages, if any, claimed from the respective companies for the damaged and unusable drugs. In view of the above discussion, the orders of the lower authorities are set aside and the entire claim of damaged drugs, unusable drugs and drugs consumed for quality control is remitted back to the file of the Assessing Officer. The Assessing Office .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version