TaxTMI 
TaxTMI 
2021 (7) TMI 1408
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....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. During the year it claimed deduction of Rs. 50,79,000/- o....
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....nue 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 expenditure has been incurred by the assessee indeed or not, the matter was referred....
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....ellant 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 Aquafresh toothbrush business [Pg. 269308 of PB - Merits (Reply dated 14.06.2013)1- The loss aggregating to Rs. 50,79,000 on account of write off....
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....005-06] - 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 Assessment Years 1990-91 and 1991-92 ITA Nos. 7466, 6707 and 6708(Bom.)/1995 Assessment Years 198990, 1990-91 and 1991-92 [Pg. 67-80 of PB-CL for AY2004-05 & 2005-06] - CIT v Nuware India Ltd, : 118 ITD 70 (Del) [Pg. 81-93 of PB-CL for AY 2004-05 & 2005-06] The ld. CIT(A), however, s....
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....isallowance 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 of vaccines nearing expiry mentioning specifically the stock of such vaccines, mails granting approval granting for the same, as also sample copies of stock write off sheets of the vaccines were filed to the CIT(A).Therefore it is not that the claim was entirely unsubstantiated. Further despite the repeated assertion of the assessee that th....
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....fficer 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 advertising expenses were held to be towards brand building for the entities owning the brand and were disallowed by AO as not being business expenses of the assessee company. An addition of Rs. 8,94,33,333/- (being 1/3 of Rs. 26,83,00,000/-) was accordingly made. 9. Before the Ld. CIT(A) the assessee made detailed submissions, reproduced at para 7.2 of the CI....
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...., 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 counter products i.e. eno, crocin, etc., for which it had acquired the licence to manufacture and sell in India from M/s GSK PLC. That the assessee was the exclusive user of the brand name of such products in India. The Ld. Counsel for the assessee contended that the benefit of the entire expenses inured to the assessee only by way of higher sales and higher profits an....
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....moted 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, there is no denying the fact that incurring of advertisement expenses has resulted in the promotion of brand name owned by the parent company in UK. Hence, the contention of the appellant that the entire advertisement 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 M/s. G....
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....s 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) -CIT v. Rockinan Cycle Industries Ltd.: 331 ITR 401 (P&H) (FB) -CIT v. EKL Appliances Ltd. : 345 ITR 241 (Del HC) It is a settled position that the expenditure incurred wholly and exclusively for the purpose of the business would be allowable as deduction under section 37(1) of the Act, even if it results in a direct or incidental benefit to a third party. Reliance is placed on the following decisions: * Sassoon J. David and Co. P. Ltd. v. CIT: 118 ITR 261 (SC) [Pg. 228 of PB-CL-2 for AY 2006-07] * CIT v. Chandulal Keshavlal & Co. 38 ITR 601 (SC) IPg. 230 of PB-CL-2 for AY 2006....
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....d 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 Section 37(1) were satisfied. Reference can be also ITA 16/2014 & connected matters Page 42 of 142 made to the decision of Delhi High Court in CIT versus Nestle India Limited [2011] 337 ITR 103 (Del), holding that the question of reasonableness or measure of expenses to be allowed cannot be a subject matter of adjustment or disallowance under Section 37(1) of the Act." It was held similarly by the Hon'ble Delhi High Court in the case of CIT vs. Whirlpool of India Limited 381 ITR 154 (Pg. 278 of PB-CL-2 for AY 2006-07). Recently Hon'ble Delhi High Court in the case of Pr. CJT-3 vs. Seagram Manufacturing (P) Ltd. 245 Taxman 389 reiterating the law in this regard, held (Pg. 288 of PB-CL-2 for AY2006-07]: "6. Regarding Questio....
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.... 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 expenditure incurred by the appellant wholly and exclusively for the purpose of its business even if it results in an indirect benefit to ihe overseas group company as per the settled position laid down in the aforesaid decision. In view of the aforesaid, adhoc disallowance of Rs. 8,94,33,333 being l/3td of the expenditure on advertisement and publicity is unlawful and is liable to be deleted." The Ld. DR relied upon the order of the Ld. CIT(A) and stated that since admittedly the benefit had accrued to the parent company who was the owner of the brand, the expenditure has been rightly disallowed by the authorities below. 11. We have heard both the parties. We are convinced with the arguments of the Ld. Counsel for the assessee that there was no reason/basis at all for hol....
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....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 GlaxoSmithKline Biological S.A., Belgium, being Rs. 16,08,70,538/- for purchase of vaccine, on account of non-deduction of tax at source thereon, holding that there was a permanent establishment of the said entity in India and, therefore, the profits attributable to the purchases made by the assessee from the said entity were liable to tax in India. The grounds raised by the assessee read as under: "2.2 That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining disallowance of Rs. 90,20,655 under section 40(a)(i) of the Act, with respect to purchase of vaccine amounting to Rs.16,08,70,538 lacs made from GlaxoSmithKline Biological S.A. ('GSK, Bio'), Belgium, allegedly holding that the appellant has failed to deduct tax at source from such payment. 3.1 That ....
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....e 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.CIT(A) against the aforesaid disallowance contending that no PE of GSK Biologicals SA SA can be said to have been formed in India as per Article 5 of Double Taxation Avoidance Agreement(DTAA) between India and Belgium read with the facts of the case and that even if it was presumed that there was a PE of GSK Biologicals SA, SA, in India, no business could be attributable to it since the purchase of vaccine took place on principal to principal basis outside India for which even payment was made outside India. The same find mention in para 9.2 of the CIT(A)'s order. The Ld. CIT(A), however, dismissed the contention of the assessee and upheld the disallowance made by the AO. Before us, at the outset itself, the Ld. Counsel for the assessee contended that his plea on this ground raised was that the issue be restored back for the reason that specific factual and....
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....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 case, the assessee had procured vaccine directly from GSK Biologicals SA on principal to principal basis and the purchases were not be attributable to PE, if any, of GSK Biologicals SA and, therefore, also no profits on account of the said transaction could be attributable to the PE in terms of the Double Taxation Avoidance Agreement. The Ld. Counsel for the assessee drew our attention to the detailed submissions made to the CIT(A), reproduced at pages 74 to 87 of the Paper Book. He also drew our attention to all the necessary documents substantiating the above arguments being copies of agreement entered into between GSK Biologicals SA and GSK Pharma which were also placed before the Ld. CIT(A). In this regard a brief summary of the contentions made were also placed before us which are as under: "During the relevant previous year, the appellant purchased /im....
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....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 conducted clinical trials in India at centres in Mumbai and Bangalore. Based on the ex-parte enquie assessing officer came to the conclusion that all the core activities, related to vaccine development, were undertaken in India by the appellant on behalf of GSK Biologicals SA and under direct supervision and control of GSK Biologicals SA. The assessing officer inferred that the appellant was responsible for undertaking clinical trials as well as research and development activities on behalf of the applicant. The assessing officer, accordingly, made a disallowance of Rs. 16,08,70,538 under section 40(a)(i) of the Act, with respect to purchase of vaccine being payment made to GSK Biologicals SA for purchase of vaccine, on the ground that the appellant failed to deduct tax at source from such payments. The CIT(A), on the basis of order passed by the assessing officer for the assessment year 2011-12, disallowed Rs. 90.20.655, in terms of aforesaid ci....
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....ishment 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. Counsel for the assessee contended that despite the above specific and detailed submissions made by the assessee the Ld. CIT(A) gave no cognizance to the same and upheld the disallowance reiterating the order of the AO. He drew our attention to para 9.3 of the Ld. CIT(A) which is reproduced as under: "9.3 The submission of the appellant have been considered. It is seen that M/s GSK Biologicals SA has outsourced its core activity to the assessee company and all the activities are undertaken under the direct supervision and control of M/S GSK Biologicals SA. Thus there is a constant touch between Indian center and the center of the assessee of the abroad for R&D activities. This arrangement where assessee is responsible for undertaking clinical trial as well as R&D activities on behalf of GSK Biologicals SA constitute permanent establishment of M/s GSK Biologicals SA in India within the meaning of DTAA between India and Belgium as under: Fixed place of business in the form of place where clinical trials and resea....
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....re that these decisions came much after the assessment was completed under section 143(3) of the IT Act and could not be adopted by the AO for the year under consideration. Without prejudice to the above, the AR of the assessee has restricted the income attributable to the applicant (PE) in India at 15.38%. However, this is not acceptable. In this case reliance is placed on the decision of Motorola Inc vs. DCIT 96 TTJ 1 and M/s National Petroleum Construction Co. vs. Add!. Director of International Taxation ITA No. 5168/Del/2010 where the tribunals have held that the income attributable to the PE is 20% to 25%. The AO during the AY 2011-12 has also adopted 22.5% based on the above decisions. Hence, the assessee's version of 15.38% is on the lower side and is not acceptable." b) The additional evidence filed by the appellant are admitted as these go to the route of the matter and AO has also not objected for admission. Circular 2/2014 came much after the relevant assessment was completed in the light of the decision of Hon'ble Supreme in the case of GE Technology Pvt. Ltd. vs. CIT and Transmission Corporation of AP Ltd. vs. CIT. But the circular is clarificatory in natur....
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....o, (Supra) as 20% and 25% of gross receipts respectively. By applying the average @ 23%, the net profit attributable to PE functions of the GSK Biologicals SA SA is determined at Rs. 90,20,655/- (being 23% of Rs. 3,92,20,237/-. Therefore the disallowance u/s 40(a)(i) is restricted to Rs. 90,20,655/-. The grounds of appeal nos. 5, 5.1 to 5.11 are partly allowed." 16. Referring to the above, he pointed out that the Ld.CIT(A) held that GSK Biologicals SA had PE in India was based on his findings that GSK Biologicals SA had outsourced its core activities to assessee company and all activities were undertaken under direct supervision and control of GSK Biologicals SA. These findings he contended had no basis at all except some data collected by the AO from the internet and this despite specific submissions made by the assessee before him that there was no agreement between GSK Biologicals SA and the assessee and even the core activities of GSK Biologicals SA were not being carried out in India. The Ld. Counsel for the assessee contended that since all the factual submissions made by the assessee and even the position of law stressed upon by the assessee have been completely ignored by ....
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....er affiliates. These findings we find are based on, as mentioned in the assessment order at page 35 "facts extracted from various websites of the assessees group companies which throw light on the vaccine business of the group and role of Indian affiliates". The role of the assessee is based on decision taken in the 63rd meeting of the Genetic Engineering Approval Committee on the 8th February 2006.The AO has contended that GSK Biologicals is carrying on vaccine development activity through these fixed place of business. That all intellectual property in the vaccine vests with GSK Biologicals, while R&D activity is carried out in India, the assessee is economically dependent on GSK Biologicals SA and has no other business. The Ld. CIT(A), we have noted has merely reiterated the findings of the AO. The assessee on the other hand, we find has made specific factual and legal submissions countering the findings of the AO/CIT(A), pointing out that the facts are to the contrary that there was no agreement of GSK Biologicals SA with the assessee but in fact it had entered into two agreements with GSK Pharma, an Indian Company, for carrying out clinical research and data management. Copie....
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....y of hearing to the assessee and after considering all factual and legal contentions raised by it. Ground No 2.2 - 3.4 are accordingly restored back to the AO with the above directions and therefore stand allowed for statistical purposes. 19. During the course of hearing the assessee raised additional grounds before us under Rule 11 of the Income Tax Rules, 1962 vide application dated 20th day of May 2021. The additional grounds raised read as under: "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 JCIT: D.B. ITA No.52/2018 and Hon'ble Bombay High Court in the case of Sesa Goa Ltd vs JCIT: 117taxmann.com 96 (Bom HC), deduction of Rs. 43,95,675, being education cess computed on returned income, paid by the Appellant before the due date of filing return of income for the subject assessment year. 2. That on the facts and circumstances of the case and in law, pursuant to law clarified in the case of Chambal Fertilisers and Chemicals Ltd (supra) and Sesa Goa Ltd (supra), the assessing officer a....
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....ion after admission of the additional grounds raised by the assessee. He contended that the decision relied upon by the Ld. DR could not by any stretch be said to be laying down a blanket proposition that additional grounds raised need to be considered by the ITAT only for the purpose whether they can be admitted or not and the adjudication of the same has invariably to be left and restored to the CIT(A). On the merits of the issue, the Ld. DR stated that the issue was covered against the assessee by the decision of the Hon'ble Apex Court in the case of CIT Vs. K.Srinivasan, 83 ITR 346 wherein the Hon'ble Apex Court had held that all surcharge and additional surcharge levied on income tax were in the nature of income tax itself and the education cess, therefore, was in the nature of income tax and thus not allowable as deduction by virtue of the provisions of section 40(a)(ii) of the Act. The Ld. DR pointed out that the decision of the Hon'ble High Court's relied upon by the Ld.Counsel for the assessee had not considered the decision of the Hon'ble Apex Court in the case of K.Srinivasan (supra) and being the decision of the Hon'ble Apex Court, the same would pr....
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....the tax liability of assessees in accordance with law and to this end the power of the Tribunal cannot be restricted only to decide issues which arise from the CIT(A)'s order. The decision of the Hon'ble apex court on the issue is as under: "The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on the merits, we do not propose to answer the questions relating to the merits of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows: "Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same ?" 3. Under s. 254 of the IT Act the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceeings....
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....R.1021, CIT vs. Karamchand Premchand (P) Ltd. (1969) 74 ITR 254 (Guj) : TC 8R.547 and CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR (Guj) 278 (FB) : (1985) 151 ITR 499 (Guj)(FB) : TC 8R.965]. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 6. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits." In view of the settled position as above, we do not find any merit in the argument of the Ld. DR and even the case law relied upon by the Ld. DR, we find, is of no assistance as it does not lay a blan....
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....of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. Explanation 1.-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian income-tax payable under section 91. Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A." 23. Undoubtedly, the decision referred to by the Ld. Counsel for the assessee of the Hon'ble High Courts of Bombay and Rajasthan have categorically held education cess to be not covered u/s 40(a)(ii) of the Act. The reasoning being that this provision originally included cess also which was specifically omitted later on and even the CBDT in Circular No. 91/58/66-ITJ (19) dated 18-05-1967 clarified that cess was not covered u/s 40(a)(ii). But at the same time we are aware of and even the Ld DR has po....
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.... ss. 4 and 5 of the IT Act, 1961, hereinafter called "the Act". These sections provide for charge of income-tax and super-tax. It was pointed out that surcharges was treated in the Finance Acts as a tax different from the income-tax and super-tax and that surcharge was levied by the Finance Act while the income and super-taxes were levied by the Act. Reference was made in this connection to the First Schedule to the Finance Act, 1963. Part I of that Schedule dealt with "income-tax and surcharge on income-tax". Under that heading were given the rates of income-tax as also the rates of surcharge. Similarly, Part II of the Schedule dealt with super-tax and surcharge on super-tax and under that heading the rates of super-tax and the rates of surcharge on super-tax were given. Among the surcharges in the case of income-tax were mentioned : (a) a surcharge for the purpose of the Union, (b) a special surcharge and (c) an additional surcharge. As regards the surcharge on supertax there was mention of (a) a surcharge for the purpose of the Union and (b) a special surcharge. The High Court examined the aforesaid provisions of the Finance Acts of 1963 and 1964 and Arts. 270 and 271 of the Con....
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.... 2 relating to income-tax and super-tax provided that these taxes would be levied at the rates specified in Parts I and II of the First Schedule increased in each case by a surcharge for the purpose of the Union. The Finance Act of 1952 was a short document and s. 2 thereof simply provided : "The provisions of s. 2 of, and the First Schedule to, the Finance Act, 1951, shall apply in relation to income-tax and super-tax for the financial year 1952-53 as they apply in relation to income-tax and super-tax for the financial year 1951- 52...." There was no specific mention whatsoever of surcharge in s. 2 nor was there any modification of the First Schedule to the Finance Act of 1951 which contained the rates, etc., relating to the surcharge. Similar state of affairs existed with regard to the Finance Acts of 1953, 1954 and 1957. Sec. 2 of the Finance Act, 1971, is to the effect that the provisions of s. 2 and of the First Schedule to the Finance Act, 1970, shall apply in relation to income-tax for the assessment year or, as the case may be, the financial year commencing on the first day of April, 1971, as they apply in relation to income-tax for the assessment year commencing on the....
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.... and duties mentioned therein between the Union and the States. The legislative power of Parliament to levy taxes and duties is contained in Arts. 245 and 246(1) read with the relevant entries in List I of the Seventh Schedule. 9. As mentioned before, the legislative entry 82 in List I relates to taxes on income other than agricultural income; income-tax, super-tax and surcharge would all fall under this entry. It is exercise of the legislative power conferred by that entry that the Union Parliament enacts the provision in the Finance Act each year relating to them. It is that Act which authorises these taxes to be charged and prescribes the rates at which they can be charged. Sec. 4 of the Act simply provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates income-tax at that rate or those rates shall be charged in accordance thereto and subject to the provisions of the Act. Sec. 95, which was omitted by the Finance Act of 1965, contained similar provision with regard to super-tax. Although under the Act s. 4 is the charging section yet income-tax can be charged only where the Central Act which, in the present case, ....
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....d or collection in the final assessment. Since by the Finance Act of 1967, this method or procedure was dropped we do not consider that much significance can be attached to this aspect. 12. In the result we are unable to sustain the view of the High Court. The question that was referred must be answered in the affirmative and in favour of the Revenue. In view of the nature of the point involved the parties are left to bear their own costs in this Court. The appeal by certificate is dismissed." Considering the decision of the Hon'ble Apex Court, when applied to the provisions of section 40(a)(ii) of the Act, it is abundantly clear that the tax levied on profits or gain of any business or profession, which is not allowable as per the said sub-section, would include all surcharge and additional surcharge levied thereon. Now coming to the nature of education cess, the Finance Bill, by virtue of which the rate of taxes are determined in Schedule-1 thereof, deals with the levy of education cess at Chapter-II(12) as under: (12) The amount of income-tax as specified in sub-sections (4) to (10) and as increased by the applicable surcharge, for the purposes of the Union, calculated....
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....ized to manufacture and sell products under the brand name in India and the entire benefit of such expenditure accrued to the appellant and no one else. 2.3 That the DRP erred on facts and in law in affirming the order passed by the assessing officer allegedly holding that "there is no denying of the fact that incurring of advertisement expenses has resulted in promotion of brand name owned by the foreign associated enterprise......... It cannot be said that entire expenses have been incurred exclusively and wholly for the purpose of the business of the appellant." 2.4 That the assessing officer erred on facts and in law in not appreciating that the advertisement and publicity expenses were incurred by the appellant in the course of carrying on of its business and were allowable deduction as business expenditure." 27. It was common ground that the issue raised in the above grounds was identical to that raised in ground No.1 of ITA No.2453/Del/2016 and our decision rendered therein at para 6 shall apply mutatis mutandis to these grounds also. Ground No.2 -2.4 accordingly are allowed. 28. Ground Nos.3 to 3.9 raised by the assessee are as under: "3. That the assessing officer....
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....logicals SA instead of operating a full- fledged centre in the form of a branch has outsourced its core activity to the Indian company, the assessee". 3.6 That the assessing officer erred on facts and in law in holding that "in fact M/s. GSK Biological SA is getting its works done in India through the appellant and other affiliates of the GSK group, which have no intellectual property right in the vaccines they develop or undertake clinical trials for". 3.7 That the DRP erred on facts and in law in upholding the aforesaid findings of the assessing officer on the basis of assumption and surmises without appreciating the merits of the matter. 3.8 That the assessing officer erred on facts and in law in not appreciating that the appellant did not carry out any clinical trial and research and development activity on behalf of GSK Biological SA in India. 3.9 That the assessing officer erred on facts and in law in not appreciating that no clinical trial / research and development was undertaken in India in respect of various vaccines imported by the appellant during the relevant previous year." 29. It was common ground that the issue raised in the above grounds was identical to t....
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....restore the matter to the AO for fresh adjudication after examining the nature and impact of the expenditure by the assessee vis a vis the existing business in terms of section 37" 32. The Ld. DR, on the other hand, pointed out that this plea had been raised by the assessee before the DRP also which on nothing that the expenses were incurred before actual launch of the project, held that the reliance placed by the Ld. Counsel for the assessee on the decision of the ITAT in the case of GlaxoSmithKline Consumer Healthcare Ltd. (supra) was misplaced. She further pointed out from the findings of the DRP at page 32 of its order that the DRP noted that the impugned expenses were capital in nature as the produce enduring benefit in respect of the new project being launched, she, therefore, contended that the plea of the Ld. Counsel for the assessee was, therefore, not maintainable. 33. We have heard both the parties. Admittedly identical issue arose in the preceding year also in the case of the assessee and the ITAT deemed it fit to restore it back to the AO for adjudication afresh after examining the nature and impact of the expenses vis a vis the existing business of the assessee. In ....
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....so ought to have allowed further deduction in respect of any additional amount paid by the Appellant towards education cess during the financial year relevant to the subject assessment year." 35. The Ld. Counsel for the assessee contended that the issues raised in all the grounds were legal and all the facts for adjudicating the same were on record. He, therefore, pleaded that the grounds be admitted for adjudication. Ld.DR did not object to the same. The additional grounds raised are legal grounds and admittedly require no investigation of facts, there is, we find, therefore no impediment in admitting them for adjudication, as held by the apex court in the case of NTPC Ltd. Vs. CIT, 229 ITR 383(SC). Order was pronounced during the course of hearing itself. 36. Thereafter it was pointed out that the grounds raised vide application dated 20-05-2021 relate to allowability of education cess. It was common ground that the issue raised in the above grounds was identical to that raised in the additional grounds raised in ITA No. 2453/Del/2016. Our decision rendered therein at para 22 shall apply mutatis mutandis to these grounds also. Accordingly the additional grounds raised vide ap....