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ACIT CC-40, Room No. 653, 6th Floor, Aayakar Bhavan, M K Road, Mumbai -400 020 Vs. Clestra Life Sciences Pvt Ltd 9th Floor, 907, Filix, Opp. Asian Paints, LBS Marg, Mumbai -400 078
December, 16th 2014
                "" Û   

                MUMBAI BENCH "C", MUMBAI
                  ...  ,  
                     . ,
                 . .
                 . . ,     

                      ITA No. : 4082/Mum/2012
                       (Assessment year: 2002-03)
                      ITA No. : 4083/Mum/2012
                       (Assessment year: 2003-04)
ACIT ­CC-40,                          Vs   Clestra Life Sciences Pvt Ltd
Room No. 653, 6th Floor,                   (Formerly known as M/s Brahma
Aayakar Bhavan, M K Road,                  Drugs Pvt Ltd),
Mumbai -400 020                            9th Floor, 907, Filix,
                                           Commercial Complex
                                           Opp. Asian Paints, LBS Marg,
                                           Mumbai -400 078
                                             .:PAN: AAACB 5795 L
(Appellant)                                ×(Respondent)
             Appellant-assessee by : Shri Ramesh Khatiwala
            Respondent revenue by  : Shri Premanand J
                         ×¢ . 127//   2013
                        C.O. No. 127/Mum/2013
         Arising out of ITA No. : 4082/Mum/2012, AY 2002-03
                            ×¢ . 128//
                        C.O. No. 128/Mum/2013
         Arising out of ITA No. : 4083/Mum/2012, AY 2003-04
Clestra Life Sciences Pvt Ltd,        Vs   ACIT ­CC-40,
9th Floor, 907 FIX Commercial              Mumbai -400 020
Complex, Opp Asian Paints, LBS Rd.
Bhandup, Mumbai -400 078
 (Cross Objector) ×¢                       ×(Respondent)
                            ×¢        :    ^  
         Cross Objector-assessee by   :    Shri Ramesh Khatiwala
            Respondent revenue by     :    ^   Shri Premanand J

   /Date of Hearing                        : 09-12-2014
  /Date of Pronouncement                   : 11-12-2014
                                    2                        Clestra Life Sciences Pvt Ltd
                                           (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                                           ITAs 4082 & 4083/Mum/2012
                                                               Cos 127 & 128/Mum/2013

      These are appeals filed by the revenue & Cross Objection by the
assessee against the order of CIT(A) for the assessment year 2002-03
& 2003-04.

2.    Common grievance of the revenue in both the years relate to
disallowance   of   advertisement       and   marketing        expenditure.         The
revenue has also taken ground with regard to violation of Rule 46A.

3.    In the Cross objection, the assessee has taken ground of validity
of reopening u/s 147.

4.    Rival contentions have been heard and record perused.

5.    Facts in brief are that the assessee is engaged in manufacturing
and trading of pharmaceutical products. On the basis of search
effected u/s 132 on M/s Genom Biotech Pvt Ltd (GBPL), completed
assessment was reopened by issue of notice u/s 143(2) r.w.s. 147 and
the AO disallowed expenditure incurred on advertisement on the basis
of report of DDIT (Inv.).

6.    By impugned order the CIT(A) deleted disallowance after having
a following observation:
                    "7.2 The AO while completing the re-assessment u/s 143(#)
                    read with section 147 disallowed advertisement and marketing
                    expenses Rs. 1,14,34,498/- reimbursed to Osian Trading Ltd.,
                    Cyprus with the observation, "The appellant in its letter has
                    asked the AO to consider all the accompaniments and
                    submissions made during the course of regular assessment for
                    the purpose of the current assessment proceedings. The
                    submission of the appellant cannot be accepted as there is
                    nothing on the record to prove that the advertisement expenses
                    claimed by the appellant were genuine. Hence the
                    advertisement expenses to tune of Rs. 1,14,34,498/- is added to
                    the total income of the appellant.
                    7.3 Before me, the appellant submitted that no opportunity was
                    afforded to the appellant to furnished any details required by
                    the AO. This is so, as already submitted, the 143(2) fixing the
                    hearing on November 09, 2009 did not reach the appellant as
                    the notice dated November 03, 2009 had been sent on the
                    wrong address and had been returned "refused". This
                3                         Clestra Life Sciences Pvt Ltd
                        (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                        ITAs 4082 & 4083/Mum/2012
                                            Cos 127 & 128/Mum/2013

submission and fact is correct as it has been dealt with in para
3, above, of this appellate order. It was vehemently argued by
the appellant that the disallowance of advertisement and the
marketing expenses is incorrect and invalid for the following
amongst other reasons:-
(a)     The advertisement and marketing expenses were
reimbursed through proper banking channel. The claims were
made through valid invoices and other supporting documents
were ever necessary. The same verified by the banker who
permitted the remittance.
(b) In the course of original assessment proceedings your
appellant produced the following documents before the AO for
his verification:
                 (1) Copy of agreement with distributor;
                 (2) Statement of advertisement and marketing
                 expenses showing details of bills, name of the
                 distributors, amount and date of payment;
                 (3) Invoice of distributor showing nature of
                 advertisement expenses,
                 (4) Supporting materials such as cutting of
                 newspaper, cutting of magazine, photo of auto
                 transport, etc.
                 (5) Bank's outward remittance advice.
                 (6) Transfer Pricing Audit Report dated October
                 22, 2002 was filed along with the return of
        (c) The above material was considered by the Transfer
        Pricing Officer when reference was made to him by the
        then assessing officer. The Addl. CIT (Transfer Pricing)
        (1), Mumbai in his order dated January 25, 2005 passed
        u/s 92CA(3) has examined all material relating to the
        claim of expenditure incurred in foreign currency
        pertaining to International transaction with companies in
        which Shri Binod Singh had a substantial interest
        namely Osian Trading Ltd., Trigram Gmbh, Trigram Ltd
        and made no disallowance from the expense claimed as
        reimbursed. It was for this reason and fact that while
        completing the original assessment u/s 14(3) vide order
        dated February 28, 2005. The then AO made no addition
        or disallowance under this Act.
        (d) The AO has not placed any material or evidence on
        record or confronted the appellant with such material to
        support his finding that the reimbursement of
        advertisement and marketing expenses was bogus. It is
        a settled rule and law, based on plethora of judicial
        decisions of Apex Court and High Courts that apparent
        state of affairs is real unless contrary is proved and
        burden of proving lies on the person who asserts/alleges
        it. This onus has not been discharged by the AO. On the
        facts and in the circumstances of the case and the
        material      already    on    record,    the    impugned
        addition/disallowance made on surmise, conjecture and
        mis-conceived facts cannot be sustained in law.
                                   4                       Clestra Life Sciences Pvt Ltd
                                         (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                                         ITAs 4082 & 4083/Mum/2012
                                                             Cos 127 & 128/Mum/2013

                         7.4 I have considered the submissions of the appellant
                         and the order of the AO. It is an admitted fact on record
                         that the said advertisement and marketing expenses
                         details were filed during the original assessment as well
                         as before Additional CIT (Transfer Pricing) (1), Mumbai.
                         After examination and verification of expenses claimed
                         as reimbursement, both, the then AO and TPO accepted
                         the claim of the appellant and no addition /
                         disallowance was made either in the transfer pricing
                         order dated January 25, 2005 passed u/s 92CA(3) or in
                         the original assessment order u/s 143(3) dated
                         February 28, 2005. At the same time, the AO has not
                         placed any material or evidence either on record or
                         mentioned in the impugned assessment order to support
                         that the expenses are bogus. A mere intimation from the
                         investigation wing cannot be basis for any addition.
                         Consequently, I have no hesitation in agreeing with the
                         appellant that the impugned addition / disallowance
                         have been made on surmised, conjecture and mis-
                         conceived facts. Accordingly, the disallowance of Rs.
                         1,14,37,498/- is deleted and the AO is directed to
                         modify the assessment order by giving the said relief to
                         the appellant".

However, the CIT(A) confirmed the reopening u/s 147.

7.    Against the above order of the CIT(A), the revenue are in appeal
before us and the assessee has also raised Cross objection alleging
validity of reopening u/s 147.

8.    Ld. DR argued that in the course of appellate proceedings, the
CIT(A) accepted the additional evidence in contravention of Rule 46A
without giving opportunity to the AO. For merit of addition, he relied
on the order of the AO. Ld. DR was specifically asked by the Bench to
pin point the documents relied on by the Ld. Departmental
Representative in violation to Rule 46A. For this purpose, Ld. DR
invited our attention to the documents mentioned in sub-para (a) to (d)
of Para 7.3 of the CIT(A) order.

9.    We have considered rival contentions gone through the orders of
the authorities below and found from the record that the documents
highlighted by Ld. DR in support of his contention that there was
                                 5                      Clestra Life Sciences Pvt Ltd
                                      (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                                      ITAs 4082 & 4083/Mum/2012
                                                          Cos 127 & 128/Mum/2013

violation of Rule 46A, we found that these documents comprises of
copies of agreement with distributor, statement of advertisement and
marketing expenses showing details of bills, name of the distributors,
amount and date of payment. We found that all these documents were
submitted by the assessee in the course of original assessment,
wherein the assessment was framed u/s 143(3). Before AO during
reassessment proceedings assessee vide his letter informed that all
these documents were furnished before AO and TPO during original
assessment proceedings and by considering the same vide order dated
25th January, 2005 passed u/s 92CA(3) has examined all materials
relating to claim of expenditure of advertisement. Similarly AO vide his
order dated 23rd February, 2005 advanced assessee's claim after
examining all these documents.

10.    Thus, it is clear that all these documents, as pin pointed by DR
was not additional documents so as to invoke the provisions of section

11.    On merits, we found that claim of such advertisement expenses
were made on reimbursement basis, details of which were placed
before the original assessment proceedings, completed u/s 143(3) on
28th February, 2005 as well as before Transfer Pricing Officer, who has
allowed the assessee's claim vide his order dated 25.01.2005 passed
u/s 93A(3). The CIT(A) has also recorded the finding to the effect that
the AO has not placed any material or evidence as mentioned in
impugned assessment order to support that the expenses were bogus.
The CIT(A) observed that a mere intimation from Investigation Wing
cannot be basis for any addition. The finding recorded by CIT(A) in
para 7.2 has not been controverted, by department by brining any
positive materials on record. Accordingly, we do not find any reason to
                                 6                        Clestra Life Sciences Pvt Ltd
                                        (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                                        ITAs 4082 & 4083/Mum/2012
                                                            Cos 127 & 128/Mum/2013

interfere with the finding of CIT(A) resulting into deletion of addition on
account of advertisement expenses.

12.   On the basis of reasoning given hereinabove, we confirm the
action of CIT(A) deleting disallowance of Rs. 1,13,50,833/- in AY 2003-
                       ×¢ . 127/  2013 :
                       ×¢ . 128/  2013 :
                    C.O. No. 127/Mum/2013 :
                    C.O. No. 128/Mum/2013 :

13.   Ground taken in Cross objection regarding validity of reopening
was not pressed by Ld. AR, the same are therefore dismissed in limini
as not pressed.

14.   In the result, both the appeals of the revenue as well as
assessee's Cross objection for both the years are dismissed.

      Order pronounced in the open Court on 11th December, 2014.

                  Sd/-                                          Sd/-
            (.  . )                                  . .
                                                    (.  . )
           (H.L. KARWA)                          (R.C. SHARMA)
            PRESIDENT                         ACCOUNTANT MEMBER
      Mumbai, Date: 11th December, 2014

/Copy to:-

1) /The Appellant.
2) ×/The Respondent.
3) The CIT (A)-36, Mumbai.
                          7                      Clestra Life Sciences Pvt Ltd
                               (Formerly known as M/s Brahma Drugs Pvt Ltd)
                                               ITAs 4082 & 4083/Mum/2012
                                                   Cos 127 & 128/Mum/2013

4)  ­(Central)-IV, Mumbai/The CIT(Central)-IV, Mumbai.
5)  "C" ,
   The D.R. "C" Bench, Mumbai.
6) [ 
   Copy to Guard File.
                                /By Order
   / / True Copy / /


                               Dy./Asstt. Registrar
                                I.T.A.T., Mumbai
*Chavan, Sr. PS
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