GLAXO SMITHKLINE PHARMACEUTICALS LTD,MUMBAI vs. ASST CIT 6(3), MUMBAI

The assessee in total raised 11 grounds of appeal. At the outset, the learned Counsel for the assessee submitted before us that the issue raised in grounds no.6 and 7, no longer survive as the assessee has got desired relief in an order passed under section 154 of the Act

As far as ground no.8 is concerned, the learned Counsel for the assessee submitted that the issue has been decided against the assessee hence, he does not want to press this ground. Thus, ground no.8 is dismissed as “not pressed”.

Further, the learned Counsel for the assessee did not want to contest the issue raised in grounds no.10 and 11. Therefore, these two grounds are also dismissed as “not pressed”.

Grounds which survive for consideration are ground no.1, 2, 3, 4 and 5 and ground no.9, which are relate to the solitary issue of disallowance of deduction claimed on account of interest on DPEA liability amounting to ` 1076.73 lakh. While in ground no.1, 2, 3, 4 and 5, the assessee has mainly raised the issue of lack of opportunity by the Assessing Officer to represent its case. Ground no.9 is on the merits of the disallowance.

Briefly stated the facts are, in the course of assessment proceedings, it was noticed by the Assessing Officer that assessee has Glaxco Smithkline Pharmaceuticals Ltd. 3 claimed deduction on account of interest on DEPA liability. When called upon to explain, the assessee in letter dated 11th December 1997, submitted that interest relatable to a period from 1st April 1993 to 31st March 1994, amounting to ` 1076.73 lakh is allowable as deduction in the assessment year under consideration. The Assessing Officer, however, observed that the original as well as enhanced demand for DPEA liability have been challenged in a Writ Petition filed in Hon’ble Delhi High Court and recovery of demand including the interest component have been stayed. He observed that neither any amount was debited to the Profit & Loss account towards interest nor any amount was paid to the Government. He, therefore, concluded that when the assessee is disputing the interest liability, it cannot be said that the liability has accrued or arisen during the previous year. At best, it can be considered as a contingent liability. Hence, it cannot be allowed in view of the provisions contained under section 43B. Though the assessee challenged the disallowance before the first appellate authority but he was unsuccessful. Therefore, the matter was carried in appeal before the Tribunal.

The Tribunal, while disposing of assessee’s appeal in ITA no.4494/Mum./1999 and others in order dated 28th July 2008, restored the matter back to the file of the Assessing Officer for Glaxco Smithkline Pharmaceuticals Ltd. 4 deciding afresh by following the directions of the Tribunal in assessee’s own case in assessment year 1994–95 and 1986–87 to 1988–89. After the matter was restored back to the file of the Assessing Officer by the Tribunal, the Assessing Officer initiated proceedings in terms with the direction of the Tribunal. The Assessing Officer observed, in response to the notice issued by him, neither the assessee appeared nor any details or evidences were submitted. He, therefore, sustained the disallowance of interest payment to DPEA as made in the original assessment order. Being aggrieved, the assessee challenged the disallowance before the first appellate authority.

The first appellate authority also confirmed the disallowance by holding that the assessee has not submitted necessary details / evidences in support of its claim case in compliance to the directions of the Tribunal.

The learned Counsel for the assessee submitted before us that the Assessing Officer in the course of the re–assessment proceedings, has issued only one notice and in response to the said notice, though, the assessee appeared before the Assessing Officer and sought adequate time and reasonable opportunity to represent its case, but the Assessing Officer without affording proper opportunity to the assessee has disallowed the deduction claimed by merely following the Glaxco Smithkline Pharmaceuticals Ltd. 5 original assessment order. The learned Counsel for the assessee submitted when the Tribunal has specifically directed the Assessing Officer to examine assessee’s claim after providing reasonable opportunity of being heard, the disallowance of assessee’s claim without proper opportunity is in violation of direction of Tribunal. Contesting the claim of the first appellate authority that assessee has not furnished any evidence either before him, the first appellate authority, the learned Counsel for the assessee submitted at the time of original assessment itself the assessee has submitted the Government order demanding interest of ` 1176.64 crore with computation details. Therefore, the Departmental Authorities cannot say that no evidence is available before the Assessing Officer regarding assessee’s claim of interest. The learned Counsel for the assessee referring to the submissions made before the Assessing Officer during the original assessment proceedings submitted that the assessee has repeatedly explained the nature of deduction claimed with documentary evidence. He submitted, as far as the allegation of the Assessing Officer that the assessee is disputing its interest liability, the learned Counsel for the assessee submitted in the mean time assessee’s Writ Petition has not only been dismissed by the High Court but the Special Leave Petition filed by the assessee has also been dismissed by the Hon'ble Supreme Court. He, therefore, submitted, as Glaxco Smithkline Pharmaceuticals Ltd. 6 the interest liability has already accrued in terms with section 43B(f), the assessee is entitled to claim deduction.

The learned Departmental Representative submitted before us, there is no substance in the claim of the assessee as the Tribunal in earlier assessment years, has held that only payments in the nature of tax, duty and cess is allowable as deduction. However, the learned Departmental Representative has no serious objection if the matter is restored to the file of the Assessing Officer for verifying assessee’s claim.

We have considered the submissions of the parties, perused and the orders of the authorities below as well as the material available on record. The main thrust of the learned Counsel’s argument, as it appears, is the Assessing Officer without affording reasonable opportunity, has disallowed assessee’s claim, hence, there is a violation of rules of natural justice. Before examining the aforesaid contention of the learned Counsel, it is necessary to observe that when this particular issue was contested by the assessee in the earlier round of litigation before the Tribunal, the co–ordinate bench of the Tribunal referring to its earlier orders held as under:–

From the above finding of the ITAT wherein the [FAT has held that this liability is not a tax, duty, cess or fee under any law leviable. Therefore, interest pait is also of the same nature and the same is not part of tax, duty, cess or fee under any law leviable. Accordingly, the claim of the assessee u/s 43B is not allowable. However, in respect of interest, the ITAT noted that interest liability accrues from year to year and, therefore, such liability may be allowed on the basis during each assessment year. Following that order of the ITAT, we find it appropriate to send the file back to the AO with a direction to consider the assessee's interest allowability claim in the light of the decision of the ITAT(supra) after providing a reasonable opportunity of being heard to the assessee.”

In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 30.10.2015