PCIT Vs Cadila Heathcare Limited (Gujarat High Court)
Summary: The Gujarat High Court considered the Revenue’s appeal under Section 260A of the Income Tax Act, 1961 arising from the Income Tax Appellate Tribunal, Ahmedabad ‘D’ Bench order dated 17th August, 2021 in ITA No.954/Ahd/2017 for Assessment Year 2012-13. At the outset, the Court allowed the draft amendment tendered by the Revenue to change the respondent’s name in view of the Certificate issued by the Registrar of Companies recording a change of name with effect from 24th February, 2022. The Revenue proposed nine substantial questions of law concerning, among other matters, guarantee fee of Rs.10,45,32,855/-, interest on convertible loan to ‘Zydus International Private Ltd.’ of Rs.9,97,52,504/-, export commission and TDS under Sections 40(a)(i) and 195, product registration expenditure, Trademark Registration & Patent Fee of Rs.8,60,25,625/-, Rs.39,39,31,000/- incurred outside the approved R&D facility with reference to Section 35(2AB), depreciation on a Hummer Car registered in the Director’s name, Rs.142 Crore received from M/s. Zydus Healthcare, Sikkim as “exempted remuneration”, and exclusion of Section 14A disallowance while computing book profit under Section 115JB. The Court admitted questions A to F and I because similar questions had already been admitted in Tax Appeal No.274 of 2018. Question G was dismissed because the similar question in Tax Appeal No.274 of 2018 had not been entertained, with the Court referring to Commissioner of Income-Tax v. Aravali Finlease Limited, [2012] 341 ITR 282 (Guj). Question H was admitted because a similar question, being question No.9, was already admitted in Tax Appeal No.995 of 2018. The appeal was directed to be heard with Tax Appeal No.274 of 2018 for questions A to F and I and with Tax Appeal No.995 of 2018 for question H.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned Senior Standing Counsel Mr.Varun K. Patel for the appellant-Revenue and learned Senior Advocate Mr.R.K.Patel assisted by learned advocate Mr.Darshan R. Patel for the respondent-assessee.
2. Learned Senior Standing Counsel Mr.Varun K. Patel for the appellant has tendered a draft amendment to change the name of the respondent in view of the Certificate issued by the Registrar of Companies for change of name with effect from 24th February, 2022. The same is allowed in terms of the draft. To be carried out forthwith.
3. The appellant-Revenue has filed this Appeal under Section 260A of the Income Tax Act, 1961 proposing the following substantial questions of law arising out of the order of the Income Tax Appellate Tribunal, Ahmedabad ‘D’ Bench, Ahmedabad (for short ‘the Tribunal’) dated 17th August, 2021 in ITA No.954/Ahd/2017 for Assessment Year 2012-13:
“[A] Whether on the facts and circumstances of the case and in law the Appellate Tribunal’s decision is ex-facie perverse because Appellate Tribunal has erred in deleting the addition made on account of the guarantee fee charge of Rs.10,45,32,855/- by ignoring the ALP determined by using external Comparable Uncontrolled Price (CUP) Method?
[B] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made on account of interest on convertible loan to ‘Zydus International Private Ltd.’ of Rs.9,97,52,504/- by holding that the assessee still had the option to convert the same into equity?
[C] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made under section 40(a)(i) of the Act on account of non-deduction of TDS under section 195 of the Act in respect of payment of export commission?
[D] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made on account of Product registration expenditure considering the same as revenue?
[E] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition of Rs.8,60,25,625/- made on account of Trademark Registration & Patent Fee considering the same as revenue expense despite of the facts that they are not recurring the nature?
[F] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition of Rs. 39,39,31,000/- made on account of expenses incurred outside the approved R & D facility w.r. to 35[2AB] of the Act?
[G] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in allowing the depreciation on Hummer Car despite the fact that the same was in the name of the Director and there was no evidence to show that the same was used wholly and exclusively for the purpose of business, the provisions of Section 32 were thereof not satisfied?
[H] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition of Rs.142 Crore being the amount received from M/s. Zydus Healthcare, Sikkim as “exempted remuneration” without appreciating that the Assessing Officer had clearly established that in the guise of remuneration, the assessee has actually received the sum from the partnership firm falling within the purview of section 56 of the Act?
[I] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in excluding the disallowance made under section 14A while computing of Book Profit under Section 115JB ignoring the clause (f) of Explanation-1 to section 115JB(2)?”
4. So far as question Nos. A to F and I are concerned, the similar questions are already admitted for consideration by this Court in case of the assessee in Tax Appeal No.274 of 2018. Therefore, this appeal is admitted qua questions Nos. A to F and I.
5. So far as question No. G is concerned, the similar question in case of the assessee is not entertained by this Court in Tax Appeal No.274 of 2018 by observing as under:
“With respect to Question [H] which pertains to depreciation claimed by the Company on purchase of a Car for the Director, the case of the assessee was that the payment for purchase of vehicle was made by the Company, though the car was registered in the name of the Director. This Court under similar circumstances in the case of Commissioner of Income-Tax v. Aravali Finlease Limited, reported in [2012] 341 ITR 282 ruled in favour of the assessee. This question is, therefore, not considered.”
6. So far as question No. H is concerned, the similar question, being question No.9, is admitted for consideration by this Court in case of the assessee in Tax Appeal No.995 of 2018. Therefore, the Appeal is admitted qua question No. H.
7. To be heard with Tax Appeal No.274 of 2018, so far as question Nos. A to F and I are concerned and Tax Appeal No.995 of 2018, so far as question No. H is concerned.
8. The Appeal is accordingly, dismissed qua question No. G.
