COMMISSIONER OF INCOME TAX-1 CHANDIGARH vs. M/S DSM ANTI INFECTIVES INDIA LTD (NOW DSM SINOCHEM PHARMACEUTICALS INDIA PVT LTD)

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ITA/117/2014HC Punjab & HaryanaPHHC01109239201427 May 2015Bench: MR. JUSTICE A.B. CHAUDHARI,MR. JUSTICE M.M. AGGARWAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that questions (i) and (ii) were covered against the appellant by a previous judgment of a Division Bench of the same court in The Commissioner of Income Tax-I, Chandigarh vs. M/s DSM Anti Infectives India Limited, ITA No.257 of 2009, decided on October 28, 2013. Therefore, these questions were answered against the appellant and in favour of the assessee/respondent. Question (iii) was also answered against the appellant and in favour of the assessee/respondent, based on the court's judgment and order passed on the same day in a connected appeal, ITA No.116 of 2014. The appeal was accordingly dismissed.

What were the facts?

This appeal by the Commissioner of Income Tax-I, Chandigarh (appellant) is against an order of the Income Tax Appellate Tribunal (ITAT) dated August 8, 2013. The ITAT directed the Transfer Pricing Officer (TPO) to consider Torrent Gujarat Biotech Limited and Standard Pharmaceuticals Limited as comparables for determining the arm's length price (ALP) for the respondent, M/s DSM Anti Infectives India Ltd., for the assessment year 2005-06. The appeal was filed before the High Court of Punjab and Haryana at Chandigarh.

What were the issues?

The High Court was to decide three substantial questions of law: 1. Whether the Tribunal was correct in relying on Section 36(1)(iii) of the Income Tax Act, 1961, in isolation, without considering that the assessee had borrowed money and also advanced money from which interest income was receivable. 2. Whether the Tribunal was correct in holding that advances made to Hindustan Max G.B. were for commercial expediency, especially since the advance pertained to earlier years and commercial expediency did not exist over a prolonged period with no transactions in succeeding years. 3. Whether the ITAT was correct in directing the AO/TPO to include M/s Torrent Gujarat Biotech Limited and M/s Standard Pharmaceuticals Limited as comparables, given that they used a very small percentage of Penicillin-G as raw material compared to the taxpayer. The appellant argued on all three questions. The respondent's contentions are not explicitly recorded in the provided text, but their arguments would have been in defense of the ITAT's order.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No.117 of 2014 (O&M)

RESERVED ON: 21.05.2015 DATE OF DECISION: 27.05.2015

The Commissioner of Income Tax-I, Chandigarh …..Appellant versus

M/s DSM Anti Infectives India Ltd.

.....Respondent

CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Ms. Urvashi Dhugga, Advocate for the appellant

Ms. Shashi M. Kapila, Mr. Deepak Suri,

Mr. Pravesh Sharma and Mr. Sanjay Kumar,

Advocates for the respondent

S.J. VAZIFDAR, ACTING CHIEF JUSTICE:

This is an appeal against the order of the Income Tax Appellate Tribunal dated 08.08.2013 in so far as it directs the Transfer Pricing Officer (TPO) to consider Torrent Gujarat Biotech Limited and Standard Pharmaceuticals Limited as comparables for the purpose of determining the arms length price (ALP) in respect of the international transaction entered into by the respondent in respect of the assessment year 2005-06. 2. The appellant contends that the following substantial questions of law arise in the present appeal: “i) Whether the facts and in the circumstances of the case, the Tribunal was right in relying upon PARKASH CHAND 2015.05.27 18:28 I attest to the accuracy and authenticity of this document

ITA-117-2014

- 2 - section 36(1)(iii) in isolation without considering the fact that the assessee has not only borrowed money but also has advance money from which the assessee was liable to receive interest income. ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the advance made to Hindustan Max G.B. were actually for commercial expediency particularly since the advance pertained to the earlier years and whether the commercial expediency can be said to have existed over a prolonged period of a number of years when no such transaction has taken pace in the succeeding years.” iii) In the facts and circumstances of the case whether the ITAT was correct in directing the AO/TPO to include M/s Torrent Gujarat Biotech Limited and M/s Standard Pharmaceuticals Limited as comparables considering the fact that they were using only a very small %age of Penicillin-G as raw material as compared to taxpayer.” PARKASH CHAND 2015.05.27 18:28 I attest to the accuracy and authenticity of this document

ITA-117-2014

- 3 -

3.

The questions No.(i) and (ii) are admittedly covered against the appellant in view of the judgment of a Division Bench of this court in The Commissioner of Income Tax-I, Chandigarh vs. M/s DSM Anti Infectives India Limited, ITA No.257 of 2009, decided on 28.10.2013. These questions are, therefore, answered against the appellant and in favour of the assessee/respondent. 4. Question No.(iii) is answered against the appellant and in favour of the assessee/respondent in view of our judgment and order passed today in the connected appeal being ITA No.116 of 2014. 5. The appeal is, therefore, dismissed.

(S.J. VAZIFDAR)

ACTING CHIEF JUSTICE

27.05.2015

(G.S. SANDHAWALIA) parkash*

JUDGE

PARKASH CHAND 2015.05.27 18:28 I attest to the accuracy and authenticity of this document

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