2021 (4) TMI 998
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.... Act was issued on 6th August, 2012. The assessee was having international transaction with associated enterprise as per form 3CEB report. Therefore, the case was referred to the transfer pricing officer and the TPO had passed order u/s. 92CA(3) of the Act on 30th January, 2015. The assessee company was engaged in the business of manufacturing and sale of pharmaceutical products. The assessee company has also carried out R & D activities for developing new drugs and involved in quality control process etc. The company was also engaged in trading activity. In the case of the assessee, draft assessment order u/s. 143(3) r.w.s.144C of the Income Tax Act, 1961 was passed and computed the total income at Rs. 9,16,04,08,572/-. Against the draft assessment order, the assessee has filed objections before the DRP. The DRP has issued direction vide their order u/s. 144C(5) of the Act on 23rd No, 2015. Thereafter, taking into consideration, the direction issued by the DRP, the Assessing Officer has passed assessment order u/s. 143(3) r.w.s. 92CA r.w.s. 144C(3) of the Act on 26th Jan, 2016 and total income was determined at Rs. 9,38,19,42,897/- against the order passed by the Assessing Office....
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....nt by misconstruing the directions of the DRP without appreciating that in previous year the DRP had allowed the claim of the Appellant u/s 37(1), however the amount was eventually disallowed on the ground of non deduction of TDS u/s 40(a)(ia). 2.3 Without prejudice to the above, the Ld. Assessing Officer / DRP ought to have appreciated that since the payments had already been made during the year under consideration and nothing was payable as at the end of the relevant year, the provisions of section 40(a)(ia) of the Act were not applicable and consequently the entire amount was allowable as deduction u/s 37(1). 2.4 Without prejudice to the above, that the Ld. AO / DRP failed to appreciate that since the payments were not taxable in the hands of RCI IS, there was no requirement to make any disallowance under the provisions of section 40(a)(ia) of the Act. 2.5 Without prejudice to the abvoe, the Ld. AO / DRP grossly erred in not allowing deduction under section HOG in respect of contribution made to RCHS. 3. Re: Addition on aecount Transfer Pricing Rs. 1,808,200,000/-: 3.1 The Ld. DRP erred both on facts and in law by not accepting the overseas Associated Enterprises (....
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....considering unclaimed balance written back (23.1 Cr) and reversal of deferred employee compensation (0.33 Cr) as part of non-operating income. The AO ought to have appreciated that directions of ld. DRP are binding on AO. c. In starting afresh the process of determining the comparables, without appreciating that the Appellant had carried out its supplementary analysis diligently and based on the available records, hence the same cannot be rejected. d. In considering companies which are dissimilar in function in the final list of comparables. c. In disregarding the approach adopted by the Appellant of using the multiple year/ prior available year's data in the supplementary economic analysis and holding that current year (I.e. Financial Year 2010 11) data for comparable companies should be used despite the fact that [he same was not necessarily available to the Appellant at the time of preparing TP documentation, Further, in disregarding the CBDT Notification No. 83/2015 dated 19 October, 2015, allowing the Appellant to use multiple year data while carrying out comparability analysts. 4. Re: Disallowance u/s 14A - Rs. 4,60,85,478/: 4.1 The Assessing Officer grossly err....
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....tire deduction under sections 8O-IB and 80-1C of the Act. 5.2 The AO grossly erred in stating that Appellant had not submitted balance sheet and profit and loss and hence was not eligible to claim deduction as per S. 80IA(7) of the Act r.w.r. 18BBB(2) of the Income Tax Rules, 1962, without appreciating that revised certificate in Form 10CCB submitted by Appellant already contained the requisite information and therefore requirement of S. 801A(7) of the Act r.w.r. 1 8BBB(2) of the Income Tax Rules, 1962 was fulfilled. 5.3 The Ld. DRP erred in law in upholding the actions of AO to deny the deduction u/s 80- IB & 80 1C of the Act, without appreciating that AO had exceeded jurisdiction and that on identical facts, deduction had always been allowed in the earlier year(s) (except for assessment years 2008 09, 2009-10 and 2010-11). The ld. DRP ought to have appreciated that determination of eligibility for allowance of deduction u/s 80-IB & 80-10 of the Act is relevant only in the first year and not in subsequent years of claim. 5.4 The ld. DRP grossly erred in law in not rejecting the actions of AO to deny the deduction and inter alia arriving at various conclusions which arc compl....
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.... the amount of non-compete fee (expense) on the ground that it is capital in nature without appreciating that amount paid was for carrying out its business more efficiently and effectively. 8. Re: Disallowance of Premium paid on FCCB- Rs. 5,945,459,801/- 8.1 The Ld. DRP erred both on facts and in law in disallowing the premium paid on redemption of Xero Coupon Convertible Bonds ("FCCB") amounting as capital expenditure without appreciating that treatment given in books of accounts as per provisions of Companies Act cannot be considered as the basis for deciding the allowability of premium on FCCBs under the- Income Tax Act, 1961. 8.2 The Ld. DRP ought to have appreciated that the FCCBs were in nature of debt and once they were not converted into equity shares, any premium paid on redemption would be allowable as revenue expenditure and accordingly the action of the At) in treating the premium on the redemption of FCCB as akin to dividend on equity shares is completely contrary to the facts and the law. 8.3 The Ld, DRP grossly erred in upholding the additions by AO without appreciating that judicial pronouncements relied by AO were not applicable in facts of the present ease....
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....rges towards investment made by the Company in overseas subsidiary expenses incurred to protect against foreign exchange rate volatility as deductible under section 37(1) of the Act, without giving any cogent reason for same.. 11.2 The Ld. DRP erred both on facts and in law in not adjudicating the claim of Rs. 3,24,80,643/- on account of adjustment of hedging charges pertaining to the cost of fixed assets against their cost and allowing depreciation thereon under the provisions of the Act. 11.3 Without prejudice to the above, hedging charges amounting to Rs. 10,00,30,513/- incurred towards investment made by the Company in overseas subsidiary companies should be adjusted to the cost of acquisition of such investment. 12. Re: Double taxation of Income from Capital gains and other sources.: 12.1 The Assessing Officer grossly erred in taxing the long term capital gains of Rs, 14,27,71,965/- and income from other sources of Rs. 1,53,43,279/- without appreciating that the while considering the net business loss 3,02,66,75,122/-, the aforesaid incomes were already offered for tax and thereafter further adding the above incomes in computing the taxable income . 13. Re: Short gra....
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....king into consideration the aforesaid facts and circumstances, the various grounds of appeal filed by the assessee and revenue are adjudicated as under:- ITA No. 702/Ahd/2016 A.Y. 2011-12 filed by assessee 4. Ground No. 1 is of general nature of ground of appeal not specifically contested by the assessee, therefore, the same stands dismissed. Ground No. 2.1 to 2.2 (contribution to Ranbaxy Community Healthcare Society (RCHS) of Rs. 30,992,839/- u/s. 37(1) of the Act and disallowing on the ground of non-deduction of TDS u/s. 40(a)(ia) of the Act) 5. During the year under consideration, the assessee has made contribution of Rs. 3,09,92,839/- to Ranbaxy Community Healthcare Society (RCHS). The assessee submitted before the Assessing Officer that this expenditure has been incurred for promoting its business, therefore, the same may be allowed as business expenditure u/s. 37 of the Act. The assessee has also submitted that ITAT Delhi has examined this issue of assessee's appeal for the assessment year 1997-98, 2001-02, 2002-03, 2004-05 and 2005-06 in its own case and held that the contribution made to RCHS was an expenditure for the purpose of promoting its business and same was allo....
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....red in confirming the disallowance of deduction in respect of contribution of Rs. 22,50,000/- and Rs. 50,00,000/- made to Ranbaxy community healthcare society ( for short RCHS) and Ranbaxy Science Foundation (for short RCF). 24. The assessee company made a contribution of Rs. 22,50,000/ to RCHS and Rs. 50,00,000/- to RSF and claimed as deduction u/s 80G but the deduction has not been set off due to a loss in the return. 24.1. Further, the assessee claimed the same as business expenditure u/s 37/35 of the Act. The assessee in this connection submitted that the Hon'ble ITAT, New Delhi on the same issue in the assessee's case had held that contribution made to RCF & RCHS are expenditure for the purpose of promoting the business of the company and is allowable as business expenditure u/s 37 of the Act. 24.2. However, the AO rejected the contention of the assessee by observing that the earlier year case is pending before the Hon'ble High Court of Delhi. Accordingly, the AO rejected the submission of the assessee and held that the assessee entitled for deduction u/s 80G of the Act. The AO further observed that the recipients did not show the amount as taxable receipts but accounted....
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....ssue as cited above after taking the same view, we allow this ground of appeal of the assessee. In the result, this ground of appeal is allowed. Ground No. 3 ( Erred in not considering overseas associated enterprise as tested party being the least complex of the transacting entities and instead considering assessee as tested party thus violating basic principles of transfer pricing) 6. During the course of assessment, the Assessing Officer stated that as per audit report in form no. 3CEB filed by assessee, the total value of international transaction entered into with its overseas AE's were more than prescribed limit. Therefore, according to the provisions of section 92CA(1), the case of the assessee was referred to the additional director of income tax (transfer pricing officer) to determine the arms length price u/s. 92CA(3) of the Act. The TPO has passed order on 30th Jan, 2015 after considering the assessee as tested party. As per the detailed discussions made in the order passed u/s. 92CA(3) of the Income Tax Act, 1961 dated 30th Jan, 2015, the TPO has made upward adjustment of Rs. 1,80,82,00,000/- on the arms length price of international transaction. The assessee filed obj....
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....ture of transaction or class of transactions. However, in order to determine the MAM for determining the ALP, it is first necessary to select the 'tested party'. The transfer pricing legislation in India does not provide any guidance on the concept of 'tested party'; however, there are some decisions on this issue, which can be of great help. 21. In order to understand the concept of tested party, one need to refer to the transfer pricing legislations of developed countries where the principles of transfer pricing have been in use for a long time and act as a guiding force for all the developing economies. The transfer pricing guidelines issued by the US Internal revenue services under section 482 provide and discuss the concept of transfer pricing. Section 1.482-5 of the US Transfer Pricing Regulations state that 'the tested party will be the participant in the controlled transaction whose operating profit attributable to the controlled transactions can be verified using the most reliable data and requiring the fewest and most reliable adjustments, and for which reliable data regarding uncontrolled comparables can be located. Consequently, in most cases t....
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....icator) is tested. The choice of the tested party should be consistent with the functional analysis of the transaction. As a general rules, the tested party is the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparables can be found i.e. it will most often be the one that has the less complex functional analysis. 3.19 This can be illustrated as follows. Assume that company a manufactures two types of products, P1 and P2 that it sells to company B, an associated enterprise in another country. Assume that A is found to manufacture P1 products using valuable, unique intangibles that belong to B and following technical specification set by B. Assume that in this P1 transaction, A only performs simple functions and does not make any valuable, unique contribution in relation to the transaction. The tested party for this P1 transaction would most often be A. Assume now that A is also manufacturing P2 products for which it owns and uses valuable unique intangibles such as valuable patents and trademarks, and for which B acts as a distributor. Assume that in this P2 transaction, B only performs simple functions and does....
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....ppendix, CBDT has agreed to benchmark South African, Ireland and Romania AEs benchmarking region as Europe. In case of Nigeria, Malaysia and Morocco the regional benchmarking has been accepted of Asia. In case of South Africa, Peru the benchmarking of Europe and in case of Egypt, Brazil and Thailand benchmarking of Asia is accepted. According to Parano.5, it is also emphatically mentioned that foreign AEs are the tested parties. It is also important to notice that how this agreement has been reached between the parties. Page No 500 where in it is held that applicant i.e. appellant is an entrepreneur manufacturer where in the functions performed by it are (a) R & D for both the products and processes (b) Production and supply of formulations and APIs (c) Provision of technical support and quality control process for the AEs (d) Application for regulatory approvals from foreign governments (e) Management support In the risk assumed by appellant is discussed at page no 502 to 505 of the paper book. After that page no 505 to 523 the functions performed by each of the AEs and risk assumed is discussed. It shows that the functions performed by AEs are very limited and natural....
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....e, which has considered all the aspects of the manner of determination of ALP which are also similar for the this year, should be given highest sanctity and therefore mechanism suggest in that agreement should be necessarily followed in determining ALP of the transactions for this year. 29. Though in the APA signed by the assessee there is no "roll back provisions" for the year under appeal, however we analyses the circumstances, which provides for applying that rule. Rule 10MA of the Income tax Rules 1962 provides for the roll back provisions as under :- '10MA. (1) Subject to the provisions of this rule, the agreement may provide for determining the arm's length price or specify the manner in which arm's length price shall be determined in relation to the international transaction entered into by the person during the rollback year (hereinafter referred to as "rollback provision"). (2) The agreement shall contain rollback provision in respect of an international transaction subject to the following, namely:- (i) the international transaction is same as the international transaction to which the agreement (other than the rollback provision) applies; (ii) the ret....
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....ed by the APA i.e. foreign AEs are least complex and adequate financial data for comparison on region basis/country basis are available and further the financial transactions are same, we hold that based on APA for A Y 2014-15 the selection of tested party should be taken as Foreign AE for the current year too. 31. On looking at the TP Study report of the assessee placed at page Nos. 409 to 478 of Paper Book Volume-II as well as the order of TPO it is apparent that assessee has also adopted region based analysis and also country by country analysis of comparable where they are available. Therefore, in the TP study report as far as the tested party is concerned we do not agree with the observation of the TPO that no comparables are available. It runs contrary to the finding of the CBDT in APA. 32. Coming back to the order of coordinate bench in case of assessee for AY 2004-05 it is apparent that tribunal has accepted that least complex party to the transaction should be taken as tested party. In that year due to the weakness of the TP documentation of the assessee where assessee compared the operating margin of all the overseas AEs with reference to a single set of comparables....
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....g activity. After due consideration of the issue, the Hon'ble Bench had observed thus: "16.1 (on page 47) It is clear that arm's length price is to be determined by taking result of comparable transactions and those transactions must be in comparable circumstances. It is therefore required to have a proper study of specific characteristics of controlled transaction. It is also required that there should be proper study of functions performed to match the identical situations under which functions have been performed. Then risk profile is also required to be compared. We may like to add that there are so many perspectives which were required to be compared and in this connection the Hon'ble Courts have also suggested so, such as, comparison of functional profile, similarity in respect of assets employed and a thorough screening of the comparables etc. Hence, in the present case, it is necessary to consider an analysis that whether the comparables selected by the TPO had analogous functional profile to that of functional profile of the assessee. It is true that functional profile and assets and risk analysis was made available but that is to be correctly understood ....
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....s all the market, price and product risks. TKC came out the work on its own, only parts of the job are sub-contracted to the assessee for its convenience. Futher, being an entrepreneur company, it is difficult to determine the profits of ATKC with respect to work downloaded to India (as the revenue received for work off-shored to India cannot be separately identified). Further, the revenue generated from the services provided by the assessee would form only a small part of the entire operations. The value of engineering drawing and design services rendered by the assessee to TKC for AY 2002-04 was Rs. 1,58,43,923/- and for AY 2004-05 it was Rs. 1,45,77,704/-. The value of service forms approximately 6% to 7% of the Cost of Sales to TKC. HENCE, THIS Shri Rahul Mitra argued, shows that testing the margins of TKC would not serve the purpose of determining the arm's length nature of the transactions undertaken by the assessee with TKC. Hence, the recourse available to test the arm's length price of the services rendered by the assessee to TKC is to test the margins from the Indian side. In view of the discussion on tested part earlier, the assessee was selected as the tested pa....
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....the selection of the tested party has been dealt with. This Manual has been the work of many authors which included India, Norway, Nigeria, Italy, USA, Netherlands, Brazil, China, OECD, Japan etc. For ready reference, the relevant portion of it observation is extracted as under: "5.3.3. Selection of the Tested Party: 5.3.3.1. When applying the Cost Plus Method, Resale Price Method or Transactional Net Margin Method (see further Chapter 6) it is necessary to choose the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit indicator) is tested. The choice of the tested party should be consistent with the functional analysis of the controlled transaction. Attributes of controlled transaction(s) will influence the selection of the test party (where needed). The tested party normally should be the less complex party to the controlled transaction and should be the party in respect of which the most reliable data for comparability is available. It may be the local or the foreign party. If a taxpayer wishes to select the foreign associated enterprise as the tested party, it must ensure that the necessary relevant information about....
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....nd allocation keys. To substantiate its claim, the assessee has also furnished a report on factual findings certified by the statutory auditors - Deloitte Anjin LLC. 11.2.5 Moreover, we find that the DRP had not considered in great detail the plea of the assessee as to why GMDAT should not be selected as the tested party for analyzing the inter-company transactions. Instead, the DRP had, in a cryptic manner, concluded that the results of assessee have to be compared with the stand alone results of Mahindra & Mahindra in the automotive segment. 11.2.6 In this connection, we tend to recall the ruling of the Hon'ble Jurisdictional High Court [Special Civil Application No.8179 of 2010 dated 31.8.2010] in the case of AIA Engineering Ltd. v. Dispute Resolution Patel through Secretary-DRP & 1. After due consideration of rival submissions, the Hon'ble Court had ruled thus - "16. . . . . .If the Dispute Resolution Panel was of the opinion that the application dated 22.4.2010 could not have been entertained, it should have considered the objections filed by the petition on merits. As a consequence of the impugned order, firstly the objections raised by the petitioner have not b....
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....e Hon'ble Tribunal, after due consideration of the issue in depth and for the reasons recorded therein, directed the AO/TPO to determine the arm's length interest at Libor plus 2% on the monthly closing balance of advances during the FY. We have, with due regards, perused the issue and the findings of the Hon'ble Bench in detail. Ironically, the main issue before the Bench was the percentage of the interest to be calculated on the loan advanced by the assessee to its foreign AEs. We are, therefore, of the view that this case is not directly applicable to the issue under dispute. (ii) In the case of M/s. Onward Technologies Ltd. (supra) as relied on by the Revenue, it is observed that the assessee, a parent company had international transaction with its AEs. With regard to IT enabled services provide to its AEs, the assessee had chosen six comparables with its foreign AEs as a tested party. The TPO had ignored the working of the assessee whereby selecting 20 comparable cases. When the issue reached before the Tribunal for resolve, the Hon'ble Bench had, after having considered rival submissions, recorded its findings, among others, as under: So, it is the profit ....
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....'ble Calcutta Tribunal in the case of Development Consultants (P.) Ltd. (supra) had recorded its findings that "33. Based on facts and our findings of the case, after due consideration of all the facts, we conclude that the analysis undertaken by the assessee to determine the arm's length price of the international transaction with Datacore USA is correct and on the basis of the analysis it is seen that transaction undertaken by the taxpayer with Datacore US is at arm's length for both the assessment years." Thirdly, the Hon'ble Delhi Tribunal in the case of Ranbaxy Laboratories Limited (supra) took a stand that- 'If the taxpayer wishes to take foreign AE as a tested party, then it must ensure that it is such an entity for which the relevant data for comparison is available in public domain or is furnished to the tax administration.' Then, the United Nation's Practical Manual on Transfer Pricing for Developing Countries had observed that- "5.3.3.1. . . . . . The tested party normally should be the less complex party to the controlled transaction and should be the party in respect of which the most reliable data for comparability is available. I....
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....n it was held as under: "No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new 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. I....
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.... of Andhra Pradesh. The amulet of Art. 31A is, therefore, potent, so far as it goes, but beyond its ambit it is still possible, as counsel have endeavoured, to spin out some sound argument to nullify one section or the other. Surely, the legislature cannot run amok in the blind belief that Art. 31A is omnipotent. We will examine the alleged infirmities in due course. It is significant that even apart from the many decisions upholding Art. 31A, Golak Nath's case decided by a Bench of 11 Judges, while holding that the Constitution (First Amendment) Act exceeded the constituent power still categorically declared that the said amendment and a few other like amendments would be held good based on the doctrine of prospective over-ruling. The result, for our purpose, is that even Golak Nath's case has held Art. 31A valid. The note struck by later cases reversing Golaknath does not militate against the vires of Art. 31A. Suffice it to say that in the Kesavananda Bharati's case. Article 31A was challenged as beyond the amendatory power of Parliament and, therefore, invalid. But, after listening to the marathon erudition from eminent counsel, a 13 Judges Bench of this Court uph....
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.... the same view and accordingly the ground of appeal of the assessee is allowed for statistical purposes. 10.6 As we have restored the issue to the file of the TPO for fresh adjudication considering the AE's as tested party, other grounds nos. 3 and 4 do not require to be adjudicated separately. Therefore, we dismiss the same." On considering the finding of the ITAT Ahmedabad and after taking the same view, we restore this issue to the file of the TPO for fresh adjudication considering A.E's. as tested party. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Ground No. 4 (Erred in confirming disallowance u/s. 14A of the Act of Rs. 4,60,85,478/-) 7. During the course of assessment the Assessing Officer noticed that assessee company has made investment of Rs. 601.22 crores in the shares of Indian companies and Rs. 3242.2 crores in its overseas subsidiaries as on 31st March, 2011. The Assessing Officer also stated that assessee has offered an income of Rs. 1,53,43,279/- as taxable income on these investments. The Assessing Officer was of the view that domestic investment yield exempt income to the assessee for which the income on transfer woul....
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....o disallowance is to be made u/s. 14A of the Act. Therefore, following the decision of Hon'ble Gujarat High Court as cited above, this ground of appeal of the assessee is allowed. Ground No. 5 (disallowance of deduction claimed u/s. 80IBand 80ICof the Act of Rs. 819,857,681) 9. During the course of assessment, the Assessing Officer noticed that assessee has claimed deduction u/s. 80IB/80IC of the act of Rs. 81,98,57,681/-. The assessee claimed these deductions in respect of undertakings located in backward area for deduction u/s. 80IB (Goa Unit) and for deduction u/s. 80IC (Paontashahib, Himachal Pradesh). On query, assessee explained that certificate of the chartered accountant in form 10CCB has already been filed vide letter dated 21st Sep, 2012 as per the requirements of section 80IB and 80IC of the Act along with profit and loss account for the respective eligible new industrial undertakings (NIU). The assessee has also enclosed copy of these certificates as per annexure 1. The assessee has also filed revised certificate in form no. 10CCB along with profit and loss account and the balance sheet of the respective new industrial undertaking and submitted that there was no chang....
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....@30% (i.e. Goa). The Auditor while computing the above deduction in Form No. lOCCB has made the following assumptions which are of relevance and brought out as under. The comments on the assumption made by the Auditor have been discussed in brackets on every point. 1. SALES: The sales have been recorded at the selling price of the company. Comments on the Assumption: (It is pertinent to note that the sales have been recorded at the global sale price effected by the company i.e. the price paid by consumer and not. by following the provisions of 80IA r.w.s.801C(7). The assessee records the sale effected after the services provided by the selling and distribution arm of the company and other facilities of the company whose cost has not been incorporated. Therefore, the sales have not been recorded as per ALP from the manufacturing unit to the company], HEAD OFFICE EXPENSES: 75% of the allocable head office expenses for the year excluding legal and secretarial, corporate affairs and communications, M&A, separation, investor relation, business development, as allocated by the management arc apportioned in the ratio of sales, Comments on the Assumption: (It is seen that the....
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....& 2009-10 also the claim of deduction u/s 80 IB/IC was disallowed. 10.2.3.2 Considering the above facts and circumstances of the case, the assesses was asked during assessment proceedings various queries relating to its claim u/s 801B/IC of the 1. T. Act, 1961. 10.3.0 The assessee was asked to justify the following during the course of assessment proceedings: i. Justification of claim u/s. 80IB/IC ii. Details of products manufactured u/s. 80IB/1C iii. Why expenses which are indirect should not be allocated in the ratio of turnover for determining deduction u/s. 801B/IC of the l.T. Act, 1961 for the units. iv. Details of R&-D expenses and its allocation to various units, v. To state whether separate books of accounts and trial balance have been maintained for 801B/IC units, vi. To give Trial Balance of these units. v. To give the costing of products manufactured in these units. viii. To state whether these products have been earlier manufactured by the assessee either by himself or loan license basis/job work basis or has been purchased from outside parties in the earlier year or during this yr. ix. List of been purchased from outside parties in the earli....
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....) to 131(11], (I1A) and (11B)14] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provision of this section, be allowed, in computing the total income of the assesses, a deduction from such profits and gains of an amount equal to such percentage and far such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils ail the following conditions, namely:- (I) It is not formed 03' splitting up, or the reconstruction, of a business already in existence: (II) It is no! formed by the transfer to a new business of machinery or plant previously used for any purpose; (III) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: (Iv) In a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or .more workers in a manufacturing process carried on with the old of power, or employs twenty or more workers in a manufacturing process carried ....
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.... information and basis relating to the deduction claimed u/s 80-JB of the Act. It is humbly submitted before your good self that the company has been claiming such deduction in earlier years and the same have been duly allowed after verifying the facts during assessment proceedings of these years except for assessment years 2008-09 and 2009-10. There is no change in the facts and circumstances during the year under consideration with regard to deduction claimed u/s 80-IB of the Act. (C) Deduction u/s 80-IC of the Act for Rs. 718,821,490 The assessee company has also claimed deduction u/s 80~IC(3) of the Act for Rs. 718,821,490/- In respect of its various industrial undertakings at Paonta Sahib, Himachal Pradesh and the same is tabulated below: Industrial Undertaking. Date of Commercial Production Year of Claim Profit for the year New SGC Plant 10lh April 2006 4th 612,560,927 New Tablet 15th July 2007 3rd 306,260,563 Plant III Deduction claimed (100%) 718,821,190 In this matter, we would like to draw your kind attention to the relevant extracts of the section 80-1C of the income Tax Act, 1961 ["the Act") reproduced as under: ....
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....eviously used for any purpose; Unquote We would like to submit that the eligible units of assessee company are entitled to claim deduction under section 80IC of the Act, since the eligible units satisfy the conditions provided by section 801C of the Act namely: The eligible units of the assessec firm manufacture Pharma products, not being any article or thing specified in the Thirteenth Schedule to the Act; * The eligible units of the assessee firm has been set up in areas notified by the Central Board of Direct Taxes ('CBDT') in exercise of powers conferred under section 8OlC(2)(a)(ii)of the Act by the Central Government. * The eligible units have commenced production (as tabled above) within the period required under the said section. Further, we would like to submit that the assessee has claimed deduction u/s 801C on the eligible New Industrial Undertaking based upon the certificates issued by the statutory auditors of the company. As per the requirement of Section 801C of the Act, we had also submitted audit report in Form No'. 1OCCB along with documents before your good self in response to notice issued u/s 143(2) of the Income-tax Act 1961. In these ce....
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....Query (iv) Details of R&D Expenses and its allocation to various units Details of R&D expenditure incurred by the company during AV 2010-11 along with the copies of approval of the R&D facilities by the prescribed authority [being Department of Scientific & Industrial Research, Ministry of Science and Technology ('DS1R')] have already been filed before your good self vide our letter dated 8th September 2011. The assessee Company is a leading pharmaceutical company in India. Being a pharmaceutical company, it has scientific research and development centers, which are duly recognized by DSIR for carrying on basic research for discovery and development of new drug molecules, pharmaceutical dosage forms including novel drug delivery systems, API, etc. These research .and development centers are of international standard and carrying on research of new medicines/ formulations. The basic object of the research and development centers of the assessee is to innovate new molecules/drugs. As per the American Chemical Society Report, the International average time for the discovery, development and launch of a new drug is around 10 to 15 yenrs and the cost related to these act....
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....s on SAP ERP system. Business area is an organizational unit within financial accounting system which corresponds to a defined business segment or area of responsibility, Pharma manufacturing is considered as a separate business area by the Company. Similarly, API manufacturing (bulk drugs) is considered separate business area. A business area may be further subdivided, for e.g. the manufacturing business area further comprises of various plants. Each Plant is given a separate Plant Code within business area. In this regard, your goodself may note that a plant location may have different production units (referred to as 'Blocks'), manufacturing different kinds of medicines. The units which are eligible to claim deduction under section 80-IB/ 1C of the Act are referred to as "New Industrial Undertaking ('N1U') by the Company. It may be noted that the transactions/ entries relating to each business area or its plants are distinctly identified by way of a separate code. At each of the plants, the company manufactures different kind of medicines and in different package forms, Each medicine in its packaged form is referred to as Stock Keeping Unit ('SKU').....
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..../Job work basis or has been purchased from outside parties in the earlier year or during this yr. Response Please find attached in Annexure - 3 the list of common products manufactured by the Company in other plants/ procured on loan license basis during the year by the Company. Please note that the Company is not claiming any deduction u/s 80IB/1C in respect of profit from sale of these products procured from other plants. Query (XII Why not after excluding other income like royalty, technological license income, export incentives, misc. Income, and sundries etc. which are not eligible for 80IB/IC deduction, the determination of eligible profits be done. Response Please find attached herewith details of miscellaneous income as Annexure - 4 which is included in the profit of New Industrial Units on which the assessce company has claimed deduction u/s 80-IB / 1C. As per the details, your good self may kindly observe that ii mainly includes sale of scrap, unclaimed balances 8t, excess provision written back, etc. related to respective units. In this connection, we would like to submit that the assessee company is engaged into the business of manufacturing Pharmaceutical....
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....ves and sundries etc. have not been included for the purpose of the determination of eligible profits We would also like to submit that similar deduction u/s 80-1B / 1C on aforesaid items has also been claimed by the assesses company in earlier years and the same has always been allowed in the Income tax assessments. It is further submitted that there is no change in the facts during the year under consideration as compared to earlier years and therefore, we humbly request your goodseif to kindly allow deduction u/s 80-IB / 1C on the aforesaid miscellaneous incomes. Query (xii) The company does trading activity also. Why the trading profit should not be excluded for determining eligible Income. Response As also mentioned in the point above, we would like to reiterate that the company has not considered 'Other income (Like Royalty, technological license income, export incentive etc] (mentioned in the order sheet)' and "Income from trading activities' as eligible profits, while computing eligible profits of the NIUs for the purpose of claiming deduction under section 801B/1C of the Act. As rightly pointed out above by your goodself; we would like to confirm th....
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....rovide for an independent computation of eligible profits of each of the undertaking respectively. We reiterate that the company has considered each eligible unit as an independent business/ source of income for the purpose of computing deduction and the provisions of section 801A(5) of the Act are duly compiled with. Query (xlv) The assesses has a huge selling and a distribution network which itself is a profit centre in its own right and existence and to include its profits as profits of manufacturing activity will be completely irrational. Therefore, why the same should not he excluded. Response In this regard, company would like to submit that the Selling and Distribution network (herein after referred to as S&D function) is an integral part of the assessee company and works cohesively. Any manufacturing activity ultimately is meant for sales and hence such function cannot be considered as a separate profit centre. Hence the S&D function is note separate business segment/undertaking to be taxed separately, since it is only facilitating the operations within the company and no separate income is earned by it from performance of Service to any third party. The term &#....
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....ith manufacturing of the medicines/ drugs and sell them to the ultimate stockiest- Like any other cost center of the company viz Human Resource Department, Administration Department, etc S&D function performs the marketing function which facilitates the primary functions of manufacturing in the company. The S&D function of the company facilitates the function of marketing; selling and delivery of the goods to the stockiest, hence, the cost incurred by this function has been considered as common cost and is accordingly allocated to the manufacturing units of the company by considering it to be a separate cost center like any other department (as has been mentioned above). We further submit that these cost centers exists in every organization for marketing the products and onward selling to the customers, however booking the revenues in this department and taxing it separately as profit center would be contrary to the facts, standard business principles and accordingly totally unreasonable and uncalled for. Also, just because the S&D function has customer interface for a limited purpose of selling the manufactured products of the company, it cannot be considered as n separate bus....
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....ssee is maintaining HO for the purposes of looking after inter alia, the business of trading in API & medical equipments, supervise the operations of its manufacturing undertakings, etc. The HO is also looking after certain other important functions of the assessee company, viz. Strategic Planning, Investor Relations, Corporate Communications, dealing with various Departments/ Ministries of the Government of India, Corporate Affairs, Shareholders Servicing, raising equity and other funds and compliance of applicable legal provisions. Therefore out of NCO expenses, the portion attributable to the industrial undertakings, i.e. 75% has been allocated. The remaining 25% NCO expenses are attributable to the other business activities. In this connection, attention is also invited to Section 44C of the Act, 'which restricts Head Office Expenses to 5% of adjusted total income of a business carried on by a non-resident in India. The assessee further submits that costs incurred in relation to Mergers & Acquisition ('M&A'), Legal and Secretarial, Corporate Affairs, etc. do not .have a direct nexus with the NIUs and arc accordingly not considered for determination of eligible p....
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....umstances discussed in the previous paragraph, we find that the impugned issue is covered by the order of Delhi ITAT in the case of assessee in which the exactly the same issue was adjudicated for the assessment year 2008-09 in ITA No. 196/Del/2013 dated 25.04.2016 in its favour. The relevant extract of the order is reproduced as under: "68. We have carefully considered the rival contentions. During the year assessee has claimed deduction u/s 80IB and 80IC as under:- Name of unit Section under which claimed Year of establishment Year of claim Initial year of the claim Amount claimed remarks Goa Plant 80IB 31.03.2002 7th 2002-03 90204832 Profit for year is Rs. 300682774/- and deduction is claim @ 30% of the eligible profit. New Tablet Plant-I 80 IC 31.03.2005 4th 2005-06 Rs. 220579510 It is eligible for deduction @100% of profit for the year New Tablet Plant-II 80IC 31.03.2006 3rd 2006-07 Rs. 156142930 It is eligible for deduction @100% of profit for the year New SGC plant 80IC 31.03.2007 2nd 2007-08 Rs. 376385228 It is Eligible for deduction @100% of profit for the year New tablet plant-III 80IC 31.03.2008 1st 2008-09 Rs. 523509006 It....
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....ecifically on the point in favour of the assessee. The contention of the revenue that this is the first year in which the methodology of claim of deduction of the assessee is being verified is not accordance with the previous assessment orders passed by the AO with respect to deduction u/s 80IB with respect to Goa plant and deduction u/s 80IC of the Act for New Tablet Plant-I. On perusal of those orders, it is apparent that these deductions claimed by the assessee in the initial year of this industrial undertaking have been examined in detail and then allowed by the revenue after making enquiry. In view of this, the argument of the revenue cannot be accepted that these deductions have not been examined. For this finding, we have material on record the assessment history in the form of assessment orders of the assessee for those years. However in case of New Tablet Plant-II and New SGC plant it is apparent that in absence of positive gross total income no deduction was claimed for AYs 2006-07 and 2007-08 and therefore the claim of deduction by the assessee for these two plants is the first year of examination of claim. Obviously new Tablet Plant-III has been set up during this yea....
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....bsence of any material change which would justify the change in view. 71. The Supreme Court in the case of RadhasoamiSatsang (supra) has held that unless there is a material change in justifying the revenue to take a different view the earlier view which has been settled and accepted of a several years should not be disturbed. The relevant extract from the said judgment is quoted below:- "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a Unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter- and if there was not change it was in support of the assessee- we do not think the question should have been reopened and contrary to what had been decided by the Comm....
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....assessee for the assessment year 1973-74 was allowed by the Income Tax Appellate Tribunal. The effect thereof was that the assessee was granted the requisite deduction under Section 80J of the Act for the assessment year 1973-74. The Department has sought reference under Section 256(1) of the Act which reference application was also rejected by the Tribunal. Likewise, for the assessment years 1974-75 and 1975-76, the claims of the assessee were allowed. The assessee, once given the deduction under Section 80J of the Act is entitled to such a deduction for a period of 5 years. If the assessee has been allowed the benefit of Section 80J in the last three preceding years, there is no reason to deny the same for the instant assessment year. We, therefore, answer this issue also in favour of the assessee and against the revenue." 74. In the present case, the claim of the assessee under section 80-I of the Act was examined and allowed by the Assessing officer for three years preceding the assessment year 1991-1992. It is relevant to note that assessments in the earlier years i.e. relating to assessment year 1988-89, 1989-1990 and 1990-1991 has not been disturbed by the Assessing Office....
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.... 80-I of the Act occur in the previous year relevant to the initial assessment year and have to be examined in the initial assessment year. In such cases, where the facts on the basis of which the deductions are claimed are subject matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without altering or reopening the assessment proceedings in which the eligibility to claim the deduction has been established. 76. In cases where deduction is granted under Section 80-I of the Act, the applicability of the Section is determined in the year in which the new industrial undertaking is established. The qualification as to whether any industrial undertaking fulfills the condition as specified under Section 80-I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under Section 80-I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing the benefit are inextricably linked with the previous year relevant to the assessment ye....
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....year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted." 79. The Division Bench of the Bombay High Court in the case of Paul Brothers (supra) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement & Chemical Industries (supra).' For the sake of brevity, we do not reproduce other decisions cited by ld. AR that reiterates the same principles that in absence of any change in facts / law etc. during intervening period the deduction granted after examination in initial year of a tax holiday period it cannot be questioned in subsequent years. 75. Therefore, we hold that as the deduction with respect to Goa Plant u/s 80IB which is in the 7th year of its claim out of 10 years, has earned eligible profit of Rs. 300682774/- and deduction thereon is claimed at the rate of 30% thereof amounting to Rs. 90204832/- and New Tablet Plant-I u/s 80IC for which this is the 4th year of the claim and assessee has claimed 100% of the eligible profit amounting to Rs.....
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....where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 30. Reference was also made to Parashuram Pottery Works Ltd. v. ITO [1977] 106 ITR 1 (SC) and then it was held: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to wh....
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....by the Independent accountant is prepared based on similar accounting policies and practices. It is also apparent that the profit and loss and the balance sheet have been prepared on rational basis after allocation of proper expenditure, which has been followed by the assessee consistently and based on the accounting practices followed in earlier years. The main reason for asking of separate books of accounts of the eligible undertaking is only to verify that whether the assessee has computed the eligible profits for deduction has some sanctity or not. Assessee has consistently followed allocation of 75% of head office expenses to the individual undertaking based on sales clocked by the individual units. This practice has been consistently followed by the assessee in past year and the revenue as stated by us earlier with respect to AY 2002-03 onwards, has accepted it. The Assessee has in brief and succinctly has explained the rationale behind allocation of each expenditure to the various units. Regarding R&D expenditure the Assessee has also followed the practice apportioning 30% to the individual undertaking in the ratio of sales. This methodology is based on logical reasoning and....
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.... 1[or hospitals in rural areas as defined in sub-section (11B) of section 80-IB], shall be in Form No. 10CCB. (2) A separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction under section 80-I or 80-IA or 80-IB1[or 80-IC] and shall be accompanied by the Profit and Loss Account and Balance Sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity. (3) In the case of an enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining an infrastructure facility, the form shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility. (4) In any other case, the form shall be accompanied by a copy of the agreement, approval or permission, as the case may be, to carry on the activity signed or issued by the Central Government or the State Government or the local authority for carrying on the eligible business." This rule a....
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....e account in respect of raw material which it had sold during the assessment year. If the assessee had maintained a separate account, then, in that event, a clear picture would have emerged which would have indicated the income accrued from the manufacturing activity and the income accrued on the sale of raw material. We do not know the reason why separate accounts were not maintained for the raw material sold and for the income derived from manufacture of yarn." On reading of the above decision, it is apparent that the main purposes of the maintenance of separate account are to deduce correct profit eligible for deduction. Hon'ble Supreme court in above decision has also held in the background of the facts that assessee did not produce separate profit and loss account of the eligible undertaking. However, in the case of the assessee such profit and loss account was produced along with the report of the accountant since beginning. Therefore, assessee has maintained separate account of the profit eligible for industrial undertaking. In this case, an accountant has audited assessee's accounts of the eligible industrial undertakings and therefore it complies with the letter ....
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....ime information on each aspect of its business process. In this era when an entity maintains its accounting and business records on Enterprise Resource Planning system, which is a standard procedure or program to optimize all business processes including Sales, Logistics, Production, Quality, Finance of an entity and SAP is a name of software product and it's a company name too which a leading provider of these solutions, it is rather incorrect to say that separate books of accounts are not maintained by the assessee. Evidence led before ld. AO in the form of profit and loss accounts, before ld. DRP in the form of the profit and loss account and complete balance sheets of the undertaking, before 'accountant' who certified the deduction of the units, its balance sheet and profit and loss accounts and before us all these records are attached in the form of paper book which are quoted by us above. In view of such overwhelming evidence, we reject contention of ld. AO and Ld. DRP that assessee has not maintained separate books of accounts. We hold that assessee has maintained separate books of accounts from which correct profit can be deduced at any time of the each of the e....
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....aper book where the gross total income of the assessee is Rs. 3347340467 and claim of the deduction u/s 80 IB/IC of the act of Rs. 1366821506/-. Therefore, it is apparent that assessee's deduction is not exceeding the gross total income of the assessee. We have perused the provision of section 80A of the act which provides as under :- "Deductions to be made in computing total income. 80A. (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 48[80U]. (2) The aggregate amount of the deductions 49 under this Chapter shall not, in any case, exceed the gross total income of the assessee." The only condition that is prescribed u/s 80A of the act is that deduction allowable to the assessee under Ch VIA cannot exceed the gross total income of the assessee. Here as already mentioned gross total income of the assessee is Rs. 3347340467/- and out of which deduction u/s 80 G of the act is a claimed at Rs. 11672734/- and deduction u/s 80 IB and IC of the act of Rs. 1366821506/- of the act totaling to Rs. 1378494420/-. This res....
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....he businesses of the eligible undertaking. We are not in the present case concerned with sub-section (4). That sub-section will apply when the combined profits - profits of the exempt unit and those of the non-exempt unit - have been ascertained; the next step will be to apportion them on the basis of the ratio which the export turnover bears to the total turnover. What we are concerned herein is the stage before that. We are concerned herein with the method by which the indirect or common expenses - expenses which are incurred for both the exempt and taxable units - are to be apportioned between the two units. To apply the formula prescribed in sub-section (4) may be appropriate in a given case considering its peculiar facts. But applying the same formula to all cases of apportionment without having regard to the history of assessments and other relevant factors may not be justified. 11. In Hukam Chand Mills Ltd. (supra), in the context of apportioning profits accruing to the assessee under the several categories of businesses carried on by him in British India, it was held that the question as to the method of apportionment was essentially one of fact depending upon the circums....
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.... and there is no statutory or fixed formula, the endeavour can only be towards approximation without any great precision or exactness. If such is the endeavour, it can hardly be said that there is an attempt to distort the profits. On the contrary, as we have already pointed out, distortion of profits may arise if the consistently adopted and accepted method of apportionment is sought to be disturbed in a few years, especially in a case such as the present one where the deduction under Section 10A is available over a period of ten years and only in some years the method of apportionment of income is disturbed. In other words, there is no "just cause" made out for abandoning the past method.' [Underline and Bold supplied by us extracted from taxmann.com] In view of the above decision of Honourable Delhi high court, allocation keys of R & d expenses as well as common expenses have rational, accepted by revenue in past years, there is no justification that how it distorts profit, in absence of compelling reasons to change i.e. 'just cause', we reject the stand of revenue in not accepting the above allocation methodology adopted by the appellant. 85. Coming to the nex....
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....is of appropriate allocation key of 'sales'. Ld. AR of the appellant relying on the decision of coordinate bench of Cadila Healthcare Ltd. (supra) has submitted that there cannot be any specific demarcation between manufacturing and selling activities of the assessee and profit accrues only at the time of sales of the goods only. Therefore, the contention of the revenue that selling and distribution function of the assessee is a separate profit center is required to be rejected at threshold. We have carefully considered the argument of ld. AR and of the revenue on this point as well as the ld. AO and Ld. DRP. We are of the view that this argument is almost similar to the argument raised by the revenue in the case of Cadila Healthcare Ltd. (supra) Coordinate bench has dealt with these arguments from all the angles of the controversy and has held as under :- '9.4 Ld. Counsel has asserted that undisputedly, it was an "inter-division transfer", hence it was expected to record the same at arm's length price. He has pleaded that the assessee is blowing hot and cold in the same breath. When it comes to transfer of services and goods, it opposes arm's length price adj....
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....it were determined and recorded. Because of the brand value the sale price must have been determined by the management as if the profit is earned by the assessee-company on sale of the products of the Baddi Unit. It was recorded on the presumption that the sales were executed by the Head Office by charging brand value, the name of the product and the goodwill of the Company. In any case, according to Ld. DR, a reasonable expenditure should have been provided, so that such an abnormal profit @ 58.66% could be checked. 9.6 In support of the above submissions, Mr. Srivastava has placed on strong reliance on the decision of Hon'ble Supreme Court in the case of CIT v. AhmedbhaiUmarbhai& Co. [1950] 18 ITR 472 for the legal proposition that, quote "The profits received relate firstly to his business as a manufacturer, secondly to his trading operations, and thirdly to his business of import and export. Profit or loss has to be apportioned between these businesses in a business like manner and according to well established principles or accountancy." Unquote. He has also placed reliance on Liberty India (supra) . 10. We have heard both the side at length. The controversy as raised ....
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....rm "Profit" implies a comparison between the stage of a business at two specific dates separated by an interval of a year. Thus fundamentally the meaning is that the amount of gain made by the business during the year. This can be ascertained by a comparison of the assets of the business at the two dates. To determine the "profit" of a manufacturing Unit the accounting standard has given certain guidelines, enumerated in short. In the accounting the "profit" is the difference between the purchase price and the cost of bringing the product to market. A "gross profit" is equal to sales revenue minus cost of goods sold or the expenses that can be traced directly to the production of the goods. Rather, the "operating profit" is also defined as equal to sales revenue minus cost of goods plus all expenses, except interest and taxes. Most of the manufacturing companies have 'Total Cost' based pricing method. Total Cost has, broadly speaking, two components; i.e. raw-material plus value addition (it includes all overheads). Therefore, profit margin is price minus total cost. In manufacturing Unit, thus cost of conversion is production overheads, such as, direct labour cost and inex....
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....tion 80IA and restricted the profit of the said Unit to 10% only. While dealing this issue, the Respected Coordinate Bench has concluded that it was not justified to disturb the working of profit merely because the profit rate of eligible unit was substantially higher than overall rate of profit of other Units of the assessee, more so when separate books were maintained by the assessee in respect of the said eligible Unit. In the present case as well the AO has proceeded to disturb the profit of the Baddi Unit and held that only 6% profit is eligible for deduction u/s.80IC.While doing so, identically, the AO has not pinpointed any defect in the working of the "profit" of the Baddi Unit. In such a situation, we can say that the legal proposition as laid down by Delhi Bench can also be applied in the present appeal as well. 10.4 The AO has also concluded that only the incremental profit, representing the difference between the profits earned earlier when the products were procured on P2P basis and the profits earned by the Baddi Unit, should be treated as a manufacturing profit. The AO has then said that earlier the assessee was procuring the products on P2P basis and showing the a....
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.... marketing activity the proportionate profit was attributed to the said activity. Contrary to this, there was no finding that upto the extent of 80%, the profit was attributed to the assessee-company. The segregation between 80% and 6% was not on account of any evidence through which it could independently be established that the major portion of the profit could be attributed to the assessee-company and rest of the profit could only be attributed to the Baddi Unit. 10.5 The AO has also made out a case that the book profit percentage of Baddi Unit was 58.67%, whereas the profit of the assessee-company as a whole was 11.88%. If we further elaborate this aspect, then the AO has also given a working through which the average selling rate was 86.36% of the Baddi Unit. Meaning thereby if we presume for example that the assessee has gross profit of 86%, then the net profit was disclosed at 58%. A question thus arises that what beneficial purpose could be served for the reduction of gross profit to a lower percentage of net profit, specially when the allegation of the A.O. was that there was an attempt to declare higher profit of Baddi unit to get more advantage of deduction. On perusal....
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....deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." As per this section, the profits of an eligible undertaking shall be computed as if such eligible business is the only source of income of the assessee. In this section again, the Statute has used three terms, i.e. "profit", "business" and "income". As narrated hereinabove an 'income' has a wider expression than the 'profit'. Likewise, 'business' has also a wider meaning than the word 'income'. In the present case, manufacturing of pharmaceutical products is declared as "eligible business". Then the question is that what is the profit of such an eligible business? On careful reading of this subsection, it transpires that the said eligible profit should be the only source of income. If we examine the separate profit & loss account of Bad....
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....on 80IA(8) reads as follows:- 'Section 80IA(8) : Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods [or services] held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods [or services] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation : For the purposes of this sub-section, "market value", in relation to any goods or....
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....ised by ld.AR Mr. Patel that what should be the line of demarcation to determine the sale price of a product if not the market price. As far as the present system of fixation of sale price of the product is concerned, a consistent method was adopted keeping in mind the several factors, depending upon the market situation, we have been informed. But if the assessee is compelled to deviate from the consistent method of pricing, then any other suggestion shall not be workable because no imaginary line of profit can be drawn, precisely pleaded before us. So the uncertainty is that on the production cost what should be the reasonable mark-up which shall cover up the margin of profit of a manufacturing unit. And why at all this complex working of computation be adopted by this assessee when a very simple method is adopted that on one side of the P&L A/c the production cost plus overheads were debited and on the other side of the P&L A/c sale price was credited to computed the profit. There are certain expenditure which are notional expenditure and there are certain expenditure which are self-generated to create the brand value of a product. Naturally, the allocation of notional expendi....
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.... to be claimed for 80IC deduction. According to him, each of the eligible business constitutes a stand alone item in the matter of computation of profit. For the computation of profit of an eligible business the word used is "derived" in section 80IC which is a narrower connotation, as compared to the word "attributable". In other words, by using the expression "profits derived by an undertaking", Parliament intended to cover such sources not beyond the first degree, i.e. the first degree of manufacturing activity. The law pronounced by the Hon'ble Supreme Court is final and should not be disputed. However, a judgement is to be correctly interpreted. 10.11 Finally, on the question of segmentation of profit a vehement reliance was placed on an old precedent namely Ahmedbhai Umarbhai& Co. (supra). Facts of that case was that the assessee had owned three Mills at Bombay and one at Raichur (Hyderabad). The assessee was manufacturing oil from groundnuts. The produced at Raichur, Hyderabad is partly sold at Raichur and partly in Bombay. The question was in respect of the liability under Excess Profit Tax Act (EPT Act) for the oil manufactured at Raichur but sold in Bombay. The cont....
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....t. The act of sale is the mode of realizing the profits. If the goods are sold to a third person at Mill premises, one could have said that the profits arose by reason of sale. The Profit would only be ascribed to the business of manufacture and would arise at the Mill Premises. Merely because a Mill owner has started another business organization in the nature of sale depot, that cannot wholly deprive the business of manufacture of its profits, though there may have to be apportionment in such a case between the business of manufacture and business of shop keeping. The question which was answered was that whether in respect of the manufacturing business of the assessee in Raichur, profits accrue or arise and if so, at what place. One of the Hon'ble Judges has opined that the manufacturing profit arise at the place of manufacture and that the sale profits arise at the place of sale and that the apportionment has to be made between the two, though the place of receipts and realization of the profits is the place where the sales are made. Simultaneously it was also opined that the manufacturing profit could not be said to have accrued at that place because there was nothing done ....
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....parate business. The whole of the profits of which accrue in an Indian State and the other part of the business be deemed to be a separate business. In para-44, the Hon'ble Court has discussed the problem with reference to certain decisions of English Courts and then made an observation that it had been held that if separation is possible in such cases, the proper course is to follow that sever the profits of the two businesses and assess accordingly. The result of the discussion was that the profits of the two businesses were directed to be apportioned. Simultaneously, the Hon'ble Court has also made an observation, quote "It is true that these are cases where several businesses were amalgamated and carried on together, or more of which were not liable to tax or excess profits duty; but the principle of apportionment upon which these cases were decided could, in my opinion, be applied with equal propriety to cases where one part of the business is distinct and separate from the other parts and is capable of earning profits separately." unquote. The Hon'ble Judge was therefore very much concern about the fact that the business should be capable of earning profits separa....
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....principle of apportionment was the criteria for segregating the manufacturing profit if it was feasible to do so. As against that in the present case the assessee has computed the profit of the Baddi Unit on the basis of the well accepted principle of accountancy that a profit is accrued where a transaction is closed, meaning thereby the profit arises solely at the time of sale. 10.13 After the detailed discussion, before we close the controversy we would like to express that the AO's proposition of segmentation of eligible profit of the manufacturing unit was not altogether meaningless. This approach of the AO cannot be brushed aside on the fact of it. But at present, when the method of accounting as applicable under the Statute, do not suggest such segregation or bifurcation, then it is not fair to draw an imaginary line to compute a separate profit of the Baddi Unit. The Baddi Unit has in fact computed its profit as per a separately maintained books of account of the eligible manufacturing activity. To implement the method of the computation at stand alone basis, as conveyed by the AO, the manufacturing unit has prepared a profit & loss account of its manufacturing-cum-sal....
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.... ld. DRP, those were filed and were available with ld. DRP as well as with AO at the time of framing final assessment order. Hence it is contended by the ld. AR that substantial compliances has been made by the assessee by filing the profit and loss account and complete compliance before passing of the final assessment order by filing the balance sheet. Hence, ld. AR contended that if the full details are available with the AO before passing of assessment order merely because there is some technical default deduction cannot be denied. This argument was examined and it is found that assessee has submitted the profit and loss account along with Form NO.10CCB and later on also the balance sheet before finalization of final assessment order i.e. those were filed before the DRP, we are of the view that assessee cannot be denied the deduction merely for this reasons. Further, the balance sheet filed later on by the assessee also did not contain any error or any fact, which could have shown that deduction claimed by the assessee, is erroneous. It is also important to note that no adverse remark is made either by the ld. AO or by ld. DRP on the balance sheet of the eligible undertakings th....
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....receding paragraphs of this order. In view of claim of the assessee supported by the audited certificate as provide u/s 80IA(7) of the act read with rule 18BBB and supported by the profit and loss account and balance sheets of the assessee, allocation of all the expenses based on the accepted formula which the assessee is applying for last several years and which has also not been disputed by the ld. AO in past years and allocation key of 'sales' of the units is also not disputed, it deserves to be accepted. We are also of the view that allocation of the expenses are on rational basis and accepted by revenue in earlier years with respect to eligible units claiming deduction for those years. Therefore, along with the old units i.e. Goa Plant and new tablet plant -I of the assessee along with the new tablet plant No -II and III and new SCG plant deduction u/s 80IB and 80IC is allowable as computed by the assessee. 90. Now we come to the last ground of objection raised by the revenue that this matter of examination of claim of the assessee should be set aside back to the file of ld. AO for fresh verification and for this ld. DR. relied on the decision of coordinate bench A....
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.... grounds of appeal before it but is not bound to do so. It is not precluded from considering a point which arises out of the appeal merely because such point had not been raised or urged by either party at the earlier stage of the proceedings. Some of these decisions, only to name a few, are CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 (Mad.), CIT v. AC Paul [1983] 142 ITR 811 (Mad.) and CIT v. Ice Suppliers Corpn. [1967] 64 ITR 195 (Punj.). In fact, the jurisdictional High Court has explained the ratio in the case of Hukumchand Mills Ltd. (supra) very elaborately. It has particularly explained the following observation of the Supreme Court in the case of Hukumchand Mills Ltd. (supra) : "The Tribunal has, however, discretion not to admit any fresh plea being put forward when it would involve investigation of facts." Explaining the above observation, the Madras High Court in the case of N.P. SaraswathiAmmal (supra) observed as follows at page 23 of the report : "We do not regard the last observation as a fetter on the Tribunal's jurisdiction to admit a new plea. For, the power to listen to a new contention and decide the appeal on that basis has been spel....
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....tice. In absence of any fresh plea by the revenue, we are afraid that we cannot agree with the contention of revenue. Our this reason also gets the support from the decision of coordinate bench in Zuari Leasing & Finance Corpn. Ltd. v. ITO [2008] 112 ITD 205 (Delhi) (TM) where in its held that :- "10. It is clear from above that primary power, rather obligation of the Tribunal, is to dispose of the appeal on merits. The incidental power to remand, is only an exception and should be sparingly used when it is not possible to dispose of the appeal for want of relevant evidence, lack of finding or investigation warranted by the circumstances of the case. Remand in a casual manner and for the sake of remand only or as a short cut, is totally prohibited. It has to be borne in mind that litigants in our country have to wait for long to have fruit of legal action and expect the Tribunal to decide on merit. It is, therefore, all the more necessary that matter should be decided on merit without allowing one of the parties before the Tribunal to have another inning, particularly when such party had full opportunity to establish its case. Unnecessary remands, when relevant evidence is on rec....
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....e expenditure should not be added back to income for the relevant accounting period. In this regard, the assessee has made the following submission. "In this regards, the Company would like to submit before your goodself that during the Assessment Year 2009-10, the company had executed hedge and forward contracts to protect its export realizations from exchange rate fluctuations and incurred marked to market (MTM) loss of Rs. 33,316.14 Mn. in the return of Income for the assessment year 2009-10 filed on 27.09.2009, the aforesaid, loss suffered in the ordinary course of business was claimed as allowable deduction [Refer OT vs. Woodward Governor India (P.) Ltd: 312 ITR 254 (SCJ). In the previous year relevant to the assessment year 2010-11, the assessee company, consistent with its stand taken in the assessment year 2009-10, recognized MTM gain of RsJ ,983.86 crorcs on reinstatement of the forward contracts by way of crediting the said amount to the profit and loss account, without actual realization thereof. Further the said amount of exchange gain was also offered to tax in the return of income filed for the said assessment year. During the Assessment Year 2011-12, the Compan....
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....et, of the assessee. The quantum of allowances permitted to be deducted under diverse heads under Sections 30 Lo 43C from the income, profits and gains of a business would differ according to the system adopted. This is made clear by defining the word "paid" in Section 43{2), which is used in several Sections 30 to 43C, as meaning actually paid or incurred according to the method of accounting upon the basis on which profits or gains are computed under Section 28/29. That is why in deciding the question as to whether the word "expenditure" in section 37(1) includes the word "loss" one has to read Section 37(1) with Section 28, Section 29 and Section 145(1). One more principle needs to be kept in mind. Accounts regularly maintained in the course of business ore to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. One more aspect needs to be highlighted. Under Section 28(i), one needs to decide the profits and gains of any business which is carried on by the assessee during the previous year. Therefore, one has to take into account stock-in-trade for determination of profits. The 1961 Act makes no provision with regard to valua....
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.... or loss would be of capital nature." Following the aforesaid decision of Supreme Court in case of .Woodward Governor (supra), the Special Bench of the Tribunal in the case of DC1T v. Bank of Bahrain & Kuwait: 41 SOT 290, also held that loss arising on unmatured derivative contracts, on mark to market basis, is allowable deduction, in accordance with the mercantile system of accounting, and could not be said to be contingent/notional loss. The relevant findings are reproduced as under: "42. We have considered the rival submissions and perused the record of the case. There is no dispute that if the date of maturity of the contract falls within the same financial year then the difference between the exchange rate as prevailing on the balance sheet date and contracted rate is an allowable deduction. The moot point for consideration is whether keeping in view the nature of contract, can it be said that a liability accrued on 31st March in respect of unmatured forward foreign exchange, contract on account of fluctuation in rote of foreign currency or not. Therefore, it is necessary to first examined the nature of contract entered into by the assessee. Forward Foreign exchange contra....
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....e method of accounting in regard to recognition of profit or loss both, in respect of forward foreign exchange contract as per the rate prevailing on March 31. iv) A liability is said to have crystallized when a pending obligation on the-balance sheet date is determinable with reasonable certainty. The considerations for accounting the income are entirely on different footing. v) As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. vi) The forward foreign exchange contracts have all the trappings of stock in- trade. vii) In view of the decision of Hon'ble Supreme Court in the wise of Woodward Governor India (1) P. Ltd., the assessec's claim is allowable. viii) in the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit. 59. We, accordingly, hold that where a forward contract is entered into by the assessee lo sell the foreign currency at on agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contr....
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....wable as deduction in the relevant year. The company has, therefore, rightly claimed MTM loss in the assessment year 2009-10 and also consistent with its stand, rightly offered for tax MTM gains in the assessment year 2010-11 and assessment year 2011-12. Strictly without prejudice to the aforesaid consistent stand of the Company, we humbly submit that pending adjudication of the appeal before the Tribunal, MTM gains offered for tax during the year under consideration of Rs. l,706.33Mn under the normal provisions andRs. 1,534.16 Mn u/s 115JB of the Income Tax Act, 1961 ('the Act')., may, consistent with and following the stand of the Department in the AY 2009-10, not be considered as taxable and should, therefore, be excluded from the taxable income of the Company." However, the Assessing Officer has not accepted the detailed submission of the assessee. The Assessing Officer was of the view that market to market gain during the year was subject to taxation while computing taxable income under normal provisions as well as u/s. 115JB of the act. Against the draft assessment order, the assessee has filed objection before the DRP. The DRP has upheld the action of the Assess....
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....provision for Rs. 1431.63 crores were treated as a contingent liability while determining the income under section 115JB of the Act in the assessment year 2009-10. The ld. AR before us claimed that a part of the aforesaid amount was written back in the year under consideration, therefore the same cannot be treated as income either under normal computation of income or under section 115JB of the Act as the same has already suffered the tax and such ground of appeal was not pressed before the ITAT in ITA 1782/AHD/2014. 98. On the other hand, the ld. DR before us agreed with the submission of the ld. AR if the amount written back correlates with the same provision which has suffered to tax in the immediate preceding AY 2009-10. 98.1. At this juncture, we find to refer the relevant finding of the AO as reproduced under: "The assessee pointed out that the AO vide order dated 30/01/2014 for AY 2009-10, did not allow the MTM loss considering the same to be contingent loss, resulting in consequent reduction in carried forward loss to AY 2010-11 by Rs. 6094.43 Mn. It was therefore submitted by the assessee that : "It is respectfully submitted that the Company continues to bonafide....
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....assessment year 2009-10 viz a viz the amount written back in the year under consideration is of Rs. 537.50 crores ( 1969.13-1431.63 crores). Thus the assessee cannot claim the relief more than the amount suffered to tax in the immediate preceding AY 2009-10 while determining the income under section 115 JB of the Act. Thus we direct the AO to restrict the relief to the assessee while determining the income under section 115 JB of the Act to the extent of Rs. 1431.63 crores only. Hence the assessee get relief for part of the amount as discussed above. Thus the ground of appeal of the assessee is partly allowed." Following the decision of ITAT on the identical issue and facts as supra we hold that the amount written back by the assessee cannot be subject to tax either under normal computation of income tax act or under section 1115JB of the Act in the year under consideration. Therefore, following the decision of the ITAT as supra reversal of amount of Rs. 1706.33 Mn is not taxable under the normal provision and Rs. 1534.16 Mn under section 115JB of the Act as the same was already suffered to tax in the preceding assessment year 2009-10. Therefore, following the decision of the ITAT....
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....S representing one share), at any time on or after 27"1 April 2006 and prior to the close of the business on 8'hMarch 2011, unless previously redeemed, converted, or purchased and can cancelled. ` * The price at which shares of the company will be issued upon conversion will initially be Rs. 716.32 and subject to adjustment in the manner provided in Condition 5.3 of terms of issue in various events some which are as under: o Free distribution, bonus shores, division, consolidation and re-classification of shares; o Dividend in shores; o Capital Distribution; o Issue of rights or warrants for equity related securities to Shareholders o Issue of convertible or exchangeable securities other thon to Shareholders or on exercise of warrants; o Issue of equity related securities The term 5.3.19 also referred that the conversion price shall not be reduced below par value of the shores (Rs. 5 at the date of issue of bonds) as a result of any adjustment made unless under applicable law then in effect. Shares issued on conversion of bonds will be fully paid up and nonassessable and will rankparipassu with the shares. Condition 5.6 of the terms of issue also contained provi....
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....f notice for confirming such intention by bonds holders and subsequent, redemption of the amount with premium of US$ 117,766,000 (equivalent INR Rs. 5,317,767,883) along with issue price of USS. 440,000,000 is enclosed as Annexure-3. As per the terms of the issue, all payments of principal, premium and default interest (If any) made by the Assessee Company in respect of the Bonds will be made free from any restrictions or conditions and be made without deduction or withholding in respect of Indian taxation save to the extent required by law. Where so required, the assessee company will gross up the net taxable amount and will be required to account separately to the Indian Tax authorities for any withholding taxes applicable on such amounts. In view of the above, the assessee company has paid withholding tax of Rs. 627,691,919 on the redemption premium. 2. Treatment in books of accounts In the books of accounts, the company is directly charging the redemption premium on a pra-rata basis to the "Share Premium Account" over the years. The detail of such premium charged to Share Premium Account in various years is as under: 31stMarch 2006 43.18 31st March 2007 1,022.75 ....
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....m on redemption of said bonds. Bonds and Debentures are not defined in the Income Tax Act, 1961 [the Act) but the sold terms have been succinctly explained by the Bombay High Court in the case of GIT vs Enam Securities Pvt. Ltd. [ TS-324-HO 2012-Bom] as under: "a debenture is an unsecured corporate obligation while o bond is secured by a Hen or mortgage on corporate property. However, in common parlance, the expression "bond" is often used indiscriminately to cover both bonds and debentures. As a matter of fact, the Companies Act, 1956 in section 2(12) defines debentures to include stack bonds and any security of the company whether or not they constitute charge on the assets of the Company, A bone! is a formal document constituting the acknowledgment of a debt, by an enterprise and normally contains a provision regarding payment of principle and interest. There is clear distinction between bonds and share capital because a bond does not represent ownership of equity capital. Bonds are in essence interest bearing instruments which represents a Joan. Further in the case of RD Goyal vs Reliance Industries Limited, the Supreme Court noted that a debenture is simply an instrument of ....
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.... provide for any interest. Further, interest is defined in section 2{2SA) of the Act and is reproduced as under: "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized" B. Summary Given the above, the premium paid on redemption of FCCB is interest, eligible for deduction under the Act for the following reasons: * The liability to pay premium is contingent upon the right of redemption being exercised by the assessee company. Further, the liability to pay premium is further contingent upon the right of conversion of FCCBs to equity shares not being exercised by the holders of the FCCBs. * The holders exercised their right for redemption in year under assessment by choosing not to convert the FCCBs into the equity shores of the assessee company in the year under assessment. * The liability to pay premium on redemption crystallized during the year under assessment upon exercise of the right of redemption by ....
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....use of the funds for the period covered by the issue of Non Convertible Debentures. The payment of a premium at the end of the term which is fixed for the Non Convertible Debentures and upon which the debentures are to be redeemed is the flip side of a situation where the assessee issues debentures at a discount. In the case of a discount, the assessee has the benefit of the funds which are realised from the issue of the debentures, over the term of the debentures. In the case of a premium which the assessee pays, the premium paid on the date fixed for redemption is in consideration of the use of the funds by the assessee until such date as the debentures fall due for redemption. The principle which has been laid down by the Supreme Court in Madras Industrial Investment Corpn. Lid. (supra) to hold that the liability equivalent to a discount represents revenue expenditure must, by analogy of reasoning, apply to the Premium which is paid by the assessee at the time of redemption of the debentures. In that view of the matter the qestion which has been framed by the Revenue would have to be answered in the affirmative, in favour of the assessee. The actual premium paid upon the redempt....
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....resent ownership in share capital. Therefore, the premium paid on redemption of FCCB is interest eligible for deduction. The liability to pay premium is contingent upon the right of redemption being exercised by the assessee company. The liability to pay premium is further contingent upon the right of conversion of FCCB to equity share not being exercised by the holders of the FCCB. Therefore, payment of interest in the form of premium which is incurred wholly and exclusively for the purpose of business is to be allowed in the year in which it is incurred. Therefore, in the light of the above facts, findings and decisions of Hon'ble Supreme Court and decision of Hon'ble High Court of Bombay, we consider that premium on redemption of debenture is in the nature of interest allowable as deduction under the provision of the act, therefore, this ground of appeal of the assessee is allowed. Ground No. 9 (Disallowing weighted deduction u/s. 35(2AB) of Rs. 413,47,54,496/ merely on account of failure to produce form 3CL) 16. During the course of assessment, the Assessing Officer noticed that assessee has claimed deduction u/s. 35(2AB) on eligible revenue expenditure @ 100% amounting to R....
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....o the previous year relevant to the impugned assessment year. It further contains a list of assessee's various in house research & development facilities. Ld. PCIT's case as made out in his above extracted findings is that the assessee has failed to produce Form 3CL with respect to approval of its impugned revenue and capital expenses. His view is that the Assessing Officer ought not to have accepted assessee's weighted deduction in absence of the above approval Form 3CL. 7. We have given our thoughtful consideration to rival contentions as well as ld. 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 Gener....
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....first decision cited at Revenue's behest is accordingly distinguished. Next juridical precedent is (2000) 242ITR 659(SC) EIMCO KCP Ltd. vs. CIT wherein ambit of Section 263 jurisdiction in case pendency of appeal preferred before the CIT(A) is discussed. The same is once again not relevant. Third case law is that of Mukul Corporation (supra) once again throwing light on nature and scope of Section 263 jurisdiction. We have no reason to disagree with the same except the fact that the assessee has already made out its case for claiming the impugned weighted deduction. Ld. Departmental Representative then invites our attention to MASTEK case laws involving Section 35 deduction claim vis-à-vis Section 43(4) of the Act defining scientific research which is not germane to the issue involved before us. Ld. Departmental Representative at last cites hon'ble Karnatka high court's decision in (2015) 60 taxmann.com 309 Tejas Networks Ltd. vs. DCIT involving Section 35 deduction claim in light of Section 43 once again. We have already observed that hon'ble jurisdictional high Court has settled the very proposition in CLARIS case (supra). We therefore find no reason for not following on....
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....sue decided by the ITAT in case of assessee for earlier years same may be allowed. In the result, ground 13 of the appeal is allowed with above direction." 74.1. The ground raised before us is identical to the issue raised before Delhi ITAT in the case no. 196/Del/2013. Hence taking the same view on such issue, we set aside the order of ld. CIT-A to the AO for fresh adjudication. Hence the ground of appeal of the assessee is allowed for statistical purposes." Respectfully considering the decision of ITAT in the case of the assessee as cited above after taking the similar view on such issue, we set aside the issue to the Assessing Officer for adjudicating afresh as per the direction laid by the ITAT in the decision as cited above. Therefore, this ground of appeal is allowed for statistical purposes. Ground No. 11 (Erred in not adjudicating claim of Rs. 13,25,11,156/- (Rs. 3,24,80,643/ on cost of fixed asset + Rs. 10,00,30,513/- towards investment made by company in overseas subsidiaries expenses) on account of adjustment of hedging charges) 19. During the course of appellate proceedings before us, at the outset, the ld. counsel has brought to our notice that identical issue o....
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....sed by the Assessing Officer on 5th May, 2016 as per page no. 203 to 205 of the paper book, therefore, he is not pressing this ground of appeal. Since the assessee has not pressed this ground of appeal, therefore, the same stands dismissed for the reason cited above. Ground No. 13 (Not allowing credit of TDS to the extent of Rs. 15654/-) 21. Heard both the sides on this issue. We direct the Assessing Officer to allow the credits subject to verification. Therefore, this ground of appeal is allowed for statistical purposes. Ground No. 14 (Charging of interest u/s. 234B & 234C of the Act) 22. This ground of appeal pertaining to the charging of interest u/s. 234B and 234C of the Act. This ground of appeal of the assessee stands dismissed as charging of interest u/s. 234B and 234C is mandatory as per provision of the law. Ground No. 15 (Not granting deduction u/s. 80G of the Act of Rs. 6 lacs) 23. Heard both sides on this issue and we restore this issue to the file of the Assessing Officer for deciding after verification of the relevant material, therefore, this ground of appeal is allowed for statistical purposes. Additional ground of appeal (The Assessing Officer gross erred in....
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....al Representative is fair enough not to controvert this undisputed fact. 27. Heard both the sides and perused the material on record. The ld. counsel has brought to our notice that identical issue on similar fact has been adjudicated in favour of the assessee by the ITAT in the case of the assessee itself vide 1781/Del/2014. The relevant part of decision of decision is reproduced as under:- "45. We have heard the rival contention and perused the materials available on records. At the outset, we find that in the identical facts & circumstances in the own case of the assessee, the ITAT in the AY 2008-09 being ITA No. 196/Del/2013 vide order dated 25-4-2016, reported in 68 taxmann.com 322, held as under: "55. We have carefully considered the rival contentions. The ld. AO has imputed the addition u/s 115JB of the Act as disallowance computed u/s 14A, read with Rule 8D of the Income Tax Rule, 1962. As we have already deleted the disallowance as per ground No.10 of the appeal wherein we have held that the amount of disallowance cannot be worked out by ld. AO without recording satisfaction on examination of books about the correctness of disallowance made by the assessee which in th....