TaxTMI 
TaxTMI 
2019 (10) TMI 1399
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....lly owned subsidiary namely Ranbaxy Pharmaceuticals Inc. ("Ranbaxy USA"), based in Florida, USA. Ranbaxy USA is engaged in sale and distribution of generic and branded prescription products in the USA healthcare system. The Applicant has received certain payments from Ranbaxy India in connection of marketing of the generic drug in the USA market. Accordingly, the Applicant has filed an application dated 31st March,2013 u/s 245 Q (1) of the Act about the nature of income and taxability of the amount received from Ranbaxy India and has raised the following questions:- 1. Whether the Applicant is justified in its contention that amount due/received from Ranbaxy Laboratories Limited (" Ranbaxy India") is in the nature of 'business profits' and is not chargeable to tax in India under the provisions of the Act in the absence of Business Connection in India as per section 9(1)(i) of the Act or under the provisions of Article 7 read with Article 5 of the India-Israel Double Taxation Avoidance Agreement ("DTAA") in the absence of Permanent Establishment in India. 2. Whether the Applicant is justified in its contention that amount due/received from Ranbaxy India is not taxable as &....
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....ant beginning either from: (a) the date it begins commercial marketing of the generic drug product; or (b) from the date of a court decision finding the patent invalid, unenforceable or not infringed; whichever is earlier. These two events - 'first commercial marketing' or 'a court decision finding the patent invalid' - are often called "triggering" events, because under the FDA regulations any of these events can trigger the beginning of the 180-day exclusivity period, which may be independent of the status of ANDA filed by an Applicant. 5. In case where exclusivity is triggered by virtue of 'first commercial marketing' by an applicant, this can happen only subsequent to approval of its ANDA. However, in the second category of triggering event, the 180-days marketing exclusivity period may begin to run even before its ANDA is approved, e.g. with a court decision finding that the patent is invalid or not infringed. In such a situation, some or all of the 180-days period could expire without the ANDA applicant being able to market its generic drug. Furthermore, until an eligible ANDA applicant's 180-day exclusivity period has expired, FDA cannot app....
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....d in case its ANDA was approved or if the marketing exclusivity period had begun pending ANDA approval (due to court decision). In view of these uncertainties Ranbaxy India, Ranbaxy USA and BP USA had entered into an agreement dated 07th December 2010 ("original agreement") for selling BP's generic version of drug in the USA market in case Ranbaxy was not able to market its drug during the exclusivity period and to share the resultant profit. According to the Ld. Counsel this was done to bring some certainty so that both Ranbaxy and BP can get mutual benefits out of such arrangement and share the profits resulting therefrom. 7. The Applicant explained that the precise reason for the original agreement was that though Ranbaxy, being the first filer of ANDA application, would have been eligible for 180 days marketing exclusivity, it was not certain of utilising this exclusivity benefit due to alert imposed by US FDA. Further, the ANDA application of BP USA was also pending which might have been approved prior to the approval of Ranbaxy's application. As per terms of the original agreement Ranbaxy had agreed to either "relinquish" or "selectively waive" its marketing exclusiv....
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.... for some percentage of profit. The Ld. Counsel drew our attention to the significant events as specified in the original agreement which were as under: Date Event December 7, 2010 ♦ Signing of original agreement between BP USA, Ranbaxy Inc. USA & Ranbaxy Laboratories Limited, India. ♦ The original agreement allowed BP to issue a "Ready Date Notice" to Ranbaxy following the later of (i) BP's manufacture of initial launch quantities, and (ii) BP has obtained tentative approval of the BP's ANDA or has received written confirmation from the FDA that BP's ANDA was eligible for Final Approval. ♦ The Ready Date Notice would require Ranbaxy to effectuate a selective waiver or relinquishment, as described by the agreement. In either case, BP would have the right to launch the product under its own ANDA and Ranbaxy could not sell its own product for the first 180-days following BP's launch. June 28, 2011 ♦ Initial launch quantity to be manufactured by BP not later than June 28, 2011. ♦ Written notice to be issued to Ranbaxy that such initial launch quantity was ready for commercial sale subject to Final appro....
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....rms of the amended agreement, as a consideration for the above arrangement, a portion of the profits (50 percent of 'contract margins') from Ranbaxy's sales of generic Lipitor during the stipulated 180 days period, was to be paid to BP USA within 45 business days from the end of each calendar quarter. However, if there was a loss from Ranbaxy's sale of generic Lipitor tablets, it could not be passed on to BP USA and the same was to be carried forwards to the next Calendar Quarter. It was submitted that the amended arrangement, which was effective from November 30, 2011 was in effect a transpose of what was contemplated at the time of entering in the original arrangement. 12. To sum up, as per original agreement BP USA by issuing ready date notice may have requested Ranbaxy to either relinquish or selectively waive its marketing exclusivity right, as a result of which BP USA would get the right to launch the product under BP ANDA in the US market and share profits resulting therefrom with Ranbaxy. However, when the Ranbaxy finally obtained the approval on 30th November 2011 it was mutually decided between the parties that Ranbaxy will sell its generic version of dru....
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....deration received by BP Israel was business receipts (like non-compete fee) which was taxable as business income. It was submitted that as per provision of Section 5(2) of the I.T. Act, non-residents are chargeable to tax in India only in respect of the following: a. Income that is received or deemed to be received in India. b. Income that accrues or arises or is deemed to accrue or arise in India. It was submitted that the applicant being a foreign company, no part of control and management of its affairs was situated in India. Relying on the decision of Hon'ble Supreme Court in the case of Keshav Mills v. CIT (23 ITR 230), it was submitted that income can be received only once and once it is received it can only be transmitted but not received again. Thus, the place of receipt of income was where it was first received. It was submitted that in the present case the amounts were remitted by Ranbaxy directly to the bank account of the applicant in Israel. Thus, the consideration was received by the applicant in Israel and no part of it can be considered as received or deemed to be received by the Applicant in India. 15. As regards 'accrual' or 'arising' of ....
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....g the source of income was assessable and taxable in the hands of the transferor and not the transferee. 17. On the nature of relationship between BP Israel and BP USA, the Revenue submitted that BP Israel was a manufacturer of generic medicines and BP USA was a trader of BP products in the US market and they were meant to transact at arm's length. While BP USA had all the rights arising from the ANDA that it has filed in the US, BP Israel was entitled to receive arm's length consideration for the sale of manufactured generics to BP USA. Accordingly, the income of BP USA arose on sale of generics made to the US customers whereas BP Israel's income arose from sale of generics to BP USA. If no sale is made by BP Israel to BP US, clearly, there would be no occasion of any income arising to the former. The two entities transacted in a principal to principal relationship and BP USA was not an agent of BP Israel, which was explicitly recognized in the Supply and Distribution Agreement. This was evident from the fact that the final ANDA approval granted by FDA to Ranbaxy stated very clearly that Ranbaxy US was acting as an agent of its Indian parent Ranbaxy whereas the tentat....
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....y and its parent were totally distinct tax payers and income-tax was levied on profits derived by both subsidiary company and the parent company on a standalone basis. 20. The Revenue submitted that BP Israel had received the entire payment of Rs. 1851 crores from Ranbaxy without manufacturing or selling a single tablet to BP USA. The entire payment was ostensibly arising out of the rights under ANDA no. 78773 which vested solely with BP USA. Even if any IPR were to be licensed by BP Israel to BP USA, the same would entitle the former to receive royalty from the latter. There was no justification to claim that the payments from Ranbaxy could be assessed as BP Israel's income. The so-called "assignment of agreement" made in March 2012 was nothing but an assignment/application of income rather than assignment of agreement. Assignment of agreement would entail assignment of rights and obligations under a contract and the assignee stepping into the shoes of the assignor. None of these requirements were met in the present case. 21. According to Revenue, even if BP USA were to license any IPR from its Israeli parent or purchase and sell the generic medicines manufactured by BP Isra....
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....licant had engaged in artificial structuring of transactions to avoid payment of tax. Collusive arrangement to justify the illegal payments for anti-competitive arrangements 24. The Ld. Counsel for the Revenue argued that in income tax jurisprudence apparent is treated as real and transactions between third parties are not to be disregarded unless circumstances are shown to exist that are out of the ordinary and defy human probabilities. The standard in this regard was preponderance of probabilities, which required examination of attendant circumstances and the test of human probabilities was laid down by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and further applied in numerous other cases. The Revenue has drawn our attention to the sequence of events and submitted that though Ranbaxy obtained the FDA approval on time (30 November 2011) to launch the sale of generic medicines, BP USA had not received the written confirmation from FDA that its ANDA was eligible for final approval for final launch of its generics by the Ready Date Notice. Irrespective of that, Ranbaxy had agreed to pa....
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....t not to sue for each other ANDAs for a period of two years from the end of the Revised Agreement; and (b) an unrecorded understanding that BP USA would not sell Atorvastatin in the US market even after the end of the 180 days exclusivity period to allow Ranbaxy enjoy higher market share. 26. The Revenue submitted that both these arrangements were per-se illegal as being anti-competitive practices under the US law and the findings in the order of the Office of the Attorney General of the State of New York (OAG) made this abundantly clear. The OAG had held that the Article 6.10.6 of the original agreement which related to the two parties agreeing to not sue each other in respect of all their pending ANDAs for the term of the agreement and two years subsequently was anti-competitive and illegal. Both Ranbaxy and BP USA without agreeing with these findings had settled the matter by assuring the OAG to treat the same clause as unenforceable and null and void and by paying penalty of USD 150,000 each. The Revenue pointed out that the revised and restated agreement of 30 November 2010 (entered on 7 December 2011) also provided for an identical clause (Article 6.10.f). Even though the ....
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.... 2011, which was just one day subsequent to the date on which the BP USA and Ranbaxy entered into the settlement agreement, and which stated that the final approval cannot be granted on account of FFE rights of Ranbaxy. Under these circumstances there was no occasion or reason for Ranbaxy to agree to share 50% of the profits on sale of Atorvastatin during the FFE period of 180 days with BP, other than to secure objectives which were meant to be illegal and hence deliberately kept under wraps. According to Revenue the consideration was meant to cover the obligation of not suing for any of the ANDAs and an unrecorded understanding that BP would not sell Atorvastatin in the US generic market even after the end of the FFE period of 180 days. This was clearly a collusive, anti-competitive agreement in violation of the competition laws of the USA that could not have been recorded in the settlement agreement. The Revenue complained that the Applicant had repeatedly refused to part with any and all information sought by the Revenue in respect of ANDAs and all its litigation with Ranbaxy between 2008-2015 on the ground that they were irrelevant information but for the reason that it did not....
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....reed between the two parties (BP USA and Ranbaxy) that was capable of being performed and was actually carried out was the covenant of not suing each other for a period of two years in respect of all ANDAs pending on the effective date of the Amended Agreement. It was pointed out that an identical obligation and clause formed part of the original agreement which was held to be per-se illegal and violative of the competition laws of the USA by the OAG. According to Revenue the consideration paid under the Amended Agreement was for an illegal/void contract, which was unenforceable under the competition laws of the USA as well as India. The Revenue further submitted that the Applicant had refused to provide the details of filings made with the OAG and the letters and notices received therefrom during the investigations and had failed to demonstrate that the source of income (rights under the ANDA) were transferred to the Applicant. 32. The Revenue submitted that settlement wherein payments made by an IPR holder or a generic company having priority to an infringer is known as Reverse Payment Settlement Agreement (RPSA) in the US pharmaceutical industry. The legality of such payment ha....
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....Ranbaxy had a right to sell Atorvastatin in the US market. In such a situation, no "mutual co-operation" or "marketing tie-up" could have been provided by BP USA/Israel. Therefore, there was no question of anyone else either selling or manufacturing for the US market during those 180 days period. According to Revenue the payment was for an illegal consideration of not suing each other ANDAs and an unrecorded understanding of not selling Atorvastatin after the end of 180 days period. The payment made for this illegal and void arrangement cannot be "business income" but was in the nature of "income from other sources". 34. The Revenue submitted that the taxability of an income depends on factors like nature of income, place where the income accrues/arises/is received and the tax residence of the assessee. The nature of income in question was "income from other sources" under section 56 (1) of the IT Act. Though the same arose in the course of business carried out by BP USA, the test of determining whether a receipt was a business income or not depended on whether it emanates from the trading activity of the entity. In this case, the payment being made for an illegal act (being viola....
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....nts maintained in India and has been debited as expenditure under the accounting standards and claimed as a deduction for tax purposes. Ordinarily, an income of this nature if in compliance of law would accrue in the country where the relevant contractual obligation is performed. However, in the present case the underlying rights and obligations were illegal and unenforceable. The concept of accrual of income was based on the crystallization of the right to receive the income. The time and place where such right accrued was to be treated as the time and place of taxability and if the right arose in more than one place, apportionment of income has to be made. In the current factual matrix, where no enforceable right to receive the income was found to exist on account of the obligation of not suing each other being illegal, void and unenforceable, no income can be said to be "accruing" to BP USA. The Revenue submitted that BP USA (or any other BP affiliate) could not have sued Ranbaxy for not having honoured the obligation of paying under the revised agreement as the only counter obligation of not suing each other was illegal, void and unenforceable. Similarly, the understanding of B....
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....through" provision but a "look at" provision. However, after the amendments brought about in 2012 with a retrospective effect from 1-4-1961, the situation had changed, and various explanations inserted in Section 9(1)(i) were meant to impart a "look through" status to this provision. This would imply that it is meant to be an anti-avoidance provision inserted to prevent avoidance of tax. Revenue has relied upon the decisions of the Supreme Court in the cases of Sneh Enterprises v. Commissioner of Customs [2006] 202 ELT 7 (SC) and South Eastern Coalfields Ltd. v. Commissioner of Customs and Central Excise [2006] 200 ELT 357 (SC) on the issue of interpretation of the statute. 39. According to Revenue the source of income in this case was Ranbaxy's desire and decision to remunerate BP USA coupled with its capacity to honour such a commitment. It was pointed out that Ranbaxy had confirmed that the income generated from sales of Atorvastatin in the US market during the FFE period had been included in its revenues for Indian tax purposes and the amount paid to BP Israel had been claimed as a deduction. Ranbaxy had accordingly obtained a tax advantage of a deduction equivalent to an ....
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....ts performance of the Agreement and requesting Ranbaxy to effectuate selective waiver and/or relinquishment of the exclusivity period, as agreed between the parties under the said agreement. 42. It was submitted that the 2011 Agreement which amended the earlier binding, enforceable Agreement of 2010 was in the nature of mutually beneficial, reciprocal arrangement between Ranbaxy and BP USA whereby Ranbaxy was to market its Drug during the exclusivity period unless injuncted by the Court; in which case, BP USA would market the same during the exclusivity period and the two parties would share the contract margin. Such an arrangement helped BP USA and Ranbaxy to keep other competitors at bay, ensuring a protected turf for the two entities. Such a business arrangement was thus in the best interest of both, BP USA and Ranbaxy, ensuring profits to both the parties while leaving out competition during the exclusivity period. It was clarified that notwithstanding that Ranbaxy had received final approval to its ANDA, there was threat of litigation from other ANDA Applicants whose applications were not approved during the exclusivity period. By entering into an Agreement dated 7th December....
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..... It was submitted that the payment had been remitted by Ranbaxy to the Applicant in Israel and thus not been received nor deemed to be received in India. The source of the said receipt was the Agreement entered into in the US with respect to the activities in the US market and cannot be said to have any relation whatsoever with any activity in India. It was reiterated that such payment cannot be said to accrue or arise in India so as to be taxable in India in the hands of the Applicant. 45. The Ld. Counsel for the Applicant emphasized that the payment in question had arisen directly from the carrying on of business and was inextricably linked to the business of the Applicant. The same being in the nature of business income cannot deemed to accrue or arise in India in terms of section 9(1)(i) of the Act in the absence of any business connection in India and for this reason the income was not liable to tax in India. Furthermore, it was contended that the giving up right to sue was a capital receipt not chargeable to tax in India as have been settled by various judicial authorities including by this Authority in the case of Lead Counsel of QSF : AAR No 1060 and 1078 of 2010 order da....
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....reement was filed with the US Federal Trade Commission ("FTC"), Bureau of Competition ("Bureau") and the Antitrust Division of the US Department of Justice ("DOJ") and the factions of execution of the said Agreement between two unrelated parties operating out of different jurisdiction, was duly available in the public domain. Further that the Amended Agreement was acted upon by the parties, without inviting any adverse finding by any of the concerned Government authorities and it was not open to the Revenue, in the Income-tax proceedings in India, to allege that the 2011 Agreement was sham or collusive. 48. On the contention of the Revenue that BP was not capable of competing during 180 days exclusivity period, it was submitted that the Revenue had completely failed to fathom the genesis of the amended agreement pursuant to which the Applicant had received payments from Ranbaxy. It was clarified that the payments were meant for the three factors 1) right to sue, 2) non compete, and 3) step-in rights and also towards the recoupment loss of Millions of Dollars on account of manufacturing of the drug pursuant to 'initial launch quantity' condition as per original agreement. ....
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....t was required to be gone into by the Revenue. The fact remained that complaint was filed in the US District Court by BP USA praying for relief of specific performance and restraining Ranbaxy from manufacturing and marketing the Drug during the exclusivity period. Furthermore, the 2011 Agreement under which the payment subject of consideration had been received by the Applicant did not, in view of the subsequent developments, require the Ready Date Notice to be issued by BP USA. The same was, therefore, not germane to the 2011 Agreement under which payments were made by Ranbaxy to the Applicant. 51. The Revenue had contended that while changes to its ANDA were being made by BP, USA upto 23rd November 2011, the Ready Date Notice was issued prior thereto. It was clarified by the Applicant that the Ready Date Notice was issued only on 23rd November 2011 and, therefore, the averment made by the Revenue was contrary to record. It was pointed out that the additional revision was in the form of telephonic amendments only. 52. With regard to the argument that the Ageement was sham/collusive since BP did not ultimately market the Drug despite receiving final approval, it was submitted tha....
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.... submitted that the US IRS by not seeking to tax the amounts received from Ranbaxy in the hands of BP USA had not regarded the assignment of the 2011 Agreement as mere diversion/assignment of income. The Applicant clarified that the amount received from Ranbaxy had been offered for tax by the Applicant in Israel but has not been taxed in the hands of BP USA, which position has been accepted by the Revenue authorities in both the countries. 54. The Applicant submitted that the provisions of section 60 of the Act can be invoked only in a situation where the income was first liable to tax in India. It was reiterated that in terms of section 5(2) of the Act the amount received from Ranbaxy having no nexus with India was not liable to tax in India at all and the provisions of section 60 of the Act was at the threshold not attracted. It was also submitted that there was not mere assignment of income having regard to the corresponding negative obligation of not manufacturing and marketing the Drug, accepted by the Applicant. The Applicant clarified that the assignee (i.e. the Applicant) and the assigning party (i.e. BP USA) remained jointly and severally liable to the other contracting p....
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....f business and was inextricably linked thereto, which was in the nature of business income and did not fall under the residual head "income from other sources". In this respect support was drawn from provisions of section 28(va) of the Act which seeks to tax non-compete fees received for not carrying on any activity in relation to business as forming part of "profits and gains of business or profession". It was submitted that in the present case the payment received by the Applicant was also for giving up the right to sue Ranbaxy arising from breach of 2010 Agreement and offering step-in rights which were in the nature of income arising from carrying on business and in the course of such business. Likewise, the element of recoupment of loss due to various activities carried out by the Applicant including destruction of manufactured drug, ANDA process, Legal proceeding and other connected costs, all were in the character of business income only, which was not taxable in India. It was also submitted that section 56 of the Act was in the nature of a residual provision to bring to tax income not falling under the other heads of the income enumerated in section 14 of the Act. Accordingl....
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.... similar payments made before this date shall not be taxable in India. This specific amendment signified that mere payer would not make the payments as 'deemed to accrue or arise' in India unless such payments are specifically covered in the section. 61. On the revenue's contention about the track record of the parties the Applicant submitted that the same has no bearing on adjudication of the present dispute and must, therefore, be ignored as irrelevant. Our attention was drawn to the decision of the Supreme Court in the case of Lalchand Bhagat Ambica Ram v. CIT : [1959] 37 ITR 288 (SC) wherein it was held that the Tribunal should not be guided by suspicions, conjectures and surmises and should act on basis of evidence or upon a view of the facts which could reasonably be entertained on the fact. Findings and Ruling 62. We have carefully considered the facts of the case, the submissions of the Applicant and the objections of the Revenue. Before we deal with the issues raised in the application and the arguments of the contending parties, it will be relevant to note that the Revenue had filed an application dated 08/01/2018 requesting this Authority to reconsider the....
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....r relinquishment/selective waiver was manufacture of initial launch quantities by BP which was stipulated in clause 2.1 of the original agreement as under: Manufacture of the BP Product. BP shall use its commercially reasonable efforts to manufacture or have manufactured the Initial Launch Quantities by no later than June 28, 2011. BP shall provide Ranbaxy with written notice as soon as BP or its Affiliates have manufactured the Initial Launch Quantities and such Initial Launch Quantities are ready for commercial sale, subject to receipt of Final Approval of the BP ANDA. It is thus found that BP USA had to manufacture or get manufactured the initial launch quantities for commercial launch which was set forth in Annexure-A of the original agreement as under: Description Number of Tablets 10mg tablet 95,218,890 20mg tablet 95,429,867 40mg tablet 75,179,027 80mg tablet 36,318,833 302,146,617 65. Thus, as per original agreement 302,146,617 number of tablets of 10mg, 20mg, 40mg and 80mg base were required to be manufactured by BP for initial launch. BP USA had filed pre-launch activities importation request (PLAIR) dated 18th November 2011 with US FDA, whereby appr....
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.... agreement. Regarding second condition of "tentative approval", it is a written communication from the US FDA stating that ANDA is eligible for final approval upon the expiry of patent or market exclusivity or upon the date authorized pursuant to an applicable license grant. It is found that the tentative approval of BP ANDA was received on 01st December 2011 which was as under: We have completed the review of this ANDA and based upon the information you have presented to date we have concluded that the drug is safe and effective for use as recommended in the submitted labelling. However, we are unable to grant final approval to your ANDA at this time because of the exclusivity issue noted below. Therefore, the ANDA is tentatively approved.... 67. It is thus found that the second condition for issue of Ready Date Notice was fulfilled only on 01st December 2011 when the tentative approval was received and only thereafter the Notice could have been validly issued. However, BP USA had issued the Ready Date Notice to Ranbaxy earlier on 23rd November 2011. Such Ready Date Notice, which was issued without the fulfilment of requisite conditions, was ab-initio void and non-enforceable an....
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....te, and shall not be construed as, an acknowledgement that BP has issued a valid Ready Date Notice. BP has not denied the fact that Ranbaxy was eligible to exercise the option of delay as stipulated under section 2.4.2 of the original agreement. As the option exercised by Ranbaxy is found to be in accordance with the terms of the original agreement, there cannot be any case of non-performance of the original agreement on the part of Ranbaxy. 69. It is thus clear from the above facts that the BP had not fulfilled its obligation in the original agreement and there was no reason for Ranbaxy to revise or restate the original agreement. Neither the initial launch quantities, as agreed in the original agreement, were manufactured by BP USA nor the Ready Date Notice was issued after obtaining the tentative approval of BP's ANDA. The exact reason for amending and restating the original agreement is also not found mentioned in the amended agreement dated 07th December 2011 which was made effective with retrospective effect from 30th November 2011. The Applicant has submitted that after the dispute in respect of original agreement was settled by the amended and restated agreement the c....
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....f so, the complaint filed in US district court could not have been withdrawn prior to signing of the revised agreement on 07th December 2011. The tell-tale evidences furnished by the Applicant in support of genuineness of the amended and restated agreement are found to be contrary to the human probabilities. 71. It is also peculiar to note that as per the amended agreement Ranbaxy had agreed to pay 50% of its contract margin to BP USA during the 180 days exclusivity period, whereas only 15% was payable as per original agreement, if at all, to BP as evident from the clause 2.6.4 of the original agreement: 2.6.4 Notwithstanding Section 2.6.2 or 2.6.3, (i) at any time during the Ready Date Notice Extension Period following Final Approval of the Ranbaxy ANDA but prior to BP's issuance of a Ready Date Notice, or (ii) after the conclusion of the Ready Date Notice Extension Period, Ranbaxy shall have the right, subject to the remainder of this Section 2.6.4, to commercialize the Ranbaxy Product, in its sole discretion. Following the commercial launch of Ranbaxy product pursuant to this Section 2.6.4, Ranbaxy shall have no further obligations hereunder to effect a Relinquishment or ....
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....he Applicant that the payment was in the nature of non-compete fee is totally incorrect as BP USA was not at all eligible to compete during FFE period of 180 days. In view of these facts we have no hesitation in holding that the payment made by Ranbaxy was not in the nature of non-compete fee as BP was ineligible to compete once the final approval of Ranbaxy's ANDA was received. 74. Once having held that the payment was not in the nature of non-compete fee we have to examine the other clauses of the agreement to find out the real nature of the payment. Clause 6.10 (f) of the revised agreement provided as under: In recognition of the Parties exchange of Confidential Information necessary for the implementation and operation of this Agreement, during the Term of this Agreement, and for a period of two (2) years thereafter, a Party shall not, directly or indirectly, challenge the other Party's right to First to File exclusivity for any ANDA, including without limitation, the Ranbaxy ANDA, filed as of the Original Effective Date, or the viability, completeness or status of any ANDAs, filed with FDA as of the Original Effective Date. (Emphasis supplied). It is found that an i....
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....uld have marketed their generic product during sole FFE period of Ranbaxy. In case Ranbaxy was unable to market its product during exclusivity period for any reason, the original agreement was still valid for BP to step in, in such an eventuality. 76. As discussed earlier BP had filed a complaint with US District Court on 29-11-2011 wherein mention was made of Ranbaxy's letter dated 28-11-2011 whereby Ranbaxy had refused to acknowledge the receipt of Ready Date Notice and had asserted that the same was invalid. The contention of Ranbaxy has already been reproduced earlier in para-68. BP has not denied the fact that Ranbaxy was eligible to exercise such option as stipulated under section 2.4.2 of the original agreement, and, if so, there cannot be any case of non-performance of the original agreement on the part of Ranbaxy. 77. It has been submitted by the Applicant that the amended agreement dated 7-12-2011 had essentially settled the dispute between BP USA and Ranbaxy with regard to complaint filed in the US District Court. The Applicant has contended that it had given up its right to sue Ranbaxy for breach of the original agreement and not recovering the loss on account of ....
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....h other's SFFEs are inherently suspect under the antitrust laws and would be presumed unlawful by a court. 24. The OAG investigated whether the No Challenge Provision was reasonably necessary to allow Ranbaxy and BP to share confidential information with one another in furtherance of the atorvastatin collaboration, but concluded that it was not. The OAG concluded: (a) The information that needed to be shared between the parties to permit the atorvastatin collaboration to succeed was very limited. Moreover, other provisions of the 2010 agreement were adequate to prevent abuse of confidential information shared, for example, another provision of that agreement forbade the parties from disclosing or using confidential information except in; furtherance of the transactions contemplated by the collaboration. (b) The No Challenge Provision was also not narrowly tailored to address any legitimate confidentiality concerns, as required by the applicable law. As part of a collaboration for marketing one drug, the No Challenge Provision prevents the parties from challenging each other's SFFEs for dozens of drugs and for any reason - regardless of the factual or legal basis for t....
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....agreement. This is also to be kept into consideration that the original agreement dated 7-11-2010 was already superseded by the amended and restated agreement dated 7-11-2011 and, therefore, the original agreement was not enforceable. Further, as rightly pointed out by the Revenue, if the revised agreement was assigned to BP Israel, it is BP Israel who should have signed the Assurance Agreement on 12-2-2014 and not the BP USA. Once the amended and restated agreement was assigned to BP Israel on 22-3-2012, BP USA had no legal authority to sign the Assurance after that date. The execution of the Assurance Agreement by BP USA on 12-2-2014 substantiates the contention of the Revenue that BP USA had only assigned the receipts of the amended agreement without assigning the obligations contained therein. 81. The Revenue has submitted that the payment received from Ranbaxy was assessable in the hands of BP USA and not the Applicant. That the assignment of the agreement by BP USA to BP Israel in March 2012 was only an afterthought and it was a mere assignment of income and not the assignment of contract. The Revenue has contended that the source of income (ANDA No. 78773) had not been tran....
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....(ANDA No. 78773) had not been transferred by BP USA to BP Israel. This argument is found to be irrelevant as ANDA NO. 78773 filed by BP USA was not the subject matter of contract between Ranbaxy and BP. The amended agreement was for sale of Ranbaxy's product during the exclusivity period pursuant to approval of its own ANDA and the BP's ANDA was approved much later after the end of Ranbaxy's exclusivity period. What is relevant to consider here is whether the assignment of the amended agreement by BP USA to BP Israel was in full or was it only partial? From the materials brought on record we find that the amended agreement was not assigned to BP Israel in its entirety. This is evident from the fact that the Assurance Agreement with the OAG was signed in February 2014 by BP USA and not by BP Israel. As already discussed earlier the original agreement was superseded by the amended agreement, which was assigned to BP Israel. This being the factual position BP Israel should have signed the Assurance Agreement with the OAG in February 2014 and not BP USA. The signing of the Assurance Agreement by BP USA in February 2014 clearly demonstrates that the amended agreement was not....
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....cant had entered into a transaction with a resident. As already discussed earlier, such assignment was mere application of income by BP USA and the taxability of the transactions/receipts has to be considered in the hands of BP USA and not in the hands of the Applicant. 85. We see considerable force in the argument of the revenue that the assignment of income by BP USA was done with sole intention of shifting the income to Israel where the Applicant enjoyed special tax exemption. Further, the Applicant has also not come clean before us, as in the statutory filings the receipts in question from Ranbaxy was shown as "royalties", whereas in the present application the Applicant has taken a stand that the income does not qualify as royalty. This issue is, however, non-sequitur in view of our finding that the receipts under question were not the income of the Applicant but that of BP USA. The question as to whether the provision of Section 60 of the Act is applicable or not, is otiose in view of the finding that the income belongs to BP USA, who is not before us in the present application. The question regarding the nature of income - whether business income or income from other source....