TaxTMI 
TaxTMI 
2022 (9) TMI 526
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....ese 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 respect of interest free advances at 8.25% to 100% subsidiaries of the appellant c....
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....edit 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 consideration) ignoring the express provisions of section 32(1)(iia) of the Act which specifically stats that additional depreciation shall be allowed o....
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....thod, 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 compared it with the third party sales. He found that sale of 06 items showed that actual sale at FOB value and third party arm's length sale at Fob value, there is a difference....
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....00/- 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 material cost and further empty container sale of Rs.13,13,310 was wrongly claimed. Therefore, 80IC of the Act deduction was allowed only to the extent of Rs.64,92,88,997/-. iv. Assessee has earned f....
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.... 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 issued 1,10,000/- option to its employees under employees stock option scheme. Assessee alleged 88,750/- fully equity paid up shares of Rs.10/- each at an exercise price of Rs.200/- on 26th November 2007 to the option grantees upon exercise of stock option on 23rd Septem....
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....m'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 Enterprises and in turn, associated enterprises also similarly sold the goods to their buyer in basket, the Arms Length Price is required to be computed as per basket approach. He therefore submitted that the addition made by the learned Transfer Pricing Officer on this cou....
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.... 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 a basket of products, international transaction of the assessee are at arm's-length. The learned transfer-pricing officer rejected the basket product approach stating that there is no provision in the statute to apply such methodology while computing arm's-length price Unde....
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....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 rule 10 A (b) to include goods, articles or things and intangible property. Therefore, there is no bar that the property may include a basket of product. 023. It is not unusual for taxpayers to negotiate their products altogether, regardless of their individual prices, as they aim to rea....
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....e. 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 business structure of the assessee showed that there were two wholly owned subsidiaries namely Solway Investment Limited Mauritius and Suuridge Investment limited Mauritius. These companies were holding 50% share each in IPCA Pharma Nigeria Limited and National Druggist Limited, South Africa. He submi....
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.... 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 might have utilize the funds for any purpose but for the purpose of benchmarking of the interest the transaction is that assessee has given a loan to its associated enterprise. Further when we looked at the RBI permissions for overseas direct investment it is coupled with equity and loan. Therefore, it canno....
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....ltogether 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 where the Transfer Pricing Officer is charged interest at the rate of 14.39%, whereas, the learned CIT (A) has reduced it to 8.25%. This ground is connected with the ground of appeal no.1(ii) of the assessee's appeal, wherein we have held that the interest is required to be charged at the rate of Libor plus and 200 points o....
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.... 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 Madras High Court in CIT vs. Shri. TP Textiles Pvt. Ltd. 394 ITR 483 (Madras). In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the disallowance. Accordingly, ground no. 3 of the appeal is dismissed. 046. Ground no. 4 is with respect to claim of the assessee in respect of Employees Stock Opt....
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.....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 addition on account of interest in respect of interest free advances made by the appellant to its 100% subsidiaries which are in the nature of quasi equity towards their working capital requirements." 054. The learned Assessing Officer is aggrieved with respect to the adjustment on account of Arms Length Price of goods sold to National Drugs (Pty) Ltd. as well as the deletion of the adjustmen....
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....rises 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 have heard the rival contentions and find that assessee has sold goods to National Drugs (Pty) Ltd. Assessee applied the CUP method as the most appropriate method. The facts were stated that the Associated Enterprises in turn supply products to the local government on tender basis price for which are fixed. Therefore, the honour to tender and in order to make penetration into the market, the goods was ....
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....guments, 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 before the learned CIT (A) and further stated that the amount of advances given to subsidiary companies are quasi equity and therefore, no interest is required to be charged. 060. The learned Departmental Representative in turn submitted that cost of borrowing of the assessee cannot be considered as an internal CUP. 061. We have carefully considered the rival contentions and perused the orders of the l....
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....er 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 the Second Proviso to Sub Section (2) of Section 92CA 3. (i) The AO erred in making adjustment of 7,5,44,049/- on account of interest in respect of interest free advances made by the appellant to its 100% subsidiaries by computing notional interest at Libor + 200% rate of interest as per the directions of DRP. (ii) The impugned addition of 2.5,44,049/- made by the AO are based on reasons which are contrary to law and facts. (iii) The AO is not justifi....
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....urther 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 learned Transfer Pricing Officer did not accept the explanation of the assessee and interest rate at libor + 300 basis points. Accordingly, with respect to amount of advance of Rs. 6,18,679/- was made. Accordingly, the order under Section 92CA(3) of the Act was passed on 30th October, 2009. Consequently, a draft assessment order was passed on 25th November, 2009. The learned Assessing Officer disallowed the deduction under Section 35(2AB) of the Act of Rs.4,22,000/- on the basis of different in for....
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....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. 069. In the Result, appeals for A.Y. 2006-07 filed by the assessee is partly allowed. For A.Y. 2007-08 ITA No. 3267/Mum/2015 070. ITA No.3267/Mum/2015 is filed by assessee for A.Y. 2007-08 against the order passed by learned CIT (A)-15, Mumbai dated 12th December, 2012. The assessee has raised the following grounds of appeal:- "1. Addition on account of Arms Length Price (ALP) u/s 92CA(3) of the Act. Rs.1,66,99,302/- The Commissioner of Income-tax (Appeals) (CIT (A)) erred in confirming the addit....
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....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 respect to purchase and sale of pharmaceutical products, which benchmarked adopting the CUP method except in case of sale of products to Activa pharmaceutical where cost plus method is adopted. Assessee has given advanced free interest to four different Associated Enterprises on which no interest has been charged. The reference was made for determination of Arms Length Price of international transactions to the learned Addl. Commissioner of Income Tax, Transfer pricing, 1(1), Mumbai, who examined the international transaction. With respect to sale of pharmaceutical products, assessee has adopted the basket of ....
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....ustment 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. 074. The ground no.1 of the appeal with respect to the transfer pricing adjustment wherein adjustment of Rs.1,17,44,223/- is made in respect of goods sold to IPCA Pharma Nigeria Ltd. the assessee benchmarked the above transactions adopting the basket approach which is rejected by the learned lower authorities. This ground is identical to ground of the assessee's appeal for A.Y. 2008-09. As this issue has already been decided by us for A.Y. 2008-09, wherein we have confirmed the action of the learned Transfer Pricing Officer, as there is no change in the facts and circumstances, we confirm the action of the learned CIT (A) in confirming the addition of....
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....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 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 15th January 2013 in respect of the following transactions: (i) Adjustment of Rs. 2,09,60,016/- in respect of goods sold to AE. (ii) Adjustment of Rs.22,50,380/- in respect of interest free advances at 8.58% to 100% subsidiaries of the appellant company. 1.1 The CIT(A) erred in confirming the addition of Rs. 2,09,60,016/- made by the AO by making adjustment to transaction of exports to Ipca Pharma Nigeria Ltd. by comparing ALP and appellant's price on a product by product basis and not on set ....
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....ficer 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 employees and that the obligation incurred in insurance of shares at a discount at a future date in lieu of the employees services is an allowable deduction under Section 37(1) of the Act. 082. Assessee is a company engaged in the business of manufacturing and export of pharmaceuticals and bulk drugs and has offices and factories at various places. It has also associated enterprises in the form of 100 % wholly owned subsidiaries in foreign jurisdiction with assessee has entered into international transactions of purchase and sale of pharmaceutical products as well as of advancing loan. 083. Facts for assessment year 2009 - 10 was that assessee filed return of income on 30/9/2009 declaring total income of Rs. 278,678,540/-. The return was processed but selected f....
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....ed 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 sold to the associated enterprise is lower than the price at which it has been sold to the third party. The assessee submitted that it has adopted a basket of products approach or aggregate transactions approach and therefore the total price for which the drugs were sold to the associated enterprise is higher than the sale price at which it has been sold to the third parties, and therefore it is at arm's-length. And no adjustment is warranted. In nutshell, the assessee has used a basket of products approach for comparison of sale prices Under CUP method. 086. The learned transfer pricing officer accepted the arm's-length principle benchmarking by the assessee with respect to all other associated enterprises however questioned the sale to IPCA Pharma Nigeria Ltd. The le....
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....r 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-equity as assessee is hundred percent parent of each of the subsidiaries. Without prejudice, assessee submitted that the weighted average interest cost to the assessee is 4.28%. The learned transfer pricing officer rejected the explanation of the assessee stating that assessee has raised funds at the rate of 5.96% and has advanced interest free loan to the associated enterprises. He therefore submitted advance in the loan associated enterprise is an international transaction and interest is required to be imputed. He rejected the applicability of London interbank offered rate. He therefore determined the credit rating of each of the associated enterprise is adopting the interest coverage ratio. He also applied the credit rating as per the debt equity ratio. Accordingly he ....
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....sed 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 with the confirmation of the addition with respect to the arm's-length price of the international transaction as well as the denial of deduction u/s 80 IC had 80 IB of the act on empty containers sale, disallowance of additional depreciation during the year for assets purchased in immediately preceding year. The learned AO is aggrieved with the order of the learned CIT - A on rejecting the interest rate of 8.58% on interest free advances given to the associated enterprises with respect to the international transaction and on allowability of deduction of ESOP by way of additional ground. Therefore both the parties are in appeal before us. 093. We first take up the appeal of the assessee. As per ground number 1 the assessee has challenged the adjustment of Rs. 20,960,016/- in respect o....
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....o 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 with respect to the disallowance of additional depreciation of Rs. 28,475,543. The learned CIT - A noted that the assessee had acquired certain assessee during the year 2008 and claimed the additional depreciation as per the provisions of Section 32 (1) (iia) of the act. As those concerned assessing put to use for less than hundred and 80 days in that period, only 50% of the allowable additional depreciation is been claimed by the assessee and allowed in assessment year 2008 - 09. The balance depreciation of 50% as claimed by the assessee during assessment year 2009 - 10 which is which was disallowed by the learned assessing officer. The learned CIT - A also disallowed the same holding that it is a wrong interpretation of the law. The claim of the assessee that identical claim has been allowed t....
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....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 January 2014 in respect of the following transactions:- (i) adjustment of Rs. 1,31,20,299/- in respect of goods sold to associated enterprise (ii) adjustment of Rs. 1,42,355/- in respect of interest free advances to 100% subsidiaries of the appellant company 1.1 The CIT (A) erred in confirming the addition of Rs. 1,27,12,447/- made by the AO by making adjustment of transaction of exports to IPCA Pharma Nigeria Ltd by comparing a ALP and appellant's price on a product by product basis and not on set of transactions with the associated enterprise 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. 1.2 The CIT (A) and the AO erred in not considering the alternately of t....
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....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 part of the package of remuneration to employees and that the obligation incurred in issuance of shares at a discount future date in lieu of the employees services is an allowable deduction under Section 37(1) of the Act. 2. 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) inspte of the fact that the loss due to the ESOP, is a notional loss to the extent of receipt of lesser amount towards share premium and the share premium as received bythe assessee is a capital receipt and not its income? 3. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) was justified in treating the expenses relating to Employees Stock Option Scheme (ESOP) as revenue expenditure, inspite of the fact that in ESOP, there is a short-receipt of the share premium and now....
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....nterest 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 associated enterprises are sourced in Indian rupees and the assessee being not a finance company has advance the fund in normal course of business, the prime lending rate should be applied. Accordingly he found that 11.75% is the SBI prime lending rate and therefore with respect to the interest charged to Mexico, China and USA unit he worked out the arm's-length price of Rs. 229,932/- whereas the assessee has received interest only of Rs. 87,577/- and accordingly the adjustment of Rs. 142,355/- was made. 0109. Accordingly the order u/s 92CA (3) of the act was passed on 15/1/2014 proposing the total adjustment on account of the arm's-length price of the international transaction of Rs. 1,32,62,654/- was made. The learned assessing officer passed an assessment order u/s 143 (3) read with Section 144C (3) read with Section 144C (4) of the act on 29/05/2014 wherein the disallowance of depreciation of Rs. 193,865 as well as the p....
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....ico, 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 base points. Accordingly we direct the learned transfer pricing officer to delete the adjustment on account of interest on interest free advances to subsidiaries amounting to 1,42,355/-. Accordingly ground number one of the appeal is partly allowed. 0114. Ground number 2 and 3 is with respect to the allowability of the claim of deduction u/s 80 IB and 80 IC on sale of empty containers. We find that identical ground has been decided by us in favour of the assessee by holding that assessee has derived the sale of empty containers from the business of the industrial undertaking. Accordingly ground number 2 and 3 of the appeal is allowed. 0115. In the result, appeals for A.Y. 2010-11 of the assessee's appeal is partly allowed 0116. In ITA number 5227/M/2016 filed by the learned assessing officer the only issue that is raised is against the allowability of deduction in respect of employee stock option scheme. We find that this issue is squa....
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.... 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 years i.e., at the rate of 25%, which means at the end of first year, the employee has a definite right to 25% of the shares and the assessee is bound to allow the vesting of 25% of the options. It is well settled in law that if a business liability has arisen in the accounting year, the same is permissible as deduction, even though, liability may have to quantify and discharged at a future date. On exercise of option by an employee, the actual amount of benefit has to be determined is only a quantification of liability, which takes place at a future date. The tribunal has therefore, rightly placed reliance on decisions of the Supreme Court in Bharat Movers supra and Rotork Controls India P. Ltd., supra and has recorded a finding that discount on issue of ESOPs is not a contingent liability but is an ascertained liability. 10. From perusal of section 37(1), which has been referred to supra, it is evident that an assessee is entitled to claim deduction under the aforesaid pro....