M/S Sun Pnarmacutical Inas v. Cnief Commissioner Of Income Tax And Anotner

HIGH COURT OF JAMMU AND KASHMIR AT.JAMMU OWP No. 1319/2009, CMP No.1704/2009,CMP No.650/2010 c/w OWP No. 9119/2010, CMP No. 1248//2010. Date of decision: 06.10.2010. M/s Sun Pnarmacutical Inas Vs. Cnief Commissioner of Income tax and anotner Coram: Hon’ble Mr. Justice Sunil HallJuda0eo Appearing counsel: M/s D.S.Chouhan, R.L.Gupta, Intiqhab Hussain Shah,Advocates and Miss Mudasir Yousf, Advocate for the petitioner-firm.Mr. D.S.ThakurAdvocate for res$Onadents. 1/VVhnether to be reported In : YesPress, Journal/Media. l1/|VVhetner to be reported In : Yes. D]0est/Journal. The petitioner is a partnership firm which Is duly| registered under the Jammu and Kashmir PartnersnipAct, 1996. The partnership firm was constituted on theIst day of March, 2003, which consists two partners,namely, (1) Sun Pharmaceutical Industries Limited and(i) Sun Pharmaceutical Key Employees Benefit Trust.The petitioner-firm was registered as a partnership.firm with the Registrar of Firms, Jammu (J&K) on.24.12.2003. The name and place of the businessindicated in the partnership firm its Jammu. Ittranspires that supplementary partnership deed wasexecuted where name of the principal place ofbusiness Is. stated to be Jammu. However, on) 13.09.2008, fourth supplementary deed of partnershipwas executed wherein for the first time, change of theprincipal place of business from Jammu to Mumbaiwas shown. The petitioner-firm was assessed atJammu by the Assessing Authority under the IncomeTax Act for the Assessment Years 2004-05 to 2008-09. It seems that the application under Section 124|of the Income Tax Act, 1961 came to be Tiled beforerespondent no.1.-Chief Commissioner of Income Tax,Amritsar, who was authorized to entertain the:application by the Central Board of Direct Taxes. The.case set out by the petitioner-firm before respondentno.1 was that the principal place of business standsshifted from Jammu to Mumbal, as such, thepetitioner-firm be directed to file the returns before theconcerned Assessing Officer under relevant rules. The.following are the main reasons whereby the transfer ofthe records was sought by the petitioner-firm:- (1)|Vue to aisturpbance in Jammu region, no boay Iswilling to work In Accounts department by staying In|Jammu ana tne local resident at Jammu Is not!competent at all. As a result, we have been facingcontinuous problem of competent accounts staff.Hence, the accounts personnel in Dadra/Mumbaiare frequently sent to Jammu to look after andcomply with the deadlines of the statutoryrequirements. (il)Consolidation process (of unit wise trial balances of Dadra Unit and head office) is done at Mumbai. (lil)| Tax return Is also prepared at Mumbal. (IV) Out statutory auditors are also based in Mumbai.They also face difficulties during the course ofaudits and finalization of financial statements yearand after year due to location/logistic problems.Even the Assessing Officer has to camp at Mumbaito obtain details from auditors. (Vv) Out tax consultant is based in Mumbai and the.assessment matters are handled/represented from.Mumbai (department officials are well aware of thisfact). Therefore, many times, difficulty arises to thedepartment in serving the notices/letters because,the same is first sent to Jammu office, whoultimately send to Mumbai office. In this process,delay always taken place. similar,delaytake|placewilesending/submitting the required details, becausethe courier or speed post takes minimum 304 days.to reach at Jammu, which results into delay.|Moreover, taking the tax consultant to|Jammu to represent the assessment matters)become|difficult for him.toadjustdue to’locational/logistic problem. (Vi) (Vv) Out tax consultant is based in Mumbai and the.assessment matters are handled/represented from.Mumbai (department officials are well aware of thisfact). Therefore, many times, difficulty arises to thedepartment in serving the notices/letters because,the same is first sent to Jammu office, whoultimately send to Mumbai office. In this process,delay always taken place. similar,delaytake|placewilesending/submitting the required details, becausethe courier or speed post takes minimum 304 days.to reach at Jammu, which results into delay.|Moreover, taking the tax consultant to|Jammu to represent the assessment matters)become|difficult for him.toadjustdue to’locational/logistic problem. (Vi) Commissioner of Income-tax (Appeals), who is.assigned the case is at Bathinda which place istotallyinconvenientforOurMumba] based|consultant due to non-availability of direct flight as.well as difficulties in arranging the transport.Out tax counsel (who represents our tribunalmatter) is based at Anmedabad and the TribunalJurisaictionIS|at|Amritsar.TnNisplaceISinconvenient for our Mumbali/Ahmedabad basedconsultant/counsel as the scheduling/arranging theprogramme from Ahmedabad to Amritsar and viceversa is very difficult especially due to non-availability of direct flight as well as difficulties inarranging the transport). (Vil)| 2. It is further submitted in the said application dated|11.10.2008 received on 22.10.2008 that the firm has changed its registered office address from Jammu to Mumbai as|under:-. Sun Pharmaceutical Industries, Acme Plaza, Ananeri-Kurla Roadm Andheri (East), Mumbai-400 059.| 2.1. It is further added that a form No.11 has been filed with|Registrar of Firms, Jammu (J&K) in this respect. In this|respect | have got necessary inquiries made by the assessingOffifer, t.e. ITO, Ward 1(3), Jammu as well as Addl. CIT..,Range-1, Jammu and CIT, Jammu who have examined the|request of the assess/firm and submitted their report to the|undersigned which shall be discussed in the subsequent|paragrapns. Meanwnile, opportunity has also been allowed to ohri S.C.Jalana, CA the authorized representative of the|assessee-firm who attended befoe me on 01.05.2009 when|written submissions dated 01.05.2009 were filed. The matter|was heard. He had asked time till 21.05.2009 for further|written Submissions to be made before the matter Is decided.Accordingly, in continuation to the said submissions filed on|01.05.2009 further written submissions dated 15.05.2009 are|again submitted. | have carefully considered thefacts stated inthe original application submitted on 22.10.2008 as well as|written submissions dated 01.05.2009 and 15.05.2009 and|also the case laws cited therein by the authorized|representative Shri Jalan to support his arguments and also|perused the report of the CIT, Jammu and the Assessing|Officer referred to above and the petition is disposed as|under :- 3. On perusal of the submissions it is notice that the main|ground taken by the Assessee firm is that the principal office|of business Is in Mumbai since all accounts are consolidated|at Mumbal, tax returns are prepared at Mumbai and statutory|auditors are based in Mumbai and that registered office is also stated to be at Mumbai as referred earlier. It would be|necessary to examine the relevant provisions for deciding the|correct jurisdiction of the Assessing Officers. This have|enumerated in Section 124(1) and (2) as under:- F124. Jurisdiction of Assessing Officer (1) Where by virtue of any direction or order issuedunder sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested withjurisdiction over any area, within the limits of suchareas, he snail navejurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on hisbusiness or profession institute within the area, orwhere his business or profession is carried on inmore place than one, if the principal place of hisbusiness or profession is situate within the area,and. F124. Jurisdiction of Assessing Officer (1) Where by virtue of any direction or order issuedunder sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested withjurisdiction over any area, within the limits of suchareas, he snail navejurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on hisbusiness or profession institute within the area, orwhere his business or profession is carried on inmore place than one, if the principal place of hisbusiness or profession is situate within the area,and. (6b) in respect of any other person residing within thealread (2) Where a question arises under this section as towhether an Assessing Officer has jurisdiction toassess any person, the question snall be determinedby the Director General or the Chief Commissioner orthe Commissioner; or where the question is onerelating to areas within the jurisdiction of differentDirectorGeneralsOT|ChiefCommissioners|OT|Commissioners, by the Directors General or ChiefCommissioners or Commissioners concerned or, It!they are not In agreement, by the Board or by sucnDirectorGeneral]OT|Chiet|CommissionerOT|Commissioner as the Board may, by notification in theofficial Gazette, specify.” 4. As seen from the above, the Assessee's case falls|in 124(1)(a) since it is carrying on a business or profession.|As per the said provisions the jurisdiction shall be vested withthe Assessing Officers within whose limits such place where|‘the principal place of business is situated. Therefore, it wouldbe relevant to adjudicate as to what is ‘the principal place of business of the assessee. It has been submitted by the|assessee's representative Shri Jalan that ‘the principal place|of business should be taken as Mumbai as per para 2 otf|written SuUomissions dated 15.05.2009. It is suomitted tnat tnefollowing activities are carried out at Mumbai. In support of tts contention regarding the|principal place of business, it is stated by the petitioner-firm that following activities are carried out at Mumpal. (1)|Purcnaseofmaterials.for.respectiveunits,identification of suppliers, rate negotiation, time ofsupply payment terms etc. (li)sale of goods of respective units, identification ofcustomers, rate negotiation, time of supply,payment terms etc. (lil)Decision to recruit the person/s at respective units.| (iV) Booking of sales of products manufactured bydifferent units. (Vv)Maintenance of books of accounts of HO.. (Vi)TDS payment returns etc. (Vil)Calling the periodical trial balance from ‘Dadra and‘Jammu’ units. (Vill)|Preparation of unit wise Profit and Loss Accountand palance sneet.. (Ix)Preparation of consolidation Profit and LossAccount and Balance Sheet. (Xx)Preparation and filing of Income Tax Return. (XI) Payment of taxes determined by Jammu AO. (xii)|Preparation of submissions to be given to the TaxAuthorities. (xiii)|Preparation of submissions to be given to the TaxAuthorities. The Chief Commissioner of Income Tax respondent no.1 after hearing the parties, dismissedthe application of the petitioner-firm by holding thatsince the firm stands registered under the J&K.Partnersnip Act, 1996, as such, It has to be presumedthat ‘the principal place of business is being carriedout by the firm in Jammu. The otner aspect wnichn nas weighed with therespondents for the purpose of determining the principal place of business is that sales of the Unitlocated at Jammu have increased from 24.7 % to80.9 % for the Assessment Years 2005-06 to 2008-09.This could be logical basis for construing that theprincipal place of business, is Jammu. Findings returned by the Commissioner otfIncome-ax-respondentno.1regardingtnemanagement activities of the Company being carriedat Mumbal nas been repelled on the premise that itruns In contravention of the Jammu and KashniirPartnersnip Act, 1996.| The otner aspect wnichn nas weighed with therespondents for the purpose of determining the principal place of business is that sales of the Unitlocated at Jammu have increased from 24.7 % to80.9 % for the Assessment Years 2005-06 to 2008-09.This could be logical basis for construing that theprincipal place of business, is Jammu. Findings returned by the Commissioner otfIncome-ax-respondentno.1regardingtnemanagement activities of the Company being carriedat Mumbal nas been repelled on the premise that itruns In contravention of the Jammu and KashniirPartnersnip Act, 1996.| The other issue dealt with by the Commissioner-respondent no.1 while rejecting the plea of thepetitioner-firm need not to be dealt with by this Court.The only issue that was required to be determined byrespondent no.1. for the purpose of jurisdiction undersection 124 clause 1 (a) was that which is theprincipal place of business after 2004. This sectionenvisages that while exercising territorial jurisdiction inrespect of the company or firm which Is carrying on.business activities at more than one place, suchpower can be exercised only where ‘the principalplace of business Is located within the area. So indetermining the territorial area, ‘principal place ofbusiness carried out by the company or the firm will confer the jurisdiction on the said assessing authority.What is ‘the principal place of business Is not definedunder tne statute. The Apex Court and other High Courts of the|country in number of judicial pronouncements heldthat the principal place of business of the company is_termed and/or treated as the place wherefrom allcontrol over of the business activities is exercised. In.other words, it is where the centre of power of thecorporate body is located. This principal place ofbusiness may or may not be a place where the firm is.registered. In Erin Estate. Galah, Ceylon Vs. Commissioner|of Income Tax Madras, it has been categorically heldthat the control and management contemplatedevidently refers to the controlling and directing powerana tnis power has been aescribed In judicialdecisions as the ‘head and brain, of the firm/companywhere policy decision are taken and need notnecessarily be place where industrial activities of thefirm are carried. In terms of the aforesaid decision,respondent no.1 was required to address itself to this:Issue, wnich ne nas not done. [he issue witn regard to‘the principal place of business should have beenaddressed looking to the averments made in the application and the material placedq witn it. Inedecision on this question has been taken by statingthat since the firm Is registered under the Jammu andKashmir Partnership Act, 1996, ‘principal place ofbusiness snail always be presumed to be at Jammu. — This, in my opinion, is not the correct decision tnlaw. The respondent no.1 was required to inquireabout the principal place of business of the petitioner-firm, which he has not done. The petitioner-firm states that its ‘principal place|of business’ has been shifted to Mumbai for which thepetitioner-firm is required to show some proof. It has”placed on record some instances in support of itswritten submissions filed before respondent no.1 butwithout placing any material in support of It. MerelyStating that ‘principal place of business has been.shifted from Jammu to Mumbai, ts not sufficient. Someevidence Is required to be produced by the petitioner-firm to substantiate this plea. Mr. Thakur, learned counsel for respondents|states that no material has been produced beforerespondent no.1 by the petitioner-firm to substantiate.this plea. In view of the above, | allow this writ petition andset aside order dated 29.09.2009 passed Dy. respondent no.1 with a further direction to said respondent as under :- (1)|to determine the issue as to when the place of|business has been _ shifted from Jammu tMumpbal: (11)|What is evidence supporting the fact that said|place of business has been shifted from Jammu to Mumbal.. Mr. Thakur, learned counsel for respondents|states that no material has been produced beforerespondent no.1 by the petitioner-firm to substantiate.this plea. In view of the above, | allow this writ petition andset aside order dated 29.09.2009 passed Dy. respondent no.1 with a further direction to said respondent as under :- (1)|to determine the issue as to when the place of|business has been _ shifted from Jammu tMumpbal: (11)|What is evidence supporting the fact that said|place of business has been shifted from Jammu to Mumbal.. Respondent no.1 shall take decision in_ thisrespect on the basis of material produced by thepetitioner-firm in this behalf and decide the samewithin a period of two months from today. Disposedof along with connected CMP(s). OWP No. 919/2010. In terms of the disposal of OWP No.1319/2009,no order Is required in this petition. Accordingly, theSame_ shall also stand disposed of along withconnected CMP(s). Jammu.|06.10.2010.‘Madan| (Sunil Hall) Judge.