Punjab-Haryana High Court
Smithkline Beecham Consumer Brands Ltd vs Commissioner Of Income Tax Patiala on 27 November, 2025
Author: Amarinder Singh Grewal
Bench: Amarinder Singh Grewal
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
****
201 Date of Decision: 27.11.2025
1. ITR-62-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
2. ITR-63-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
3. ITR-64-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTH CARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
4. ITR-65-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
5. ITR-66-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
6. ITR-67-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
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ITR-62 to 69-1995 -2-
7. ITR-68-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
8. ITR-69-1995
M/S.SMITHKLINE BEECHAM CONSUMER HEALTHCARE LTD.
...Petitioner
Versus
COMMISSIONER OF INCOME TAX ...Respondent
CORAM:- HON'BLE MR. JUSTICE JAGMOHAN BANSAL
HON'BLE MR. JUSTICE AMARINDER SINGH GREWAL
Present:- Mr. Rohit Jain and Mr. Vaibhav, Advocates (through V.C.) and
Mr. Abhishek Sharma, Advocate for the Petitioner
Ms. Urvashi Dhugga, Sr. Standing Counsel with
Mr. Vidul Kapoor, Jr. Standing Counsel and
Ms. Kavita Advocate
for respondent-Income Tax Department
***
JAGMOHAN BANSAL, J. (ORAL)
1. As common issues are involved in the captioned petitions, with
the consent of both sides, the same are hereby disposed of by this common
order. For the sake of brevity and convenience, facts are borrowed from
ITR-62-1995 (RA No.882/DEL/1993).
2. The petitioner-M/s Smithkline Beecham Consumer Health Care
Ltd. (for short 'assessee') is engaged in the business of manufacture of
consumer products. The assessee is selling its products inside as well as
outside India. It filed Income Tax Return for the Assessment Year 1982-83
onwards. The Assessing Officer (for short 'AO') selected returns of the
assessee and framed assessment under Section 143 (3) of Income Tax Act
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ITR-62 to 69-1995 -3-
1961 (for short, "1961 Act"). The AO disallowed few expenses as well as
assessed closing stock at the value different from value declared by assessee.
The matter reached Tribunal through First Appellate Authority. The Tribunal
partially allowed appeal of the assessee. The Tribunal decided following
questions against the assessee:-
(i) The assessee could change method of determination of
value of closing stock, however, ordered to add few
expenses relating to establishment in the value of closing
stock;
(ii) Benefit of weighted deduction under Section 35B;
(iii) Surtax paid by assessee;
(iv) Deduction under Section 40(c);
(v) Inclusion of Excise duty in the closing stock.
The Tribunal decided following questions in favour of the assessee:-
(i) Deduction with respect to air-conditioning coolers,
calculators and fans used in R&D; and
(ii) Extra shift allowance on new plant and machinery as a
whole or on the basis of number of days the machinery
was put to use;
(iii) Deduction under Section 40A(5).
3. The parties approached Tribunal seeking reference on different
issues to the High Court. The Tribunal and thereafter this Court considered
few questions to be answered by this Court.
4. This Court on 19.11.2025 passed the following order-
"1. Learned counsel for assessee with respect to ITR-62-
1995 and connected matters pointed out that issue with respect
to surtax paid by company stands settled against the assessee
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ITR-62 to 69-1995 -4-
by Hon'ble Supreme Court in 'Smith Kline & French (India)
Ltd. Vs. CIT' 219 ITR 581.
2. Supreme Court in 'CIT Vs. Hero Cycle Ltd.' 228 ITR
463 (SC) has remanded the matter back to Tribunal with
respect to weighted deduction under Section 35B on
commission paid to Indian agents.
3. With respect to valuation of closing stock, he submitted
that assessee w.e.f. assessment year 1982-83 adopted method
of direct/variable cost method. The Revenue is claiming that
assessee should continue to adopt total cost method as
adopted prior to 1982-83. The Tribunal has partially decided
in favour of Revenue. The Tribunal has held that assessee was
free to adopt direct cost or total cost method, however, has
ordered to include few indirect costs in the value of closing
stock.
4. On being pointed out that inclusion of few elements of
indirect cost in the closing stock of one particular year would
amount to exclusion in next assessment year, learned counsel
for the assessee expressed his inability to controvert. He
submits that it is revenue who is claiming that assessee should
not be permitted at all to change method of valuation.
5. The Tribunal has decided question of deduction under
Section 40(c) against assessee who has not preferred appeal,
thus, revenue has wrongly raised question of said deduction.
Question of deduction under Section 40A(5) stands settled
against revenue by supreme court in 'CIT Vs. Mafatlal
Gangabhai & Co. (P) Limited' 219 ITR 644 (SC).
6. The question of extra-shift allowance on new plant and
machinery as a whole or on the basis of number of days the
machinery was put to use stands settled in 'South India
Viscose Ltd. Vs. CIT' 227 ITR 286 (SC).
7. The question of inclusion of excise duty in closing stock
stands settled in 'CIT Vs. Dynavision Ltd.' 348 ITR 380 (SC).
8. The assessee has claimed deduction of Rs.25,628/- with
respect to air conditioning & coolers, calculators, fans used by
research and development department. The revenue claims
that these expenses cannot form part of R&D.
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ITR-62 to 69-1995 -5-
9. Learned counsel for Revenue seeks time. He assures
the Court that no further adjournment would be sought.
10. On request, adjourned to 27.11.2025.
11. It is made clear that neither written nor oral request for
adjournment shall be entertained.
12. Photocopy of this order be placed on the file of other
connected case(s)."
5. Learned counsel for Income Tax Department submits that she
does not dispute afore-stated factual and legal position. The Revenue has no
objection to method of valuation as applied/approved by Tribunal. She
further submits that question of weighted deduction on commission paid to
agent in India may be remanded to AO to ascertain factual position and
thereafter decide as per judgments of Hon'ble Supreme Court as well as
mandate of Section 35B.
6. In the wake of aforestated factual and legal position as well as
statement of both sides, question of surtax paid by assessee and inclusion of
expenses as ordered by Tribunal in the value of closing stock are answered
against the assessee. Question of deduction under Section 40A(5) is
answered in favour of assessee as per Mafatlal Gangabhai and Co. (P) Ltd.
(supra). Question of deduction with respect to air-conditioning, coolers,
calculators, fans used in R&D is answered in favour of assessee. Question of
extra shift allowance on new plant and machinery is answered in favour of
assessee in terms of South India Viscos Ltd. (supra). Question of inclusion
of excise duty in the value of closing stock is answered in favour of assessee
in terms of Dynavision Ltd. (supra)
7. The question remains of weighted deduction. The assessee is
claiming that it appointed an agent outside India who promoted its product
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ITR-62 to 69-1995 -6-
outside India. The foreign agent appointed an agent in India. The assessee is
entitled to deduction in terms of Clause (iv) of Section 35B(1)(b) of 1961
Act. The factual position needs to be examined and matter further needs to
be adjudicated in the light of judgments of Supreme Court as well as mandate
of Section 35B. Both parties are in tandem that this issue needs to be
remanded to assessing authority, accordingly, this question is referred to
Assessing Authority who would pass fresh order considering factual position
as well judgment of Hon'ble Supreme Court in 'Commissioner of Income
Tax Vs. Stepwell Industries Ltd', [1997] 228 ITR 171 (SC).
8. Disposed of in above terms.
9. Pending application(s), if any, stands disposed of.
10. Photocopy of this order be placed on the file of other connected
case(s).
(JAGMOHAN BANSAL)
JUDGE
(AMARINDER SINGH GREWAL)
JUDGE
November 27, 2025
Deepak DPA
Whether Speaking/reasoned Yes/No
Whether Reportable Yes/No
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