TaxTMI 
TaxTMI 
2021 (7) TMI 1408
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....ispute Resolution Panel(DRP in short), in second round, on the directions of the ITAT. It was common ground that the issues involved in both the appeals were identical, they were therefore heard together and are being disposed off by a common consolidated order. Ld. Counsel for the assessee contended that A.Y. 2005-06 was the base year and the additions/adjustments made therein had been reiterated in the succeeding year, i.e A.Y. 2006-07. The appeal for A.Y. 2005-06 was therefore first taken up for hearing. ITA No.2453/Del/2016 A.Y. 2005-06. 2. Ground No.1 raised by the assessee reads as under: "1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining the disallowance of stock written-off of Rs. 50,79,000 allegedly holding that the appellant failed to produce evidence of (i) informing the excise authorities or other regulatory authorities for destruction of such goods and (ii) intimating the dealers/ stockiest for not selling Aquafresh toothpaste, to substantiate the claim." 3. Brief facts relating to the issue are that the assessee company is in the business of manufacturing and trading of drugs and oral health care products.....
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....destruction of the stock and claiming consequently the expenditure as revenue expenditure, the Revenue's submission that it is an item of disbursement and hence may be regarded as capital in nature cannot be accepted. Similarly this expenditure as pointed out in point no. 3 of the Revenue's submission cannot be considered as relates to any frame work of business or as mentioned in the point no. 1 doesn't bring out any new asset. The Revenue's reliance that this write off be treated as capital expenditure based on the contention that the action of recalling of the product amounts to termination of agency and purely voluntary for obtaining substantial benefit cannot be accepted in the facts of the case. Based on the settled position of law as to what constitutes a capital expenditure, this write off of stock cannot be treated as capital expenditure. We are also not in agreement with the contention of the Ld. DR that these expenditures were not related with particular previous year but were related to many earlier years cannot be accepted as these products constitute a part of the closing stock for the instant year. 11. Now coming to the issue whether this exp....
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.... products, etc. The appellant is also engaged in resale / distribution of vaccine. The appellant has in the relevant previous year written off in the profit and loss account stock amounting to Rs. 50.79.000 comprising of the following: (a) During the relevant previous year, the appellant has written off the stock of following vaccine aggregating to Rs.38.33 lacs, which were nearing expiry: (Rs. in lacs) Brand Quantity Value Fluarix 13.820 17.28 Mencevax 5.884 20.07 Priorix. 246 0.34 Tvpherix 653 0.64 38.33 (b) The appellant had discontinued its business of manufacture of Aquafresh Tooth Brush and the said product was withdrawn from the market. Therefore, the entire inventory of Aquafresh Tooth Brush, related raw material and packing material were withdrawn and destroyed. Accordingly, the appellant has written off stock of Aquafresh toothbrush amounting to Rs. 12.46 lacs. The write off of such stock is supported by (i) stock write off sheet approving the write off of such products, (n) Copy of resolution of the meeting of the Board of Directors held on 11-03-2004 for discontinuation of Aqu....
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.... - CIT v Becton Dickinson India (P.) Ltd.: 214 Taxman 636 (Delhi HC) [Pg. 40-42 of PB-CL for AY 2004-05 -& 2005-06] - CIT v Bharat Commerce & Industries Ltd.: 107 Taxman 135 (Delhi HC) [Pg. 43-45 of PB-CL for AY 2004-05 & 2005-06] - IAC v. Consolidated Pneumatic Tool Co. (India) Ltd.: 14 ITD 564 (Bom. Tribunal) - Wipro Limited vs. DCIT : 96 TTJ 211 (Bangalore Tribunal). - Samsung India Electronics Limited (ITA No. 3734/Del/2002) (Delhi Tribunal) - Jet Airways India (P) Ltd. vs CIT (in 4228/M/2000 for assessment year 1997-98; 3349/M/2002 for assessment year 1998-99; 2682/M/2003 for assessment year 1999-2000; 5945/M/2003 for assessment year 2000-01; 7389/M/2004 for assessment year 2001-02; 4087/M/05 for assessment year 1997-98; 3691/M/02 for assessment year 1998-99; 3201/M/03 for assessment year 1999-2000; 6084/M/03 for assessment year 2000-01; 7390/M/04 for assessment year 2001-02) (Mumbai Tribunal) - Emersons Process Management India (P) Ltd. vs Addl. CIT: IT Appeal No. 8118 (Mum.) of 2010 [Pg. 46-66 of PB-CL for AY 2004-05 & 2005-06) - Digital Equipment India Ltd. vs CIT: ITA No. 6623 and 6624(Bom.)/2008 Assess....
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....urther, the DRP, in appellant's own case for assessment year 200607 held the claim of the appellant for deduction of expenses on impairment of stock as allowable revenue expenditure [Page 26 of PB -CL for AY 2004-05 and 2005-06]. In view of the aforesaid, it is respectful submission of the appellant that any disallowance of the expenses in respect of the impairment of stock amounting to Rs. 50.79 lacs is not sustainable and is liable to be deleted." The Ld. DR on the other hand relied on the order of the Ld. CIT(A). 6. We have heard both the parties and have also gone through the documents and decisions relied /referred to before us. The claim of write off of stock amounting to Rs. 59,79,000/- has been denied for want of evidence. The write-offs claimed by the assessee relate to the following: Vaccines 37.33 lacs Aquafresh toothbrush 12.46 lacs. Total 57.79 lacs The major write off claim evidently pertains to vaccines which, we find, the assessee consistently claimed had been nearing expiry and thus had no realizable value. Copies of emails exchanged within the assessee company seeking approval for release, write off and destruction of stock ....
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....ly on the ground that the said expenditure resulted in promotion of brand name owned by the foreign company. 8. Brief facts relating to the issue, as find mention in the order of the Ld.CIT(A) at para 7.1, are that the assessee company during the relevant year incurred expenditure of Rs. 26,83,00,000/- on advertisement and sale promotion. The Assessing officer noted that assessee company was spending on advertising and marketing and therefore, it had built a formidable marketing network in India. That by incurring these expenses it was generating benefits to the parent company i.e. GSK Pic, UK who owned the brand. The AO further noted that the said expenses were incurred in promoting the brand in India, the benefit of which was ultimately to be derived by the parent company. The AO further observed that there was a strong nexus between the expenses on advertisement and the revenues of the Associated Enterprises and therefore, the AE should contribute towards advertisement expenditure incurred by the assessee in India. That this arrangement was concocted to lower the profit of the assessee company and to save on the expenditure of the parent company and therefore, 1/3 of the adve....
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....sement expenses have been incurred wholly and exclusively for the purpose of the business of the appellant cannot be accepted. Therefore, the entire expenses cannot be attributed to the business of the appellant and AO has rightly attributed 1/3 of such expenses to brand building. The disallowance made by the AO of Rs. 8,94,33,333/- is upheld. Grounds of appeal No.3, 3.1, 3.2, 3.3, 3.4 and 3.5 are different. 10. Before us, the Ld. Counsel for the assessee reiterated the submissions made before the CIT(A). At the outset he drew our attention to the details of advertisement and promotion expenses, 1/3rd of which was disallowed by the AO, as reproduced in the brief submissions filed before us and pointed out that it was evident from the same that all expenses were incurred for promoting the sales of the assessee company only and had nothing absolutely to do with the promotion of the brand of the parent company. That the assessee locally incurred routine expenses for advertising and promoting the products dealt in by the assessee company for increasing its turnover. The Ld. Counsel for the assessee contended that the assessee was in the business of manufacture and sale of over the c....
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....oc disallowance of Rs. 8,94,33,337 being 1/3rd of the expenditure on advertisement and publicity. The CIT(A) vide order dated 24-03-2014 disposed off the appeal filed by the appellant challenging the said disallowance holding as under: "7.3 The submission of the appellant have been considered. The assessing officer has disallowed 1/3 of advertisement expenses incurred by the appellant company on the ground that brand owned by the parent company i.e. GSK Plc. UK is being promoted and therefore, benefit is reaching to the parent company. The appellant has submitted that even it is presumed that the benefit of the said advertisement accrues to the owner of the brand, than too it would not be commercially expedient for the assessee to recover any amount on account of advertisement from the owner of the brand as the owner of the such brand has allowed the appellant to use their brand without charging any royalty. The similar issue was before the DRP in AY 2006-07 wherein appellant submitted that even if there is some incidental benefit derived by the parent company in the promotion of brand name the entire expenses are eligible for deduction u/s 37(1) of the Act. Therefore, the....
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....consequently higher profit. The entire benefit of advertisement and sales promotion expenses inured to the appellant as none of its affiliate company has sold any product in the domestic Indian market and it is only the latter which has sold the products (which were advertised) in the Indian market. Such expenses incurred in India, do not have any reach outside India so as to result in any benefit to the other group company which are the owner of the said brand. (a) It is the settled position of law that the reasonableness of the expenditure has to be seen from the point of view of businessman and not that of the Revenue, as laid down by the Supreme Court repeatedly in the following cases: - CIT v. Malayalam Plantations Limited: 53 ITR 140 (SC) - CIT v. Walchand & Co.: 65 ITR 381 - J.K. Woollen Manufacturers v. CIT: 72 ITR 612 (SC) -CIT v. Birla Cotton Spg. and Wvg. Mills Ltd.: 82 ITR 166 (SC) - Madhav Prasad Jatia v. CIT U.P.: 118 ITR 200 (SC) - S.A. Builders Ltd. v. CIT : 288 ITR 1 (SC) - CIT v. Bharti Televentures Ltd: 331 ITR 502 (Del) -CIT v. Padmani Packaging (P) Ltd. : 155 Taxmann 268 (Del) ....
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....r example, a retail trader may advertise different products which may incidentally benefit the manufacturers, but this does not mean that advertisement expenditure fails to meet the requirement of "wholly and exclusively". Law in this regard is well settled" Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. vs. CIT : 374 ITR 118, too, held [Pg. 265 of PB-CL-2 for AY 2006-07]: "54 Expenditure and decision of the appellant, whether or not to incur the said expenditure; the quantum thereof, cannot be a subject matter of challenge or disallowance by the Assessing Officer, once it is accepted that the expenditure was wholly, i.e. the quantum of expenditure incurred was fully, and exclusively for business purpose. In Sassoon J. Davit & Co. Pvt. Ltd. versus CIT [1979] 118 ITR 261 (SC), it has been held that an appellant can claim deduction for expenditure incurred for business purposes and no one else has authority to decide whether or not the appellant should have incurred the said expenditure. The expenditure cannot be disallowed wholly or partly because it would incidentally benefit a third person once the requirements of ....
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....eas owner of the articles/TPR would have subsisted. But that would nevertheless subsist in any event on the theory of trans-national reputation of the IPR owner. In the circumstances, disallowing a certain proportion on an entirely artificial and notional basis from the expense otherwise deductible, in our opinion, was not justified. The question of law is answered against the revenue. For the above reasons, the appeal fails. It is accordingly dismissed. The AO has, on the basis of assumption and surmises, held that incurring of advertisement expenses has resulted in promotion of brand name owned by the foreign AE and, therefore, it cannot be said that the entire expenses have been incurred wholly and exclusively for the purpose of the business of the appellant. The aforesaid observation by the AO are only in the realm of assumption and surmises in as much as such expenses on advertisement have undisputedly incurred by the appellant in the course of carrying on of its own business and promoting sale of product manufactured by it in India. The incidental benefit allegedly resulting by way of promotion of brand owned by foreign AE cannot be the reason to disallow such expend....
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.... in India. These contentions of the assessee have remained uncontroverted. The entire benefit, in such circumstances, inured to the assessee alone as it alone was operating in the Indian market. Benefit if any to the AE was only incidental. And on account of such incidental benefit accruing to a third party it cannot be said that the expense was not wholly and exclusively for the benefit of the assessee. As long as the objective /purpose for incurring an expenditure is to benefit the assessee solely, the expenditure can be said to be incurred wholly and exclusively for the benefit of the assessee. Any incidental benefit accruing to a third party on account of the same, being beyond the control of the assessee, does not dilute the character of the expense. We do not find any reason or basis therefore for holding a part of the expense as pertaining to brand building. We therefore direct deletion of the disallowance made on account of brand building expenses amounting to Rs. 8,94,33,333/- Ground of appeal No. 2 is allowed. 12. Ground No.2.2, 3.1, 3.3 and 3.4, it was stated by the Ld. Counsel for the assessee related to the same issue of disallowance made of amount paid to M/s....
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....ing to Rs. 16,08,70,538/- to Glaxosmithkline Biologicals SA (hereinafter referred to as GSK Biologicals SA) at Belgium for purchase of vaccine. The Assessing officer (AO) noted that no TDS had been deducted on this payment as required u/s 195 of the Act. He further noted that the assessee was responsible for undertaking clinical trials as well as research and development activities on behalf of M/s GSK Biologicals SA, for which reason he held that the core activities of the Belgium Company were being carried out in India, and therefore it constituted permanent establishment of M/s GSK Biologicals SA in India within the meaning of Article - 5 of the DTAA between in India and Belgium. He also held that the assessee constituted "Business connection" of M/s GSK Biologicals SA SA within the meaning of section 9(1)(i) of the Act. Accordingly the AO held that the income of the Belgium company was taxable in India and therefore, the assessee was under obligation to deduct tax at source, which having not been deducted, the amount paid to GSK Biologicals SA, of Rs. 16,08,70,538/- was liable to be disallowed u/s 40(a)(i}of the Act. 14. The assessee made detailed submissions before the Ld.C....
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....d entered into an agreement for provision of services in relation to procurement, organization and coordination of clinical trials in India by GSK Pharma to GSK Biologicals SA and also for rendering services involving pretrial scientific activities, data entry, data clinic, data analysis and reporting of clinical trials and other medical data. The Ld. Counsel for the assessee pointed out that GSK Biologicals SA did not have at its disposal, nor had legal right or access to any fixed place for carrying out its business in India and further even the activities carried out by GSK Biologicals SA of rendering services in relation to conduct of clinical trials could not be said to constitute the core business of GSK Biologicals SA which need to be carried out from a fixed place for constituting a PE in India as per Article 5(1) of the DTAA. The Ld. Counsel for the assessee contended that it was also pointed out that neither the assessee, nor GSK Pharma was engaged in soliciting orders for or on behalf of GSK Biologicals SA and, therefore, the assessee could not be said to be a dependent agent PE in terms of Article(4) of DTAA. The Ld. Counsel for the assessee also contended that in any c....
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....The assessing officer held that clinical trial activities constitute permanent establishment of GSK Biologicals SA in India within the meaning of Article 5 of Double Taxation Avoidance Agreement with Belgium (DTA A) [Pg. 52-77 of PB-CL-1 for AY 2006-07] on account of the following: (a) Fixed place of business in the form of place where clinical trials and research and development takes place including but not limited to CDMCI and BDS/, Bangalore under Article 5(1) of the DTAA; (b) Premises used as a sales outlet or for receiving or soliciting orders with respect to vaccines under Article 5(2)(i) of the DTAA; (c) CDMCI, Bangalore under Article 5(2)(c) of the DTAA; (d) BDSI. Bangalore under Article 5(2){c) of the DTAA; and (e) Dependent agent PE in the form of the appellant under Article 5(4) of the DTAA. In coming to the conclusion that GSK Biologicals SA had a PE in India and. therefore, consideration paid by the appellant for import of vaccines were chargeable to tax in India, the assessing officer made ex-parte inquiries and investigation. From the various websites, the assessing officer gathered that appellant had got conduct....
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....pplication before the Authority of Advance Rulings to decide, whether it would result in a Permanent Establishment in India within the meaning of Article 5 of the Double Taxation Avoidance Agreement between India and Belgium. The Hon'ble Authority of Advance Rulings, however, vide order dated 21-07-2015 dismissed the application of the assessee as not maintainable on the grounds that questions raised in the application had been decided in the assessment of the captioned assessee and were pending before the CIT(A). Also the cases of GSK-Balguim for assessment year 2005-06 to 2009-10 were reopened by the issuing officers under section 148 of the Act in order to bring to tax its income holding existence of permanent establishment in India. The assessee has challenged the re-assessments in writ petitions before the Delhi High Court, which are admitted and are also pending disposal. It would be appreciated that the question in the above appeal as to whether GSK-Belgium has a permanent establishment in India can only be decided in the hands of the payee company, which matters are pending at present before the Hon'ble Delhi High Court." 15. The Ld. Co....
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....kline Biologicals SA for the year ending December, 2004 and December 2005 as additional evidence. These additional evidence were forwarded to AO for his report. The report of the AO is as under: "The Circular states that, for the purpose of making disallowance of 'other sum chargeable' u/s 40(a)(i) of the Act, the appropriate portion of the sum which is chargeable to tax under the Act shall form the basis of such disallowance and shall be the same as determined by the AO having jurisdiction. The assessee has also submitted the copy of the assessment order for AY 2011-12 passed by the AO to show the method of arriving at the disallowance to be made u/s 40(a)(i). With respect to the above it should be state that the circulars came in to force only during the FY 2013-14 and FY 2014-15 and cannot be used as a basis of disallowance made by the AO for AY 2005-06. The circulars were issued in the light of decision of supreme court of India in the case of GGBP Technology Pvt. Ltd. vs CIT and Transmission Corporation of AP Ltd. vs. CIT. It should also be stated here that these decisions came much after the assessment was completed under section 143(3) of the IT Act....
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....mination of 'other sum chargeable' has been made under subsection (2), (3) or (7) of section 195 of the Act, such a determination will form the basis for disallowance, if any, under section 40(a)(i) of the Act." c) Following the above circulars which have been followed by Assessing Officer, in AY 2011-12 in the case of the appellant, the disallowance of the appellant is computed as per the principle followed by the AO in A.Y. 2011-12. The appellant has worked out the ratio of operating profit to operating income of the deductee i.e. GSK Biologicals SA SA @ 24.38%. By applying the same rate of profit on the sale transactions of vaccines to the assesse, the amount of Rs. 3,92,20,237/(i.e. 24.38% of Rs. 16,08,70,538/-) is attributable to the net profit earned by the GSK Biologicals SA SA on the sale of vaccines to the assessee. The Assessing Officer has worked out the net profit attributable to PE services taking the average of the percentages held as net profit of the company attributable to the PE services in the case of Motorolla Inc. Vs DCIT (Supra) and M/s National Petroleum Construction co, (Supra) as 20% and 25% of gross receipts respectively. By applying the a....
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....ased on the principle followed by the AO in assessment year 2011-12. She further referred to Ground No.3.1, 3.3 & 3.4 raised by the assessee challenging the order of the CIT(A) holding that GSK Biological SA had outsourced its key activities to the assessee, that clinical trial activities constituted PE of GSK Bio and that of the assessee constituting business connection of GSK Bio. She contended that the AO had given detailed findings on the above, based on facts before him and she heavily relied on the order of the AO in this regard. 18. We have heard both the parties and have also carefully gone through the orders of the authorities below as also the documents referred to by the Ld. Counsel for the assessee before us. On going through the same and after carefully considering the same we find merit in the contention of the Ld. Counsel for the assessee that the issue needs reconsideration. The AO has held PE of GSK Biologicals SA in India based on his findings that clinical trials and R &D are core activities in vaccine development which is got done by GSK Biologicals in India through the assessee and other affiliates. These findings we find are based on, as mentioned ....
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....te where trials were to be carried out. That even the Genetic Engineering Committee report did not relate to the impugned year, being dated 8th February 2006.That the findings to the effect that no other activity was being carried out by the assessee except clinical trials was incorrect as the assessee was manufacturing Eno and Crocin. The findings of the AO therefore that the assessee was carrying out clinical trials for GSK Biologicals, we find, has been demonstrated before us to be not based on relevant facts. And the Ld. CIT(A) has merely reiterated the findings of the AO despite specific factual and legal contentions made by the assessee to the contrary. We have also noted that the determination of PE of GSK Biologicals SA, is pending before the Hon'ble Delhi High Court in writ petitions filed by GSK Biologicals SA against proceedings initiated u/s 148 of the Act on the basis that there exists PE, for A.Y. 2005-06 TO 2009-10. Considering the above, we are of the view that it would be in the fitness of matter to restore the issue back to the AO for adjudication afresh in accordance with law after giving due opportunity of hearing to the assessee and after considering all ....
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....IT, 229 ITR 383 and Jute Corporation of India Vs. CIT, 187 ITR 688. On the merits of the case, he relied upon the decision of the Hon'ble High Courts as referred to above, stating that the issue was squarely covered in favour of the assessee. 21. The Ld. DR raised no objection to the admission of the additional ground but contended that since the same were being raised for the first time, they needed to be restored to the CIT(A), pointing out that the Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax vs Tollaram Hassomal (MP) 298 ITR 22 had held that the additional grounds admitted by the Tribunal and raised for the first time before it, need to be restored back to the CIT(A) for adjudication. To this the Ld. Counsel for the assessee contended that as per Rule 11 of the Rules, the ITAT is entitled to admit the additional grounds and the admission is not restricted to mere admitting it only and not adjudicating it. That the decision relied upon by the Ld. DR was rendered in the facts of those case wherein it was considered expedient by the Hon'ble High Court to restore the issue to the CIT(A) for proper adjudication after admission of the addi....
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.... in the memorandum of appeal, subject to the same being heard by the leave of the Tribunal. The Rule further permits the Tribunal to not confine itself to the grounds raised while deciding an appeal. Reading the above together, there is no restriction to the power of the Tribunal in entertaining an additional ground raised before it for adjudication. As long as all facts are available on record all additional grounds, including those raised for the first time can be adjudicated by the ITAT. This issue stands settled by the apex court in the case of NTPC Limited (supra) where on the question whether the Tribunal has jurisdiction to examine a question of law not raised before the lower authorities, it was categorically held that the power of the ITAT in dealing with appeals has been expressed in the statute in the widest possible terms. That there is no restriction of its power to deal only with those issues which arise from the CIT(A)'s order and any question of law, facts relating to which are on record, can be raised before the Tribunal for the first time. It was emphasized in the decision that the purpose of assessment proceedings is to correctly assess the tax liability of as....
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....before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. the AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 5. The view that the Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow a view of the powers of the Tribunal [vide, e.g., CIT vs. Anand Prasad (1981) 128 ITR 388 ....
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....hence no impediment to the ITAT in adjudicating the issue. Therefore we find there is no reason to restore it for adjudication to the CIT(A). The contention of the Ld. D.R. therefore that the additional ground raised should be restored to the CIT(A) is accordingly dismissed. Now coming to the issue to be adjudicated, whether the education cess paid by the assessee and calculated as proportion of the income tax, is allowable as expenditure. This issue arises in the context of the provisions of section 40(a)(ii) of the Act which deals with certain amounts which are not allowable while computing the income under the head 'business and profession' and sub-clause(ii) thereof mentions taxes paid on profits and gains of business and profession as not allowable. The relevant provisions of section reproduced as under: "40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", - (a) in the case of any assessee- (i) ........................... ................................. (ii) any sum paid on ....
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.... in sub-s. (1) that income-tax and super-tax shall be charged at the rates specified in Parts I and II of the First Schedule respectively and that in cases to which certain paragraphs of those parts apply these taxes shall be increased by a surcharge for the purpose of the Union. According to sub-s. (2) where the total income of an assessee not being a company includes any income chargeable under the head "Salaries" income-tax and super-tax payable by the assessee on the salary portion of the total income shall be the proportionate amount payable according to the rates provided in the Finance Act, 1963. Under s. 2 of the Finance Act, 1963, income-tax was to be charged at the rates specified in Part I of the First Schedule and super-tax at the rates specified in Part II of that Schedule. The income-tax was to be increased in the cases mentioned by a surcharge and additional surcharge for the purpose of the Union and a special surcharge. The super-tax was, however, to be increased by a surcharge for the purpose of the Union and a special surcharge. It will be noticed that s. 2(2) of the Finance Act, 1964, did not contain mention of any of the surcharges. This led to the controversy w....
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....proviso to s. 137 the Federal legislature was empowered to increase at any time any of the duties or taxes leviable under that section by a surcharge for Federal purposes and the whole proceeds of any such surcharge were to form part of the revenues of the federation. Sub-s. (3) of s. 138 which dealt with taxes on income related to imposition of a surcharge. Under the Government of India Act, 1935, the surcharge was levied for the first time by the Indian Finance No. 2 Act, 1940. Sec. 3(1) of that Act read : "Subject to the provisions of this section, the rates of income-tax and rates of super-tax...imposed by sub-s. (1) of s. 7 of the Indian Finance Act, 1940, shall, in respect of the year beginning on the first day of April, 1940, be increased by a surcharge for the purposes of the Central Government." Similar phraseology was employed in respect of surcharge on super-tax. The provisions relating to surcharge were omitted in the Finance Acts of 1946 to 1950. It was reintroduced in the Finance Act of 1951 and the same has been continued in the Finance Acts of subsequent years. Special surcharge came to be levied in the Finance Acts of 1958 to 1964 and 1966 to 1971....
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....ased by a surcharge for the purposes of the Union. The word "surcharge" has thus been used to either increase the rates of income-tax and super-tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term "income-tax" as used in s. 2 includes surcharge. 8. According to Art. 271, notwithstanding anything in Arts. 269 and 270, Parliament may at any time increase any of the duties or taxes referred to in those articles by a surcharge for the purposes of the Union and the whole proceeds of any such surcharge shall form part of the consolidated fund of India. Art. 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that taxes on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in cl. (2). Art. 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Art. 268 which is the first one under the heading "Distribution of revenue between the Union and the States" relate to duties levied by the Union....
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....hich may be described as : (i) the basic charge or rate (In Part I of the First Schedule); (ii) surcharge; (iii) special surcharge; and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way, the additional charges form a part of the income-tax and super-tax. It is possible to argue, and that argument has been commended on behalf of the Revenue, that the word "surcharge" has been used in Art. 271 for the purpose of separating it from the basic charge of a tax or duty for the purpose of distributing the proceeds of the same between the Union and the States. The proceeds of the surcharge are exclusively assigned to the Union. Even in the Finance Act itself it is expressly stated that the surcharge is meant for the purpose of the Union. 11. It would appear that, since the Finance Act, 1943, upto the Finance Act, 1967, a provision was made for taxing the income under the head "Salaries" according to the provisions of the Finance Act of the preceding year rather than of the current year if the assessee had any income in addition to his income by way of salary. According to the Tribunal this was done because if the income under the head "Sa....
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....vasan (supra) read with the Finance Bill levying education cess. We therefore hold that education cess falls within the scope of amounts not allowed as deduction u/s 40(a)(ii) of the Act. The additional grounds raised by the assessee are, therefore, dismissed. In effect the appeal of the assessee is partly allowed for statistical purposes. We now take up the appeal of the assessee in ITA No.532/Chd/2014 for assessment year 2006-07. ITA No. 532/Chd/2014(A.Y. 2006-07): 25. Ground No.1 raised by the assessee in this appeal is general and hence requires no adjudicated. 26. Ground Nos.2 to 2.4 raised by the assessee are as under: "2. That the assessing officer erred on facts and in law in disallowing a sum of Rs. 6,12,00,000, being 1/3rd of the expenditure on advertisement and publicity of Rs. 18,36,00,000 incurred by the appellant holding that the expenditure was incurred for brand building for the entities owning the brand. 2.1 That the assessing officer erred on facts and in law in holding that there was a strong nexus between the advertisement expenditure and revenues of the associated enterprises and, therefore, the associated enterprises shou....
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....t the appellant was responsible for undertaking any clinical trial as well as research and development activities on behalf of GSK Biological SA, the resultant new/ improved product of which belongs to GSK Biological SA. 3.3 That the assessing officer erred on facts and in law in holding that clinical trial activities constitute permanent establishment of GSK Biological SA in India within the meaning of Article 5 of Double Taxation Avoidance Agreement (DTAA) between India and Belgium on account of the following: b. Premises used as a sales outlet or for receiving or soliciting orders with respect to vaccines under Article 5(2)(i) of the DTAA; a. Fixed place of business in the form of place where clinical trials and research and development takes place including but not limited to CDMCI and BDSI, Bangalore under Article 5(1) of the DTAA; c. CDMCI, Bangalore under Article 5(2)(c) of the DTAA; d. BDSI, Bangalore under Article 5(2)(c) of the DTAA; and e. Dependent agent PE in the form of the appellant under Article 5(4) of the DTAA. 3.4 That the assessing officer erred on facts and in law in alternatively holdin....
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....nt in the course of carrying on its business and the same did not result in the creation of a capital asset nor any advantage in the capital field so as to be regarded as capital expenditure." 31. The issue raised in the aforesaid grounds relates to claim of Product Development & Research Expenses to the tune of Rs. 14.55 lacs which was not allowed to the assessee. These were incurred by the assessee for carrying out consumer survey market research & consumer analysis in respect of products that from part of the assessee's line of business. The Ld. Counsel for the assessee contended that the issue stood squarely covered in favour of the assessee by the decision of the ITAT in the case of GlaxoSmithKline Consumer Healthcare Ltd. for assessment years 1998-99 to 2004-05. Copy of the said order was placed before us. Our attention was drawn to the relevant portion of the order. It was also pointed out that identical issue stood adjudicated in the case of the assessee by the ITAT in earlier years and the issue had been restored back to the AO. Our attention was drawn to the order of the ITAT in the case of the assessee for A.Y. 1998-99 and 1999-2000 in ITA No. 2099/Del/2002 421/Del/20....
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....unds before us vide its application under Rule 11 of the Income Tax Rules, 1962, dated 15.03.2019 as under: Additional ground dated 22.11.2018: "That on the facts and circumstances of the case and in law, the impugned order passed by the assessing officer giving effect to the appellate order passed by the Hon'ble Tribunal, is barred by limitation and therefore, is liable to be quashed. " Additional ground dated 26.11.2018: "Without prejudice, that the assessing officer erred on facts and in law in not appreciating that disallowance of expense under section 40(a)(i) of the Act ought to be restricted to the appropriate proportion of the sum chargeable to tax out of the total payment of Rs. 19,80,75,340 made by the appellant to GlaxoSmithKline Biological S.A." Additional ground dated 20.05.2021: "1. That on the facts and circumstances of the case and in law, the assessing officer ought to have allowed, in pursuance to law clarified by the Hon'ble Rajasthan High Court in the case of Chambal Fertilisers and Chemicals Ltd vs JCJT: D.B. ITA No. 52/2018 and Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v....