Tribunal rules in favor of assessee on multiple issues, directing AO to delete disallowances and allow deductions.

The Tribunal ruled largely in favor of the assessee, directing the AO to delete disallowances and allow deductions on various issues such as payments to a corporate service provider, software expenses, depreciation, transfer pricing adjustments, and advertisement expenses. The revenue's appeal was dismissed, and the assessee's appeal was allowed for statistical purposes, with several matters being sent back to the AO for reconsideration in accordance with previous Tribunal decisions.

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Issues Involved:
1. Disallowance of payments made to Piramal Corporate Services Ltd (PCSL)
2. Disallowance of software expenses
3. Disallowance of deduction under Section 35(2AB)
4. Disallowance of depreciation on additions to computer software
5. Disallowance of depreciation pertaining to Boehringer Mannheim India Ltd. (BMIL), Piramal Holdings Ltd. (PHL), and Glass and Bulk Drug Division (GBDD)
6. Adjustment of inventory as per Section 145A
7. Disallowance under Section 14A read with Rule 8D
8. Disallowance of advertisement and business promotion expenses
9. Addition to total income and reduction of deduction under Section 80IC
10. Eligibility of deduction under Section 80IC
11. Transfer Pricing Adjustment of notional interest on loan advanced
12. Transfer Pricing Adjustment of guarantee commission
13. Addition of disallowance under Section 14A to computation of book profits under Section 115JB
14. Amortization of expenses on account of trademarks

Detailed Analysis:

1. Disallowance of Payments Made to Piramal Corporate Services Ltd (PCSL)
The Tribunal found that the identical issue had been resolved in favor of the assessee in AY 2008-09, where it was established that the payments made to PCSL were in line with the agreement dated 29/04/1995. The Tribunal directed the AO to delete the additions made towards disallowances of payment made to PCSL.

2. Disallowance of Software Expenses
The Tribunal noted that this issue was covered in favor of the assessee by the decision of ITAT for AY 2009-10, where it was held that software expenses are revenue in nature and deductible under Section 37(1). The AO was directed to allow deductions towards software expenses as revenue in nature.

3. Disallowance of Deduction Under Section 35(2AB)
The Tribunal restored the issue to the file of the AO, directing him to provide an opportunity to the assessee to furnish the required approval in Form 3CM from the competent authority, following the precedent set in AY 2008-09 and 2009-10.

4. Disallowance of Depreciation on Additions to Computer Software
The Tribunal, referencing the decision in AY 2009-10, held that the assessee is entitled to depreciation at 60% on computer software and upgradation of existing software. The AO was directed to allow depreciation as claimed by the assessee.

5. Disallowance of Depreciation Pertaining to BMIL, PHL, and GBDD
The Tribunal found that this issue was covered in favor of the assessee by decisions in AY 2008-09 and 2009-10, and directed the AO to allow depreciation as claimed by the assessee on BMIL and PHL units.

6. Adjustment of Inventory as per Section 145A
The Tribunal restored the matter to the file of the AO for re-adjudication, directing him to verify the claim of the assessee that the impact of grossing up of tax would be nil to profit and loss for the year if taxes are paid before the due date of filing the return of income.

7. Disallowance Under Section 14A Read with Rule 8D
The Tribunal restored the issue back to the file of the AO, directing him to verify the claim of availability of sufficient interest-free funds and to exclude investments that did not yield exempt income while computing disallowances under Rule 8D(2)(iii).

8. Disallowance of Advertisement and Business Promotion Expenses
The Tribunal, following the decision in AY 2009-10, held that the Medical Council Regulations, 2002, do not apply to companies and directed the AO to delete the additions made towards disallowances of advertisement and business promotion expenses.

9. Addition to Total Income and Reduction of Deduction Under Section 80IC
The Tribunal restored the matter to the file of the AO for re-adjudication, directing him to follow the findings given by the Tribunal for AY 2008-09 and 2009-10.

10. Eligibility of Deduction Under Section 80IC
The Tribunal held that the eligibility criteria for claiming deduction under Section 80IC need to be examined in the year of formation, as per the decision in AY 2009-10. The AO was directed to allow the deduction claimed by the assessee.

11. Transfer Pricing Adjustment of Notional Interest on Loan Advanced
The Tribunal, following the decision in AY 2008-09, directed the AO to delete the additions made towards TP adjustment on account of interest on loan given to AEs, applying LIBOR or EUROBOR rates instead of Indian PLR.

12. Transfer Pricing Adjustment of Guarantee Commission
The Tribunal directed the AO to restrict the TP adjustment on account of guarantee commission to 0.5% of the corporate guarantee issued to the AEs, as per the decision in AY 2008-09 and 2009-10.

13. Addition of Disallowance Under Section 14A to Computation of Book Profits Under Section 115JB
The Tribunal, following the decision in AY 2009-10, directed the AO to delete the additions made towards book profit computed under Section 115JB in respect of disallowances made under Section 14A.

14. Amortization of Expenses on Account of Trademarks
The Tribunal upheld the deletion of disallowances made by the AO towards amortization of expenses on account of trademarks under Section 35A, following the consistent view taken in the assessee's own case for earlier years.

Conclusion:
The appeals were resolved largely in favor of the assessee, with several issues being restored to the AO for re-adjudication in line with previous Tribunal decisions. The revenue's appeal was dismissed, while the assessee's appeal was allowed for statistical purposes.

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