TaxTMI 
TaxTMI 
2016 (4) TMI 1316
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....cross objection are being disposed off by way of this consolidated order. ITA no.641/Mum./2007 - Assessee's Appeal Assessee has raised five grounds in this appeal. 3. Ground no.1, relates to disallowance of assessee's claim of deduction under section 35(2AB) of the Income Tax Act, 1961 (for short "the Act") amounting to Rs. 1,61,96,892. 4. Brief facts relating to this issue are assessee company filed its return of income for the impugned assessment year on 1st December 2003, declaring loss of Rs. 3,15,35,060, under the normal provisions and paid tax of Rs. 5,44,980 under section 115JB of the Act. Subsequently, assessee on 31st March 2005, filed a revised return of income declaring loss of Rs. 5,25,97,009, under the normal provisions and computed tax of Rs. 1,09,148, on the book profit declared under section 115JB. During the assessment proceedings, the Assessing Officer noticed that assessee had debited an amount of Rs. 3,23,93,782 to the Profit & Loss account on account of research and development expenditure and claimed deduction under section 35(2AB) for an amount of Rs. 4,85,90,676. When called upon by the Assessing Officer to justify the deduction claim....
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....ribunal after considering the submissions of the parties vis-a-vis deduction claimed under section 35(2AB), held as under:- "3.4. We have gone through the submissions made by both the sides as well as facts of the case and the position of law emerging out from the decisions relied upon by the parties before us. The brief facts are that deduction u/s 35(2AB) was claimed by the assessee in respect of research and development expenses incurred at New Mangalore and KRS Gardens research centre. Application was made with DSIR dated 28.03.2001, copy of which is enclosed at pages 37 to 68 of the paper book. The recognition of the research unit was granted by the DSIR vide its letter dated 03.07.2002 for New Mangalore unit (copy available at P.B. 68) and letter dated 04.12.2002 for KRS Gardens research unit (copy available at page no.69 of the paper book). In view of these facts, it clearly emerges out that assessee had made the applications well in time. Thereafter, granting of approval by the competent authority was not in the control of the assessee. It has been further brought to our notice that there was no delay on the part of the assessee in supplying any information to the ....
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....diture thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesaid provisions. The discussion, which is undertaken by the Gujarat High Court while interpreting the aforesaid provisions, is extracted below: "7. .........The lower authorities are reading more than what is provided by law. A plain and simple reading of the Act provides that on approval of the research and development facility, expenditure so incurred is eligible for weighted deduction. 8. The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of: (i) development of facility; (ii) incurring of expenditure by the assessee for development of such facility; (iii) approval of the facility by the prescribed authority, which is DSIR; and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest or imply that research and development facility is to be approved from a particular date and, in other words, it is nowhere suggested that date of approval only will ....
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....e Revenue on this issue is rejected. The other issue raised by the AO in disallowing the deduction was that no agreement has been entered as contemplated by section 35(2AB). In this regard also we have noted that the assessee has made requisite compliance as has been required by the prescribed competent authority and compliance of all the procedural requirements has been examined by the competent authority while granting approval. In our considered view, we should look substantive compliance of the provisions. Documentation in any particular format and its approval in a particular manner is not object of this action. In any case, all these aspects have been examined by the competent authority while granting approval, thus the AO should not have denied benefit of deduction on his whims and fancies. We find that the assessee has rightly placed reliance on the judgment of coordinate bench in the case of ACIT vs. Meco Instruments (supra) and Sri Biotech Laboratories India Ltd., supra, in support of his claim. 3.6. Thus, taking into accounts all the facts and circumstances of the case as well as aforesaid judgments, we find that the assessee is eligible for deduction u/s 35(2AB....
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....he Assessing Officer referring to the balance sheet of the assessee observed investment in Global Remedies Ltd. and Caryl Laboratories Ltd. are to the tune of Rs. 2.61 crore and Rs. 5.09 crore respectively as on 31st March 2003. He further found, during the previous year relevant to assessment year 2003-04, assessee has made payments on account of job works to these subsidiaries to the tune of Rs. 1.26 crore and Rs. 1.01 crore respectively. On a comparative analysis, he found that the funds advanced to the subsidiaries are nearly 6 times and 11 times of the job work charges paid. He further found that the advances are on account of various expenses incurred on behalf of subsidiary companies which have to be recovered by the assessee. The Assessing Officer was of the view that the assessee should either have recovered the same during the previous year or it should have charged interest on the same. He observed, while on one hand, assessee was incurring costs on account of interest the subsidiary is benefiting by availing interest free funds. 13. As far as Strides Research and Specialties is concerned, the Assessing Officer observed, it is a separate and distinct profit centre as ....
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.... learned Authorised Representative submitted that assessee had demerged its CRAM division to form a separate company w.e.f. 1st April 2002, as per the directions of the Court. He submitted, pursuant to demerger, the debit balance to the CRAM division was treated as advance to the new company. Learned Authorised Representative submitted, the so called advance is a mere book entry and there was no actual cash out flow from the assessee to the said company towards such demerger. Learned Authorised Representative submitted, though, advance to Indian subsidiary companies were made from the earlier assessment year and also continued in subsequent assessment years, the Assessing Officer has not made any disallowance up to assessment year 2002-03 or even in subsequent assessment year 2004-05 to 2006-07, though, assessments were completed under section 143(3) of the Act. He submitted, in fact in assessment year 2004-05, against the disallowance made by the Assessing Officer, assessee preferred appeal before the learned Commissioner (Appeals) accepting assessee's claim deleted the addition and Department accepted the decision of the learned Commissioner (Appeals) by not preferring any appeal....
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.... under section 143(3) of the Act. In fact, in assessment year 2004-05, the disallowance made by the Assessing Officer on the ground of commercial expediency was found unacceptable by the learned Commissioner (Appeals) and the Department accepted the decision of the learned Commissioner (Appeals) by not referring any further appeal. All these facts invariably prove that the advances made are on account of commercial expediency as the assessee has a close business connection with the subsidiaries. The Hon'ble Supreme Court in Hero Cycle Ltd. (supra), while approving its earlier decision in CIT v/s S.A. Builders, [2007] 288 ITR 001 (SC) held as under:- "12. Insofar as loans to the sister concern/subsidiary company are concerned, law in this behalf is recapitulated by this Court in the case of S.A. Builders Ltd. v. CIT (Appeals) [2007 (288) ITR 1/158 Taxman 74]. After taking note of and discussing on the scope of commercial expediency, the Court summed up the legal position in the following manner:- '26. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of busine....
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....nd see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman." 18. The principle laid by the Hon'ble Supreme Court squarely applies to the facts of the present case. In view of the aforesaid, we hold that as the advance made to the subsidiary are on account of commercial business / business expediency, proportionate disallowance out of interest expenditure cannot be made. Ground no.2, is allowed. 19. Ground no.3, assessee has challenged the disallowance of Rs. 16,82,953, and Rs. 10,888, on account of PF and ESIC respectively. 20. Brief facts are, during the assessment proceedings, the Assessing Officer on a perusal of tax audit report found that there was a delay in remittance of employer's and employees' contribution to P.F. He also found similar delay in respect of payment of ESIC dues. He, therefore, called upon the assessee to explain why the expenditure incurred should not be disallowed under section 43B, and treated as assessee's income in terms of section 2(24)(x) r/w section 36(1)(va). In response to the query raised by the Assessing Officer, it was submitted by the assess....
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....in assessee's case for assessment year 2001-02, allowed assessee's claim with the following observations:- "5.2. We have gone through the facts of the case. The undisputed facts are that the entire payment has been made before the due date of filing the return. Similar issue came before the Tribunal in assessee's own case for A.Y. 2001-02, wherein Hon'ble Tribunal has allowed relief to the assessee, relevant para of the Tribunal's order is reproduced below: "6. After considering the rival submissions and perusing the relevant material on record we find that the Hon'ble Supreme Court in the case of CIT v. Alom Extrusions Ltd. [(2009) 319 ITR 306 (SC)] has held that the amendment to first proviso and the omission of the second proviso to section 43B by the Finance Act, 2003 is retrospective. In that view of the matter any amount referred to in section 43B, being the sum payable by the employer shall be allowed as deduction if it is paid before the due date of filing of the return. The Hon'ble Delhi High Court in the case of CIT v. Aimil Ltd. [(2010) 321 ITR 508 (Del.)] has held that if employees' share is deposited before the due date then no disallowance is called ....
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....o be reduced from profit of business for computing deduction under section 80HHC. Being aggrieved of such disallowance of deduction under section 80HHC, assessee preferred appeal before the learned Commissioner (Appeals). 29. Learned Commissioner (Appeals) after considering the submissions of the assessee that only profit on transfer of DEPB credit is covered by the newly inserted section 28(iiid), however, did not accept the same and confirmed the assessment order on this issue. 30. Learned Authorised Representative submitted, the face value of DEPB credit during the year was Rs. 6,56,57,201, whereas, the assessee sold such credit at net value of Rs. 6,04,98,035, thereby incurred a loss of Rs. 51,59,166. Learned Authorised Representative referring to the decision of the Hon'ble Supreme Court in Topman Exports v/s CIT, [2012] 342 ITR 49 (SC), submitted, the face value of DEPB credit would be covered by section 28(iiib), hence, entitled to deduction under section 80HHC. He submitted, profit arising on transfer of such credits would be covered by section 28(iiid), hence, the limitation provided in Fourth provision under section 80HHC(3) would only apply to such profits. Lea....
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....of the Hon'ble Supreme Court and co-ordinate bench of the Tribunal, we restore the matter back to the file of the Assessing Officer to allow assessee's claim in terms of principle laid down by the Hon'ble Supreme Court. 34. In ground no.5, assessee has challenged the addition made on account of transfer pricing adjustment relating to disallowance of interest on the advances made to overseas subsidiaries. 35. Brief facts are, the assessee is engaged in the business of manufacturing of generic pharma and nutritional products. It exports formulations, packing material and bulk drugs to its overseas group of companies hereinafter called A.Es. Though, the assessee had subsidiaries located in U.S.A., Mexico, Switzerland, Brazil, Uruguay, U.A.E. and South Africa, however, subsidiaries located in U.S.A., Brazil and Mexico are engaged in manufacturing activities. Other subsidiaries are engaged in trading activities only. During the relevant previous year, assessee entered into international transactions with its A.E. as under:- Sr. no. International Transaction Amount (Rs. in crore) Method Applied 1. Sale of packing material and bulk drug 6.37 TNMM 2....
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....generated by them is more than other transactions, however, the Assessing Officer did not accept the contention of the assessee on the reason that the assessee had not brought on record any contemporaneous document to show that interest was not charged having regard to the volume and margins on the A.E. transactions. Secondly, according to the Transfer Pricing Officer, interest chargeable is on account of financial cost which has nothing to do with profit at the operational level. Accordingly, he determined the arm's length price for the interest free credit extended to the assessee at Rs. 13,05,113 and made an adjustment. In terms of the adjustment made by the Transfer Pricing Officer, the Assessing Officer completed the assessment. Though, the assessee challenged the addition made on account of transfer pricing adjustment of the advances made to the subsidiary but the learned Commissioner (Appeals) dismissed the same by observing that the assessee was not able to justify its claim that no interest should be charged on the interest free advances to the subsidiary. Learned Commissioner (Appeals) observed, as the assessee was paying heavy interest on borrowing, whereas it has ad....
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....e working furnished before the first appellate authority, contended that the average cost of borrowing during the relevant assessment year was 4.34%. He, therefore submitted, LIBOR plus 200 basis points can be considered as the rate of interest. 38. Learned Departmental Representative, on the other hand, submitted, as per the amended provisions of section 92B, the expression "International Transaction" would include capital financing including receivable or any other due arising during the course of business. Therefore, assessee's claim that interest free advances would not constitute international transaction is not acceptable. Learned Departmental Representative submitted, once the interest free advances are held to be coming within the ambit of international transaction, then determination of arm's length price of such transaction is imperative. He submitted, the interest free advance is in effect extended credit period granted to the A.E. for receivables. Hence, arm's length price has to be determined as per method prescribed under section 92C. He submitted, since the assessee has exported goods to A.Es and non-A.Es and there is delay in realisation of export proc....
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....se, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; (d) provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service; (e) a transaction of business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date;" 40. On a plain reading of clause (c) of Explanation-(i) to section 92B, it is evident that any type of advance payment or d....
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....ansaction. It is observed, the Transfer Pricing Officer has applied the average interest rate of domestic credit facility availed by the assessee. However, it is seen from the material on record, the entire expenditure incurred by the assessee on behalf of the overseas subsidiary are on foreign currency (dollar), therefore, domestic PLR rate in terms of Indian rupee cannot be applied. It has been brought to our notice through the working submitted before the Departmental Authorities that the average cost of borrowings to the assessee is 4.84%. The learned Authorised Representative has also submitted a working showing the average LIBOR rate of financial year 2002-03 at 1.698%. In a number of decisions, different benches of the Tribunal have consistently held that in such type of international transaction, domestic PLR rate cannot be applied and the rate of interest has to be quantified either with reference to LIBOR or EURIBOR depending upon the country and currency in which the transaction has taken place. Considering the facts of the present case, we are of the considered opinion that LIBOR rate of 1.698% plus 300 basis point would be the appropriate interest rate applicable to th....
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.... bearing loans by obtaining FCNR loan from State Bank of India of Rs. 43 crore @ 3.26% interest rate. Thus, it was submitted by the assessee, if at all any disallowance of interest has to be made, the same should be restricted to the interest charged @ 3.26%. Alternatively, assessee also submitted, if the interest is not allowable as business expenditure, the same has to be allowed under section 57(iii). The Assessing Officer, however, did not find merit in the submissions of the assessee. The Assessing Officer, after considering the loan taken and investment made in overseas subsidiary yearwise observed that borrowed funds have been diverted for making investment. Hence, interest on such borrowed funds is not allowable as business expenditure. Accordingly, the Assessing Officer working out interest cost of 10% on the investment in subsidiary from assessment year 2000-01 to 2003-04 and computed the total disallowance out of interest expenditure at Rs. 8,05,87,632. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals). 44. Before the first appellate authority, it was submitted by the assessee by furnishing a fund flow statement ....
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....rrowed funds. 47. Learned Authorised Representative submitted, assessee has made investment in fixed asset during the year which was out of borrowed funds, therefore, it cannot be said that the borrowed funds were not utilised for the purpose for which they were availed. He submitted, in any case of the matter, as the assessee had mixed funds, both interest bearing and interest free presumption would be investments made in subsidiary were out of interest free funds. For such proposition, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd. [2009] 331 ITR 340 (Bom.), and HDFC Bank Ltd. v/s DCIT, W.P. no.1753 of 2016. Further, learned Authorised Representative submitted, there is enough documentary evidence brought on record to show that the overseas subsidiaries are acting as marketing arms of the assessee. He submitted, as a result of investment made by the assessee in establishing the overseas subsidiary, the sales in certain geographical locations has substantially increased. In this context, he drew the attention of the Bench to the transactions with the subsidiary companies. He submitted, from the aforesaid fac....
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....nishing a summary of cash flow that during the financial year 2002-03, the total interest free funds to the assessee by way of internal accruals and infusion of equity was to the tune of Rs. 14,93,70,838, whereas the investment made in subsidiary was to the tune of Rs. 14,30,50,843, thereby stile leaving a surplus interest free funds available with the assessee of Rs. 63,19,996. Moreover, the assessee has contended before the Departmental Authorities and also has stated before us, borrowed funds were utilised for the purpose for which they were availed by investing in fixed assets and working capital. Aforesaid, contentions of the assessee was not considered by the Departmental Authorities with any genuineness. When the Assessing Officer makes the disallowance of interest expenditure on the allegation that borrowed funds were utilised for the purpose of investment in subsidiary, the burden is on the Assessing Officer to establish the nexus between the borrowed funds and the investments made. Establishment of such nexus assumes more importance when it is found that along with borrowed funds, assessee had sufficient interest free funds available with him to make the investment. In su....
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....ut of interest expenditure can be made. As far as the findings of the learned Commissioner (Appeals) that assessee is eligible for deduction under section 57(iii), we are of the view that only because the assessee accepted the decision of the learned Commissioner (Appeals) in assessment year 2002-03, for whatever may be the reason that will not deprive the assessee from claiming deduction of interest expenditure under section 36(1)(iii). It may be a fact that in assessment year 2002-03, considering that there was enough interest income against which the interest expenditure could be set-off, hence, there is no impact on the tax liability, the assessee might have accepted the decision of the learned Commissioner (Appeals). Moreover, it may be a fact that at relevant point of time, the assessee did not had the benefit of decision of the Hon'ble Jurisdictional High Court which could have led the assessee not to accept the decision of the learned Commissioner (Appeals). Thus, on over all consideration of the facts and circumstances of the case, we allow assessee's claim by deleting the addition of Rs. 8,05,87,632. Thus, we allow the ground raised by the assessee in cross objecti....
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....entative that issue is squarely covered by the decision of the Tribunal in assessee's own case for assessment year 2002-03, wherein following its earlier order for assessment year 2001-02, the Tribunal has upheld the order of the learned Commissioner (Appeals). Learned Departmental Representative has not controverted the factual position. 54. On a perusal of the order of the co-ordinate bench of the Tribunal for assessment year 2002-03, in assessee's own case, in ITA no.1727/Mum./2006 dated 16th December 2015, it is noticed that while upholding the order of the learned Commissioner (Appeals) in assessee's own case claim of reduction in indirect cost by 10% of the export incentives the Tribunal followed its own order for assessment year 2001-02 in assessee's own case wherein the Tribunal had decided the issue by following the decision of the Hon'ble Supreme Court in Hero Export v/s CIT, [2007] 295 ITR 454 (SC). The relevant observations of the Bench is as under:- "7.1. It is noted by us that similar issue came up before the Tribunal in A.Y.2001-02, wherein the Tribunal has upheld the claim of the assessee by relying upon the decision of Hon'ble Supreme Court in the c....
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....r is eligible for deduction under section 80HHC. 59. We have considered the submissions of the parties and perused the material available on record. There is no dispute to the fact that foreign exchange gain was directly as a result of export made by the assessee. Moreover, it is observed from the order of the learned Commissioner (Appeals) similar relief was also granted to the assessee in the preceding assessment year. In view of the above, we do not find any infirmity in the order of the learned Commissioner (Appeals). Ground no.4, is dismissed. 60. In ground no.5, the Department has challenged the decision of the learned Commissioner (Appeals) with regard to netting of interest expenditure against interest income for computation of deduction under section 80HHC. 61. In the course of assessment proceedings, the Assessing Officer noticing that the assessee had included interest earned on fixed deposit in the banks amounting to Rs. 89,82,566, in the business income for claiming deduction under section 80HHC, disallowed the claim by holding that such income being in the nature of income referred to any Explanation (baa) to section 80HHC(4B), 90% of such income has to be re....
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....liance of the ld. DR on the judgment in the case of CIT vs Asian Star Co. Ltd. (2010) 326 ITR 56 (Bom) is misconceived as the same has been reversed by the Hon'ble Supreme Court in the afore-noted case. As such no fault can be found with the impugned order on this score. This ground is not allowed." 15.3. No contrary decision has been brought before us and therefore, respectfully following the order of the Tribunal in earlier year and judgment of Hon'ble Supreme Court, we find no substance in the ground raised by the Revenue and the same is dismissed." 64. There being no material difference in facts brought to our notice by the learned Departmental Representative, respectfully following the aforesaid decision of the Tribunal, we uphold the order of the learned Commissioner (Appeals) by dismissing ground no.5, raised by the Department. 65. In ground no.6, Department has challenged the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to exclude excise duty and sales tax from the total turnover for computation of deduction under section 80HHC. 66. Brief facts are, while completing the assessment, Assessing Officer held that excise duty has to ....
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....ITR 667 (SC)] holding that the excise duty is not includible in the Rs.total turnover' in the formula contained in section 80HHC. The impugned order on this issue, being in conformity with the view taken by the Hon'ble Supreme Court, does not warrant any interference. This ground is not allowed." 16.2. No contrary judgment has been placed before us, and therefore, respectfully following judgment of Tribunal and that of Hon'ble Supreme Court, we decide this issue in favour of the assessee and therefore Ground no. 7 of the Revenue's appeal is dismissed." 69. There being no material difference in facts, respectfully following the decision of the co-ordinate bench of the Tribunal, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Department. 70. Ground no.7, raised by the Department relates to transfer pricing adjustment in respect of sale of finished goods. 71. Brief facts are, assessee is engaged in the business of generic, pharma and nutritional products. It exports formulation, packing material and bulk drugs to its group companies. As noted by the Transfer Pricing Officer, assessee has subsidiaries located in U.S.A.,....
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....receding assessment year, under identical facts and circumstances, the learned Commissioner (Appeals) had held that there was no transfer of profit from assessee to A.E. Thus, on the basis of aforesaid consideration, learned Commissioner (Appeals) held that price charged by the assessee to its A.E. is reasonable requiring no further adjustment. 73. We have considered the submissions of the parties and perused the material available on record. It is observed against the order of the learned Commissioner (Appeals) for assessment year 2002-03, the Department came in appeal before the Tribunal. The Tribunal restored the issue back to the Assessing Officer / Transfer Pricing Officer for fresh consideration observing as under:- "17.6. We have gone through the submissions made by both the sides as well as orders of the lower authorities. It is noted by us that Ld. CIT-DR is factually correct in submitting that CIT(A) has deleted the addition without following the correct approach. The issues with regard to transfer pricing adjustment have to be resolved following a mechanism and complying with the provisions as contained in chaper X, dealing with the transfer pricing issues as....
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....the observations of the Tribunal as referred to above, we restore the matter back to the file of the Assessing Officer with a direction to make a fresh analysis relating to most appropriate method which could be adopted for bench marking the international transaction and, thereafter, undertake a comparably analysis. It is further directed, the Transfer Pricing Officer should consider the objections / submissions of the assessee with regard to adoption of most appropriate method as well as the selection of comparables, etc. Only after considering the submissions of the assessee and affording due opportunity of being heard, the Transfer Pricing Officer shall pass a speaking and reasoned order meeting all the objections raised by the assessee. With the aforesaid direction, the issue is restored to the file of the Assessing Officer. Ground no.7, is allowed for statistical purposes. 75. In ground no.8, the Department has challenged the decision of the learned Commissioner (Appeals) in directing the Assessing Officer not to reduce the deduction computed under section 80HHC, while computing book profit under section 115JB. 76. Brief facts are, while computing the book profit under s....
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....rference. This ground is not allowed." 79. There being no material difference in facts, respectfully following the aforesaid decision of the co-ordinate bench, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Department. 80. In the result, Department's appeal is partly allowed for statistical purposes and assessee's cross objection is allowed. ITA no.4063/Mum./2010 - Department's Appeal 81. Ground no.1 relates to acceptance by the learned Commissioner (Appeals) assessee's claim of deduction under section 80HHC in respect of sales effected to Mission Pharma Logistic Pvt. Ltd. 82. Brief facts are, the Assessing Officer in the course of assessment proceedings, while verifying assessee's claim of deduction under section 80HHC, noticed that during the relevant previous year, assessee had effected sales to another entity viz. Mission Pharma Logistic Pvt. Ltd. and claimed deduction under section 80HHC, on such sales. Assessing Officer observed that Mission Pharma Logistic Pvt. Ltd. is not doing any manufacturing activity and is only engaged in re-packing liberalising, kit packing, etc. He, therefore, opined that Mission ....
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....ies and perused the material available on record. Undisputedly, assessee has set-up a unit outside SEZ for manufacturing and sale of generic pharma products and other nutritional products. It is also not disputed that assessee during the relevant previous year, has sold its products worth Rs. 3,33,62,706 to Mission Pharma Logistic Pvt. Ltd. a company set-up in SEZ and claimed deduction under section 80HHC, on such sales turnover. On a perusal of sub-section (4C) of section 80HHC, it is noticed that an assessee having set-up a unit outside SEZ engaged in manufacture / production of goods or merchandise, if sells such products to any undertaking situated in SEZ which is eligible for deduction under section 10A, then such sales effected by the assessee shall be deemed to be export out of India for the purpose of section 80HHC. Thus, on a plain reading of the provisions contained in sub-section (4C) of section 80HHC, it becomes clear that to qualify as deemed export out of India three conditions are to be satisfied. Firstly, assessee claiming such deduction must have set-up an undertaking for manufacture or production of goods outside SEZ; secondly, the goods / products manufactured by....
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....nd no.3, Department has challenged the decision of the learned Commissioner (Appeals) in rejecting indirect cost by 10% of the export incentives for computing profit from trading exports under section 80HHC. 90. Similar issue arose in Department's appeal in ITA no.274/Mum./ 2007, dealt by us in ground no.5. Following the reasoning given in Para-50 to 52, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.3, raised by the Department. 91. In ground no.4, Department has challenged the decision of first appellate authority for netting of interest receipts against interest payment for computation of deduction under section 80HHC. 92. This issue is similar to the issue raised in Ground no.5, by the Department in its appeal in ITA no.274/Mum./2007. Following the reasoning given in Para-60 and 61, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.4, raised by the Department. 93. In ground no.5, Department has challenged the decision of the learned Commissioner (Appeals) in deleting the adjustment made to the arm's length price by the Assessing Officer and the Transfer Pricing Officer. 94. This issue i....