TaxTMI 
TaxTMI 
2019 (4) TMI 868
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounds, which are mutually exclusive, independent of and without prejudice to one another: 1. The order passed by the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the learned CIT(A)'] is bad in law and on facts 2. Re: Addition on account of Corporate Guarantee provided to associated enterprises Sun Pharmaceutical Bangladesh Ltd. - Rs. 8,94,313/-. 2.1 The learned CIT(A) has grossly erred in upholding the additions of Assessing Officer/TPO who failed to appreciate the fact the Corporate Guarantee provided to associated enterprises is not covered under the definition of international transaction as envisaged under sec. 92B. 2.2 Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the addition made by the Assessing Officer/TPO for benchmarking the Guarantee fees without appreciating that the Appellant giving corporate guarantee is shareholder's activity and not a service transaction. 2.3 Without prejudice to the above, the learned CIT(A) grossly erred in upholding the addition made by the Assessing Officer/TPO who has applied the yield method not being a prescribed method under the Indian Transfer Pricing p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3.6 Without prejudice to the above, even if the profit split method is to be followed, the Assessing Officer grossly erred in upholding the order of the TPO who made addition without appreciating the fact that there is nil profit to be attributed to the Appellant since the entire profit earned by the AE on the sale of the Products in USA is wiped off on account of subsequent infringement claim of USD 506 Mn. 3.7 Without Prejudice to the above, the learned CIT(A) grossly erred in upholding the order of Assessing Officer/TPO who made addition without appreciating the fact the full infringement loss ought to be deducted against the profits of the AE derived from the sale of Para IV products and only the profits / loss after such adjustment, if any should be split between the Appellant and the AE. 3.8 Without prejudice to the above, the learned CIT(A) grossly erred in not allowing the relief of infringement claim of Rs. 1,42,52,16,938/- given by TPO while working out the profit from the transaction for the purpose of profit split. 3.9 Without prejudice to the above, if profit split method is to be followed, the ratios of 50:50 ought to be adopted for benchmarking of sales ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....US FDA under which the approval was sought without appreciating the fact that the US FDA Para under which the product is filed is irrelevant for the Appellant who is a contract manufacturer. 5.3. Without prejudice to the above, the learned CIT{A) has grossly erred in upholding the order of TPO who has wrongly applied profit split method as the most appropriate method without referring to any external comparable benchmarks. 5.4. Without prejudice to the above, the learned CIT(A) has erred in not appreciating that the IPR rests with the AE and the AE was exposed to significant risks inherent in the transaction and accordingly the profit allocation for the IPR to the AE was extremely low and unjustified. 5.5. Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the order of TPO who has benchmarked the sales of Non-Para IV products in ratio of 80:20 without appreciating that Appellant is merely a contract manufacturer. 5.6. Without prejudice to the above, if profit split method is to be followed, the ratios of 50:50 ought to be adopted for benchmarking of sales of products. 6. Re: Non-allowance of weighted deduction u/s 35(2AB): 6.1. On th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... erred in allocating proportionate R&D expenditure incurred to SPI and SPS without appreciating that the same is allowable to the Appellant u/s 35(2AB). 7.3 Without prejudice to the above, learned CIT(A) erred in not following the CIT(A) order passed in the case of Appellant for earlier years where it was considered that since the Appellant already has its infrastructure in place, only the incremental expenditure incurred by the Appellant after partnership firm came into existence ought to be disallowed. 7.4 Without prejudice to the above, the CIT(A) grossly erred in computing the amount of research and development expenditure attributable to the development of formulation drugs for the domestic market at Rs. 6343.53 lakhs against the correct amount of Rs. 2332.84 lakhs 7.5 Without prejudice to the above, similar issue has been considered by the Assessing Officer at the time of tax assessment of partnership firms SPI and SPS wherein the disallowance was restricted to Rs. 35.13 lakhs in case of SPI and Nil in case of SPS, and accordingly in the case of Appellant disallowance ought to be restricted on the same. * 7.6 Without prejudice to the above, the R&D expense should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of repairs expenditure amounting to Rs. 16,82,791/- treating the expenditures as capital expenditure on the allegation that some of the expenditure is incurred on parts of the plant & machinery which can function independently. The learned CIT(A) ought to have appreciated that the expenditure on repairs has been incurred to maintain existing assets and not for creating new assets or results in benefit of enduring nature. 11. Re: Disallowance u/s 14A read with Rule 8D - 11.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the action of the Assessing Officer of making disallowance u/s.!4A read with rule 8D, without appreciating that: 1 The income earned by the appellant on its investment in partnership firm was not exempt and hence was not to be considered for disallowance under section 14A; 2 Section 14A was not applicable in instant case since Assessing Officer failed to Establish satisfaction as to how the claim of the Appellant was incorrect; 3 Provisions of section 14A could not be made applicable to investments which are capable of generating taxable income; 4 The Appellant had sufficient interest free fun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the decided case laws on the subject. 13. Re: Addition of Selling and Distribution expense incurred on behalf of Sun Pharmaceutical Industries ("SPI") disallowed u/s 14A: 13.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in disallowing Selling and Distribution expenditure incurred by the Appellant u/s. 14A on the ground that the said expenditure is directly incurred by the Appellant for the partnership firm without appreciating that: 1 Selling and distribution expenditure were directly incurred by the Appellant for the purposes of its business activities and it could not be termed and categorized to be directly incurred for earning the exempt income under Rule 8D; 2 The selling and distribution expenditure to be disallowed as worked out by the Assessing Officer is determined arbitrarily in the ratio of turnover and has no direct nexus towards the exempt income earned by the Appellant; 3 The CIT(A) has failed to substantiate and demonstrate its claim that the said expenditure is directly incurred by the Appellant towards earning of exempt income; 4 The said expenditure was incurred by the Appellant for the purpose of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....44 2.32 279.33 However, only one associate enterprise of the assessee has availed the loan against the corporate guarantee provided by the assessee namely sun pharmaceutical (Bangladesh) Ltd. But the assessee has not charged any commission/fees from such associated enterprise. The assessee for not charging commission/fees has submitted that: i) It has not incurred any expense for providing the corporate guarantee to the banks on behalf of the associated enterprise. As such the corporate guarantee was provided as a measure of long-term commitment towards the subsidiary companies. Accordingly, the assessee has shifted its burden of providing financial resources to its associated enterprise to the banks. ii) It is an undisputed fact that the subsidiary company availing the loan from the bank is an associated concern of the assessee. Thus there exist an implicit guarantee which is always available to the associated enterprise. As such there was no impact on the loan provided by the bank on account of explicit guarantee provided by it. It is because the associate enterprise was capable of availing the loan facilities from the bank. There was also no be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ld.CIT (A) erred in law and facts in reducing the adjustment on account of ALP for Corporate Guarantee Fees from 2.96% to 2% since ALP for each year is assessed on the basis of risk factor of that particular year and said ALP was worked out on the basis of Country and foreign exchange risk." 10. The Ld. AR before us filed a paper book running from pages 1 to 253 and submitted that in the identical facts and circumstances in the own case of the assessee and Revenue bearing ITA Nos. 1666/AHD/2016 and 1663/AHD/2016 pertaining to AY 2009-2010, the ITAT was pleased to restore the issue to the Ld. CIT (A) for fresh adjudication vide order dated 08-09-2017. Accordingly, the Ld. AR before us prayed to restore the issue to the file of Ld.CIT(A) for fresh adjudication as per the provision of Law. 11. On the other hand, the Ld. DR did not raise any objection if the matter is restored to the file of Ld. CIT(A) for fresh adjudication as per the provision of Law. 12. Both the parties before us relied on the order of authorities below as favorable to them. 13. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals presiding over the Courts or the Tribunals and not reached objectively on the basis of the facts placed before the authorities. If a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that the drug falls under Chapter IV of federal food, drug, and Cosmetic Act, (in short FD&C Act) which is subject to legal risk which is to be borne by the AE. As such the assessee is not subject to such legal risk as it is acting merely as a contract manufacturer. The assessee further submitted that its AE had suffered a huge loss on account of patent infringement. 15.2 However, the TPO during the proceedings observed certain facts as enumerated below: i. The drug, Pantoprazole falls under chapter IV of the FD&C Act, in the preceding year. But in the year under consideration, it was sold as a generic drug. Therefore there was no risk to the AE in the year under consideration on account of the infringement of the patent. ii. The assessee has earned a margin at the rate of 13.86% on the sale to AE as per the accounts of the AE whereas the AE has earned profit margin at the rate of 87.45% on sale which is representing 4186% on the cost of the drug. As per the TPO, such a huge margin is not natural considering the FAR analysis. The TPO was of the view that such huge margin has been shifted to its AE as it is located in tax heaven zone. iii. The AE has sold this dru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....risks can be categorized as under: "Risks borne:- • Since the owner of the IPRs is the SPG FZE, the substantial risks related to the product are borne by the SPG FZE • The risks borne by the SPG FZE are as follows: • ü Litigation risks and cost • ü Penalties • ü Chargebacks • ü Shelf Stock Adjustments • ü Product Returns and Other Allowances • ü Infringement issues • ü Loss of profit claims by the original patent holder in the event the patent claim is rejected. In the present case since the product is para IV product the same is subjected to huge litigations. The expenses/damage that can arise out of the litigations are as follows:- • Lost profits due to diminished sales because of infringement of patents • Lost profits due to the necessity of having to reduce price to compete with the infringing party • Lost profits due to overall reduction in business attributable to the need to divert resources because of infringement • Lost future profits due to depressed prices th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ract manufacturer as claimed by it. The Sun BVI/FZE while making an application for the registration of the technology under ANDA has to furnish the details of the factories where such technology was developed. As the assessee has sufficient infrastructure facilities which have been approved by the US FDA, therefore it is implied that there was an active role of the assessee in getting the product approved from ANDA. ii. The agreement between the assessee and Caraco dated 29th of January 2008 further evidence that there was the active role of the assessee in the distribution and sale of the product. iii. The loss incurred by the AE-Sun BVI/FZE on account of infringement of a patent is routine business activities. The Sun BVI/FZE may incur a loss in some of the drugs which will certainly be compensated with the profit of other drugs. iv. The assessee is also performing other functions as detailed under: "-as a person developing the ANDA documentation-as a manufactuerer creating the entire infrastructure as per theUSFDA standards for production of the drug (creation of USDFDA approved facility- as a manufacturer getting the facility approved by USFDA- as a person wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,248 6 Profit 3,42,02,465 21,76,42,012 7 Additional credit allowed on account of Return of goods 7a Rate difference accounted in F Y 2009-2010 8,68,81,314 7b Returns / Short receipts accounted in F Y 2009-2010 51,04,992 7c Rate difference accounted in F Y 2010-2011 (20,85,381) 7d Returns / Short receipts accounted in F Y 2010-2011 3,24,83,034 Recovery of Expenses accounted in FY 201 0-2011 0 8 Additional expenses [ litigation ] incurred by the company 0 9 Remaining profit [ 6 minus 7 minus 8 ] 9,52,58,053 10 Shared in equal ration by both associates 2,25,76,15,859 2,25,76,15,859 Usd rate = Ind Rs. 47.40 47.40 8.11. It is seen that SPG FZE has earned huge profits in sale of this drug. However, the of the assessee company with respect to significant risks involved in such sales is evident in the costs incurred by SPG FZE on sales return, rebates and litigationcosts. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ile only some portion of the risk is to be adopted by SPIL, it would not be necessary for SPIL to bear any residual burden in respect ofinfringement payout of a particular product although it carries all the responsibilities as an ultimate parent. It would be sufficient if it is attributed a limited risk in addition to its major functions/assets to justify the profit split of 50:50. In light of the above discussion, it is found reasonable to attribute 80% of the risk to Sun Global and 20% risk to SPIL. The total infringement payout is apportioned for the present year in ratio of turnover and 20% of such apportionment amounting to Rs. 142,52,16,938/- is allowed as deduction from the amount of Rs. 225,76,15,860/- suggested as adjustment in the case of pantoprazole sale. 8.13 In light of the above discussion, an upward adjustment of Rs. 83,23,98,920/- is made to the profits of the assessee company with reference to benchmarking of the transaction of sale of pantoprazole to SPG BVI and SPG FZE." 16. Aggrieved assessee preferred an appeal to the Ld.CIT (A) who has the enhanced the addition made by the AO/TPO by observing as under: "On careful consideration of submission of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent made in upward adjustment to Arm's Length Price amounting to Rs. 277,97,86,456/-, penalty proceedings u/s.271(1)(c) r.w. Explanation-7 are also initiated for which I am satisfied." 17. Being aggrieved by the order of Ld.CIT (A), the Assessee is in appeal before us. 18. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA# 1666/AHD/2016 the impugned addition was deleted by the Hon'ble ITAT vide order dated 08-09-2017. 19. On the other hand, the Ld. DR filed the written submissions which are available on record. But the same has not been reproduced for the sake of brevity and convenience. The ld. DR vehemently supported the order of authorities below. 20. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee's (supra), the ITAT deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "26.We have given a thoughtful consideration to the orders of the authorities below. We agree with the contention of the ld. Senior Counsel that no new f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may be mutually agreed upon. SPGI shall not be entitled to cancel any order placed by it and accepted by SPIL unless other wise agreed upon by the parties. 2.2 SPGI agrees to provide a forecast on agreed format to SPIL so as to facilitated SPIL to carry out production planning of the Products for sale and supply as per terms of this Agreement. 2.3 SPGI will be required to make payments in US Dollars against supplies of the PRODUCT within 75 days of the receipt of goods for the invoices raised by SPIL in this regard or within such other time as may be mutually agreed upon in this regard. 2.4 At the request of SPGI, SPIL shall supply the product ordered by SPGI by such carrier or carriers as SPGI may designate. Such delivery instructions shall be submitted by SPGI to SPIL well in advance SPIL agrees to dispatch at the cost of SPGI, the finished Product to SPGI or to its nominees within the time frames stipulated by SPGI from time to time as per the orders placed by SPGI and accepted by SPIL. SPIL further undertakes to supply the product with adequate packing and coverage to ensure that the Product reaches SPGI or its nominee adequately packed and acceptable as per CGMP guid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, or neglect or damage etc. on its part on account of legal liabilities or otherwise arising out of non meeting its all legal obligation in respect of any matter whatsoever. 4.4 Quality control. If mutually agreed in writing, SPIL may conduct itself quality control tests pursuant to specifications, policies and/or procedures provided by SPGI in writing No production batch shall be released for sale unless it conforms to the SPGI specifications, practices and stipulations referred to in Section 4.1. SPGI will facilitate SPIL in curing deficiencies, to the extent acceptable to SPGI, of lots or batches of Product not meeting with SPGI specifications, practices or stipulations. 4.5 SPIL Warranty, SPIL warrants that the Finished Products manufactured and delivered to SPGI hereunder shall conform to the product specifications communicated by SPGI to SPIL. SPGI shall notify SPIL of any non-conforming manufactured Products within sixty days after receipt of Products or within sixty (60) days after any hidden defects are discovered. Any notification or nonconformance under this section shall include proof of non-conformity/defect. SPIL may, at its discretion, have the defective Prod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncurred by SPGI as a result of SPIL's violation of this representation. Notwithstanding anything to the contrary in this Agreement, it is agreed that SPIL's liability for indemnificatio under this Agreement will be limited for the Product containing manufacturing defect or the Product fist conforming to the product specifications communicated by SPGI to SPIL under this Agreement. 7.1.6 SPIL Shall not claim any right, title, or interest to the Products, product names and the rights attached with them under any of the trademarks, or patent laws, SPIL shall not manufacture and/or sell for sale in the market of United. States of America and in Europe during the term of this Agreement any Products under a trademark connected with the Products or under a name phonetically or otherwise similar to trade names connected with the products as mentioned in Appendix A. 7.1.7 SPIL shall not subcontract or delegate to any other persons, firm or body corporate the whole or any part of the manufacture, of the Products or assign this Agreement or any part thereof or deal in any manner whatsoever with the rights, benefits or obligations created hereunder without the prior consent in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry's executive directors are no more than puppets then the turning point in respect of the subsidiary's place of residence comes about. Whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction. (v) Holding structures are recognized in corporate as well as tax laws. Special purpose vehicles and holding companies have a place in legal structures in India, be it in company law, the takeover code under the Securities and Exchange Board of India or even under the income-tax law. When it comes to taxation of a holding structure, at the threshold, the burden is on the Revenue to allege and establish abuse, in the sense of tax avoidance in the creation and/or use of such structures. In the application of a judicial anti-avoidance rule, the Revenue may invoke the "substance over form" principle or "piercing the corporate veil" test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the transaction in question is a sham or tax avoidant. (vi) The legal position of any com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion. 83. Having established that the ownership of IPR/ANDA rights of Pantoprazole Sodium was with SPG BVI, now let us examine the applicability of the most appropriate method for determining the arm's length price. 84. OFCD guidelines for profits spilt method (PSM) states as under:- C. Transactional profit split method C.1 In general 2.108 The transactional profit split method seeks to eliminate the effect on profits of special conditions made or imposed in a controlled transaction (or in controlled transactions that are appropriate to aggregate under the principles of paragraphs 3.9-3.12) by determining the division of profits that independent enterprises would have expected to realise from engaging in the transaction or transactions. The transactional profit split method first identifies the profits to be split for the associated enterprises from the controlled transactions in which the associated enterprises are engaged (the "combined profits"). References to "profits" should be taken as applying equally to losses. See paragraphs 2.124- 2.131 for a discussion of how to measure the profits to be split. It then splits those combined profits between t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d transactions that it is appropriate to aggregate) by determining the division of profits that independent enterprises would have expected to realize from engaging in the transaction or transactions. 86. A perusal of the aforementioned guidelines shows that PSM can offer a solution for highly integrated operations for which a one sided method would not be appropriate. PSM may also found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions to the transaction. Considering the functions performed by the appellant company to SPG BVI, it is clear that SPIL has performed only one simple function and that is manufacturing of Pantoprazole Tablets. Except for this, there is no significant unique contribution by SPIL. For such simple functions as per OECD guidelines for transaction profit spilt method typically would not be appropriate of the functional analysis of that party. 87. The relevant agreement which is placed on record and has been dealt elsewhere clearly establishes that the appellant company SPIL is nothing but a contract manufacturer of SPG BVI. Now let us examine the relevant provisions of the Act read with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the net profit allocated to the enterprise in the first instance together with the residual net profit apportioned to that enterprise on the basis of its relative contribution shall be taken to be the net profit arising to that enterprise from the international transaction --[or the specified domestic transaction]; (e) Transactional net margin method, by which,-- (i) the net profit margin realized by the enterprise from an international transaction[or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; (ii) the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14 and yet the FAA has observed that the assessee did not furnish ANDA related documents filed by SPG. SPGmay not have done any filing related to Pantoprazole Sodium patent to US FDA but the fact of the matter and which have been demonstrated successfully by the appellant company is that the IPR/ANDA rights became the property of SPG BVI by virtue of the agreement for sale between SPARC and SPG. 91. Adverting to assessee's alternate and without prejudice contention that even if PSM is he ld to be the most appropriate method for a moment than also the same has to be considered in the light of the sequence of events starting from the manufacturing and sales of the drug Pantoprazole and ending with the out of court settlement and the payment of settlement compensation of USD 506 million The settlement is based on the cumulative profits earned by the AE till the date of settlement. here is no dispute and it has been accepted by both the lower authorities that after the out of court settlement of the litigation the assessee group has suffered losses which were based on the aggregate of profits earned by the group over all the year. With the settlement based on aggregate of yearly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4. Considering the facts in totality in the light of the decision of the Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. (supra) and on conspectus understanding of the facts as discussed elsewhere, we do not find any merit in the findings of the First Appellate Authority in accepting the application of PSM as the MAM , in our understanding of the facts TNMM is the MAM on the given facts and the same is accepted as such. We set aside the findings of the ld. CIT(A) and direct to delete the addition of Rs. 612,03,39,468/-. Ground no. 5 of the assesse is allowed. 27.As mentioned elsewhere, the facts are identical; therefore, we do not find any reason why the findings of the Tribunal (supra) should not be followed. Respectfully following the findings, we direct the AO to delete the addition of Rs. 103,87,52,830/-. Ground no. 6 is accordingly allowed. 21. Admittedly, the facts in the case on hand are identical to the facts of the case as discussed above. However, the question arises whether the TPO verified the details furnished by the assessee in determining the ALP of the impugned transaction using TNMM during the assessment proceedings. Regarding th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adopted by the TPO in applying the profit split method for determining the ALP in respect of Drugs not falling under the category of Para VI. As such the TPO has applied the profit split method in the ratio of 80:20 in respect such drugs. The assessee share was determined in the ratio of 80% whereas the share of the AE was determined in the ratio of 20% after considering the FAR analysis. 22.3 However, the AO in applying the profit split method for determining the ALP in respect of the Drugs under the category of Para VI other than Pantoprazole adopted the ratio of 50% each between the assessee & its AE as used in the case of Pantoprazole drug. The TPO determined the said of ration under profit split method after considering the FAR analysis. In view of the above, the TPO made an upward adjustment of Rs. 73,03,24,358 in respect of drug falling under the category of Para-IV other than Pantoprazole and Rs. 21,34,71,777.00 in respect of drug falling under the category of Non-Para-IV. Thus the AO made the addition of Rs. 94,37,96,134.00 in aggrgate to the total income of the assessee. 23. Aggrieved assessee preferred an appeal to the Ld.CIT (A) who enhanced the addition in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing drugs resulting into a further upward adjustment of Rs. 43,81,94,615/- vide notice dated 17.01.2017. This Notice has already been reproduced in para 8.3.2 above. 8.3.10. Incompliance to the above, the Ld. Authorized Representative, has furnished a written submission dated 25.01.2017, the synopsis of which has already been reproduced in para 8.3.3 above. 8.3.11. It is noticed that the contentions made above are almost similar to those which have been made in response to the enhancement notice pertaining to sale of Pantoprazoie. For the similar reasons and the reasons discussed above in para 8.3.8 & 8.3.9, the same are rejected. The only difference pointed out by the Ld. AR is that the business of other products under Para IV filing namely Amifostine, Oxaliplatin & Nicardipine has been retained by SPG FZE and hence the risk of infringement was not transferred to appellant as in the case of Pantoprazole. However, I find that these drugs were not manufactured and marketed under exclusive right and hence there was hardly any risk of infringement cost. Further no evidence is brought on record by the appellant to show that any cost has also been incurred on this account by the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ately by the Bench in A.Y. 2008-09 qua ground no. 5 of that appeal in ITA Nos. 3927 & 3420/Ahd/2014. 35.The relevant findings of the Tribunal have been elaborately extracted while deciding ground no. 6 of the present appeal. Therefore, to avoid repetition, . A.Y. 2009-10 respectfully following the findings given while deciding ground no. 6 of the present appeal. We direct the A.O. to delete the addition of Rs. 123577944/-. Ground nos. 7 & 8 are accordingly allowed." 28. Admittedly, the facts in the case on hand are identical to the facts of the case as discussed above. However, the question arises whether the TPO verified the details furnished by the assessee in determining the ALP of the impugned transaction using TNMM during the assessment proceedings. Regarding this, a query was raised from the bench to the learned counsel for the assessee who replied that all the necessary details were available with the TPO and no defect of whatsoever was pointed out therein. Similarly, the ITAT in the earlier year considering the fact that no defect was pointed out by the TPO in the details furnished by the assessee in determining the ALP using TNMM allowed the appeal of the assessee. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the books of accounts. Moreover, the assessee should have filed the revised return of income for claiming the weighted deduction under section 35(2AB) of the Act, but the assessee has not done so. Thus the AO disallowed the weighted deduction claimed by the assessee. 31. Aggrieved assessee preferred an appeal to the Ld.CIT (A). 31.1 The assessee before the Ld.CIT (A) submitted that it has omitted to claim the weighted deduction under section 35(2AB) of the Act in respect of the expenses for Rs. 689.37 lacs inadvertently in the return of income. But it is a fact that the deduction was claimed under section 35(2AB) of the Act at the rate of a hundred percent. Thus it is not a case where the assessee has not claimed the deduction in the return of income. 31.2 The assessee further submitted that it can claim deduction during assessment proceedings in view of the judgment of the Hon'ble Gujarat High Court in the case of Claris life sciences Ltd reported in 326 ITR 251. 31.3 The assessee also submitted that it is not necessary to get the research and development expenses approved by the DSIR. 31.4 However, Ld.CIT (A) rejected the claim of the assessee by observing that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made by the assessee was purely legal claim as it is eligible for weighted deduction as per the provisions of Section 35(2AB) of the Act. Merely because the same was not claimed in the return of income nor through a revised return of income, the same cannot be denied. The relevant portion of Section 35(2AB) reads as under:- 35[2AB] (1) where a company engaged in the business of [bio-technology or in [any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule]] incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of [a sum equal to [two] times of the expenditure] so incurred. [Explanation.- For the purposes of this clause, "expenditure on scientific research", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority . A.Y. 2009-10 under any Central, State or Provincial Act and filing an application for a patent und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PCIT's concern expressed in order revising the above regular assessment. We deem its appropriate at this stage to throw some light on the nature and ambit of Form 3CL. The same comes under Rule 6(7A) of the Income Tax Rules, 1962 framed under the provisions of the Act. The above sub rule is relevant for approval of expenditure incurred on in house research & development facility by a company u/s.35(2AB). Sub clause (b) thereof is the specific provision thereto stipulating that the prescribed authority shall submit its report in relation to the approval of in house Research & Development facility in Form No.3CL to the Director General (Income Tax Exemptions) within 60 days of its granting approval. The same is merely in the form of intimation to be sent from prescribed authority's end to the department. An assessee engaged in such Research & Development activity having already obtained Form 3CM approval of its facility has no role to play in such correspondence. We notice that a co-ordinate bench of this tribunal in ACIT vs. M/s. Torrent Pharmaceuticals ITA No.3569/Ahd/2004 decided on 13.11.2009 holds that the impugned weighted deduction is not to be restricted to the extent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee." 37.3 Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 38. Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the Ld. DR has not brought anything on record contrary to the argument advanced by the Ld. Counsel for the assessee and the finding of the Ld. CIT-A. 38.1 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above-said judgment, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ning the proceedings u/s. 147. The order u/s. 143(3) r.w.s. 147 for A.Y. 2008-09 was passed by the Assessing Officer on 14.02.2014. The above mentioned issue was challenged before the CIT(A)-2, Vadodara. The appeal of the assessee has been decided by my predecessor vide order dated 31.03.2015 contained in Appeal No. CAB/(A)- 2/387/14~15 (A.Y. 2008-09) and his findings recorded in para-7.3 to7.5.2 are reproduced as under:- "7.3 I have considered the appellant's submission and the AO's observations. The appellant's main contention are that that the product technology developed are completely owned by it and no part of ownership of the product technology or processes developed during such R & D work is for any other party. Besides being a working partner, the appellant in pursuance of the obligation undertaken under the partnership deed had provided these services in relations to the manufacturing activities of the firm and that no R & D activity was carried out for SPI. In relation to the these claims, the appellant has also stated that it has received remuneration and share of profit from SPI, credits of which are available to it to the corresponding debit in the book....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant is that as per section 35, R & D expenditure has been incurred by it for its own business and hence same cannot be debited in the books of accounts of SPI. But as already stated, once it is proved that part of such expenditure has been incurred by the appellant for the purpose of earning of share of profit and remuneration from the firm which is not forming part of its own total income, such expenses cannot be allowed as a deduction in computation -of its total income. The AO has disallowed such expenditure only and it is not a case where such expenses have been directed to be debited in the books of accounts of the firm, SPI. Hence, this contention is nlso rejected. 7.5 The other contentions of the appellant are related to the method adopted by the AO for the purposes of allocation of such R & D expenses to the manufacturing activitiesundertaken by the appellant and the manufacturing activity undertaken by the firm SPI. In this regard, the appellant has submitted that it had submitted working on unit profitability statement before AO during the course of assessment proceedings vide letter dated 21/11/2011 whereby the bifurcation .of turnover between domestic/export and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Heads are as follows:- Thus, the total expenses for formulation drug for domestic market is 1651.48,+ 2193.40 + 167.61 +.62.90 = 4075.49 lakhs. The balance expenditure of 9028.7 lakhs is for the purpose of overseas market. The appellant's claim that only 1651.48 lakhs of expenditure should be considered for allocation to SPI is not acceptable due to lack of proper details filed by it before the AO or during the current appellate proceedings. The Domestic formulations turnover of SPIL is Rs. 1451.25 crores and that of SPI is Rs. 1086.2 crores. Hence, the R & D expenditure related to formulation drug for domestic purposes is to be allocated in the ratio of these two turnovers. Hence, the R & D expenditure related to the formulation production made by the SPI comes to 1086.2/2537.45x 4075.49 =Rs.1744.56 lakhs. 7.5.2 Accordingly, the AO is directed to restrict the disallowance out of - R&D expenses to this figure of Rs. 1744.56 lakhs. The appellant gets part relief accordingly." 12.2. It is noticed that the appellant has furnished similar written submission in this year also and the details of various expenses incurred under different heads submitted before the Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions and perused the materials available on records. At the outset, we find that in the identical facts and circumstances in the own case of the assessee's (supra), the ITAT deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "We have given a thoughtful consideration to the facts in issue before us. There is no dispute that the assessee did incurred expenditure under the head "Research & Development" activity. The only dispute relates to the . A.Y. 2009-10 allegation that part of such expenditure belong to the business activity of the partnership firm SPI. There is also no denying by the lower authorities that the entire Research and Development activities are done by the appellant company only being the flagship company of Sun Pharma Group. In our understanding of the facts, the appellant company had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Since the assessee is holding 97.5% of share in the partnership firm, SPI it becomes the duty of the assessee to promote the business of the partnership firm in the capacity of the majority stake holde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the ITAT order as discussed above, we allow the ground of appeal of the assessee and dismiss the ground of appeal of the Revenue. 50. The next issue raised by the assessee in ground No. 8 is that the Ld.CIT (A) erred in not allowing deduction of the remuneration received from the partnership firms while determining the books profit under section 115JB of the Act. 51. The assessee in the year under consideration has received remuneration from the partnership firm namely SPI amounting to Rs. 15,07,27,535/- which has been reduced in computing the book profits u/s 115JB of the Act. The assessee claimed that the remuneration paid to it by the firm was not allowed as a deduction in the hands of the firm. 51.1. Accordingly, the assessee claimed that such remuneration is not taxable in its hands as per proviso to section 28(v) r.w.s. 40(b) of the Act. The assessee further submitted that such remuneration cannot also be subject to tax under the section of 115JB of the Act. The assessee accordingly reduces the amount of remuneration while working out the tax liability under the provisions of section 115JB of the Act. 51.2. However, the AO disagreed with the contention of the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pectfully following the order of CIT(A)-IV, Ahmedabad, hold that remuneration of Rs. 15,07,27,535/- cannot be deducted while computing the book profit u/s. 115JB. Circular No.8/2014 dated 31.03.2014 relied upon by the appellant is entirely on different issue. Accordingly, the action of Assessing Officer in this regard is upheld and Ground No. 11 is dismissed." 53. Being aggrieved by the order of Ld.CIT (A) the assessee is in appeal before us. 54. The Ld.AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No. 1666/AHD/2016 the impugned addition was confirmed by the Hon'ble ITAT vide order dated 08-09-2017. As such the Ld.AR conceded for the above addition to the book profit u/s 115JB of the act. 55. On the other hand the Ld. DR vehemently supported the order of authorities below. 56. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee (supra), the ITAT confirmed the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "60. This issue was also involve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 and reduced by specific items provided thereon. The only specific amount of income which has to be reduced is the income to which provisions of Section 10, 11 or 12 apply, if any such amount is credited to the Profit and Loss account and Section 10(2A) defines such income as the share of profit of a partner from the partnership firm, the language is clear and unambiguous and needs no other insertion or deletion. The remuneration to partner may have the color of appropriation of profit of a partnership firm as held by the Hon'ble Supreme Court and Hon'ble High Courts in various decisions relied upon by the ld. Senior Counsel but as mentioned elsewhere, Section 115JB is a complete code in itself. Therefore, if the remuneration is credited by the appellant company in its Profit and Loss account then the same could be reduced it specifically provided under the Explanation to Section 115JB of the Act which we find missing from the relevant provisions. We, therefore, do not find any merit in this claim of the assessee and accordingly we confirm the findings of the First Appellate Authority. Ground no. 9 is dismissed." 57. As facts in the case on hand are identical to the fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion of the Ld.Authorized Representative. In respect of proportionate disallowance of deduction u/s.10B on unrealized sale proceeds of Rs. 40,64,118/- from both the eligible units, I find that the appellant has failed to prove that these sale proceeds have been realized within the stipulated time period including the time extended by the competent authority. As per provisions of section 10(3), the deduction shall not be admissible in respect of the sale proceeds which are not received in or brought into India in convertible foreign exchange within the period of six month from the end of previous year or within such further period as the competent authority may allow in this behalf. No proof of extension of time by competent authority was available with the appellant at the relevant time. Since the appellant has not complied with the requirements of this section, I uphold the disallowance made by the Assessing Officer. It may also be mentioned here that under the similar facts and circumstances of the case, CIT(A)-IV, Ahmedabad has also confirmed the disallowance vide para 21.3 of the order in A.Y. 2008-09. In view of the above discussion, Ground No.13 is dismissed." 61. Being ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are identical to the facts of the case as discussed above, therefore we are inclined to restore the issue to the file of AO and direct accordingly for fresh adjudication as per the provisions of law. Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record contrary to the argument advanced by the ld. Counsel for the assessee. 65.1 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract has been reproduced in the preceding paragraph. In the light of the ratio decidendi in the above-said judgment, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR and the ld. AR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) who partly confirmed the order of the AO by observing as under: "17.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative. The issue under consideration is as to whether expenditure made by the appellant for purchase of various items will amount to creation of new assets with an enduring benefit to the company. In this regard/ it is worthwhile to refer to the ratio laid down by the Hon'ble Supreme Court in the case of Daimia Jain & Go. Ltd. Vs. CIT (1971) 81 ITR 754 wherein it has been held that "in deciding whether a particular expenditure is a capital in nature, what the Courts have to see as to whether the expenditure in question was incurred to create any new assets or was incurred for maintaining the business of the company, if it is the former, it is capital expenditure. If it is the latter, it is revenue f expenditure". In this background, the items purchased by the appellant company have to be dealt with accordingly. (a) Purchases of Rs. 1,04,719/-- from Mutech Engineers:- It is noticed that, the appellant has purchased panel boards for MCC (Motor Control Centre)which is in the nature of replacement of a part of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as decided in its favor by the Hon'ble ITAT vide order dated 08-09-2017. 71. On the other hand, the Ld. DR vehemently supported the order of authorities below. 72. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the impugned issue is not covered in favor of the assessee as claimed by the Ld.AR of the assessee. The relevant extract of the ITAT order (supra) is extracted below: "93.We have carefully considered the orders of the authorities below. We find that following expenses were incurred by the assessee - (a)Kiran Pumps for Rs. 1,59,000/-:- The assessee has purchased LUTZ Pump FLP single motor which is capable of functioning independently without assistance of any other plant & machinery. Therefore, it can be said that a new capital assets has come into existence and hence the expenditure is treated as capital expenditure. (b) Martin Christ GMBH of Rs. 5,53,436/-:- the appellant has purchased Freeze Dryer Beta with accessories for the purposes of drying process of organic solvents. The assessee has also incurred labour charges on installation of this dryer. The factual matrix shows that new capital asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e also claimed that it has sufficient owned fund exceeding the investment. 75.2. There is no direct and active involvement in the purchase and sale of tax-free investments. The assessee has investments in its overseas subsidiaries, mutual fund, and capital of partnership firms. 75.3. In case of partnership firm, the profit accrued to it was not exempted in the hands of the partnership firm. The partnership has credited only the share of profit which is not the income in the hands of the partners but credit to partner's capital account. Further assessee earned interest income and remuneration from partnership firm which is taxable. Thus the provision of section 14A does not apply to the investment in a partnership firm. 75.4. However, the AO disregarded the contention of the assessee and worked out the disallowance in the manner provided under section 14A read with rule 8D of Income Tax Rule as given below: Disallowance of interest expenses Rs. 5,82,987/- Disallowance of administrative expenses Rs. 4,17,40,201/- 76. The aggrieved assessee, preferred an appeal to the Ld.CIT (A) who partly confirmed the order of the AO by observing as under: "19. Ground No. 16 per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levant extract of the ITAT order (supra) is extracted below: "99.After considering the facts in issue before us. We find that a similar issue was decided by the Tribunal in ITA Nos. 3297 and 3420/Ahd/2014 vide ground no. 17 of that appeal. The relevant findings read as under:- 153. A similar issue was considered by the Bench in A.Y. 2007-08 in ITA No. 2076 & 2067/Ahd/2013, and the relevant findings read as under:- 52. Coming to the disallowance made u/s. 14A by the First Appellate Authority, it is an undisputed fact that the assessee was having sufficient own funds for making the investment in the partnership firm. It is also true that the assessee was on a contractual obligation to look after the marketing and distribution activities of the firm SPI as per the partnership deed read along with the supplementary deed to earn remuneration from the partnership firm. However, it is equally true that a reasonable disallowance of expenditure should be made for earning the exempt income so far as the share of profit from the partnership firm SPI is concerned. We are conscious about the fact that Rule 8D is not applicable for the year under consideration but at the same time for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....CIT (A) respectfully following the order of his predecessor upheld the action of the AO. 85. Being aggrieved by the order of Ld.CIT (A), the assessee is in appeal before us. 86. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA# 1666/AHD/2016 the impugned addition was deleted by the Hon'ble ITAT vide order dated 08-09-2017. 87. On the other hand, the Ld. DR vehemently supported the order of authorities below. 88. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee (supra), the ITAT deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "104. The Tribunal in A.Y. 2008-09 in ITA No. 3297 & 3420/Ahd/2014 had the occasion to consider the dispute vide ground no. 10 of that appeal and held as under:- 119. We have considered the orders of the authorities below and have given a thoughtful consideration to the order of the Hon'ble Jurisdictional High Court in the case of Alembic Ltd. The Hon'ble High Court was seized, interali....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld by both, the CIT (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argued by the Revenue that while computing the book profit under Section 115JB of the Act, the disallowance of interest expenditure on exempt income was wrongly negative by both the authorities on the ground that it was not the liability for expenses, but a liability relating to assets. 6.5 We find no fault in the approach adopted by both the authorities. The addition under section 115JBof the Act of a sum of Rs. 1,14,43,040/- when was made as an expenditure estimated on earning of dividend income under Section 14A of the Act, without reiterating the rationale of confirming deletion of such amount as has been elaborately done at the time of deciding question no. 1, this deletion requires to be confirmed." 8. Taking into consideration the evidence on record and considering the division of this court in the case of Commissioner of Income-tax-1 vs. Gujarat State Fertilizers & Chemicals Ltd. (supra), we are of the opinion that issue Nos. (iii) and (iv) required to be answered in favour of the assessee and against the revenue. In . A.Y. 2009-10 that view of the m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....92. Being aggrieved by the order of Ld.CIT (A) the assessee is in appeal before us. 93. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA# 1666/AHD/2016 the impugned issue was decided in its favor by the Hon'ble ITAT vide order dated 08-09-2017 94. On the other hand, the Ld. DR vehemently supported the order of authorities below. 95. We have heard the rival contentions and perused the materials available on record. At the outset, we note that the impugned issue is not covered in favor of the assessee as claimed by the Ld.AR of the assessee. As such it was restored to the AO for fresh adjudication. The relevant extract of the ITAT order (supra) is extracted below: "64.On finding similarity of facts, we have no hesitation in following the decision of the Tribunal given in earlier year and the relevant findings read as under:- 153. A similar issue was considered by the Bench in A.Y. 2007-08 in ITA No. 2076 & 2067/Ahd/2013 and the relevant findings read as under:- 52. Coming to the disallowance made u/s. 14A by the First Appellate Authority, it is an undisputed fact that the assessee was having sufficie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. Hence the ground of appeal of the assessee is allowed for statistical purpose. 97. The issue raised by the assessee in the ground no. 14 is related to penalty proceeding u/s 271(1)(c) of the Act. However, the grievance of the assessee is premature at this stage and therefore the same is accordingly dismissed. 98. In the result, the appeal of the assessee is partly allowed for statistical purposes. Now we take up the Revenue's appeal in ITA No.922/Ahd/2017 for AY 2010-11 99. The Revenue has raised the following grounds of appeal "1. On the facts and in the circumstances of the case, and in law, earned CIT(A) erred in educing the addition on account of interest on loans to AEs and on account of 0% OFCD by 1% ignoring the facts that 100 basis point increase was required on account of Country and foreign exchange risk keeping in view substantial foreign exchange risk involved on account of loan to the AE in dollar & severe fluctuations in the foreign exch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o disallow w.r.t. section 801 A(4) of the Act and ignored the law as well as fact that the said amount was not for infra structural development by an undertaking as is provided u/s. 80IA(4) (i) read with explanation (a) to (d) or (iv) of the said section. 9. On the facts and in the circumstances of the case, the learned CIT(A) erred in the law and facts in deleting the addition on account of disallowance of expenditure incurred on behalf of its sister concern without appreciating the fact that the assessee has used the said arrangements to shift the profit and which is not allowable u/s.37 of the I.T. 10. On the facts and in the circumstances of the case, learned CIT(A) erred in law and facts in directing to allow weighted deduction on the R&D expenses which was not certified by DSIR without appreciating that as per provisions of section 35(2AB), the assessee is eligible to for weighted deduction only in respect of the amount which is certified by the prescribe authority i.e. Secretary, Department of Scientific and Industrial research, government of India." 100. The first issue raised by the Revenue in Ground No. 1 is that the Ld.CIT (A) erred in reducing the addition on a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the course of appellate proceedings, I had held that the OFCDs remained debt until they are converted into equity on a future date at an option of the investor. Accordingly, Arm's Length predetermined by TPO was upheld in A.Y. 2009-10, subject to 1% reduction in interest rate benchmarked for I exchange fluctuation risks. However, now this issue stands decided in 1 the favour of appellant, vide order dated 10.05.2016 of Hon'ble ITAT, Ahmedabad contained in ITA No. 1589 & 1592/AHD/2011 (A.Y. 2006-07). In that case the TPO made following adjustments:- (i) Interest on loan to AEs at LOBOR plus rate allowed to AEs Rs. 7,83,82,483/- (ii) Interest on 9% OFCD Rs. 21,08,42,301/- The relevant portion of order of Hon'ble ITAT is reproduced as under:- "7. Assessee carried the matter before the Ld. CIT(A) and reiterated its claim. After considering the facts and the submissions, the Id. CIT(A) reduced the interest to LIBOR+0.25% from LIBOR+2%. The assessee is disputing the LIBOR+0.25% and the revenue is in dispute for the deletion of 1.75%. 8. We have heard the rival contentions and have carefully perused the orders of the authorities below....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to the Assessee and therefore no income was considered. The TPO did not find the contention of the Assessee acceptable. He considered the Optionally Fully Convertible loan as debt and considering the average six month Euro Libor rate for the year @ 4.48% to which he added the interest rate of 2.90 basis point as per the agreement and thereafter considered the rate of interest to be @ 7.38% and accordingly computed the interest on Rs. 108.32 Crore for 171 days at 7.38%. The aforesaid adjustment made by the TPO was considered by the Assessing Officer and the addition of Rs. 3,99,74,426/- was made to the income. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee decided the issue in favour of Assessee. 10. And the Tribunal held as under:- 7. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that as per the agreement, the interest was payable only if the conversion option was not exercised on the expiry of 5 year period. If at any time during the 5 year period conversion option was exercised and the loa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11. It is contended that the Hon'ble Supreme Court has explained the nature of OFCDs and have held that OFCDs are hybrid securities which remained in the nature of debentures till they are converted into equity, after which they take form of equity. Counsel further pointed out that in the earlier assessment years, the Bench has drawn support from the decision in the case of Cadila Healthcare in ITA No. 2430/Ahd/2012 without appreciating the fact that in that case, the assessee has produced comparable data to show that independent parties had entered into agreements with similar terms (benefits) and not charged any interest thereon whereas in the case in hand, the assessee has not produced comparable data to justify that OFCDs were issued at arm's length price. It is strongly contended that since these facts have not been brought on record, therefore, the Bench should not follow its earlier decision. 20. Shri Soparkar ld. senior counsel replying to the submissions of revenuestated that the decision of the Hon'ble Supreme Court in the case of Sahara India Real Estate (Civil Application) No. 9813 of 2011 relied upon by the learned DR is not applicable to the issue befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the decision of the Co-ordinate Bench in the case of Cadila Healthcare. 23. The Hon'ble High Court in the case of A.P.V. Kokkiliagada Meerayya, Masud Khan has laid down the following : 28. There can be no dispute with respect to the settled legal proposition that a judgment of this Court is binding, particularly, when the same is that of a coordinate Bench, or of a larger Bench. It is also correct to state that, even if a particular issue has not been agitated earlier, or a particular argument was advanced, but was not considered, the said judgment does not lose its binding effect, provided that the point with reference to which an argument is subsequently advanced, has actually been decided. The decision therefore would not lose its authority, "merely because it was badly argued, inadequately considered or fallaciously reasoned". The case must be considered taking note of the ratio decidendi of the same i.e. the general reasons, or the genera! grounds upon which the decision of the court is based, or on the test or abstract, of the specific peculiarities of the particular case, which finally gives rise to the decision.(Vide Somawanti v. State of Punjab, Ballabhadas Mathu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the first ground related to the adjustment made on account of notional interest on Optionally Convertible Debenture to Foreign Subsidiary. The Tribunal considered the following facts:- 4. During the course of assessment proceedings, Assessing Officer noticed that Assessee had subscribed to Optionally Convertible Loan of U.S. $ 27 Million issued by Zydus International Pvt. Ltd., Ireland. Accordingly reference under Section 92CA of the Act for computing of arms length price in relation to the transaction was made to Transfer Pricing Officer (TPO). TPO noted that the Assessee had entered into an agreement with Zydus International Pvt. Ltd. on 09.10.2007 for a convertible loan of U.S $ 27 Million which was subsequently utilized by the Ireland Company for acquiring shares in Zydus Healthcare, Brazil. As per the terms of agreement, no interest was payable if the amount was converted into equity. However, if the same is redeemed, interest was payable at Libor Plus 290 bps and the interest was to be computed at annual rates and payable at maturity that is 5 years from the date of first disbursement. The rupee value of the amount of loan as on 31.03.2008 was Rs. 108.32 crore. It was al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing the findings of the Hon'ble High court (supra) and the Co-ordinate Bench (supra), we direct the A.O to delete the impugned additions. Ground no. 2 is accordingly allowed. 26. Thus, the distinguishing facts as canvassed by the Shri Shrivastava do not culminate in to any proposition so as to convince us to take any divergence from earlier findings and the judicial discipline also guides us to follow the decision of the Co-ordinate Bench in the light of the ratio laid down by the Hon'ble Supreme Court and the Hon'ble Jurisdictional High Court of Gujarat (supra) and considering the fact that the OFCD were on beneficial terms as per facts mentioned above. Consequently, we have no hesitation to follow earlier judgment in assessee's own case as a result we delete the impugned additions. Ground No. 3 of assessee is allowed." 107. As facts in the case on hand are identical to the facts of the case as discussed above, therefore we are inclined not to disturb the finding of the Ld.CIT (A). Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal, so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the IT Act itself." 107.2 In the light of the ratio decidendi above we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR before us has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. Hence the ground of appeal of the Revenue is dismissed. 108. The issue raised in the ground no. 2 is that the Ld.CIT(A) erred in reducing the adjustment on account of ALP for Corporate Guarantee Fees from 2.96% to 2%. 108.1 An identical issue has been considered and decided by us in assessee's appeal in ITA 929/AHD/2017 vide ground no. 2 and in Para 13 of this order. Thus respectfully following the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e proceedings of A.Y.2009-10, the Ld. Authorized Representative have filed copy of order of Hon'ble ITAT, Ahmedabad in the appellant's own case dated 22.02.2016 contained in ITA Nos. 1558 & 1676/Ahd/2006 (A.Y. 2002-03), ITA Nos. 1513 & 1701/Ahd/2007 (A.Y. 2003-04) and ITA Nos. 1193 & 1287/Ahd/2008 (A.Y. 2004-05), wherein the similar issue in A.Y. 2004-05, has been decided in the favour of appellant The Hon'ble ITAT has held that the authorities below have not pointed out any specific provisions under which such addition can be made. Moreover, the provisions of section 40A(2) are applicable only in respect of the payments made to the related parties. It has been further held that the Assessing Officer has not brought on record any claim u/s. 80IB made by the assessee and hence there was no justification for making the addition." 113. Being aggrieved by the order of Ld.CIT (A), the Revenue is in appeal before us. 114. Both the parties before us vehemently supported the order of authorities below as favorable to them. 115. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of drug, patent in foreign countries. Therefore, these expenses are not covered under explanation to section 35(2AB) of the Act. Accordingly, the AO held that no weighted deduction in respect of such expenses could be claimed under section 35(2AB) of the Act. Thus the AO disallowed the excess weighted deduction claimed by the assessee amounting to Rs. 2,17,24,495/- and added to the total income of the assessee. 119. The aggrieved assessee, preferred an appeal to the Ld.CIT (A) who deleted the addition made by the AO by observing as under: "10. Ground No. 7 is against the action of the Assessing Officer in holding that the trade mark registration charges of Rs. 67,10,905/- and overseas product registration charges of Rs. 3,67,38,983/- are not eligible for weighted deduction-and accordingly, the Assessing Officer disallowed a sum of Rs. 2,17,24,945/- being weighted deduction u/s 35(2AB). This issue has been discussed by the Assessing Officer in para-5 of the assessment order. I find that basis of disallowance and submissions of the appellant are similar to the A.Y. 2008-09, In A.Y. 2008-09, the CIT(A)-IV, Ahmedabad vide paras-9.3 to 9.7 of order dated 14.10.2014 after elaborate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f trade mark registration and overseas product registration charges u/s. 35(2AB). 11. On perusing the details of R & D expenditure, the A.O found that the assessee has claimed weighted deduction @ 150% on - (a) Trade Mark Registration Charges : 2,42,56,296/- (b) Overseas Product Registration Charges : 2,00,00,508/- 12. The assessee was asked to justify its claim. Assessee filed a detailed reply justifying its claim of weighted deduction. It was explained that the expenditure incurred for product registration although named as Product Registration Expenditure is not merely an expenditure for registration of the product, but in large measure constitutes expenditure for validation and confirmation of the Research carried out. The A.O did not accept the claim of the assessee holding that these expenses were incurred for registration of drug patents in foreign countries. The A.O accordingly withdrew the weighted deduction and allowed only 100% of the same as revenue expenditure. 13. Assessee carried the matter before the ld. CIT(A) but without any success. While dismissing the grievance of the assessee, the ld. CIT(A) followed the findings of his predecessor given in A.Y.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract of the order has already been reproduced above. In the light of the ratio decidendi in the said order, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. Hence the ground of appeal of the Revenue is dismissed. 124. The issue raised by the Revenue in ground number 5 is that the Ld.CIT (A) erred in allowing the weighted deduction claimed under section 35(2AB) of the Act in respect of lunch/refreshment of expenses and brokerage of the property. 124.1 The assessee in respect of research and development expenses has claimed weighted deduction under section 35(2AB) of the Act. However, the AO on perusal of the details of research and development expenses found that it has incurred certain ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he order. Since, these expenses relating to lunch and refreshment were pertaining to the employees engaged in R&D activities and brokerage was paid for the property used in R&D Centre, it was held that these expenses qualify for weighted deduction at 150%, Since the facts are identical in this year also, I respectfully following the order of CIT(A)-IV, Ahmedabad, direct the Assessing Officer to allow weighted deduction at 150% on lunch and refreshment and brokerage for property. Thus, Ground No. 8 is allowed." 129. Being aggrieved by the order of Ld.CIT (A), the Revenue is in appeal before us. 130. Both the parties before us vehemently supported the order of authorities below as favorable to them. 131. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee Revenue appeal ITA No 1663/AHD/2016, the ITAT deleted the addition made by the AO. The relevant extract of the order is reproduced as under: "118. The denial of the weighted deduction u/s. 35(2AB) of the Act has been allowed by the ld. CIT(A) by following the findings of his predecessor give....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espectfully following the findings of the Co-ordinate Bench (supra), ground no. 5 is dismissed". 131.2 As facts in the case on hand are identical to the facts of the case as discussed above, therefore we are inclined not to disturb the finding of the Ld.CIT (A). Moreover, we are bound to follow the order of this Tribunal in the own case of the assessee in the earlier year as the facts are identical in the impugned issue before us. It is also important to note that the ld. DR has not brought anything on record against the finding of the Ld. CIT-A, and the argument advanced by the Ld. Counsel for the assessee. 131.3 We also place our reliance on the judgment of Hon'ble Madras High Court in the case of CIT v. L.G. Ramamurthi 1977 CTR (Mad.) 416 : [1977] 110 ITR 453 (Mad.). The relevant extract of the order has already been reproduced above. In the light of the ratio decidendi in the said order, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi ren....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so involved in the case of appellant ion A.Y. 2008-09 and the CIT(A)-IV, Ahmedabad vide para-16.2 to 16.2.2 of the appellate order has allowed the appeal of the appellant on this account holding that the Wealth-tax paid, payable or a provision thereof, cannot be treated on par with Income-tax and accordingly the provisions for Wealth-tax was not required to be added to the book profit u/s.115JB. Respectfully following the order of CIT(A)-IV, Ahmedabad, I also direct the Assessing Officer to exclude the provisions of Wealth-tax from the book profit computation u/s.115JB. Thus, appellant succeeds in respect of Group No.10." 136. Being aggrieved by the order of Ld.CIT (A) the Revenue is in appeal before us. 137. Both the parties before us vehemently supported the order of authorities below as favorable to them. 138. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee in ITA 1663/AHD/2016 vide order dated 8-9-2017 where the ITAT deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "129. The ld. CIT(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in line and tune with the judicial discipline and decorum. Hence the ground of appeal of the Revenue is dismissed. 139. The issue raised by the Revenue in ground number 8 is that the Ld.CIT (A) erred in deleting the addition made by AO under section 80IA(4) of the Act for Rs. 1,83,99,656/-. 139.1 The assessee in the year under consideration has not claimed a deduction of Rs. 75,37,561/-u/s 80IA(4) of the Act in its return and the revised return of income as there was no positive income in the computation of income. But the assessee claimed that it has the right to claim the deduction u/s 80IA(4) of the Act as and when necessary as per the provision of law. 139.2 All the units engaged in the business of the electricity, maintain separate books of account of each unit and same is audited under the Act. The assessee further submitted that the sale of such unit becomes the purchases of other units. As such the profit derived by the said unit is included in the total income of the assessee. 139.3 However, the AO disagreed with the submission of the assessee by observing that the income of the assessee turn positive due to various addition being made in the assessment. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted in captive power plant are as under:- Statement of Panoli CPP Panoli working of deduction u/s 801A CPP Panoli 08-09 CPP Panoli 07-08 CPP Panoli 06-07 Panoli CPP 05-06 Panoli CPP 04-05 A Profit before tax as per Profit & Loss A/c 32,79,235 (9,53,471) 82,89,195 75,41,568 43,51,772 B) Add: Items disallowed / considered separately Depreciation 18,57,315 18,57,315 18,57,315 18,57,315 13,95,524 Disallowance 20,144 u/s 43 B-Bonus Disallowance u/s 43 B-Earned leave - - 1,950 - - Total B 18,77,459 18,57,315 18,59,265 18,57,315 13,95,524 C) Less: Items allowable/ Exempt Depreciation allowable 7,92,565 9,19,853 10,92,925 22,68,015 1,12,34,536 Total C 7,92,565 9,19,853 10,92,925 22,68,015 1,12,34,536 Net Profit 43,64,129 (16,009) 90,55,535 71,30,868 (54,87,240) Previous Year (16,009) Profit / (Loss) Amount claimed 43,48,120 - 90,55,535 179. We further find t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....muneration of the net profit of SPI. 144.2 During the year under consideration, assessee received 5% of net profit of SPI, i.e. Rs. 15,07,27,535/- under the head remuneration. 144.3 However, the SPI had not debited this remuneration in its profit & loss account because of section 40(b) of the Act. The AO was of the view that as per the explanation of section working partners mean an individual who actively engaged in the business of the firm. In the present case assessee is not an individual but a company. Thus the provisions of the section do not apply to the remuneration paid to the company. Therefore the remuneration was not debited in the profit& loss account. 144.4 Thus, the assessee has not offered such remuneration to tax because of section 28(v) of the Act. However, the expenses incurred by the assessee on behalf of the SPI duly debited in its profit & loss accounts which are not incurred exclusively for the business as per section 37 of the Act. On a question by the AO assessee submitted that the assessee already had a well-established marketing and distribution network and required personnel for carrying out such activities. The assessee is an established pharmac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contained in appeal No.1193 & 1287/AHD/2008 has also been filed by the Ld.Authorized Representative during the course of appellate proceedings and it has been vehemently submitted that this issue now stands covered in the favour of appellant." 147. Being aggrieved by the order of Ld.CIT (A), the Revenue is in appeal before us. 148. Both the parties before us vehemently supported the order of authorities below as favorable to them. 149. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee in ITA 1663/AHD/2016 vide order dated 8-9-2017, the ITAT deleted the addition made by the TPO/AO. The relevant extract of the order is reproduced as under: "132. A perusal of the order of the Co-ordinate Bench for earlier years shows that the Bench has considered similar issue in ITA Nos. 3297 & . A.Y. 2009-10 3420/Ahd/2014 and has decided this issue in favour of the assessee and against the revenue. The Tribunal while deciding this issue had followed the decision of the Coordinate Bench in assessee's own case in ITA Nos. 1589 & 1592/Ahd/2011 wherein th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ready been reproduced above. In the light of the ratio decidendi in the said order, we are of the considered opinion that the view adopted by the co-ordinate bench as discussed above shall be applied in the case on hand with full strength. The ld. DR has not brought any decisions varying from similar or identical facts or circumstances. Therefore, the ratio decidendi rendered by the earlier order of the Tribunal has necessarily to be followed by us in line and tune with the judicial discipline and decorum. Hence the ground of appeal of the Revenue is dismissed. 150. The issue raised by the Revenue in ground number 10 is that the Ld.CIT (A) erred in directing the AO to allow weighted deduction u/s 35(2AB) of the Act not certified by the DSIR. 150.1 At the outset, we note that we have adjudicated the issue raised by the Revenue along with ground of appeal of the assessee's appeal in ITA 929/AHD/2017 vide ground no. 6 vide Para no. 35 of this order. Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 151. In the result, the appeal of the Revenue is partly allow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d accordingly the profit allocation to the AE ought io be high. Without prejudice to the above, even if PSM is to be followed, the Ld. CIT(A) grossly erred in upholding the order of AO/TPO without appreciating the fact that the profits of the AE derived from sale of Pantoprazole ought to be split between the Appellant and the AE after deducting the infringement claim of USD 506 million which was discharged by AE. Without prejudice to the above, if the PSM is to be followed, the ratio of 50:50 ought to be adopted for benchmarking sale of the product. 2. Re: Addition on account of Sale of Para IV products other than Pantoprazole to Sun Pharma Global FZE - Rs. 94,76,59,251/-: 2.1 The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in rejecting the benchmarking done by the Appellant as a contract manufacturer having regard to the functions performed, the assets deployed and risks undertaken by the Appellant in the transaction. 2.2 The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in classifying the saies made by the Appellant having regard to the relevant Para of the US PDA under which the approval was sought without appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o erred in classifying the sales made by the Appellant having regard to the relevant Para of the US TDA under which the approval was sought without appreciating the fact that the US PDA Para under which the product is filed is irrelevant for the Appellant who is a contract manufacturer. 3.3 The Ld. CIT(A) has grossly erred in sustaining the additions made by the TPO by recharacterizing the true nature of the transaction undertaken by the appellant based on peculiar interpretation of the past & unpredictable future events. 3. Without prejudice to the above, the Ld. CIT(A), has grossly erred in upholding the order of AO/TPO and sustaining the additions merely by placing reliance on the order of CIT(A) for AY 2008-09 which covered Pantoprazole drug without appreciating the evidently distinguishable facts relevant for Non Para IV products. 3.5 The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who erred in arbitrary adoption of residual PSM as the same cannot be applied to the transaction under review as neither there is any transfer of unique intangibles nor multiple interrelated transactions requiring separate evaluation. 3.6 Without prejudice to the above,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in disallowing selling and distribution expenditure allegedly incurred on doctors/medical practitioners without appreciating that the same is for the promotion of the business and was in furtherance of its business objectives and further erred in: 1 Not appreciating that the provisions of Indian Medical Council Regulations, 2002, are not applicable to the pharmaceutical companies and hence any expenditure incurred on sales promotion would be allowed as business expenditure u/s 37(1) being in furtherance of its business objectives. 2 Relying on the CBDT Circular No. 5/2012 while disallowing the amount of expenditure without appreciating that department circular are not binding on the Appellant. 5.2 Without prejudice to the above, the Ld. CIT(A) has already upheld disallowance of selling and distribution expenditure allegedly incurred on behalf of Sun Pharmaceutical Industries ('SPS') and Sun Pharma Sikkim ('SPS') u/s 14A, therefore, the amount to be disallowed under this ground ought to be reduced by the amount already disallowed under the other ground. 6. Disallo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....racterized the remuneration received by the Appellant as royalty. The Ld. CIT(A) ought to have appreciated that if the income was sought to be recharacterized as royalty, then the expenditure incurred to earn such income ought to be allowed as deduction. 8. Re: Disallowance u/s 14A read with rule 8D- Rs. 7,1G,20,195/- 8.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of Rs. 7,16,20,195/- u/s 14A by invoking rule 8D of the Income-tax Rules, 1962 without appreciating that: .1 The AO has mechanically invoked rule 8D without first recording its satisfaction regarding the correctness of the claim made by the Appellant; .2 The income earned by the Appellant from the partnership firm is not an exempt income covered under chapter III of the Act and hence section 14A could not be invoked to that extent; .3 Since the Appellant had sufficient interest free funds to make the investments, presumption ought to be made that investments were made from interest free funds and not borrowed funds; .4 Provisions of section 14A cannot be applied to investments which are strategic in nature or c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8D. 10. Disallowance of R&D expenses (revenue) allegedly incurred on behalf of partnership firms of SPI and SPS - Rs. 117,70,04,468/-: 10.1 On the facts and in the circumstances of the case and in law, the Ld. CIT{A) grossly erred in allocating R&D expense (revenue) incurred by the Appellant to the partnership firms of SPI and SPS without appreciating that: .1 The Appellant had carried out the R&D as part of its own business activities and that all the IPRs arising out of the said R&D activity remained with the Appellant; .2 The decision to manufacture the products at the factory of SPI and SPS was based on business and commercial expediency and in pursuance of the obligation on the Appellant under the partnership deed in lieu of which it was entitled to receive remuneration; .3 The Appellant being a working partner was obliged to provide technical and other information to partnership firm and hence the incurrence of R&D (revenue) expenses, if any, was in furtherance of its obligation under the partnership deed and therefore, allowable u/s 37(1). 10.2 Without prejudice to the above, the Ld. CIT (A) grossly erred in allocating proportionate R&D ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allowance ought to be substantially reduced. 11. Re: Disallowance of R&D expenses (capital) allegedly incurred on behalf of SPI and SPS-Rs.17,71,22,520/-: 11.1 The Ld. CIT(A) grossly erred in allocating capital R&D expenditure amounting to Rs. 17,71,22,520/- incurred by the Appellant to SPS and SPI on the ground that the Appellant had incurred R&D expenses for and on behalf of SPS and SPI without appreciating that the assets acquired were actually owned by the Appellant and used for conducting R&D activities in the Appellant's facilities which were approved by the DSIR and this is also duly certified by the statutory auditors of the Appellant Company. 11.2 The Ld. CIT(A) failed to appreciate the fact that capital expenditure was solely for the benefit of Appellant and ownership of all products and facilities was exclusively with the Appellant and not SPS and SPI. 11.3 The CIT(A) grossly erred in disallowing the expenditure incurred by the Appellant on the capital assets without appreciating that the said deduction was allowable by virtue of the enabling provisions of section 35{2AB) and 35(1 )(iv) and the Appellant had fulfilled all the conditions relating to sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n lieu of the services and functions rendered in its capacity as working partner of the Firm; .4 That addition of royalty income on account of use of trademark and brand name is on notional basis and was never realized by the Appellant; 12.3 Without prejudice to the above contention, the Ld. CIT(A) grossly erred in upholding the allegations that the transaction with SPI was entered into with a motive to avoid tax as SPI was entitled to deduction u/s 80IB without appreciating the fact that deduction claimed by SPI u/s 80IB was limited to only 25% percent of profits earned and that SPI continued to pay tax on the balance income. 12.4 Without prejudice to the above, the order of the CIT{A) for AY 2008-09, the very basis on which the Ld. CIT{A) / AO has relied, has been rendered inexistent. The Hon'ble C!T(A) while adjudicating for AY 2008-09 in Appellant's case had in turn relied on the decision of the Hon'ble CIT(A) in case of SPI for AY 2008-09. However, the Hon'ble Amritsar ITAT in case of SPI has decided the case in favour of the Appellant and hence no addition on account of re-characterization of remuneration on this basis can be held tenable. 12....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n interest income received in respect of tax free bonds and taxing it as taxable which is otherwise exempt under the provisions of the Act thereby not considering the CBDT Circular No. 14 (XL-35) dated 11.04.1955." 153. The 1st issue raised by the assessee is that ld. CIT (A) erred in confirming the addition made by the AO/TPO for Rs. 94,73,729/- on account of sale of pantoprazole to SPG (FZE). 153.1 We have already decided the impugned issue in favor of the assessee in ITA 929/AHD/2017 in the ground of appeal bearing no. 3 vide Para No. 20 & 21of this order. Thus respectfully following the same, we set aside the order of the Ld.CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 154. The issue raised in the ground no. 2 and 3 are related to the addition made by the TPO for Rs. 94,76,59,251 and 107,77,95,776.00 respectively on account of sale of drugs other than pantoprazole to SPG BVI and SPG FZE. 154.1 We have already decided the impugn issue in favor of the assessee in order in ITA 929/AHD/2017 in the ground of appeal bearing no. 4 and 5 vide Para No. 27 & 28 of this order. Thus respectfull....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hip expenses amounting to Rs. 84,99,194/- by way of the reimbursement of fees for conference, seminars, and sponsorship. The doctors gain knowledge about the various disease which is shared with the assessee. The doctors also provide feedback which helps the assessee to improve/develop its product and research and development. 156.7 The assessee has also reimbursed the accommodation expenses to the doctors amounting to Rs. 28,91,444/- which is incurred by the doctors for their stay to attend the conference and seminars. 156.8 The assessee also submitted that IMC regulation does not apply to it as assessee is a pharmaceutical company and not a medical practitioner. 156.9 The assessee also contended that circular issued by the CBDT bearing no. 5/2012 does not apply to it as held in various judicial pronouncements. 157. However, AO disregarded the contention of the assessee and held that MCI is a statutory body which discharges its function under the Medical Council Act 1956. Therefore any violation of the guidelines would be covered under the prohibition of law as mentioned in explanation 1 to section 37(1). 157.1 Further, CBDT also in this regard issued circular No. 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 2012. Since Medical Council of India has prohibited expenditure on freebies given to the medical professional with effect from 10,12.2009, in my considered view, the Circular No. 5 of CBDT dated 01.08.2012 only reasserts the legal position and hence the expenditure on freebies will not be allowable u/s. 37(1) being an expenditure prohibited by law. Accordingly, I hold that expenditure on gifts to the-extent of Rs. 7,27,99,029/- shall not be deemed to have been incurred for the purposes of business or profession and hence the disallowance to this extent is confirmed. 23.2.1. As regards the balance expenditure on Accommodation (Lodging & Boarding) at Rs. 28,91,444/- and Conference fees and sponsorship at Rs. 84,99,194/-, the appellant has submitted that these expenses pertained to reimbursement of accommodation expenses to the Doctors and medical " practitioner during their stay to attend the conference and seminars , organized in furtherance of business objections of upgrading the medical ! knowledge. Similarly, conference fees and sponsorship has been also stated to be reimbursement of fees for conference and seminars held in India and abroad. It has further been claimed that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extract of the order is reproduced as under: "We have heard both the parties. Mr. Soparkar is very fair in pointing out at the outset that this tribunal's decision in Asstt. CIT v. Liva Healthcare Ltd. [2016] 161 ITD 63/73taxmann.com 171 (Mum. - Trib.) upholding such a disallowance in case of pharmaceutical companies offering free samples to doctor post introduction of the relevant product in market after establishing end use; is hit by Section 37(1) explanation. He however refers to another co-ordinate bench decision in Macleods Pharmaceuticals Ltd. v. Addl. CIT [2016] 161 ITD 291/74taxmann.com 250 (Mum. - Trib.) holding that the above Board's circular dated 01.08.2012 would not have any retrospective effect since not operating in assessment years 2010-11. He further quotes another co-ordinate bench decision in Dy. CIT v. PHL Pharma (P.) Ltd. [2017] 163 ITD 10/78taxmann.com 36 (Mum. - Trib.) distinguishing the above case law in Revenue's favour whilst deleting an identical disallowance on the ground that such business promotion expenses are allowable as business expenditure not hit u/s. 37(1) explanation. We afforded ample rebuttal opportunity to the Revenue. Learn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng no. 12 vide Para No. 88 & 89 of this order. Thus we direct the AO accordingly to delete the addition of expenses disallowed u/s 14A while computing the book profit u/s 115JB of the Act. Hence the ground of appeal of the assessee is allowed. 166. The issue raised by the assessee in ground No. 10 and 11 is that the Ld.CIT (A) erred in confirming the order of the AO by allocating the research and development expenses incurred by it to the other partnership firms and accordingly made the disallowance of such expenses proportionately 166.1 We have already decided the impugned issue in favor of the assessee in ITA 929/AHD/2017 in the ground of appeal bearing no. 7 vide Para No. 64 & 65 of this order. Thus we direct the AO accordingly to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 167. The issue raised by the assessee in the ground no. 12 is that the Ld.CIT (A) erred in confirming the addition made by the AO amounting to Rs. 2,01,23,42,044/- on account of remuneration received by the assessee from partnership firms treated as fees for the use of trademarks and brands. 167.1 The assessee in the year under consideration has received....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceedings for A.Y. 2008-09 by the CIT(A)-IV, Ahmedabad. After considering the terms of the agreement, it has been held in A.Y. 2008-09 that the so called "remuneration" was nothing but it was fee for permitting use of all present and future trademark/brands and technology to SPI. The relevant findings are recorded by the CIT(A)-IV, Ahmedabad in this regard in paras-20.5 to 20.5.1. Following the order of CIT(A)-IV, Ahmedabad and also considering the factual and legal position in this regard, in A.Y. 2009-10, I also held that the appellant company had received a sum of Rs. 57,49,50,297/- from SPI as consideration for permitting use of all present and future trademark/brands, in the entire world/ for the period of 5 years and for providing other managerial services. Thus, the so called "remuneration" as claimed by the appellant does not represent the remuneration at all but fee for above mentioned services and accordingly income was enhanced by Rs. 57,49,50,297/-. The business arrangements of appellant with SPS firm are identical to SPI. 21.2. Since the facts are identical in this year also, I respectfully following the order of CIT(A)-IV, Ahmedabad in A.Y. 2008-9 and my own order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m, this amount of 40.12 crores would have otherwise come to the assessee in the firm of share of profit which again is exempt from taxation u/s. 10(2A) of the Act. Therefore, in our considered opinion, the allegation that it is a case of tax evasion is ill-founded. The fact of the matter is that such payments were never re-characterized as royalty in earlier assessment years and the action of the First Appellate Authority in the year under consideration is nothing but based upon assumptions and presumptions. No addition can be sustained which are based upon assumptions, surmises or conjectures. We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the amount of Rs. 40.12 crores re-characterized by the First Appellate Authority. Ground no. 13 is allowed. 73.As no distinguishing fact emerge from the orders of the authorities below, respectfully following the findings of the Tribunal (supra), we direct the A.O. to delete the addition of Rs. 57,49,50,297/-. Ground no. 15 is allowed." 173.1 As the facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the same we set aside the order of l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: Detail of revenue expenditure as under: Particulars Amount a.Total Revenue R & D Expenditure dbited to P &L 16,566.24 b.Inadmissible amount of R &D expenditure out of (a) above 7.83 c.Revenue R&D Expenditure admissible @ 200% out of (a) above 33,116.82 (16,558.42*2) 174.3 Detail of capital expenditure as under: Particulars Amount a.Total Capital Expenditure (Net) 3,521.04 b.Inadmissible amount of R &D expenditure out of (a) above 1,050.79 c.Revenue R&D Expenditure admissible @ 100% out of (a) above[35(1)(iv)] 60.37 d.Less Sale Proceed on sale of Assets (8.40) e.R&D Expenditure admissible @200% out of a (a) above 4,802.56 (2,401.28*2) 174.5 The assessee further filed the reconciliation statement of the difference between the expenditure (both Revenue & Capital) claimed by it and the expenditure approved by the DSIR: 174.6 Reconciliation statement for revenue expenditure as under: I. Revenue R &D expenditure Particulars Amount (Rs. In lacs) Amount (Rs.in lacs) Gross Amount of Revenue R &D on which weighted deduction is claimed 16,566.24 Less: Amount Inadmissible 1.Less on Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Munciupal Taces 33.39 4. Rates and Taxes 13.81 5. Rent 0.27 Total 143.6 The assessee in response to the notice issued by the AO explained that the word "expenditure in the nature of cost of any land or building" used in section 35(2AB) of the Act relates to the purchase of any land or building. But the expenses claimed by it are in the nature of wear & tear expenses which are not capital in nature for the land or building. Therefore the repair and maintenance charges cannot be considered as the cost of the building. These expenses were incurred for wear & tear and maintenance of the building. These expenses are not bringing the building into existence or to put to use for work. Therefore expenses are not in the nature of capital. Repair of building expenses incurred for the building in which the research and development activity carried out. Therefore expeses are eligible for deduction u/s 35(2AB) of the Act. 3) During the year under consideration the assessee has incurred the expenses towards clinical trial activity carried outside the approved facilities and in the overseas countries amounting to Rs. 511.33 lacs as detailed under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the transportation of the employee of the R&D unit. These expenses are integral part of the R&D activity. 175. However the AO disregarded the contention of the assessee by observing that as per provision of 35(2AB) only expenses approved by the DSIR eligible for weighted deduction. Therefore expenses not approved by the DSIR are not eligible for weighted deduction u/s 35(2AB) of the Act. The facts of the case law i.e., M/s Claris life-science ltd relied by the assessee are not applicable on the facts of the assessee. Similarly, the issue involved in the case of Torrent Pharmaceuticals, its decision is not yet settled. Thus excess deduction claimed by the assessee amounting to Rs. 3,693.69 lacs is disallowed and added to total income of the assessee. 176. Aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld.CIT (A) has submitted that as per provision of section 35(2AB) of the Act for claiming weighted deduction only one condition i.e. facility used for the purpose of R&D activities should be approved by prescribed authority, is required to be complied. The assessee in support of its contention relied on the judgment of the Torrent pharmaceut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R. included in Rs. 2046.99 lacs and then allow consequential relief without appreciating that it was for the assesee to approach the Secretary, D.S.I.R. for reconsideration of approval of expenditure on scientific rsearch to the extent of Rs. 2046.99 lacs not considered in certificate issued by the Secretary, D.S.I.R.. for the purpose of weighted deduction u/s. 35(2AB) of the Act. 16. Whether on the facts and Circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A.O. to verify each and every item of the expenses not certified by D.S.I.R. included in Rs. 2046.99 lacs and then allow consequential relief without appreciating that in accordance with the Scheme of Section 35(2AB) of the Act, the approval of expenditure on Scientific research is the guiding factor for the A.O. to determine the allowance or otherwise of the weighted deduction u/s. 35(SAB) of the Act claimed by the assessee. 17 Whether on the facts and Circumstances of the case and in law, the Ld. C.I.T. (A) was justified in directing the A.O. to verify each and every item of the expenses not certified by D.S.I.R. included in Rs. 2046.99 lacs and then allow consequential relief witho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplication of PSM as the MAM , in our understanding of the facts TNMM is the MAM on the given facts and the same is accepted as :h. We set aside the findings of the Id. CIT(A) and direct to delete the f petition of Rs. 612,03,39,468/-. Ground no. 5 of the assesse is allowed. 95. Ground no. 6 relates to the denial of weighted deduction u/s. 35(2:A&) on trade mark charges, overseas product registration charges. 96. An identical issue was considered by the Bench in assessee's own case in ITA Nos. 2076 & 2067/Ahd/2013 wherein the Bench has followed the findings of the Co-ordinate Bench in ITA No. 1589/Ahd/2011 and the same reads as under:- 34. We find that an identical issue was considered by the Co-ordinate Bench in assessee's own case in ITA No. 1589/Ahd/2011 qua ground no. 3 wherein the Bench has followed its earlier decision in ITA No.2430/Ahd/2009. The findings thereon read as under:- Ground no. 4 relates to the disallowance of trade mark registration an do verse as product registration charges u/s. 35(2AB). 11. On perusing the details of R & D expenditure, the A.O found that the assessee has claimed weighted deduction @ 150% on (a) Trade Mark Registratio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... allow the impugned weighted deduction. Ground no. 3 is accordingly allowed. 35,We direct accordingly. Ground no. 6 is allowed. 97. Respectfully following the same, we direct accordingly. Ground ho. 6 is allowed. 98.6round no. 7 relates to the denial of weighted deduction u/s. 35{2AB) on expenses incurred on Corporate Advertisement. 99.The issue is identical to the issues raised vide ground no. 6 (supra). For , similar reasons, we direct the A.O. to allow the weighted deduction. , Ground no. 7 is allowed. 100. Ground no. 8 relates to the denial of weighted deduction u/s. 35(2AB) on revenue expenditures. 101. Once again, the issues are same as raised vide ground no. 6 hereinabove. For our detailed discussion therein, we direct accordingly. Ground no. 8 is allowed. , 102. Ground no. 9 relates to the claim of deduction of remuneration received from partnership firm for determination of book profit u/s. 115JB. 103. Facts in issue are that the appellant company has claimed to have (received remuneration of Rs. 40.12 crs from partnership firm Sun Pharma (Industries (SPI) which was deducted while working: out profit u/s. 115JB of the Act. It was claimed by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sent appeal, we have extracted the relevant part of the decision of the Co- ordinate Bench. For the reasons given therein, ground no. 2 is also dismissed. 74. Ground no. 3 relates to the deletion of the disallowance of Rs. 7,91,222/- claimed u/s. 35(2AB) of the Act incurred for lunch, refreshment and brokerage paid for property used by R & D unit employees. 183.2.Further the relevant extract of the judgment of the Torrent pharmaceuticals ltd bearing ITA No. 4343 & 4356/Ahd/2007 for the AY 2002-03 vide order dated 31-01-2011 are reproduced as under: At the outset Ld. Counsel for the assessee stated that this issue is squarely covered in favour of assessee and against the Revenue by the decision of this Tribunal in the case of ACIT v. Torrent Pharmaceuticals Ltd. in ITA No.3569 /Ahd/2004 & CO No.18/Ahd/2005 for assessment year 2001-02 vide order dated 13-11-2009, wherein the Tribunal has held in para-10:- "10. In view of the above facts and circumstances, we are of the view that it is only the expenditure which will only be allowed, whereas the assessee vide the copy of the letter reproduced hereinabove has very clearly explained as to how the entire expenditure claimed b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appeal is dismissed and that of the assessee's CO is allowed. " 183.3.The facts of the case on hand are identical to the facts of the case as discussed above. The ld. DR has also not brought anything on record contrary to the finding of ld. CIT-A, and the argument advanced by the Ld. AR for the assessee. Therefore respectfully following the same, we do not want to disturb the finding of ld. CIT-A. 183.4 However, we note that the AO has made the disallowance of the expenses not certified by the DSIR. As such the issue of the verification of the expenses pertaining to R & D facility is not arising from the order of the AO. However the ld. CIT-A allowed the relief to the assessee subject to the direction that the AO shall verify whether the expenditure claimed by the assessee belongs to the R & D facility of the assessee. However, we note that there are certain expenses which were disallowed by the AO treating them not connected with the R & D facility of the assessee. 183.4 The details of such expenses stand as under: (a) Patent and Trade Mark Registration Charges 38.30 (b) Overseas product Registration expenses 230.83 (c) Repairs to building ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Ld.CIT(A). Hence the ground of appeal of the assessee is dismissed. 190. The issue raised by the assessee in the additional ground, i.e. ground no. 15 for the relief u/s 10(15) of the Act for interest on tax-free bond which assessee mistakenly offered to tax. 190.1 The ground raised by the assessee is legal in nature which can be admitted at any stage of the proceedings. For this proposition we find support and guidance from the judgement of Hon'ble Supreme Court in case of CIT Vs. Sinhgad technical education society reported in 397 ITR 344 wherein it was held as under: "The Tribunal permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the Tribunal that as per the provisions of section 153C, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. Since this requirement under section 153C is essential for assessment under that provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in profiteering and collecting capitation fee is concerned. Whatever other repercussions are there, based on these findings, they can follow." In view of the above, we admit the additional ground raised by the assessee and restore the matter to the file of AO for fresh adjudication. Hence the ground of appeal of the assessee is allowed for statistical purposes. 191. In the result the appeal of the assessee is partly allowed for the statistical purposes. 192. Now we take up the Revenue appeal in ITA No. 1234/Ahd/2017 for AY 2012-13 The Revenue has raised the following ground as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T, (A) was justified in directing the A.o. to delete the addition on account of interest on loan to A.Es of Rs. 13,43,79,010/-without appreciating that till the amount advanced by the assesee to its Associated Enterprise, was adjusted towards equity capital, the amount remained in the form of advance and hence for that period of time the assessee ought to have charged interest on loan advanced to its A.E. 2. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T. (A) was justified in d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated to trade mark registration charges, overseas product registration charges, repairs to building & municipal taxes, lunch and refreshment expenses, brokerage charges for property without appreciating that in accordance with the provision of section 35(2AB) of the Act, weighted deduction u/s. 35(2AB) is allowable only if the expenditure incurred on scientific research is approved by the prescribed Authority i.e. Secretary, D.S.I.R. Govt of India as is evident from the discussion made in the assessment order, the assesee did not establish that the Secretary, D.S.I.R. had approved the above referred expenditure for the purpose of weighted deduction u/s. 35(2AB) of the Act. 7. Whether on the facts and circumstances of the case and in law, the Ld. CI.T. (A) was justified in holding that " The appellant company has incurred the expenditure of Rs. 1,70,95,96,941/- also for the purpose of its business through the partnership firm and accordingly disallowance u/s, 37 is not called for" without appreciating that the A.O. had correctly disallowed the expenditure on selling and distribution expenses incurred by the assessee u/s. 37(1) of the Act, since the assessee had debited the expens....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduct manufactured in Units under S.P.I, and SPS were developed at the R 85 D facilties of SPIL, in whose books of accounts such R 85 D expenses 12. Whether on the facts and in circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that "The expenses incurred for development of Formulation Drug for domestic market are to be considered only because SPI and has no business outside the country" without appreciating the factual finding recorded by the A.O. in the assessment order to the effect that "Further both SPIL and the partnership firms i.e. SPI and SPS are selling products overseas as well as in local market" 13. Whether on the facts and circumstances of the case and in law the Ld. C.I.T. (A) was justified in directing the AO. to the disallowance to the extent of Rs. 84,99,194/- being conference fees and sponsorship, without appreciating that the A.O, had correctly disallowed the expenses on conference fees and sponsorship, since the said expenses incurred by the assessee were in the nature of freebies/gift to the medical practineers, thereby assessee had violated the Regulations laid down by Medical Council of India. 14. Whether on the facts and cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that the CIT(A) erred in reducing the addition on account of interest on loans to AEs on account of 0% OFCD. 193.1 We have already decided the impugned issues against the Revenue in the ground of appeal bearing no. 1 vide Para No.106 & 107 of this order in ITA 922/AHD/2017. Thus respectfully following the same, we are inclined not to disturb the finding of the Ld.CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed. 194. The issue raised by the Revenue in ground number 3 is that the Ld.CIT (A) erred in deleting the addition of weighted deduction made under section 35(2AB) of the Act on trademark registration charges and overseas product registration expenses of Rs. 2,69,13,314/-. 194.1.We have already decided the impugned issues against the Revenue in the ground of appeal bearing no. 4 vide Para No.122 & 123 of this order in ITA 922/AHD/2017. Thus respectfully following the same, we are inclined not to disturb the finding of the Ld.CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed. 195. The issue raised by the Rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ars. In A.Y. 2006-07, the CIT(A)-IV, Ahmedabad vide order dated 31.03.2011 contained in Appeal No. CIT(A)-IV/100-B/CC-1/08- 09, has directed the Assessing Officer to allow weighted deduction since repairs to building and municipal taxes were instinctly related to R&D unit and hence cannot be held to be unconnected to the development of R&D Facility which was already approved. Similar view has been expressed in A.Y 2008-09 by the CIT(A)-IV, Ahmedabad vide para 13.2.3 of order dated 14.10.1014, relevant portion of which has been reproduced in this order while dealing with Ground No. 21. Respectfully following the orders of CIT(A)-IV, Ahmedabad, the Assessing Officer is directed to allow weighted deduction on expenses relating to Building repairs and Municipal taxes amounting to Rs. 1,21,59,206/- since the facts are identical in this year also. Thus, Ground No. 6 is allowed 198. Being aggrieved by the order of the ld. CIT-A, the Revenue is in appeal before us. 199. Both the parties before us relied on the order of authorities below as favorable to them. 200. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT-A. Hence the ground of appeal of the Revenue is dismissed. 203. The issue raised by the Revenue in ground number 7 and 8 is that the Ld.CIT (A) erred in deleting the addition made by AO under section 37 of the Act for Rs. 1,70,95,96,941/-on account of expenses incurred on behalf of its sister concerns. 203.1 At the outset, we note that we have adjudicated the similar issue raised by the Revenue in ground bearing no. 9 vide Para no. 149 of this order in ITA 922/AHD/2017. Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 204. The issue raised by the Revenue in ground number 9 and 10 is that the Ld.CIT (A) erred in deleting the addition made by AO under section 80IA(4) of the Act for Rs. 97,03,809/-. 204.1.At the outset, we note that we have adjudicated the similar issue raised by the Revenue in ground bearing no. 8 vide Para no. 143 of this order in ITA 922/AHD/2017. Thus respectfully, following the same, we do not find any reason to interfere in the order of the Ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. 205. The issue raised b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....FDD2 of the world market) |Formulation Development of Annexure 2 2193.40 Injectibles {Syringe/Nasal Spray Cream} Mahakali Formulation & Analytical Annexure 3 1618.62 Development (For Regulated market-US & Europe) Orgainic Synthesis Process Organic synthesis (basic) for bulk drugs Organic synthesis (process) for bulk drugs Total R &D Expenditure dept. wise Annexure 4 Annexure 5 873.62 1065.83 7402.95 mfg at Silvassa, Dadra, Jammu, Halol, LL & 3rt Party Manufactured by SPIL at Halol or at 3rd party/LL but not by SPI Mainly for US, Europe & Rest of the world market. Domestic may be negligible. Only for Bulk Drug/API Only for Bulk Drug/API Document 2 Regulatory/O verseas Expenses Annexure 6 217.96 a) b) 500.89 Expenses on accounts of Products Registration, Clinical Trails, Subscription etc. for product for overseas market. Expenses on accounts Clinical Trails for Domestic market. R & D a) 4751.79 Expenses for Professional Professional Charges for products for Fees Other.- miscellaneous expenditu....