AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 526
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....r AY 2008-09 are taken as lead appeal. All these appeals are disposed of by this common order. For A.Y. 2008-09 ITA Nos. 2493 & 2815/Mum/2015 02. ITA No. 2493/Mum/2015 is filed by IPCA laboratories Limited (the assessee) and ITA No.2815/Mum/2015 filed by the Dy. Commissioner of Income-tax, large taxpayer unit-1, Mumbai (the learned AO) against the order of learned Commissioner of Income-tax (Appeals)-56, Mumbai [the learned CIT (A)] dated 11th February, 2015. 03. In ITA No.2493/Mum/2015 assessee has raised following grounds of appeal:- "1. Addition on account of Arms Length Price (ALP) u/s 92CA (3) of the Act. The Commissioner of Income-tax (Appeals) - 56, Mumbai (CIT (A)] erred in confirming following additions made by the Assistant Commissioner of Income tax (LTU), Mumbai (AO) us. 92CA(4) of the Act on account of adjustment in Arm's Length Price (ALP) pursuant to order of the Additional Commissioner of Income-tax, Transfer Pricing 1(3), Mumbai (TPO), u/s. 92CA(3) of the Act dated 21st October 2011 in respect of the following transactions: (i) Adjustment of Rs. 1,27,40,126/-in respect of goods sold to AES. (ii) Adjustment of in r....
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....TPO was not just an estimation but was supported by scientific calculation based on the norms of CRISIL, a well known and leading credit rating agency in India. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that, the disallowance of reduction of the depreciation claimed on assets purchased in India. is not supported by the relevant statutory provisions, ignoring the express provisions of section 43(1) of the Act and in allowing depreciation of Rs. 98,85,782/- to the assessee on account of Foreign Exchange Variation and also ignoring the fact that, as far as local assets are concerned foreign exchange gain is always required to be taken into account to determine the "actual cost" of fixed assets eligible for depreciation. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing something which is not permitted by law, to be specific in the case under consideration, allowing the claim of additional depreciation of Rs. 1,23,37,420/ on the assets acquired and installed during the FY 2006-07 (immediately preceding FY to the current FY under consid....
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....all other transactions except sale of pharmaceuticals products. 06. The assessee has sold pharmaceuticals products to its Associated Enterprises and adopting the CUP method, it benchmarked the same. The assessee has given details for the sale of various products to its associated enterprises. The assessee has given arm's length price and the transaction price for the sale of products in the form of working in form no.3CEB. The basis adopted by the assessee was that it adopted 'basket of products' approach and stated that booked sales price is higher than ALP and therefore, the transactions are at arm's length price. In nutshell, assessee contended that if 'basket of products' is adopted and multiple products are considered as one basket of such products and its sale value is compared with the arm's length price, no adjustment is required. 07. The learned Transfer Pricing Officer held that under the Comparable Uncontrolled Price method, an item-by-item [product-by-product] comparison has to be made and this approach was adopted in the earlier year also and therefore, it is inappropriate to use a basket of product approach. Accordingly, he analyzed each of the products and comp....
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....he Assessing Officer noted that form No.3CL dated 6th April, 2009 issued by Ministry Of Science And Technology, there were some variations. He found that the difference is of Rs.2,15,000/- being excess scientific expenditure claimed by the assessee, therefore, he disallowed 50% thereof at Rs.1,07,500/-. ii. Assessee is claiming deduction under Section 80IB of the Act in respect of profit of industrial undertaking at Silvassa amounting to Rs.8,10,28,422/-. Assessee submitted separate profit and loss account as well as audit report in form no. 10CEB. The learned Assessing Officer noted that assessee has reduced the material cost of Rs.1,44,10,984/- of export incentive. It is also received Rs.4,19,430/- by way of empty container sales. Both these items are not eligible for deduction under Section 80IB of the Act and accordingly, the claim of the assessee was reduced by this amount and allowed to the extent of Rs.6,61,98,008/-. iii. Assessee has also unit at Dheradun, which is eligible for deduction under Section 80IC of the Act, the deduction of Rs.65,08,61,369/- was claimed. There is also Assessing Officer found that the incentive of Rs.2,59,062 was reduced from mat....
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....of interest at 8.25% and direct the Transfer Pricing Officer to compute the same. iv. With respect to the deduction under Section 80IB and 80IC of the Act, he upheld the disallowance to the extent of the sale of empty containers. He held that sale of scrap is not eligible for deduction as income derived from the industrial undertaking. v. With respect to the claim of depreciation disallowed of Rs.98,85,782/- on account of foreign exchange fluctuation gain, he deleted the addition for the reason that the assets were not purchased outside India and therefore, provision of Section 43A of the Act do not apply. vi. With respect to the claim of additional depreciation of Rs.1,23,37,420/- on account of assets put to use in second half of A.Y. 2007-08, relying on the decision of the co-ordinate bench in Cosmo Films Ltd. vs. DCIT in ITA No. 2508/Del/2007 dated 5th August, 2011, he deleted the disallowance. 012. Before the learned Assessing Officer, the assessee raised an additional ground of appeal with respect to deduction of Rs.2,89,90,715/-, with respect to discount on issue of shares under employees Stock option scheme. The fact shows that assessee has issu....
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....s.2.5corres than the actual FOB Arm's Length Price derived by the assessee. He submits that the learned Transfer Pricing Officer has not disputed the Arm's Length sales value of any of the products but he disregarded the basket approach. Wherever there is an excess of Arm's Length Price compared to the actual sale price he has picked those items and made addition to that extent. Where the Arms Length Price is less than the actual sale price, the learned Transfer Pricing Officer has accepted the same. He referred to the OECD guidelines with respect to the comparability and referred to paragraph no.1.60 and submitted that business strategies could also include market penetration scheme. He submits that a taxpayer seeking to penetrate market to increase its market share might temporarily charged price of the product lower than comparison. Further, a taxpayer seeking to enter a new market or expand its market share may temporarily charge higher cost and achieved lower profits. He therefore submitted that the sale made in Nigeria, the assessee penetrate by supplying anti malarial drugs along with other regular and as a market strategy, the assessee sold these goods to its Associated Ent....
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....ssee benchmarked these transactions determining FO be sale price per unit to other parties, made adjustment with respect to cost for additional credit period to the associated enterprise and reduced it by ECGC premium paid on sales to other parties. It also reduced the third party prices in some of the cases with the commission paid on sales to other parties. The resultant price was stated to be the arm's-length price of pharmaceutical products on FOB basis per unit. The assessee then multiplied that third party prices with actual quantity sold to associated enterprises. It determined the arm's-length sale value at OB price for all those 20 products and compared it with the actual FOB sale price charged to associated enterprise. Out of the 20 products in 14 products, the actual sale value charged to the associated enterprises was higher than the arm's-length price determined. In six products, the actual sale value to associated enterprises was less than the arm's-length price. However if all 20 products are taken together, the actual sale value is higher by Rs. 2,67,86,789/- to the arm's-length price. Therefore, the claim of the assessee is that if all 20 products taken together as....
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....multinational enterprises and tax administration January 2022 in paragraph number 3.9 to 3.12 deals with the valuation of taxpayer's separate and combined transactions. This also accepts that ideally the transactions should be tested on a transaction-by-transaction basis. However, in certain circumstances if the transactions are closely linked on continuous that they cannot be evaluated adequately on a separate basis and when it is impracticable determine pricing for each individual product, in those circumstances it may be more reasonable to assess the ALP for the two items together rather than individually. It also considered the portfolio approaches wherein some products are marketed by taxpayer with a low profit or even at a loss in a portfolio. It also considers the cases where the sale of products is also part of the package deal. In those circumstances, it suggests that it is more practicable to adopt aggregate in those transactions and determine ALP on combined transaction basis. 022. Undisputedly the revenue as well as the assessee has adopted CUP method. The CUP method requires comparison of the price charged paid for property transferred. The property is defined in ru....
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....o not support the case of the assessee. 026. Even in the later years, i.e. assessment year 2009 - 10 and 2010 - 11 assessee himself stated that CUP method may not be appropriate and adopted profit split method for the reason that the basket of product approach is not acceptable to the revenue. Even in those cases, the learned transfer-pricing officer is applied CUP method. 027. Merely because invoices are prepared in a particular manner, they do not prove that goods sold in those products are inextricably linked with each other. 028. In view of this, we confirm the action of the lower authorities in making a transfer pricing adjustment with respect to sale of pharmaceutical products in Nigeria to associated enterprises amounting to Rs. 1,27,40,126/-. Thus, the ground number 1 of the appeal to that extent is dismissed. 029. With respect to second transfer pricing adjustments because of interest on interest free advances charged at 8.25%, the learned Authorized Representative submitted that these loans are given earlier years. He submitted that these are in the form of quasi equity and therefore, no interest should be charged. He further submitted chart to show that the b....
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....ntion of the assessee that the concerned loans had been sourced out of the cost free owned funds from internal accruals and on account of commercial expediency is and therefore the interest is not charged. According to us, the interest rate is required to be benchmarked looking at comparable prices. Only in the circumstances where there is no comparable prices available then only the interest can be benchmarked by the cost of borrowing by the lender. Admittedly, in this case assessee states that it has not incurred the cost for borrowing the above funds, which have been lent to the associated enterprises. However, here the comparable rates are available. Therefore, the argument of the assessee that it has not incurred any cost of borrowing does not have any relevance. The second argument of the assessee is that that the advances given to the two of the recipient subsidiaries have utilize the money advanced to them by the assessee for further investment in the shares of step down subsidiaries of the assessee company and therefore the advances are quasi equity and no interest is required to be charged. In the present case, the advances given to the subsidiaries. The subsidiaries migh....
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....tedly, the unit at Silvassa and Dheradun are eligible undertakings income, which is eligible for deduction under Section 80IC and 80IB of the Act. Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of CIT versus Sadhu forging Ltd 336 ITR 444 as well as the decision of the honourable Gujarat High Court in Tax Appeal No. 368 of 2008 DECEMBER 21, 2013 an Dy. CIT v. Harjivandas Juthabhai Zaveri [2002] 258 ITR 785/ [2003] 132 Taxman 923 (Guj.) In view of this, we find that lower authorities have erred in not allowing deduction under Section 80IB and 80IC of the Act on the above sum. Accordingly, ground no.2 and 3 of the appeal is allowed. 038. In the result, the appeal of the assessee is partly allowed. 039. Now we come to the appeal of learned Assessing Officer. The ground no.1 with respect to the Transfer Pricing adjustment with respect to advances given to the subsidiary companies wher....
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....y, ground no. 2 of the appeal is dismissed. 043. Third ground of appeal is with respect to the additional depreciation of Rs.1,23,37,420/- disallowed by the learned Assessing Officer but allowed by the learned Commissioner of Income tax (Appeals). 044. The facts show that the assessee has acquired certain assets, which were entitled for additional depreciation according to Section 32(1)(iia) of the Act in the second half of the immediately preceding year. As the assessee has put to use those assets for less than 180 days in the previous financial year, assessee is entitled to only 50% of the additional depreciation. The same was allowed to the assessee in that year. Assessee has claimed balance 50% of such depreciation in the current year, the learned Assessing Officer says that there is no such provision in the Act and therefore the same was disallowed. The learned CIT (A) following the decision of the co-ordinate Bench in case of Cosmo Films Ltd (supra) allowed the claim of the assessee. The learned Assessing Officer has challenged the same before us. 045. We have heard the rival parties; we find that the issue is squarely covered by the decision of the Hon'ble Madra....
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....ing the addition made on account of adjustment in respect of goods sold to National Drugs (Pty) Ltd. 2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting adjustments made on account of interest in respect of interest free advances made to 100% subsidiaries of the M/s IPCA Laboratories Ltd." 053. In ITA No.8120/Mum/2010, assessee has raised following ground of appeal:- "1. (i) the Commissioner of Income-tax (Appeals)- 15, Mumbai [CIT(A)], erred in confirming the adjustment made by the Assistant Commissioner of Income-tax, Central Circle 13, Mumbai, (AO), on account of interest in respect of interest free advances made by the appellant to its subsidiaries at 3.38% being average cost of borrowings. (ii) The impugned addition made by the Assessing Officer and confirmed by the CIT (A) are based on reasons, which are contrary to law and facts. (iii) The Assessing Officer is not justified making addition on account of interest as the advances have been made by the appellant out of its own funds and its internal accrual. (iv) Without prejudice, the Assessing Officer is not justified in making a....
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....of Rs.96,58,078/- was proposed by the learned Transfer Pricing Officer. The learned Assessing Officer passed the assessment order under Section 143(3) of the Act on 31st December, 2008 determining the total income of the assessee at Rs.19,85,65,035/-. 056. On appeal before the learned CIT (A), he deleted the addition of Rs.59,89,000/- with respect to sale of the assessee to its Associated Enterprises which in turn supplied goods to the local government on tender basis for which prices are fixed. With respect to interest on interest free advances, the learned CIT (A) directed the learned Assessing Officer to recompute the adjustment on account of interest to Associated Enterprises by taking average cost of borrowing and after considering the dates on which the money has been advanced. The learned Assessing Officer is aggrieved with the same and is in appeal before us. The assessee is aggrieved with respect to the direction of the learned CIT (A) to charge interest at the rate of 3.38% being average cost of borrowings. Therefore, assessee is in appeal before us. 057. Coming to the 1st ground of appeal of adjustment in respect of goods exported to National Drugs (Pty) Ltd. We ha....
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....he reasonable rate of interest thereon. Accordingly, an adjustment of Rs.37,69,078/- was made. The claim of the assessee is that the appellant out of its own fund has made the advances and the cost of borrowing of the assessee is only 3.38%. Further, it was contended that the interest can be computed only if the period for which the advance were outstanding and not for the whole year. Based on these arguments, the learned CIT (A) directed the learned Assessing Officer to adopt the interest rate as 3.38% as it is an internal comparable rate for the purpose of adjustment of interest on account of interest paid advances to associate enterprises. Further, he also directed the learned Assessing Officer to recompute the adjustment considering the date on which the moneys have been advanced to its Associated Enterprises. The Assessing Officer is aggrieved with the order of the learned CIT (A) in directing him to adopt lower interest rate at the rate of 3.38% whereas, assessee is aggrieved with the direction of the learned CIT (A) to compute the interest at the rate of 3.38% on the amounts of advances. 059. The learned Authorised Representative reiterated the submission which were made ....
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....s to associated enterprises (AEs) at 24,18,705/ (i) Adjustment made on account of interest free advances to 100% subsidiaries at 7,5,44,049/- 2. (i) The AO erred in making adjustment to the transaction of exports to AEs by comparing ALP and appellants price on a product by product basis and not on set of transactions with one particular AE and failed to follow principles of aggregation which is well established rule in transfer pricing analysis and the OECD guidelines which advocates aggregation of transactions under certain circumstances. (ii) The appellant submits that the AO ought to have considered the fact that the appellant is driven by commercial consideration of penetrative pricing when it tries to market its product in new overseas markets and therefore it prices such product lower in such markets while ensuring that, the other products compensate for the lower margin on such product. (iii) Without prejudice to the above the appellant submits that the AO ought not to have made adjustment of ALP in respect of transactions where the variation between the ALP determined by the AO and the actual sale price is less than 5% in accordance with ....
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....e price and no adjustments were warranted. The learned Transfer Pricing Officer is of the view that in the CUP Method product by product comparison has to be made and basket of product approach cannot be used. Thereafter, he computed the Arms Length Price of each product. In respect of the transaction with Ipca Pharma Nigeria Ltd., he found that assessee has sold 5 products and the actual sale value is less than the Arms Length Price and accordingly, made an adjustment of Rs. 17,33,115/-. He further considered transaction with National Drugs (Pty) Ltd and found actual sales value is less by Rs. 6,85,590/- from its Arms Length Price and therefore, adjustment was required. Accordingly, he proposed an adjustment of Rs. 24,18,705/- on sale of products to Associated Enterprises. 065. The learned Assessing Officer found that assessee has given interest free unsecured loans with no repayment dates to its Associated Enterprises. Assessee did not charged any interest on such loans stating that assessee is the holding company of the Associated Enterprises and the loans given by the assessee are in the nature of capital infusion. Therefore, these are part of shareholder activities. The lea....
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....e advanced as were in appeal of the assessee for A.Y. 2008-09. 066. The learned Departmental Representative supported the order of the learned Assessing Officer as well as the direction of the learned Dispute Resolution Panel. 067. We have carefully considered the rival contentions and perused the orders of the lower authorities. Both the grounds of appeal have already been dealt with by us in appeals of the assessee for A.Y. 2008-2009. Therefore, respectfully following the decision in appeal of the assessee for A.Y. 2008-09, we confirm the addition of Rs.17,33,115/- for sale of pharmaceutical products to Ipca Pharma Nigeria Limited and delete the addition of Rs.6,85,590/- on account of sale of pharmaceutical products to National Drugs (Pty) Ltd. 068. With respect to the interest on loans and advances to the sister concern following the order for A.Y. 2008-09, we find that the interest has been charged at Libor plus 200% rate of interest for the number of days, the loans were given resulting into adjustment of Rs.5,44,049/-. Accordingly, the order of the learned Assessing Officer is confirmed to that extent. Accordingly, appeal filed by the assessee is party allowed. 06....
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....duction. 3. Deduction u/s.801Cof the Act-Dehradun Unit Both the CIT (A) and the AO erred in not considering income of Rs.4,54,631/- being sale of empty containers as profit of industrial undertaking for the purpose of deduction u/s. 801C. The appellant submits that the sale of empty containers are directly related to the profits derived from the business of industrial undertaking of the appellant and therefore the same is eligible for deduction. 4. Disallowance us 40A(3) of the Act Rs.1,56,365/ The CIT (A) erred in confirming the disallowance of Rs.1,56,365/- made by the AO u/s. 40A(3) of the Act on the ground that the same are not covered under the exceptions provided by Rule 6DD. 5. Each of the above grounds is without prejudice to one another. 6. The appellant craves leave to add, to alter, vary or cancel any of the above grounds of appeal." 071. The assessee filed its return of income on 29th October, 2007 at a total income of Rs.62,98,47,014/-. The return was revised on 27th March 2009 at a total income of Rs.60,81,99,329/-. The learned Assessing Officer found that assessee has entered into the international transactions with res....
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....on under Section 80IC of the Act for Dehradun unit which was reduced by the learned Assessing Officer by DEPV of Rs.1,05,166/- and cash discount of Rs.2,77,632/- and Rs.4,54,631/- by sale of empty container. v. Depreciation allowance of Rs.5,18,871/- was also reduced on account of foreign exchange gain. Disallowance of Rs.1,56,365/- was made under Section 40A(3)of the Act. Accordingly, the total income was computed at Rs.64,78,14,863/- by order dated 14th February, 2011. 073. Assessee preferred the appeal before the learned CIT (A), who passed an order on 12th December, 2011. The learned CIT (A) considering the transfer pricing adjustment of sale of pharmaceutical products as well as the interest adjustment on interest free advances to its subsidiaries were confirmed. The disallowance under Section 14A of the Act as per Rule 8D was also dismissed. With respect to the eligible units, the disallowance with respect to sale of empty containers, DEPV and cash discount was also confirmed. Disallowance under Section 40A (3) of the Act was also confirmed. Accordingly, the appeal of the assessee was dismissed and therefore, assessee has preferred this appeal before us. ....
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....paid to the government and therefore, it cannot be considered for disallowance. Further, the various attestation charges paid to foreign embassy amounting to Rs.1,08,755/- which is covered under Rule 6DD(b) of the Income Tax, Rules 1962. Accordingly, the disallowance to the extent of Rs.21,800/- out of total disallowance of Rs.1,56,365/- is upheld and Assessing Officer is directed to delete the balance disallowance. Accordingly, ground no.4 of the appeal is partly allowed. 078. In the result, the appeal filed by the assessee for A.Y. 200708 is partly allowed. For A.Y. 2009-10 ITA Nos. 3597 & 3691/Mum/2016 079. ITA No.3597/Mum/2016 is filed by the assessee and ITA No.3691/Mum/2016 is filed by the assessee against the order passed by the learned CIT (A)-56, Mumbai dated 29th February, 2016. 080. In ITA No.3597/Mum/2016, the assessee has raised the following three grounds of appeal:- "1. Addition on account of Arms Length Price (ALP) u/s 92CA(3) of the Act. The Commissioner of Income-tax (Appeals) 56, Mumbai [CIT (A)] erred in confirming following additions made by the Assistant Commissioner of Income-tax (LTU), Mumbai (AO) us. 92CA(3) of the Act on ac....
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....d that the assets are not acquired and installed during the year under consideration. 4. Each of the above grounds is without prejudice to one another. 5. The appellant craves leave to add, to alter, vary or cancel any of the above grounds of appeal." 081. In ITA No. 3691/Mum/2016, the learned Assessing Officer has raised the following two grounds:- "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing to re- compute the rate of interest on account of interest free advances advanced by the assessee to its wholly owned subsidiaries ignoring the high risk involved in granting such advances and also ignoring the fact that, the 8.58% rate as applied by the Transfer Pricing Officer was not just an estimation but was supported by scientific calculation based on the norms of CRISIL, as well known and leading credit rating agency in India? 2. On the facts and in the circumstances of the case and in law, the learned. CIT(A) has erred in allowing deduction in respect of Employees Stock Option Scheme (ESOP) holding that, discount of share premium and it was a part of the package of remuneration to emp....
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....e assessee has determined the arm's-length price on basket approach method comparing the price at which the assessee has sold the tracks to the associated enterprise and the average price at which the drugs has been sold to the third parties. While computing the price, at which it has sold them to the AES as well as to the third party, the assessee has made various adjustment to the price such as adjustment has been made in the sale price to the third party because of credit, export credit guarantee insurance claim premium et cetera. Similar adjustment have also been made to the sale price of the drugs to the AE -like product promotion expenses et cetera after these adjustments it is stated by assessee that the arm's-length price of all the product sold to the associated enterprise is Rs. 17.86 crores whereas the price charged from the AE for this products is Rs. 19.03 crores and therefore the transaction is at arm's-length. The assessee has adopted the CUP method for the sale of each products to its associated enterprises. For each drug, the sale price of a drug to the third party and to the associated enterprise has been analyzed. In some of the tracks the price at which it has s....
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....he assessee and the TPO is that assessee in stating that basket of product approach should be taken where the TPO says that the comparison has to be made product wise i.e. each product separately. Therefore the basket of product approach was rejected. He further held that CUP has been historically treated as the most appropriate method by the assessee as well as the revenue and therefore the residual profit method deserves to be rejected. He compared the product by product the ALV against the actual sales and found that the ALV is higher than the actual sales value by Rs. 20,960,016/-. Accordingly such adjustment was made to the sale of pharmaceutical products to an AE. 087. The AO also found that assessee has given interest free advances to its subsidiaries of US dollar 1,58,283 on which no interest has been charged. He noted that in the past year the transfer pricing officer has applied the interest rate at the rate of 14.3%. The assessee submitted that that no advances have been made from interest-bearing funds, the advances are out of free reserve and therefore there is no justification. Assessee also stated that the amount advanced to subsidiaries is in the nature of quasi-....
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....he order of the learned transfer pricing officer was confirmed sale of pharmaceutical products. With respect to the benchmarking of interest on interest free advances given to the associated enterprises he rejected the rate of interest adopted by the assessing officer at 8.58% and held that LIBOR must be adopted. Accordingly he directed the learned assessing officer to recompute the transfer pricing adjustment. The additional depreciation claimed by the assessee with respect to assets purchased in earlier years on which additional depreciation is allowable and claimed in that year to the extent of 50% was disallowed. With respect to the claim of deduction u/s 80 IC and 80 IB of the act on empty containers sale was also not allowed. During the appellate proceedings the assessee raised an additional ground of appeal with respect to the deduction of Rs. 21,574,527 in respect of issue of shares Under the employees stock option scheme. The learned CIT - A allowed the claim based on the decision of the honourable madras High Court as well as the decision of special bench and the reasons given for assessment year 2008 - 09 by the learned CIT - A. 092. Therefore assessee is aggrieved wi....
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.... 2,250,380/- in respect of interest free advances, this issue is also identical to the transfer pricing issue in the appeal of the assessee for assessment year 2008 - 09 wherein we have held that the interest is required to be charged on the basis of LIBOR+200 basis point. Therefore the reject the chargeability of interest at the rate of 8.58% by the assessing officer. Accordingly the learned transfer pricing officer is directed to charge interest at the rate of labor+ 200 basis points. 096. Accordingly ground number 1 of the appeal is partly allowed. 097. Ground number 2 of the appeal is with respect to the allowability of deduction on empty containers sold of Rs. 1,027,691/- at Dehradun unit which is eligible for deduction u/s 80 IC o of the act. We find that this issue is identical to the appeal of the assessee for assessment year 2008 - 09 wherein we have held what is eligible for deduction under that section is the profits of the business of the eligible industrial undertaking. The empty containers sold are necessarily part of the business of the industrial undertaking. Therefore deduction u/s 80 IC on the same cannot be denied. 098. Ground number 3 of the appeal is w....
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....above deduction. Therefore, we confirm the action of the learned CIT - A in admitting the additional ground in granting the deduction of the same u/s 37 (1) of the act. Accordingly ground number 2 of the appeal of the AO is dismissed. 0102. Accordingly, for assessment year 2009-10, appeal of the assessee is partly allowed and appeal of the Assessing Officer is dismissed. For A.Y. 2010-11 0103. ITA Nos. 3811 & 5227/Mum/2016 0104. Assessee has preferred ITA number 3811/M/2016 for assessment year 2000 - 11 against the order passed by the Commissioner of income tax (appeals) - 56, Mumbai dated 28th of March 2016 raising identical grounds of appeal as were raised in assessment year 2009 - 10 is Under:- 1. Addition on account of arm's-length price (ALP) u/s 92CA (3) of the act. The Commissioner of income tax (Appeals) - 56, Mumbai (CIT (A)) erred in confirming following additions made by the Asst Commissioner of income tax (LTU), Mumbai (AO) u/s 92CA (3) of the act on account of adjustment in arm's-length price (ALP) pursuant to the order of The Additional Commissioner Of Income Tax, Transfer Pricing - 1 (3), Mumbai (TPO), u/s 92CA (3) of the act dated 15 Ja....
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....sale of empty containers as profit of industrial undertaking for the purposes of deduction u/s 80 IB. The appellant submits that the sale of empty containers are directly related to the profits derived from the business of industrial undertaking of the appellant and therefore the same is eligible for deduction. 3. Deduction Under Section 80 IC of the act - Dehradun Unit both the CIT (A) and the AO erred in not considering income of Rs. 13,10,638 /- being sale of empty containers as profit of industrial undertaking for the purposes of deduction u/s 80 IC. The appellant submits that the sale of empty containers are directly related to the profits derived from the business of industrial undertaking of the appellant and therefore the same is eligible for deduction." 0105. In ITA No.5227/Mum/2016 the learned Assessing Officer has raised following grounds of appeal:- "1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) was justified in allowing deduction in respect of Employees Stock Option Scheme, (ESOP) holding that discount on the issue of ESOP cannot be considered as an under recovery of share premium and it was a ....
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.... that there is a difference between the transaction value and arm's-length price of Rs. 12,712,447/- with respect to sale of pharmaceuticals to Nigerian associated enterprises. Similarly in case of sale of pharmaceuticals to IPCA USA adjustment was made of Rs. 4,007,852/- by adopting the product by product approach. Accordingly for the sale of pharmaceutical products total adjustment of Rs. 13,120,299/- was made. 0108. It was further found that the assessee has given an interest free loan to associated enterprises as in the earlier years however in this year the interest was charged at LIBOR +3.5% amounting to Rs. 87,577 with respect to the interest free advances given to Mexico, China and USA associated enterprises. Further with respect to the Nigeria associated enterprises the interest was charged the rate of 18% amounting to Rs. 1,794,252/-. For this year the transfer pricing officer questioned the benchmarking of the interest to the Mexico, China and USA associated enterprises stating that when Nigeria was charged at the rate of 18% by these units are charged at lesser rate of interest. The assessee explained the cost of borrowing to the AO. The AO/TPO held that loan to the ....
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....lly considered the rival contention and perused the orders of the lower authorities. With respect to the first addition on account of adjustment made to the sale of pharmaceutical products to the associated Enterprises of Rs. 13,120,299/- we find that the identical issue arose in the case of the assessee for assessment year 2009 - 10 wherein we have upheld the action of the learned transfer pricing officer of adopting the CUP as the most appropriate method and comparison of the product by product approach of the sale price. As the issue involved in this appeal is identical, we upheld the addition of Rs. 1,31,20,299/-. 0113. With respect to the second adjustment in respect of interest free advances 200% subsidiaries, we find that the interest of 18% charged to the Nigerian associated enterprises by the assessee or the SBI prime lending rate of 11.75% cannot be said to be the comparable price for charging of interest on loans from Mexico, China and USA unit. The loans were advanced to the associated enterprise in foreign jurisdiction and therefore the rate of interest should be applied as applicable in that jurisdiction. Therefore, assessee has correctly applied the LIBOR +350 bas....
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....) of the Act would be attracted. It is also pertinent to note that section 37 does not envisage incurrence of expenditure in cash. 8. Section 2(15A) of the Companies Act, 1956 defines 'employees stock option' to mean option given to the whole time directors, officers or the employees of the company, which gives such directors, officers or employees, the benefit or right to purchase or subscribe at a future rate the securities offered by a company at a free determined price. In an ESOP a company undertakes to issue shares to its employees at a future date at a price lower than the current market price. The employees are given stock options at discount and the same amount of discount represents the difference between market price of shares at the time of grant of option and the offer price. In order to be eligible for acquiring shares under the scheme, the employees are under an obligation to render their services to the company during the vesting period as provided in the scheme. On completion of the vesting period in the service of the company, the option vest with the employees. 9. In the instant case, the ESOPs vest in an employee over a period of four y....