TaxTMI 
TaxTMI 
2022 (3) TMI 340
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....horities below on the following grounds: "1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming addition of Rs. 1,92,04,765 from out of total addition of Rs. 1,93,56,012 made by the Assessing Officer on the basis of the order u/s. 92CA(1) passed by the Transfer Pricing Officer. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance of Rs. 3,33,478 made by the Assessing Officer in respect of Employees' Contributions to ESI on the ground that the same was not paid within the prescribed time limit under the ESI Act even though the payment was made within the time limit for filing the return of income u/s. 139(1) of the Income-tax Act. 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the appellant company's relevant ground of appeal that from out of the total development cost incurred by the appellant company for the products to be sold in domestic as well as international market, only the portion of development cost pertaining to the products to be sold in domestic market should be allocated to Baddi Unit for the purpos....
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....er scrutiny assessment several additions and/or disallowances were made. Upon determination of the total income of the assessee at Rs. 30,74,68,950/- an appeal was preferred by the assessee against the said order before the first appellate authority. The ld. CIT(A) vide order dated 21.3.2017 partly allowed the appeal filed by the assessee against the said assessment order. Being aggrieved by order of the ld. CIT(A), both the assessee and Revenue are before us with respective grievance. 5. Now we adjudicate the issues ground wise raised in the above appeal as follows. 6. Ground No.1: In this ground, the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 1,92,04,765/- out of total addition of Rs. 1,93,56,012/- made by the ld. AO on the basis of order under section 92CA(3) of the Income Tax Act, 1961 passed by Transfer Pricing Officer (TPO). 7. During the course of assessment proceedings, the issue was referred to the TPO, who vide his order dated 29.1.2013 read with subsequent order dated 22.3.2013 passed under section 154 of the Act made the following adjustment on account of Arm's Length Price (ALP) in respect of international transact....
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....cause notice as to why service provided by the assessee to its AEs should not be benchmarked and as to why a suitable commission of 3% should not be taken as arm's length price for providing corporate guarantee in respect of these entities. The assessee was accordingly supplied with requisite data on which benchmarking was based, in a CD. The assessee by and under a written submissions dated 18.1.2013 pleaded that benchmarking in the instant case did not require, because there was an implicit parent support to the subsidiary, more so when, subsidiary companies are carrying on the business of marketing of assessee's products, and the assessee company was simply helping its AEs in its growth by taking risk factors. Relying on the decision of ITAT, Hyderabad Bench in the case of Four Soft Limited, it was pleaded by the assessee that corporate guarantee was not covered within the scope of the international transactions under section 92B of the Act. The contents of submissions of the assessee are as under: "The assessee has contended that yield method is not the correct method to evaluate guarantees and that the difference between two differently rated bonds cannot indicate gua....
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....ge additional collateral from related (parent) company in the form of guarantees. At the same time, guarantees are also being used, at the option of the borrower, to obtain better conditions, notably interest rates, on external financial transactions, creating a benefit on a group -wide basis. 7.6. The claim of the assessee that the guarantee has been provided for working capital and financial needs of the AE and hence it should be treated as implicit parent support and hence the guarantee needs to be benchmarked at nil is not found an acceptable argument. For an arm's length study, the parentsubsidiary obligation needs to be set aside and it needs to be determined as to what would be the behavior of an independent party in the same scenario. The plea of implicit support would need to be discarded. Once it is acknowledged that a service has been rendered (as it has been done in this case -as the guarantee enables the AE to handle its finances more efficiently), then the service needs to be benchmarked. 7.7 The assessee has contended that providing guarantee is a more efficient way of providing support to the AE as this does not involve any liquid fund outflow ....
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....e profits were shifted to low tax jurisdiction to bring down the aggregate tax incidence of a multinational group. 7.8 The assessee has elaborately discussed the benefits being given by the AEs to the assessee company. However, for this, these companies are being remunerated at arm's length rate. Providing free guarantee support cannot be a reward for providing market access. For that a separate reward system exists. As far as guarantee is concerned, it needs to be benchmarked a suitable rate. 7.9 The reliance placed by the assessee company on the decision of Hon'ble ITAT in the case of Everest Kanto Cylinder Ltd ITA No. 542/Mum/2012 is examined. The decision of the Hon'ble ITAT has many contradictions built into it. While it mentions that the HSBC guarantee cannot be compared to assessee guarantee as assessee does not incur a cost while giving guarantee, it has failed to mention the costs incurred by HSBC in giving the guarantee. While it has talked about discussing the terms, conditions and circumstances in which the third party guarantees have been given, it has accepted guarantee between a Bank and the assessee itself as a proper internal CUP for t....
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.... to arrive at various levels of yields for differently rated bonds in a global scenario since the US bond market is a mature one and is freely traded globally. The coupon rate represents yield on various bonds and the rate is directly proportional to the rating given to the bond. Higher the risk of default by the issuing company on this bond, higher the coupon rate. .Details of these bonds are available on the web. The details of such corporate bonds available on www.finanace.yahoo.com (publicly available) was gathered. On analysis of over 1100 bond data, from where the bonds Issued during the F:V 2008-09 were segregated, it is seen that the difference in coupon rate (yield or interest rate) in respect of AA rated bonds and RS rated bonds cornes to 2.706 %age points. A copy of the data mentioned above is supplied to you in a CD. By taking guarantee for payments on behalf of its AC, the assessee has incurred significant currency risk as evident by general depreciation of rupee against dollar. In order to factor this currency risk, the above spread is increased to 3% which is found to be reasonable spread which the assessee should have charged as benefit granted to the AE. . . ....
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....7-08 and 2008-09 and have confirmed the adjustment made by TPO and addition made by the AO. For convenience sake the findings of CIT(A) in AY 2007-08 is reproduced as under: ..... ...... ...... In AY 2008-09 also the CIT(A) has taken the same view and confirmed the addition made by the AO on similar facts following his own order in AY 2007-08. In the current year under appeal i.e. AY 2009-10, the issue is the same and I find no reason to differ from the findings of CIT(A) as quoted above. Hence following the same reasoning, I uphold the addition made by the A. O. Accordingly, the ground on this issue is dismissed." 9. Being aggrieved by the order of the ld. CIT-A, the assessee is now in appeal before the Tribunal. 10. Before us, the ld. counsel for assessee, besides reiterating the submissions made before the ld. Revenue authorities, further contended that the issue is covered in the favour of the assessee in its own case in ITA 907/AHD/2012 for the AY 2007-08 after referring the decision rendered by the ITAT, Ahmedabad Bench in the case of Micro Ink Ld. Vs. ACIT, reported in 63 taxmann.com 353. 11. On the other hand, the learned DR submitted that the order of ....
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....erent view. Some of them held that the transaction of corporate guarantee is an international transaction whereas some of them held that the transaction of corporate guarantee is outside the purview of the international transaction including the Ahmedabad tribunal in the case of Micro Ink Ltd. vs. Addl. CIT reported in [2015] taxmann.com 353, wherein it was held that the corporate guarantee is not international transaction. At the time of hearing, the learned AR heavy relied on this order of the tribunal. 12.2. However, we find that the Hon'ble Madras High Court in the case of PCIT vs. Redington (India) Ltd. reported in 122 taxmann.com 136 has held that corporate guarantee is covered under the limb of international and having bearing on profit and loss account. The relevant finding of the Hon'ble court reads as under: The concept of bank Guarantees and Corporate Guarantees was explained in the decision of the Hydrabad Tribunal in the case of Prolifics Corpn. Ltd v. Dy. CIT [2015] 55 taxmann.com 226/68 SOT 104 (URO). In the said case, the revenue contended that the transaction of providing Corporate Guarantee is covered by the definition of international transaction afte....
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....val of doubts, it is hereby clarified that -" 73. An Amendment made with the object of removal of doubts and to clarify, undoubtedly has to be read to be retrospective and Courts are bound to give effect to such retrospective legislation. 12.5. In view of the above, we hold that the amendment as discussed above was brought by the finance Act 2012 but the same is applicable retrospectively i.e. 1-4-2002. Thus the amendment is applicable to the year under consideration. 12.6. The next aspects arises for the determination of the benchmarked for working out the ALP of the impugned international transaction. The TPO/AO in the case on hand has adopted US bond data for working out the ALP by using the data of bond obtained from the finance yahoo.com by observing as under: 7.12 In light of the discussion above, no case is made to alter the charge of guarantee as per the process described in the show cause notice. An attempt has been made to analyze the bond data in US market to arrive at various levels of yields for differently rated bonds in a global scenario since the U5J bond market is a mature one and is freely traded globally. The coupon rate represents yield o....
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.... Industries Ltd. v. Dy. CIT [2017] 79 taxmann.com 216 (Mumbai - Trib.), Parent company charged commission at 0.25 %. The ALP was determined by the Tribunal at 0.50%. (ii) Hindalco Industries Ltd. v. Addl. CIT [2015] 62 taxmann.com 181 (Mum.), Parent company charged commission at 0.50% which was considered as at ALP. (iii) Manugraph India Ltd. v. Dy. CIT [2015] 62 taxmann.com 347 (Mum. - Trib.), The corporate guarantee was not treated as international transaction by the parent company but the Tribunal treated it as international transaction u/s 92B and upheld the ALP of 0.50%, following the order in the case of the assessee for the earlier year. The Tribunal followed Everest Kento Cylinder Ltd. v. Asstt. CIT [2015] 56 taxmann.com 361 (Mum-Trib). It seems that the decision in Bharti Airtel Ltd. (supra) was not referred to in this case. (iv) Aditya Birla Mincas Worldwide Ltd. v. Dy. CIT [2015] 56 taxmann.com 317/69 SOT 18 (URO) (Mum - ITAT). The assessee had not classified this transaction as international transaction. However, guarantee commission was fixed at 0.50%. (v) Mylan Laboratories Ltd. v. Asstt. CIT [2015] 155 ITD 1123/63 taxmann.com 179 (....
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....ere are certain clauses in the Loan agreement which should be considered while determining the ALP as detailed under: i. "The loan has a commitment fee of 0.25% on the undrawn balance of the facilities i.e. the bank would be paid a fee even if the loan has not been availed. ii. The interest charged is Libor plus 62.50 bps per annum (Libor plus 0.625%) iii. Agreement fees @0.5% to be paid immediately on signing the documents. iv. Collateral security of all movable and immovable present and future properties of the company including manufacturing facilities, research facilities and office premises. v. A minimum fixed asset cover of 1.1 times over these assets. vi. Net debt / EBIDTA to be not more than 4.5 times vii. Debt gearing not to exceed 1.65 times during the currency of facility. viii. Debt service cover ratio shall not be less than 1.33 times during the currency of facility. ix. Tangible net worth shall not be less than INR 3.4 billion at all times during the currency of the loan. x. Exposure to non-pharmaceutical group companies not to exceed 15% of tangible net worth, xi. Currency risk ....
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....argued that on account of conversion rate having been changed from the date of advancing loan and as on the close of the year it has earned foreign exchange gain on substantial basis. Therefore, there is no loss of revenue and hence the adjustment made is not justified. The claim of the appellant is that the motive is not to earn the interest income but to run the business through AE smoothly. Further, the appellant has not disclosed lesser tax and has not shifted any profit outside India. The claim of the appellant is not acceptable. Had the purpose of giving the money been to further the interest of the business, the appellant could have easily given the money as share capital and not as loan. Once the amount has been given as loan and has .been shown in the balance sheet as such the appellant should charge market rate of interest at Arm's Length Price. The basic principle of determining the Arm's Length Price is by assuming that the transaction has taken place between unrelated parties. Therefore, the reasoning given by the appellant is not acceptable. The TPO has given detailed justification while adopting the Arm's! Length interest rate which should have b....
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....th average LIBOR rate which has not been disputed. But the TPO has added the credit risk at 3.50% and the margin @ .50% to determine the ALP of the interest which should have charged from the AE by the assessee. 53.3 Now the first controversy arises about the basis of charging 3.50% credit from the AE. Regarding the addition of 3.5% for credit Risk in 6 Month Libor rates we note that it represents the difference in the credit rating of AAA Indian companies which was obtained from the CRISIL in response to the notice issued under section 133(6) of the Act viz a viz the credit rating of BBB of the AE which was determined by the TPO on the basis of financial documents of the AE. 53.4 However, we note that the approach of the TPO suffers from certain infirmities as detailed under: i. Once the AE has taken as a tested party, then the comparables of AE should be obtained to determine the ALP. However, the TPO in the case compared the AE with the credit rating of Indian companies as discussed above. In our view, the comparables with the AE should have taken and not with the comparables available with the assessee. ii. The TPO at his own determined the c....
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....repaid in the foreign currency. Even otherwise according to us the markup towards the transaction cost is exorbitant and comparison with the bank is also untenable. In view of this, we do not see any rational in the impugned in further cost and risk premium on the rate directed by the learned Dispute Resolution Panel. Accordingly we direct the learned Transfer Pricing Officer to not to charge any risk premium following the decision of the coordinate bench. In view of this, the transaction cost imputed of 300 basis points cannot be sustained." 53.7 Accordingly, we are also of the view that addition in the rate of interest on account the credit risk suggested by the TPO is not sustainable. 53.8 We also note that there was no addition on account of interest rate in the immediate preceding AY 2007-2008 though the assessment was framed under section 143(3) of the Act. 53.9 Now the second controversy arises about the basis of charging .50% margin from the AE. Regarding this, we note that the assessee is charging margin at 37.50 bps from the AE which appears quite low as even the bank charges from the company having high net worth a margin of .50%. Therefore we ....
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....limit of the relevant Act, and hence following ratio laid down by the Hon'ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation (supra), the ld. CIT(A) upheld the order passed by the ld. AO in disallowing the said sum of Rs. 3,33,489/- and added the same to the total income of the assessee, which in our considered opinion is without any ambiguity so as to warrant our interference. Thus, this ground of appeal preferred by the assessee is found to be devoid of any merit, and hence dismissed. Ground No. 3 and additional ground of appeal 23. This issue relates to non-allocation of R&D cost relating to discovery and research expenditure while computing profit eligible for deduction under section 80-IC of the Act in respect of Baddi Unit. 24. During the course of assessment proceedings, upon verification of the details filed by the assessee, it was found by the AO that the assessee did not allocate R&D expenditure relating to discovery and research expenditure while computing profit eligible under section 80-IC in respect of Baddi Unit, whereupon explanation was sought from the assessee as to why the same should not be allocated to Baddi Unit. In ....
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....f the eligible unit has to be computed, as if it is the only unit then there is no reason to bring in expenditure which is not incurred by the eligible unit. Under the circumstances there is no need to attribute R&D spend by virtue of force of attraction, if no direct service is rendered by the R&D center to Baddi unit. Even if one were to attribute R&D expenditure to Baddi unit, then there is no justification for allocation of R&D spend in relation to discovery research. Discovery research is in relation to new molecule where there is no guarantee of success. It is only after the results of discovery research have passed the requisite pre-trials, the research would enter the development phase. It is likely that the discovery project may fail and it may be a sunk cost from the company's perspective. Accordingly, it may be emphasized that the advantage of discovery research cannot be said to have benefited the Baddi unit and hence there is no need to allocate such expenditure to Baddi utiit. Following the same logic for R&D discovery expenses, the capital expenditure on R & D should also not be so allocated, Without prejudice to the above contentions, ....
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.... of expenses on new discovery research at this particular unit found to be irrational. Such plea of the assessee was not even found to be convincing before the ld. CIT(A). At the time of hearing, the ld. counsel appearing for the assessee submitted before us that the ld. AO ought to have considered that out of the development cost incurred by the appellant company for the products to be sold in the domestic and the international market as well, only that portion of the development cost pertaining to the products to be sold in domestic market shall be taken for making allocation to Baddi unit, since the said unit is solely engaged in manufacturing of products and that too to be sold in domestic market. However, the appellant company incorrectly considered development cost for allocating to Baddi Unit while filing return of income. It was further argued by the ld. counsel for the assessee that instead of deciding the issue on merit, the ld. CIT(A) only took into consideration this particular aspects of considering total development cost for making allocation to Baddi Unit while filing return of income, and disallowed the claim of the assessee. It is a fact that such mistake was done ....
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.... as the same was not directly connected with the eligible unit. In our considered view the cost which is directly connected with the eligible unit is eligible for deduction while determining the deduction under section 80 IC of the Act. 40.2 We further note that the Hon'ble ITAT in the own case of the assessee (supra) has not allocated the cost incurred on the scientific research activity while working out the deduction under section 80-HH/80-I of the Act. Though the decision of the tribunal was about the deduction under section 80HH/80I of the Act, in our considered view the principles laid down by the Tribunal are directly applicable to the facts of the case on hand. At this juncture we find important to refer the relevant extract of the order of this tribunal in the own case of the assessee (supra) which reads as under: 5. We have heard the rival submissions, perused the material available on record and the judgment cited by the parties. There is no dispute that the facts in the present case are identical with the facts of the case pertaining to A.Y. 2004-05. We have perused the order of the Hon'ble co-ordinate Bench in assessee's own case in ITA No.435....
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....nt to note that the Hon'ble Gujarat High Court in the own case of the assessee reported in 88 taxmann.com 530 has held that the R and D expenses should not be allocated to the units eligible for deduction under section 80-IA of the Act. The relevant extract of the judgment is reproduced as under: 8.1 It is not in dispute that research centre is an independent centre and that its main object is to conduct research for the business of the assessee. The research centre, therefore, in our opinion, is not directly linked with the eligible undertaking. Thus, for the purpose of computing deduction u/s.80HH and 80I, profit from eligible undertaking is to be computed on the basis of gross income by reducing expenditure which has been incurred for the eligible undertaking out of the gross income derived from the industrial undertaking. In view of the aforesaid, question no.(A) is answered in favour of the assessee and against the Revenue. 25.3. In that view of the matter, we do not hesitate to hold that R&D expenditure is need not to be allocated to Baddi Unit as the case made out by the assessee are to be viewed this particular fact of not extending any research work by the said....
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....be the mode of allocation for such expenses, as found to be the view of the ld.AO. On the basis of the turnover, the said allocation has been worked out to 51.56% of the total administrative expenses, accordingly, additional amount of Rs. 3,75,57,364 (Rs. 16,73,68,858/- minus Rs. 12,98,11,494/-) has been allocated by the ld. AO resulting into reduction in the deduction to the tune of Rs. 3,75,57,364/- under section 80IC of the Act was made, which was in turn confirmed by the ld.CIT(A) by following order of his predecessor passed in the assessee's own case for the Asstt.Year 2007-08. 28.2. Therefore, we find that the dispute regarding basis of allocation of administrative expenses revolves within the periphery of turnover or employees, is before us. We find that the issue is squarely covered in assessee's own case in ITA No. 907/Ahd/2012 for the Asstt.Year 2007-08 while dealing with the issue, and deciding in favour of the assessee, the Coordinate Bench has observed as under: "21. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the allocation of the said expenses between Indrad and Baddi unit. As....
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....ndertaking is very high in a particular year but in the subsequent year the turnover may go done or vice versa which will affect the pattern and consistency in the allocation of the administrative expenses and distort the presentation of the financial statements for different years. Therefore we are of the considered view that the basis of the allocation of administrative expenses based on the turnover is not advisable. 21.5 The next controversy arises what should be the basis of the allocation of the said expenses in the given facts and circumstances. Generally, the human resources working in any of the undertakings of the assessee does not frequently change as the market forces do not regulate it, unlike the sales. Therefore in the given facts and circumstances, we are of the view that the allocation of the administrative expenses should be done based on the human resources engaged in the different undertaking of the assessee. 21.6 In view of the above, we reverse the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed." 28.3. We find that the Coordinate Bench was of the view....
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....ofession, as against gross total income of the assessee. 31.1. In response to the show cause issued to the assessee on this ground, the assessee submitted as follows: "With regards to the ongoing assessment proceedings, your good selves have asked the assessee company to show cause that why claim for deduction under section 80IC of the Income Tax Act, 1961 (the Act) shall not be restricted upto the extent of Income from Business/and Profession, as against the claim put up by the assessee company in its return of income against the Gross Total Income. In this context the assessee company as under: 1. During the year under review, the Gross Total Income of the asssssee company is Rs. 151.10. crores, which includes the profit of Rs. 183.91 crores earned from an undertaking eligible under Section 80IC of the Act and as well as other business income and short-term capital gains. 2. The assessee company submits that it had duly computed the quantum of deduction of eligible undertaking as per the mechanism provided under Section 801C of the Act of the Act same has been certified by the chartered accountant vide the report given in Form 10CCB Before d....
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....ny income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." On account of the non obstante nature of above provisions, the amount of deduction available under any of the section of Part C of Chapter V7-A shall be restricted to the amount of income of that nature, which is derived by the assessee and is included in the gross total income. On careful perusal of this section, it can be inferred that benefit of deduction under Part C of Chapter VIA can extend only upto the limit of Gross Total income and cannot be extended beyond that. It shall be noteworthy to take into account that for restricting the claim of deduction under Part C of Chapter VI-A, what is to be seen is the amount of Gross Total income. It is....
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....income as short term capital gain. It was the further contention of the assessee that as per mechanism provided under section 80IC of the Act, the assessee duly computed the quantum of deduction of undertaking. The assessee further contended that deduction under this section can be availed when gross total income of assessee includes any gains derived by an undertaking or any enterprise from any eligible business, and subject to such other conditions as specified therein. According to the assessee, the provision of section 80IC stipulates conditions subject to which deduction can be availed and only up-to that extent quantum of deduction can be availed. However, the section does not provide any conditions pertaining to utilization/adjustment of such deduction, once the deduction is available in the hands of the assessee company. The contention raised by the assessee was not found acceptable by the ld. AO. The ld. AO was of the view that section 80AB lays down limit of such deduction allowable in computation of total income. It further clarifies that for the purpose of deduction, the income of that nature herein "business income" as computed in accordance with the provisions of this....
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....n ground of appeal on this issue is dismissed. 31.3. However, it appears from the order passed by the ld. CIT(A) that he has only approved/confirmed order passed by the ld.AO. He has not appreciated the facts in right perspective, rather, while confirming order of the ld.AO, the ld. CIT(A) has simply upheld his finding without assigning any reason whereof. The ld. CIT(A) only reproduced the operative part of the assessment order in rejecting claim of the assessee under section 80IC of the Act, restricting it only to the income derived from business. 32. At the time of hearing of instant appeal, the ld. counsel for the assessee submitted before us that the gross total income of the assessee was of Rs. 151.09 crores and the deduction admissible under section 80IC in respect of the profit of the eligible units viz. Bhaddi unit was of Rs. 183.91 crores. The break up whereof was directed to be produced by the ld.AR, upon which the following were submitted before us along with the statement of income with reference to the revised return filed by the assessee. Particulars Total for Assessee Allocated to Baddi R&D Expenses Revenue - Wt component 529,090,154 170,021,....
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.... to be taken into account for the purpose of allowing the deductions available to the Assessee, subject to the ceiling of 'gross total income'. The Appellate Authority was of the view that there is no limitation on deduction admissible under section 80-IA of the Act to income under the head 'business' only, with which we agree. 13. The other contention of the Revenue is that sub-section (5) of Section 80-IA refers to computation of quantum of deduction being limited from 'eligible business' by taking it as the only source of income. It is contended that the language of sub-section (5) makes it clear that deduction contemplated in subsection (1) is only with respect to the income from 'eligible business' which indicates that there is a cap in sub-section (1) that the deduction cannot exceed the 'business income'. On the other hand, it is the case of the Assessee that sub-section (5) pertains only to determination of the quantum of deduction under sub-section (1) by treating the 'eligible business' as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final computation of deduction under ....
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....eduction under section 80-I, loss sustained in other divisions or units cannot be taken into account as sub-section (6) contemplates that only profits from the industrial undertaking shall be taken into account as it was the only source of income. Further, the Court concluded that Section 80-I(6) of the Act dealt with actual computation of deduction whereas Section 80-I(1) of the Act dealt with the treatment to be given to such deductions in order to arrive at the total income of the assessee. The Assessee also relied on the judgment of this Court in Canara Workshops (P.) Ltd. (supra) to emphasize the purpose of sub-section (5) of Section 80-IA. In this case, the question that arose for consideration before this Court related to computation of the profits for the purpose of deduction under section 80-E, as it then existed, after setting off the loss incurred by the assessee in the manufacture of alloy steels. Section 80-E of the Act, as it then existed, permitted deductions in respect of profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articl....
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....sessee that income from other sources under the head "income from other sources" in addition to business income have to be considered for the purpose of allowing deduction to the assessee subject to ceiling of gross total income. It was also the contention of the Revenue before the Hon'ble Court that language of sub-section 5 clearly specifies that deduction contemplated in sub-section 1 is only with respect of income from eligible business which indicate that there is a cap in sub-section 1 that deduction cannot exceed business income. On the other hand, the assessee submitted that sub-section 1 pertained only to determination of quantum of deduction under sub-section 1 by treating the eligible units as only source of income. In that particular case, the amount of deduction from eligible business computed under section 80IA for the concerned assessment year was of Rs. 492,78,60,973/- which represents income from eligible business under section 80IA and is the only source of income for the purpose of computing deduction under section 80IA of the Act. Question, therefore, arose with regard to allowing deduction so computed to arrive at "total income" of the assessee can be determine....
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....,202/- made by the A.O. on account of unutilized MODVAT/CENVAT credit made u/.s 145A of the I. T. Act.'" 6) "Whether the Ld. C1T(A) is right in law and on facts in deleting the disallowance of Rs. 4,50,000/- made by the A.O. on account of capital investment subsidy." 7) "Whether the Ld.CIT(A) is right in law and on facts deleting the disallowance made u/s.80IC of the Act attributable to amount pertains to: i) Allocation of R & D expenses. ii) Deduction in respect of Notice Pay. iii) Sale of scrap. 8) "Whether the Ld.CIT(A) is right in law and on facts deleting the disallowance of Rs. 30,21,416/- made u/s.80G of the Act" 37. In Ground no.1, the Revenue has challenged the deletion of disallowance of Rs. 14,94,163/- on account of garden expenses. 38. For claiming garden expense as revenue expenditure, the explanation of the assessee was that the said expenditure was required to be incurred regularly for gardening inside the factory premise as per the requirement of Gujarat Pollution Control Board, in order to minimize the effect of pollution arising out of chemical process, and therefore, the same is an allowable deductio....
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....dered the Notification of the CBDT, and arrived at a conclusion that claim of the assessee for higher depreciation is covered by all the parameters, and therefore, assessee has rightly made the claim. Accordingly, the ld. CIT(A) directed the AO to allow deprecation @ 50%. Aggrieved Revenue is now before the Tribunal. 42. We have heard both the parties, and gone through the impugned orders and also the Notification of the CBDT circular cited supra. We find that the ld. AO has not appreciated whole facts of the case while deciding the applicability of Notification cited (supra). On the contrary, the ld. CIT-A observed that parameters provided in the Notification clearly applicable to the case of the assessee, and therefore, assessee is entitled for higher depreciation. To support his finding, the ld.CIT(A) has also relied upon decision of the ITAT, Ahmedabad Bench in the case of Voltamp transformer in ITA No.1676/Ahd/2021. The ld. CIT(A) allowed depreciation at 50% on sound footing, based on the above notification. This view of the matter, we do not find any infirmity in the order of the ld. CIT(A) on this issue, which we confirm, and the ground no. 2 of the Revenue's appeal stand....
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....of Rs. 218.31 Lacs which was not approved by the DSIR. 44.4. Likewise, the expenditures of Rs. 1351.45 Lacs which has been held as incurred outside the approved in-house research facility cannot be allowed for deduction. Thus the AO disallowed the weighted deduction of Rs. 6,75,72,500/- and in aggregate disallowed the amount of Rs. 7,84,88,000/- (1,09,15,500/- + 6,75,72,500/-) only. 45. Aggrieved assessee preferred an appeal before the learned CIT(A) who deleted the disallowances made by the AO by observing as under: 8.2 I have carefully perused the assessment order and the submissions given by the appellant. The issue related to this addition are claim of different expenses which have not been accepted by the DSIR in its report. The DS1R has disallowed revenue expenditure on R & D including recurring expenses on building rates and taxes and salary to Dr. C. Dutt amounting to Rs. 218.31 and revenue expenses incurred outside approved facility amounting to Rs. 1351.45 lakh. The issue has been decided in earlier years in favour of the appellant by CIT(A) for A.Ys. 2006-07. 2007-08 & 2008-09 where following the orders of ITAT for earlier years in the case of the....
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....veloped in an in-house research and development facility, 'flic said decision has been further confirmed by the 1 lon'ble Gujarat! Ugh Court. [(2013) 31 taxmann.com 300]. The facts of the appellant company are similar to this case. Therefore, following the finding of CIT(A)and ITAT in earlier years and also the decision of Hon'ble Gujarat High Court in case of Cadila Health Care, the disallowance of Rs. 7,84.88.0007- (Rs. 1,09,15,500 + Rs. 6,75,72,500) made by the AO u/s.35(2AB) is deleted. Accordingly, this ground of appeal is allowed. 46. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 47. Both the learned DR and AR before us vehemently supported the order of the authorities below as favourable to them. 48. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue of rates and taxes and salary to Dr. C Dutt is squarely covered in favour of the assessee by order of this tribunal in own case of the assessee in ITA 1869/AHD/2009 vide order dated 31-5-2012 pertaining to the AY 2005-06. The relevant extract of the order is reproduced as under: ....
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....ll the three expenses included in the Explanation are not capable of being incurred inside the in-house research and development facility and, therefore, for all the expenditures included in the Explanation including the expenditure on clinical drug trial, it is not required that the same has to be incurred inside the in-house research and development facility and if the same are incurred in relation to drug developed in an in-house research and development facility, the same become eligible for deduction under section 35(2AB)(1). [Para 3.8] . 50.1 Respectfully following the above finding of special bench of Tribunal, we hold that the assessee is eligible for weighted deduction on expenses incurred on clinical trial and patent registration. Accordingly, we do not find any infirmity in the order of learned CIT(A) and directed the AO to allow weighted deduction. Hence the ground of appeal of the Revenue is hereby dismissed. Ground No. 4: 51. The issue raised by the Revenue in ground no. 4 is that the learned CIT (A) erred in allowing the depreciation @ 60% on computer software instead of at 25% on the value of the assets. 52. The assessee in the books of account recorded ....
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....Standards cannot overwrite the definition given in the Income Tax Act, Accordingly, the appellant is entitled to depreciation @60%. The grounds of appeal are accordingly allowed. " Moreover, Hon 'ble Mumbai special bench in its order of Data Craft India Ltd. (supra) highlighted the fact that term 'computer' has not been defined under the ITAct nor in the general clauses Act, 1987. the meaning of the term computer has to be understood by applying the principles of statutory interpretation i.e.. one has to give the meaning to the expression 'compute/-' not merely by going to the dictionary meaning but by applying common parlance or commercial parlance tests as well as hv analyzing the amendment of legislature in providing higher rate of depreciation..... The Hon 'ble special bench further went on to hold that 'though junctions of the computer ax one composite unit is for performing logical, arithmetical or memory functions etc.. but it is not the only equipment which perform* such functions that can be called as 'computer'. All the input and output devices which in fact support in the receipt of input and outflow of the output are....
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....art of computer for purpose of depreciation or the same can be treated as intangible assets. At this juncture it is pertinent to refer the depreciation schedule as provided under Act. On perusal of the same we find that Part-A, block III sub block (5) of the Depreciation Schedule contain the rate of depreciation for computer including computer software which reads as under: III. MACHINERY AND PLANT *** (5) Computers including computer software [See note 7 below the Table] Notes: 7. "Computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device. 56.1. From the reading of the above, it becomes clear that software is part of computer. Hence, the depreciation on the same is allowable at the rate applicable for computer. In this regard we also find support and guidance from the judgment of Hon'ble Madras High Court in case of CIT vs. Computer Age Management Services (P.) Ltd. reported in 109 taxmann.com 134 where in similar facts, Hon'ble court held as under: 8. The question would be as to whether the software application, which was acquired by the assessee would f....
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....R relied upon the order of the AO, while the ld. counsel for the assessee supported order of the ld. CIT(A). 61. Having heard both the parties, we have gone through orders of the authorities below and materials available on record. It is submitted by the ld. counsel for the assessee, that assessee is regularly following 'exclusive method', i.e. 'net method' of accounting, whereby cost of purchases are accounted for without taking into effect i.e. net of MODVAT including inventory i.e. opening stock and closing stock. He relied on the proposition of law laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra), where it was held that the MODVAT being irreversible credit in the hands of the manufacturer, the same would not amount to income taxable under the Act. It is not in dispute that the assessee is following exclusive method of accounting for the past several years. In other words, valuing purchase price minus MODVAT credit is permissible method of accounting. The ld. CIT(A) has rightly relied upon the judgment of Hon'ble Apex Court in the case of Indo Nippon Chemical Co. Ltd. (supra) wherein it was observed that merely becau....
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....rinagar Sugar Mills Ltd. (ITA. No. 772/Mum/20l2) . in which it is held, that if the object of the subsidy scheme is to enable to assessee in ; setting of the new unit or to expend the existing unit, when the receipt of the subsidy is to be treated on capital account. Following the ratio of this decision the AO is directed to treat the capital investment subsidy of Rs. 30,00,000/- received from Government of India under the Central Capital investment Subsidy Scheme. 2003 as received towards cos! of capital asset and not to reduce the claim of depreciation. Accordingly, appeal on this ground is allowed. 65. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 66. Both the learned DR and AR before us vehemently supported the order of the authorities below as favourable to them. 67. We have heard the rival contentions of both the parties and perused the materials available on record. The dispute on hand is whether the WDV of block assets can be reduced by the amount of subsidy or not. At this juncture, we note that the subsidy was provided on account of setting up of small scale industrial unit in backward area under Central Capital Investment....
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....sion reached by the majority of the High Courts cannot be said to be an unreasonable view and on a preponderance of preferability that view commends itself particularly in the context of a taxing statute. The expression 'actual cost' needs to be interpreted liberally. The subsidy of the nature in the instant case did not partake of the incidents which attract the conditions for their deductibility from 'actual cost'. The Government subsidy, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost'. 67.2. In view of the above discussion and judgment of Hon'ble Supreme Court, we do not find any infirmity in the order of the learned CIT(A). Thus the ground of appeal of the Revenue is hereby dismissed. 68. Ground No. 7: In this ground, the revenue raised the issue that learned CIT(A) erred in deleting of disallowance made under section 80IC of the Act on account of allocation of R&D expenses of Rs. 36,16,40,065/-, notice pay ....
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....e are identical with the facts of the case pertaining to A.Y. 2004-05. We have perused the order of the Hon'ble co-ordinate Bench in assessee's own case in ITA No.4356/Ahd/2007 (supra). The Hon'ble Tribunal following the decision of co-ordinate Bench in ITA No.1347/Ahd/2007 for A.Y. 2003-04 dismissed the ground of appeal raised by Revenue. In view of the fact that issue has already been decided by Hon'ble co-ordinate Bench in ITA No. 4356/Ahd/2007 for A.Y. 2004-05 and ITA No.1347/Ahd/2007 for A.Y. 2003-04 in assessee's own case. Respectfully following the order of the coordinate bench, this ground of Revenue's appeal is dismissed. 40.3 It is also important to note that, the AO in the subsequent assessment year 2008-09 has not allocated the cost on scientific research under the head discovery and capital cost to the eligible unit. Thus in our considered view the principle of consistency needs to be applied in the case on hand as held by the Hon'ble apex court in the case of Radhaswoami Satsang v/s CIT reported in 193 ITR 221 wherein it was held as under: "13. We are aware of the fact that strictly speaking res judicata does not apply to inco....
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....der sections 80-I and 80-IA." 73.2 In view of the above, we hold that the assessee is eligible for deduction in respect of the income as discussed above under section 80 IC of the Act. Accordingly we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed and the Revenue is dismissed. 69.3. Respectfully following the same, we do not find any reason to interfere in the order of the ld. CIT-A and thus direct the AO grant the deduction under section 80-IA of the Act on the items of income as discussed above. Hence, we hereby dismiss the ground of appeal of the Revenue. 70. Ground No. 8 : This ground relates to the deletion of disallowance of Rs. 30,21,416/- made under section 80G of the Act. 71. Brief facts of the case are that, during the assessment proceedings, the ld. AO noticed that the assessee has made donation of Rs. 1,17,20,000/-, but the same was not reflected in the return of income. According to the ld.AO, since the assessee has claimed deduction under section 80IC in respect of 100% profit of the Baddi unit, which was arrived at after the said disallowance of donation, separate deduction in response of the d....
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....while computing "Total Taxable Income" in accordance with the parameters provided therein. Therefore, since the order of ld.CIT(A) is based on the decision of the Tribunal on similar issue, we do not find any infirmity in his order allowing deduction under section 80G of the Act. We uphold his order, and this ground of Revenue's appeal stands rejected. 73. In the result, the appeal of the Revenue is dismissed Now we take up ITA No. 1286/Ahd/2017, an appeal by the Assessee for AY 2010-11 74. The assessee has raised the following ground of appeal: 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance of Doctors' Sponsorship Expenses of Rs. 14,32,80,540 out of the total disallowance of Rs. 14,86,15,415 made by the Assessing Officer. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming addition of Rs. 98,71,013 made by the Assessing Officer on the basis of the order dated 8.1.2014 passed by the Transfer Pricing Officer u/s. 92CA of the Income-tax Act 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the relevant Gr....
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....l. Ground No. 1 75. The grievances of the assessee is that the learned CIT(A) erred in confirming the disallowance of doctor sponsorship expense in part for Rs. 14,32,80,540/- only. 76. The assessee during the year claimed selling and distribution expenses of Rs. 70.81 Crores which included expenses of Rs. 14,86,15,415/- on account of doctor sponsorship and business advancement of Rs. 25,29,92085/- only. 76.1. The AO in the assessment proceeding observed that the expenses incurred for the benefit of doctor is not allowable under the provision of section 37(1) of the Act as the same is incurred in violation of regulation issued by the Indian Medical Council in exercise of power conferred under section 33 of Indian Medical Council Act 1956. Further, the CBDT also issued circular number 05/2012 dated 01-08-2012 prohibiting the allowances of such expenses. Thus the AO disallowed the expense amounting to Rs. 14,86,15,415/-. 76.1. Similarly, the AO observed that the assessee failed to establish that the expenditure on account of business advance does not include expenses incurred for benefit of the Doctors. Thus the AO made Ad-hoc disallowance of such expense for an amount....
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....armaceutical companies like the appellant. 6.2.1 It is seen from the submissions made by the appellant that the amount spent on doctor's sponsorship expenses includes the following- Sr. No. Particulars Amount [Rs. 1. Academic Grant/Scientific Grant 10,62,30,190 2. Gift Card 3,26,69,010 3. Travel Charges 43,81,340 4. Organizing CME 17,24,750 5. Medical Equipment 9,22,176 6. Stationary Kit 7,39,014 7. Conference Participation 5,18,565 8. Book 5,00,334 9. Advertisement 3,46,891 10. IT Spares 1,33,792 11. Stall charges 15,000 12. Other 4,34,353 6.2.2 It has been submitted by the appellant that these expenses include payments made to people and institutes for carrying out research & development for new formulations, organizing seminars, giving medical equipment's as samples to doctors to test the nature of the product, etc, and hence these are incurred for the promotion of the appellant's business. I am inclined to agree with the appellant when it states that some of these expenses are essential for the promotion and development of its business. ....
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....ion of Rs. 2,52,99,208/- Is deleted. Ground of appeal No 3 is partly allowed. 78. Being aggrieved by the order of the learned CIT(A) both the assessee and Revenue are in appeal before us. The assessee is in appeal against confirmation of disallowance of Rs. 14,32,80,540/- whereas the Revenue is in appeal against the deletion of addition of Rs. 53,34,875/- and Rs. 2,52,99,208/-. The relevant ground of the Revenue's appeal in ITA No. 1328/Ahd/2017 reads as under: "Where the Ld.CIT(A) is rightly in law and on facts in granting relief of Rs. 53,34,875/- on account of distribution expenses under the head "Doctor Sponsership" and deleting the disallowance of Rs. 2,52,99,208/- made by the A.O on account of business advancement expenses." 79. Both the learned DR and AR before us vehemently supported the order of the authorities below to the extent favourable to them. 80. We have heard the rival contentions of both the parties and perused the materials available on records. The fact of the case is not in dispute. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. We find the expenses incurred by the assessee as discussed above have b....
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.... providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductable expense in its accounts against income. 4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action. 80.2. A perusal of the above circular reveals that CBDT has issued the circular as discussed above after making a reference to the circulars issued by the medical Council of India known as "Indian Medical Council Professional Conduct, Etiquette and Ethics) Regulations, 2002". This circ....
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....if there is any violation or prohibition as per MCI regulation in terms of section 37(1) r.w. Explanation 1, then it is only meant for medical practitioners and not for pharmaceutical company (Assessee Company) for claiming the expenditure. 80.5. From the above order of Delhi tribunal, there remains no ambiguity that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation as discussed above. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any Allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is not applicable upon Pharma companies, then, in our considered view, there was no violation of the provisions of section 37(1) of the Act. 80.6 Without prejudice to the above we also note that the circular issued by CBDT as discussed above is applicable for the assessment year 2013-14 whereas the year under consid....
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....770/- on account of loan and advances provided to AE and an amount of Rs. 6,80,243/- on account of liaising fee paid to AE. 83. As far as TP adjustment of Rs, 91,90,770/- on account of loan/advance is concern we note that the issue raised by the assessee in its grounds of appeal for the AY 2010-11 is identical to the issue raised by the assessee vide ground no. 1 in ITA No. 1285/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1285/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2010-11. The appeal of the assessee for the assessment 2009-10 has been decided by us vide paragraph Nos.18 of this order and allowed in favour of assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2010-11. Hence, the grounds of appeal filed by the assessee to the extent of Rs. 91,90,770/- is allowed. 84. Coming to upward adjustment of Rs. 6,80,243/- on account liaison fee paid to AE. We note that the identical addition was made by the TPO/AO in immediate preceding assessment year 2009-10 which has been deleted by th....
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....g of the authority below, hence the ground of appeal the assessee is allowed. 85. Ground no.3: In this ground, the grievance of the assessee is that the ld. CIT(A) has erred in rejecting the claim of the assessee that while computing deduction under section 80IC of the Act that the eligible income ought not to be reduced by reallocating administrative expenses of Rs. 5,48,16,601/- to Baddi unit. 86. Though, at the outset, it has been stated by the ld. counsel for the assessee that this issue in question is covered in favour of the assessee by the decision of the Tribunal for the Asstt. year 2007-08 and 2009-10 in assessee's own case (copy of which is placed on record), for the sake of brevity, we take a short facts of the case, emerge out from the relevant orders. 87. During the assessment proceedings, it was noticed by the AO that the assessee has allocated common administration expenses on the basis of number employees of Indrad and Baddi unit. According to the AO, allocation should be based on the basis of the turnover of both the units, and not on the basis of number of employees. A show cause notice was issued to the assessee to this effect. It was explained by the as....
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....nd independent of its manufacturing activities, and therefore, does not qualify for inclusion of the same in the eligible profits for claiming deduction under section 80IC of the Act. He accordingly denied the claim of the assessee and reduced all four above incomes from the eligible profits. 91. Aggrieved, assessee preferred an appeal before the ld. CIT(A), however, assessee could not get any relief. Thus, assessee is before the Tribunal. 92. Before us, the ld. counsel for the assessee while reiterating submissions made before the Revenue authorities further stated that similar issue arose in the earlier assessment years i.e. A.Y.2007-08 & 2008-09 also in ITA No. 907 and 1634/Ahd/2012, wherein the claim of the assessee was allowed. He also relied upon the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Metrochem Industries Ltd. reported in 79 taxmann.com 440. Therefore, when the facts and circumstances in this year also are the same, the claim of the assessee for the Asstt. Year 2010-11 should also be allowed on similar line. 93. On the other hand, the ld. DR supported the orders of the Revenue authorities. 94. Heard both the sides. We have also gone thro....
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....eduction in respect of the income as discussed above under section 80 IC of the Act. Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed, and the Revenue is dismissed." 94.1. In view of the above order of the Tribunal, we do not find any disparity of facts and circumstances in the present year as that of earlier years. Therefore, we are unable to deviate from the view taken by the Co-ordinate Bench on this issue. We set aside orders of the Revenue authorities on this issue, and allow impugned claim of the assessee. This ground of appeal of the assessee is allowed. 95. Ground No. 5: The grievances raised by the assessee in this ground is that the learned CIT (A) erred not allowing the deduction of Rs. 79,58,97,799/- under the provision of MAT while calculating the book profit. 96. The assessee while calculating the book profit under the provisions of MAT under section 115JB of the Act has reduced the profit eligible for deduction under section 80HHC of the Act amounting to Rs. 79,58,97,799/- in pursuance to the clause (iv) of explanation 1 to section 115JB of the Act. 96.1. The assessee during the assess....
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....inance Act, 2011 with effect from 1.4.2005, the said profit u/s.80HHC is not eligible for deduction from the book profit. In view of the same the AO's action is disallowing the same was correct and the same is upheld. Ground of appeal no.11 is dismissed. 98. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 99. The learned AR before us contended that the amendment brought under the statute with retrospective effect, denying the benefit to the assessee is unconstitutional, particularly, in the circumstances when such amendment was brought to nullify the judgment of the Hon'ble Supreme Court in the case of Ajanta Pharma reported in 327 ITR 305. 99.1 It was also contended by the learned AR that the assessee at the time of filing the return of income was very much entitled for the profit of the business eligible for deduction under section 80HHC of the Act to be reduced from the book profit. There was no possibility for the assessee to foresee at the time of filing the return of income that there will be some amendment with retrospective effect on a future date. Accordingly, the assessee contended that it cannot be deprived from the benefi....
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.... also clear from the Explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. [Para 7] The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect. [Para 8] 101.2. Undeniably, the Parliament is empowered to bring amendments under the statute that too retrospectively provided it is not detrimental to the assessee. In other words any amendment denying the benefit to the assessee cannot be brought under the statute with retrospective effect. 101.3. We also note that there will be certain classes of assessee who must have claimed the benefit of clause (iv) of explanation 1 to section 115 JB of the Act prior to the amendment by the Finance Act as discussed above. But, assuming their case have not been selected under scrutiny, then such benefit cannot be denied to them. On the contrary the assessees who were subject to scrutiny assessment, if they a....
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....penses under the head "Doctor Sponsorship" and deleting the disallowance of Rs. 2,52,99,20s/- made by the A.O. on account of business advancement expenses." 3) "Whether the Ld. CIT(A) is jig lit in law and on fads in deleting the disallowance of Rs. 13,74,22,500/- made by the A.O. out of deduction claimed by the assessee u/.s 35(2AB) of the 1. T. Act in respect of research and development expenditure." 4) "Whether the Ld. CIT(A) is right in law and on facts in allowing depreciation @50% in place of 15% on the basis of Notification No. 10/2009 dated 19.01.2009 issued by CBDT." 5) "Whether the Ld. CIT(A) is right in law and on facts in allowing depreciation @60% in place of 25% on computer and computer software." 6) "Whether the Ld. CIT(A) is tight in law and on facts in deleting the disallowance of Rs. 3,82,800/- made by the A.O, on account of capital investment subsidy." 7) "Whether the Id. CIT(A) is right in law and on facts deleting the disallowance made u/s. 80IC of the Act attributable to amount pertains to: i) Allocation of R & D Expenses ii) Deduction in respect of Notice Pay in) Sale of scrap." ....
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.... ground of appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 48 to 50 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2010-11. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 114. In ground no. 4, the grievance of the Revenue is that the ld.CIT(A) has erred in allowing the depreciation @ 50% instead of 15% on the value of the assets. 115. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2010-11 is identical to the issue raised by the Revenue vide ground no. 2 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2010-11. The ground appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 42 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the y....
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.... the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2010-11. The ground of appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 69 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2010-11. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 122. In ground no. 8, the grievance of the Revenue is that the ld. CIT(A) has erred in deleting the disallowance of Rs. 1,24,03,519/- made under section 80G of the Act. 123. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2010-11 is identical to the issue raised by the Revenue vide ground no. 8 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2010-11. The ground of appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 72 of ....
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....and during the year no services have been rendered by R&D unit of the appellant company to the Baddi Unit. 6. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in rejecting the relevant ground of appeal that the appellant is entitled to deduction of provision for leave encashment notwithstanding the provisions of Section 43B of the Income-tax Act. 7. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 126. In ground no.1, the grievance of the assessee is that the ld. CIT(A) has erred confirming the disallowance of Rs. 14,00,4000/- made on account loan given to AE which was written off during the year under consideration. 127. The assessee during the year has written off an amount of Rs. 14,00,40,000/- on account of short term loan given to AE namely ZAO Torrent Pharma Russia. The assessee in support submitted that in order to supply its medicine in Russia it established a wholly owned subsidiary being "ZAO Torrent Pharma" in the year 1997 through which it derived substantial business gain throughout the period. However due ....
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....not be said that the amount advanced by the assessee to the AE has become irrecoverable. Accordingly, such amount cannot be allowed as deduction treating the same as business loss to the assessee. Thus the AO, disallowed impugned claim of the assessee and added the sum of Rs. 14,00,40,000.00 to the total income of the assessee. 128. Aggrieved assessee preferred an appeal to the learned CIT-A, who confirmed the order of the AO by observing as under: In the instant case, I am inclined to accept the contention of the AO for the reasons that the amount in question was advanced as a loan which was capital in nature. Merely because assessee had to infuse additional capital in the subsidiary company, the outstanding loan does not partake the character of revenue loss or justify the writing off of the outstanding loan or claim of bad debt u/s.36(2) of the Act. The loan advanced was clearly capital in nature and also the business of subsidiary is distinct. If appellant's proposition is accepted than whole loans to the subsidiary become eligible for deduction u/s. 36(2) of the Act. In the case of Selam Magnetize (supra) Hon'ble Bombay High Court has agreed with concurrent....
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....ian market through its wholly-owned subsidiary. The necessary details of the sales made by the assessee to its wholly-owned subsidiary in the earlier years can be verified from the different financial statements which are available on record. ii. The amount of loan advanced by the assessee to its subsidiary company was representing the working capital loan which is evident from the financial statement of the assessee viz a viz the financial statement of the subsidiary which are placed on pages 5 to 26 of the paper book. Similarly, there is also a board resolution available on page 4 of the paper book to justify that the amount of loan advanced by the assessee was in the nature of working capital loan. It is also significant to note that there was no addition in the block of fixed assets of the subsidiary company after receiving the working capital loan from the assessee. This fact can be verified from the financial statements of the subsidiary company which are available in the paper book. On the contrary we find that the subsidiary company has incurred losses from the operations as evident from the financial statements of the subsidiary company which are available in the ....
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....n the share capital of the subsidiary company was held as allowable deduction. It was held so for the reason that both the assessee i.e. ACE Designers Ltd. and its subsidiary were in the same line of business. However, there is one distinguishable feature in the case on hand viz a viz in the case of ACE Designers Ltd. that the subsidiary of ACE Designers Ltd. was wound up whereas the subsidiary of the assessee was in existence. However, the case on hand is on a better footing as the amount of loan was representing the working capital loan and the ir-recoverability of the same was also not doubted by the Reserve Bank of India. 132.3 In addition to the above, we also note that there are other multiple factors which are strongly suggesting that the amount of loan was not recoverable, particularly, in the situations where the subsidiary company was incurring losses from the operations. At the time of hearing, it was also explained by the learned counsel for the assessee that the purpose of writing off the loan due from the subsidiary company was to make the net-worth of the subsidiary company positive. According to the learned counsel for the assessee, it was not possible to infuse ....
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....R and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the ground of appeal filed by the assessee is partly allowed. 135. In ground no. 3, the grievance of the assessee is that the ld. CIT(A) has erred confirming the re-allocation of administrative expenses of Rs. 7,80,92,117/- to Baddi Unit for purpose of deduction under section 80IC. 136. At the outset we note that the issue raised by the assessee in its ground of appeal for the AY 2011-12 is identical to the issue raised by the assessee vide ground no. 4 in ITA No. 1285/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1285/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the assessee for the assessment year 2009-10 has been decided by us vide paragraph Nos. 28 of this order in favour of assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the grounds of appeal filed by the assessee is allo....
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....he learned CIT-A by observing as under: The Twelfth ground of appeal relates to additional claim with of provision of leave encashment, which has been disallowed in return of income u/s Section 43B; as provision for leave encashment is neither a statutory liability nor a contingent liability The appellant has not made any specific submission in support of its claim and outstanding leave encashment is required to be disallowed as per provisions of section 43B of the Act hence this claim made by appellant is not entertained. This ground of appeal is dismissed. 143. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 144. The learned AR before us submitted that a direction may be issued to allow the deduction of the leave encashment in the year in which it was paid in pursuance to the provisions of section 43B of the Act. 145. On the contrary the learned DR vehemently supported the order of the authorities below. 146. We have heard the rival contentions of both the parties and perused the materials available on record. There are certain expenses which are allowed on payment basis in pursuance to the provisions of section 43B of ....
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....T(A) is right in law and on facts in deleting the addition amounting to Rs. 24,86,820/- made on account of upward adjustment u/s. 92 CA(1) of the Income Tax Act, 1961." 150. In ground no. 1, the grievance of the Revenue is that the learned CIT(A) erred in deleting the disallowance made by the AO for garden expenses of Rs. 31,65,799/- only. 151. At the outset we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 are identical to the issue raised by the Revenue vide ground no. 1 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 39 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 152. In ground no. 2, the grievance of the Revenue is that the learned CIT(A) erred in deleting the disall....
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.... The appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 42 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 158. In ground no. 5, the grievance of the Revenue is that the learned CIT(A) erred in deleting the disallowance made by the AO for the excess depreciation claimed by the assessee on computer software. 159. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the Revenue vide ground no. 4 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 56 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall als....
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....nd no. 8 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2011-12. The appeal of the Revenue for the assessment 2009-10 has been decided by us vide paragraph Nos. 72 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 166. In ground no. 9, the grievance of the Revenue is that the learned CIT(A) erred in deleting the upward adjustment on account of TP adjustment for Rs. 24,86,820 with respect to liaison services. 167 At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the assessee vide ground no. 1 in ITA No. 1285/AHD/2017 for the assessment year 2009-10 and ground no. 2 in ITA No. 1286/Ahd/2017 for A.Y. 2010-11 Therefore, the findings given in ITA No. 1285 and 1286/AHD/2017 shall also be applicable for the year under consideration i.e. A....
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....d Jobwork charges 139.60 Capital Expenses Furniture and Fixtures 42.98 Electrical Equipment 47.30 6. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in rejecting the relevant Ground of Appeal No. 11.3 raised before him to the effect that even though the appellant allocated R&D development cost to Baddi Unit on the basis of turnover while filing the return of income, there is no need for such allocation as profit u/s.80-IC is required to be computed assuming that the eligible business was the only source of income of the appellant company and during the year no services have been rendered by R&D unit of the appellant company to the Baddi Unit. 7. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in rejecting the relevant ground of appeal that the appellant is entitled to deduction of provision for leave encashment for Rs. 5,00,54,452/- under the provisions of Section 43B of the Income-tax Act. 8. The appellant craves to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.....
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....12. 175.1. The TPO found that as per circular No. 15/2014-15 dated 01-07-2004 of Reserve Bank of India that the shares should be allotted to the assessee within the period of 180 days whereas there was the delay in the allotment of the shares. Thus the TPO characterized the share application money as loan and advances. The TPO worked out the interest at Rs. 27.20 lacs on such amount and made upward adjustment by making addition to the total income of the assessee. 176. Aggrieved assessee preferred an appeal before learned CIT(A). 176.1 The assessee before the learned CIT(A) submitted that it has made payment of share application to different AEs and all of them have allotted shares within the period of 180 days except in case of Zao Torrent Pharma (Zao) where there is minor delay of 4 days. However if period of 180 days counted from the date of board meeting then there is no delay in the allotment of shares. 176.2 The assessee further submitted that transaction of acquisition of share is genuine transaction. Therefore, the TPO cannot re-characterized a genuine transaction of share acquisition into debt without proving the same a nongenuine or sham transaction. In suppor....
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....advanced money to its AE for acquiring the shares which is a capital account transaction. Therefore, there cannot be any adjustment under the provisions of transfer pricing on account of capital account transaction being the acquisition of shares. Merely, there was a delay in the allotment of shares by the AE to the assessee, such delay cannot change the character of the transaction as loan. We note that the Delhi bench of ITAT in the case of Bharti Airtel Limited vs. ACIT reported in 43 taxmann.com 150 has held as under: 47. We find that in the present case the TPO has not disputed that the impugned transactions were in the nature of payments for share application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has, however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated as in the nature of....
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....O to delete the addition made by him. 180.2. In view of the, the ground of appeal of the assessee is partly allowed and the ground of appeal of the Revenue is hereby dismissed. 181. In ground no. 3, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the re-allocation of administrative expenses of Rs. 8,44,58,039/- to Baddi Unit for purpose of deduction under section 80IC of the Act. 182. At the outset we note that the issue raised by the assessee in its ground of appeal for the AY 2012-13 is identical to the issue raised by the assessee vide ground no. 4 in ITA No. 1285/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1285/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the assessee for the assessment 2009-10 has been decided by us vide paragraph Nos. 28 of this order in favour of assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the assessee is allowed. 183. The issue raised in ground No. ....
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....as well capital in nature in-house research as per the provision of section 35(2AB) of the Act. The form 3CL for the year under consideration, being DSIR approval of the expenses incurred was not received yet. 186.2. However, the AO held that the assessee company has not received the approval of the expenses in form 3CL from DSIR which is prerequisite for claiming the deduction under section 35(2AB) of the Act. Thus, the AO disallowed 100% of the weighted deduction claimed on revenue expenses and capital expenses other than building which was worked out at Rs. 122,92,36,600/- only. 186.3. The AO further, without prejudice to the above held that expenditure such as recurring expenses relating to building rates and taxes, Salary to Dr. C. Dutt and expenditure incurred outside approved facility like clinical trial, patent registration and professional expenses which are not approved by the DSIR over the year is not allowable for deduction. In other words, the weighted deduction of the expenditure to the extent of approval given by the DSIR should only be allowed. 187. Aggrieved assesse preferred an before the learned CIT(A). 187.1. The assessee before learned CIT(A) furnis....
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.... and Appellant has not proved that how such expenditure is covered by norms prescribed in Form No.3CL for claiming weighted deduction hence such claim of Appellant is not accepted. 189. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 190. The learned AR for the assessee before us besides reiterating the submission made before the lower authorities submitted that the issue on hand is covered by the judgment of Hon'ble Gujarat High court in the own case of the assessee reported in 88 taxmann.com 530. 191. On the other hand the learned DR vehemently supported the order of the authorities below. 192. We have heard the rival contentions of both the parties and perused the materials available on records. At the outset, we note that issue of allowance of weighted deduction on account of expenditure incurred in connection with research and development activity is covered in favour of the assessee by the order of the Hon'ble Gujarat High Court in the own case of the assessee (supra) wherein the Hon'ble court held as under: 13. As regards Question No.(A), we find that the Tribunal has followed its earlier decision passed in respect....
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....011-12 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the assessee is allowed for the statistical purposes. 196. Ground no. 8 of the assessee is general in nature, hence the same does not require any separate adjudication. Accordingly, we dismiss the same as infructuous. 197. In the result appeal of the assessee is partly allowed. Coming to ITA No. 1415/AHD/2018, an appeal by the Revenue for the AY 2012-13 198. The Revenue has raised the following grounds of appeal: 1) "that the Ld. CIT(A) is right in law and on facts in deleting the disallowance of Rs. 36,67,88l/- made by the A.O. on account of garden expenses." 2) "that the Ld. CIT(A) is right in law and on facts in granting relief of Rs. 21,41,80,000/- on account of distribution expenses under the head "Doctor Sponsorship" and deleting the disallowance of Rs. 4,4 7,60,553/ - made by the A.O. on account of business advancement expenses and sales promotion expenses of Rs. 40,78,113." 3) "that the Ld. CIT(A) is right in law and on facts in deleting the disallowance of Rs. 1,20,17,23,600/- made by the A.O. out of deduction claimed b....
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....he DR before us also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. 201. The issue raised in ground no. 2 by the Revenue is that the learned CIT(A) erred in deleting the disallowances of doctor sponsorship expenses of Rs. 21,41,60,553/- and business advancement expenses of Rs. 4,47,60,113 and sales promotion expenses of Rs. 40,78,113/-. 202. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the assessee vide ground no. 1 in ITA No. 1286/AHD/2017 for the assessment year 2010-11. Therefore, the findings given in ITA No. 1286/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the assessee for the assessment 2010-11 has been decided by us in favour of the assessee vide paragraph Nos. 80. Please refer the relevant paragraph for the detailed discussion. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied ....
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....-13 is identical to the issue raised by the Revenue vide ground No. 4 in ITA No. 1327/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the Revenue for the assessment 2009-10 has been dismissed by us vide paragraph Nos. 56 of this order. Please refer the relevant paragraph for the detailed discussion. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. 209. The issue raised in ground no. 6 by the Revenue is that the learned CIT(A) erred in deleting the disallowance of depreciation of Rs. 2,76,356/- on account of capital subsidy received. 210. At the outset we note that the issue raised by the Revenue in its ground of appeal for the AY 2012-13 is identical to the issue raised by the Revenue vide ground no. 6 in ITA No. 1327/AHD/2017 for the assessment year 2009- 10. Therefore, the findings given in ITA No. 1327/AHD/2017 shall also be applicable for....
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....ncludes an amount of Rs. 8,73,445 received from various suppliers being penalty on account of short or late supply of materials and deficiencies in services etc. Similarly it includes an amount of Rs. 26,48,271/- being cost recovered against inter unit transfer of stock which does not have any element of profit. It also includes an amount 1,553/- being cost of making duplicate keys recovered from employee and remaining amounts represent receipt such as amount recovered on account of material mishandling for Rs. 1,90,000/- & other for Rs. 670/-. Thus the assessee argued that same is either directly related with manufacturing activity or not having any profit element as same amount also claimed as expenses. 214.3. However the AO held the discount received from vender on purchases which is not arising from eligible manufacturing activity. Thus the same is not eligible for deduction under section 80IC of the Act. Likewise, the miscellaneous income also not arising from manufacturing activity. Thus the AO disallowed the amount of cash discount and miscellaneous income from eligible profit under section 80IC of the Act. 215. Aggrieved assessee preferred an appeal to the learned CIT....
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.... authority as favorable to them. 218. We have heard the rival contentions of both the parties and perused the materials available on record. As regards income shown by the assessee under the head cash discount amounting to Rs. 2,00,147/- , we note that such cash discount is against the purchases on account of prompt payment made by the assessee. In other words, the purchases were recorded by the assessee at the higher value without adjusting the amount of cash discount. Had the assessee been adjusted such cash discount against the purchases, the gross value the purchases would have come down by the amount of cash discount which would have resulted in the greater amount of income and the same would have been eligible for deduction under section 80IC of the Act. Thus, we are of the view that amount of income by way of cash discount cannot be denied for the benefit of the deduction under section 80IC of the Act merely on account of the different presentation shown by the assessee. 218.1 Without prejudice to the above, if the cash discount shown by the assessee as income is excluded from the deduction provided under section 80IC of the Act, then the corresponding expenses should ....
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.... judgments. 219.2 The AO, however held that the gain on foreign currency exchange has nothing to do with sale or export of goods. As such it is arising due to prevailing conditions of forex market and the assessee also has not treated the same as part of sale. Further Accounting Standard 11 issued by the ICAI also requires to disclose any gain or loss arising due to fluctuation in foreign currency rate separately from sale or purchases and this principles is also approved by the Hon'ble Supreme court in case of CIT vs. Woodward Governor India (P) Ltd reported in 312 ITR 254. Therefore in the light of AS-11 and Judgment of Hon'ble Supreme court such gain on foreign currency exchange cannot be treated as ordinary business profit. Accordingly the AO disallowed the amount of foreign exchange gain of Rs. 7,16,31,391/- from eligible profit under section 80IC of the Act by holding that same is not derived from the industrial undertaking. 220. However the learned CIT(A) on appeal by the assessee deleted the disallowances made by the AO by observing as under: With respect to addition on account of net foreign exchange gain of Rs. 7,16,31,391/-, I find merit in the argument of....
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....he parties and perused the material available on records. With respect to the foreign exchange income, we note that this issue has already been allowed in favour of the assessee in the series of judgments which have been reproduced in the order of the learned CIT-A. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT. 224. In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT-A. Hence the ground of appeal of the revenue is hereby dismissed. 225. The issue raised in ground No. 8 by the Revenue is that the learned CIT(A) erred in deleting the disallowance of the additional depreciation of Rs. 32,02,273/- on trolley, mobile racket and pallets. 226. The assessee during the year under consideration has purchased Trolleys, Mobile Rackets and pallets. The assessee treated the same as part of plant and machinery. Thus, the assessee claimed depreciation and additional depreciation at the rate applicable on the plant and machinery. The assessee in support of its contention submitted that the trolley are used for movement of goods, mobile racket ar....
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....ssing Officer should have adopted functional test to decide whether said items constituted plant and machinery - Held, yes - Whether since said stools, tables, stainless steel racks, etc., were required for laboratory purpose, i.e.. for purpose of production or processing of chemical tests, in laboratory premises leading to production of stocks, they must .be categorized as plant and machinery - Held, yes" Further, Hon'ble Pune Tribunal in case of Varroc Engineering P.Ltd vide ITA No: 827/PN/2013dated 25/08/2014 held as under: "13. We find that the Hon'ble Bombay High Court in the case of CIT vs. Parke Davis (India) Ltd. (1995) 214 ITR 587 (Bom) has held that the assessee company claimed depreciation u/s.32 in respect of the fans, which were installed in its administrative office. The Tribunal held that the fans installed in the administrative office of the assessee constituted plant and machinery for the purpose of granting depreciation u/s.32 of the Act. On reference, the Hon'ble High Court held that the expression plant has been given an extended meaning even to include vehicles, books, scientific apparatus, etc. used for the purpose of business or ....
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....the plant and machinery and claimed depreciation accordingly whereas the AO treated the same as furniture and fixture and disallowed the excess deprecation which has been reversed by the learned CIT (A). 230.1. Now the question arises before us whether the assets being Trolleys, Mobile Rackets and pallets used in manufacturing plant for movement and safe storage of goods can be described as plant and machinery or furniture. At this juncture, we note that the coordinate of bench Pune Tribunal in case of Serum Institute of India (supra) in similar facts and circumstances observed that nature of the assets used in the business is to be decided on the basis of functional test of the assets and accordingly held that tables, stools, rackets etc. used in laboratories are part and parcel of plant and machinery. We also find that the learned CIT(A) in his order followed the order cited above i.e. order of the Pune Tribunal i.e. Serum Institute of India (supra). The relevant extract of the order has already been reproduced in the order of the ld. CIT-A. Therefore, respectfully, following the same, we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal ....
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....s been decided by us vide paragraph Nos. 84 of this order against the revenue. Please refer the relevant paragraph for the detailed discussion. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the Revenue to the extent of upward adjustment on account of liaison services is hereby dismissed. 237. Coming to deletion of upward adjustment of Rs. 5,88,66,054 on account of dossier licensing fee. 237.1. The assessee in the year under consideration has shown an income of Rs. 2,68,25,090/- from its associated enterprises based in Germany on account of Dossier licensing fees. It was explained that there is an agreement between the assessee and Torrent Pharmaceuticals Gmbh Germany. As per the agreement the AE has to get registration of the product developed by the assessee and subsequently market the same. In return, the AE has to share the income with the assessee in the ratio of 75: 25. In other words, share in the income from the impugned activity of the AE is 75% whereas the share of the assessee is 25%. The assessee to....
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....antial margins on sa e of pharmaceutical products. Detailed working has also been provided by the appellant. It is noted that appellant has earned a profit of Rs. 3,80,83,078/- during the year on sales emanating from the dossier licensing. Further the TPO has also accepted that the transaction of sale of pharmaceutical products to A.E. TPO has not controverted this vital fact pointed out at length by the Ld. AR in response to the Show Cause Notice issued. This fact has been ignored for the purpose of making Transfer Pricing adjustment. What is pertinent to be noted is that the TPO did not note that pursuant to the Dossier License Agreement there also emanates an intangible right in the form of 'exclusive manufacturing rights1 for the appellant company. All profits attributable to manufacturing have been allocated to the appellant is a matter of fact. The TPO did not appreciate the entire agreement in totality. He analyzed only a limited portion of the agreement i.e. pertaining to Dossier Licensing Fees. But for the registration the appellant would not have been in a position to exploit the German market. Considering the above factual position that substantially majority of the ....
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....ndertakes the function of marketing the said "I registrations and explores multiple opportunities in the jurisdiction and when they find the clients who intend to license their dossier the dossier licensing fees is received. The revenue from the Dossier Licensing may or may not be generated in the year of product registration. It may take several years for registered product being accepted in a foreign market and there are also possibilities that no Dossier Licensing Fees may be generated from certain registrations. Therefore, the reasoning of TPO that the profits of the AE is considered at entity level and includes income and expenses to activities other than sale of Dossier Licensing cannot be a ground for rejecting the ratio of allocation of Dossier Licensing Fees adopted by the Appellant on year to year basis. In view of the above discussion the upward adjustment made by TPO amounting to Rs. 5,88,66,054 is deleted. This ground of appeal is allowed. 239. Being aggrieved by the order of the learned CIT(A) the revenue is in appeal before us. 240. The learned DR before us vehemently supported the order of the AO. On the contrary the learned AR submitted that the prof....
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.... 15.3 I have carefully considered the facts of the case, Assessment Order and submissions made by the appellant. The Assessing Officer has made addition of Rs. 91,72,392/- on account of disallowance u/s 14A of the Act while computing book profits u/s 115JB of the Act. It is observed that identical issue came up for consideration before Hon'ble Ahmedabad ITAT in the case of Adani Agro Pvt. Limited in ITA No. 2539/Ahd/2013, dated 2nd February, 2018 wherein, relying upon decision of Vireet Investments (ITAT, Delhi Special Bench), adjustment made under Section 14A while computing book profit under Section 115JB is deleted. The relevant finding is as under: "15 As far as applicability of section 115JB upon the assessee is concerned, there is no dispute. Book profit of the assessee has to be computed. Only question before us is, (a) whether three amounts viz. a sum of Rs. 6.60 crores worked out by the AO with the help of Rule 8D r.w.s. 14A of the Act is to be added in the book profit by making an adjustment, (b) whether share of profit from partnership firm received by the assessee is to be added in the book profit, and the amount of Rs. 9,00,825/-calculated by the asse....
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....hich have yield exempt income during this year. This finding is qua the computation for 14A r.w.r. 8D. As far as adjustment in the book profit is concerned, Special Bench has held that such adjustment cannot be made by adopting the procedure provided in section 14A r.w.r. 8D. Thus, this issue is squarely covered by the decision of Special Bench. On due consideration of the above facts and circumstances, we are of the view that the Id. CIT (A) has appreciated the controversy in right perspective. The Id. CIT (A) has rightly excluded the amount of Rs. 6.06 crores from book profit." As issue is covered in favour of Appellant, by the decision of Hon'ble Ahmedabad ITAT cited (supra), disallowance under Section 14A made by AO while computing book profit for Rs. 91,72,392 is deleted. 246. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 247. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 248. We have heard the rival contentions of both the parties and perused the materials available on record. The Assessee in the instant case has made suo moto disallowance u....
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....of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." 248.4. Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). 248.5. Now the question arises how to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts & circumstances, we feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary ....