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2022 (8) TMI 1443
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....ssed by the Learned Commissioner of Income-tax (Appeals) [the 'Ld. CIT(A)'] erroneously affirming the findings of the learned Assessing Officer [the 'Ld. AO'] is unsustainable and ought to be quashed. 2. Re: Addition on account of Corporate Guarantee provided to Associated Enterprises Sun Pharmaceutical Bangladesh Ltd. - Rs 9,95,440/-. 2.1 The learned CIT(A) has grossly erred in upholding the additions of Assessing Officer/ TPO who failed to appreciate the fact the Corporate Guarantee provided on behalf of Associated Enterprises is not an international transaction. 2.2 The learned CIT(A) has grossly erred in not appreciating that the Appellant had extended the guarantee to promote its own interest and had not incurred any additional cost for the same. 2.3 Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the addition made by the Assessing Officer/ TPO for benchmarking the Guarantee fees to be charged by the Appellant from its Associated Enterprise (AE). 2.4 Without prejudice to the above, the learned CIT(A) grossly erred in upholding the order of Assessing Officer / Transfer Pricing Officer who has wrongly charged an additi....
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....(2). The action of the Ld. CIT(A) / Ld. AO is in gross contradiction to the law laid down by the Hon'ble Supreme Court in case of Apollo Tyres Ltd. vs. CIT [255 ITR 273 (2002)]. 3.5 Without Prejudice to the above, the said remuneration of Rs. 67,25,69,731/- from SPS has been duly accounted and considered in determining book profits for AY 2012-13 and has already been subjected to addition in that year and hence, no addition in this regard ought to be made in the current year. 4. Disallowance of expenditure incurred on repairs treating them as capital expenditure - Rs. 35.13.250/-: 4.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in holding expenditure aggregating to Rs. 35,13,250/- to be capital in nature despite the same been incurred for meeting routine commercial necessities like maintaining operational efficacies, asset replacements in the ordinary course of business, without giving rise to any benefit in the capital field, indicating that the expenditure was revenue in nature and hence, eligible for deduction under section 37(1). 4.2 Without prejudice to the above, the Ld. CIT(A) ought to have allowed additional deprec....
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....ns of Transfer Pricing on account of Corporate guarantee given to the AE. 6. The AO/TPO in the assessment proceeding found that that the assessee has provided Corporate Guarantee to its AE namely Sun Pharmaceutical Bangladesh Ltd to the extent of Rs. 1.84 crores without charging any guarantee fees. The TPO/AO treating the same as an international transaction made upward adjustment of Rs. 9,95,440/- by applying guarantee fee @ 5.41%. 6.1 On appeal, the learned CIT (A) found that the assessee is in appeal before Hon'ble Jurisdictional High court on the same issue in Income Tax Appeal No. 567 of 2016 and the outcome of the same is pending. Thus, the learned CIT (A) disposed of the issue by holding the upward adjustment on account of guarantee fee will stand confirmed or deleted subject to the order of the Hon'ble High court. 7. Being aggrieved by the order of the learned CIT(A) both the assessee and Revenue are in appeal before us. The relevant ground of appeal raised by the Revenue in ITA No. 1519/Ahd/2018 reads as under: "4. On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in not confirming the transfer pricing addition of Rs. 9,95,440/- towards co....
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....titution of larger bench was never challenged before the Hon'ble High Court. We, therefore, do not find any reason why this issue has been raised once again before us when the same has not been challenged before the Hon'ble High Court. Moreover, when a superior court is seized with a substantial question of law on this very issue, it would be improper for an inferior court to constitute a special bench to decide the same issue. 32.Considering the issue in totality in the light of the admission of the appeal before the Hon'ble High Court of Gujarat, in all fairness, in our considered view and understanding of the law, we restore this issue to the files of the A.O. with a direction that the same must be considered afresh after the decision from the Hon'ble Jurisdictional High Court of Gujarat and after giving a fresh opportunity of being heard to the assessee. Ground no. 5 is treated as allowed for statistical purpose 10.1 The facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the order of this tribunal in own case of the assessee in all those A.Ys which are binding on us, we restore this issue to the file of ld. C....
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...., we hold that the bank/corporate guarantee is an international transaction. Therefore, the same has to be bench marked for determining the ALP. Thus the issue involved on hand is no longer covered as alleged by the learned AR for the assessee in view of the judgment of Hon'ble Madras High Court as discussed above. 10.4 The next aspects arises to determine the benchmarking for working out the ALP of the impugned international transaction. The TPO/AO in the case on hand has worked out the ALP at 5.41% and basis of the same has already been elaborated in TPO order. In this regard, we find that the Hon'ble Bombay High Court in case of CIT vs. Everest Kento Cylinders Ltd reported in 58 taxmann.com 254 held that while determining the ALP the rate charged by the bank or financial institution cannot be taken as comparable. The relevant finding of the Hon'ble Court reads as under: In the present case, it is assessee-company that is issuing corporate guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which apply for issuance of a corporate guaran....
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....accepted as ALP for all corporate guarantees given by the assessee. (vii) Godrej Consumer Products Ltd. v. Asstt. CIT [2016] 69 taxmann.com 436 (Mumbai - Trib.)- The assessee suo motu benchmarked the commission chargeable on bank guarantee @ 0.25%. It was determined at 0.50%. 10.6 Thus, in view of the above discussion and latest development, we are also of the opinion that the extension of corporate/guarantee to AEs is an international transaction and needs to be benchmark and in view of several order of the tribunal as referred above 0.5% of commission on the value of corporate/ bank guarantee will serve the justice to both the assessee and the Revenue. However in the case on hand, we have set aside the issue to the file of the AO for fresh adjudication in light of consistent view taken by the Tribunal in own case of the assessee for earlier Assessment Years with direction to decide the issue a fresh as per the outcome of appeal filed by the Revenue before Hon'ble Gujarat High court in own case of the assessee. But we are also conscious to latest development on the issue on hand as discussed above. Therefore, we direct the AO to also consider the judgment of Hon'ble Madras High....
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....e followed in the year under consideration by virtue of the development as discussed above. 15. On the other hand, the learned DR vehemently supported the order of the authorities below. 16. 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 on hand is covered against the assessee by the order of this Tribunal vide order dated 0809-2017 in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under: 110. We have considered the facts, circumstances, relevant provisions and rival submissions,. A harmonious reading of the provisions of section 115JB of the Act reflects that in the case of a company subject to the provisions of Section 115JB of the Act has to prepare P&L statement in accordance with the provisions of part (ii) of Schedule (vi) of the Companies Act. 111. The relevant clause of Explanation 1 reads as under:- Explanation [1]- For the purposes of this section, "book profit" means the [profit] as shown in the [statement of profit and loss] for the relevant previous year prepared under sub-section (2), as....
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....gs of the First Appellate Authority. Ground no. 9 is dismissed. 16.1 However, at the time of hearing, it was brought to the our notice that the Hon'ble Calcutta High Court in the case of Ankit Metal & Power Ltd. (supra) has held that the items of receipt which are not income under the provision of section 2(24) of the Act cannot be made subject to tax under the provisions of MAT while calculating the profit under section 115 JB of the Act. The relevant extract of the judgment is reproduced as under: "27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be include....
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....essment proceeding, the AO on examination of repair and maintenance expenses found that the amount claimed by the assessee includes certain amount aggregating to Rs. 35,29,755/- which are in nature of capital expenditure. On question, the assessee submitted that these expenses include amount towards installation charges, purchase of stores and consumables, purchase of glass-lined agitator, tablet filling attachment, PLC system with control panel and air sampler. The assessee made detailed submission with regard to each item but sum and substance of the same are that all these item are replacement of worm out item as normal wear and tear expenses incurred in the normal course of business and individually, these items do not create any assets but helps in maintenance of existing machine to original condition. 19. However the AO disbelieved the submission of the assessee and held that the glass lined agitator purchased by the assessee is the main part of the reactor, thus constitute capital assets. Likewise, the capsule filling machine purchased by the assessee being a special machine used for filling of tablets is capital assets. Further the purchase of PLC system with control panel....
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....nvoice No. 2711 dated 03.06.2010 reveals that appellant has purchased a Glasslined Agitator in Nagar Unit. Since agitator is capable of independently functioning as a separate machine, the expenditure is treated as capital in nature. The action of Assessing Officer on this account is confirmed. d) ACG Pam Pharma Tech Pvt. Ltd, of Rs. 16,95,000/-: Scrutiny of Invoice dated 27.02.2011 reveals that the appellant has purchased a capsule filling machinery which is capable of independently functioning as a machine. Hence the expenditure on this account has to be treated as capital expenditure and accordingly the action of Assessing Officer is confirmed. e) Soalce Enqi. Mktq. Pvt. Ltd, of Rs. 5.80.000/- and Rs. 29,000/-: Scrutiny of invoices reveals that the assessee has purchased control pane! with PLC touch screen for Halol Unit. Since the PLC control panel is an independent machine, in my considered view, the expenditure has to be treated as capital in nature and accordingly the action of Assessing Officer is confirmed. f) International PBI SPA of Rs. 3.01,750/-: Scrutiny of Invoice No. 438 dated 30.06.2010 reveals that the assessee has purchased Air Sampler Unit for tab....
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.... of the assessee. 26. Aggrieved assessee preferred an appeal to the learned CIT-A, who also confirmed the order of the AO by observing as under: "25.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, the appellant has not established genuineness of the parties from whom purchases are claimed to have been made by furnishing their confirmation or by producing them before the Assessing Officer. The transportation of goods from the seller to the business premises of the appellant, has also not been proved by Delivery challan or GR, vehicle No. etc. Moreover, the appellant has also failed to establish that the material purchased from the above mentioned parties was actually used in manufacturing or trading etc. Under these circumstances, the claim of appellant cannot be accepted and accordingly disallowance made by the Assessing Officer on account of bogus purchases at Rs.51,702/- is confirmed and Ground No. 22 is dismissed. 27. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 28. The learned AR before us contended that when the material was purchased from these parties,....
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....ssee is hereby allowed. 31. The next issue raised by the assessee in ground No. 6 of its appeal is that the learned CIT(A) erred in confirming the disallowance of business promotion expense of Rs. 4,75,64,950/- incurred in connection with doctors. 32. The assessee during the year claimed selling & distributing expenses of Rs. 196,66,18,209/- only. The AO on the verification found that selling and distribution expenses includes gift and freebies to the doctor for an amount aggregating to Rs. 6,64,27,499/- detailed as under: Sr. No. Nature of Expenses Amount 1 SAS - ACCOMMODATION (LODGING & BOARDING) 43,78,314/- 2 SAS - CONFERENCE FEES & SPONSERSHIP 1,88,52,751/- 3 SAS - BUSINESS PROMOTIONAL EXPENSES 4,31,86,636/- 4 FIELD STAFF - MISCELLANEOUS EXPENSES 9,798/- Total ..... 6,64,27,499/- 32.1 The AO was of the view that the above expenditure are not allowable under explanation 1 to section 37(1) of the Act as the same is incurred in violation of guideline issued by the Medical Council of India. 32.2 The assessee in support of its claim contended that such expenses were incurred to gain regular development in the medical field and valuable inputs in the form....
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....the facts on record and submission of the Ld. Authorized Representative. Admittedly, the appellant has incurred expenditure of Rs. 8,41,89,667/- as detailed above on gifts and reimbursement of lodging and boarding and conference expenses incurred by the Doctors/medical practitioners. As is evident from the written submission, the business promotion expenses of Rs. 7,27,99,029/- are pertaining to the equipment provided to various medical practitioners as gifts. Claim of indirect business gain as a result of gifts provided to the medical practitioners is irrelevant for allowability of these expenses. The appellant has also argued that the amendment to Indian Medical Council (Professional Conduct, Etiquette & Ethics) Regulation 2002 on 10.12.2009 and CBDT Circular No. 5/2012 dated 01.08.2012 are not applicable in the case of appellant since they are applicable to the Doctors/ Medical Practitioners accepting freebies. This argument of Ld. Authorized Representative is also not acceptable. Undisputedly, Medical Council of India has amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 with effect from 10.12.2009 prohibiting from accepting of gifts, ....
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....o. 5/2012 and amended guidelines of Medical Council of India. Accordingly, I hold that accommodation expenses at Rs.28,91,444/- are also deserves to be disallowed being freebies. The conference fees and sponsorship expenses since were incurred for sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines, Further they appears to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. Accordingly, the disallowance to the extent of Rs.84,99,194/- being conference fees and sponsorship is directed to be deleted and balance amount of disallowance is confirmed. Thus, appellant succeeds partly in respect of Ground No. 20." 27.2.1. In view of the above, I hold that reimbursement of the | accommodation expenses has directly benefited the medical practitioner and j doctors and hence the same is in the nature of gifts/freebies. Similarly j various equipments gifted to the doctors debited under the head business ' promotion expenses also fall under the category of....
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....eleted. Thus, Ground No. 24 is partly allowed." 34. 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. 4,75,64,950/- whereas the Revenue is in appeal against deletion of disallowance of Rs. 1,88,62549/- being conference & sponsorship fee and miscellaneous expenses. The relevant ground of appeal of the Revenue in ITA No. 1519/Ahd/2018 reads as under: "17. On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in deleting the disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners." 35. The learned AR for the assesse before us submitted that identical disallowance was also made in the immediate previous assessment year being A.Y. 2010-11. The issue travelled to the ITAT in ITA No. 922 & 1234/Ahd/2017 where the Hon'ble bench vide order dated 29-03-2019 decided the issue in ....
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....ficer of the Appellant Company. Aggrieved by the order, the Appellant has preferred an appeal before Commissioner of Incometax (Appeals) [CIT(A)]. The Hon'ble CIT(A) has also decided the appeal vide its order dated 28.03.2018. In response thereto, the Appellant has preferred the captioned appeal before the Hon'ble Income-tax Appellate Tribunal (Tribunal1) vide ITA no. 1462/Ahd/2018. 2. During the year under consideration, the Appellant has incurred expenses for education cess and secondary & higher education cess (collectively referred to as 'cess'). The amount of cess incurred as tax liability can be very well reflected in the tax computation sheet issued by the Ld. AO along with its order giving effect to order of CIT(A) dated 4.6.2018 whereas cess levied on account of payment of Dividend Distribution Tax under section 115-O of the Act is disclosed under SI No. 6(c) of Schedule DOT in the ITR 6 as "Annexure-1 "and "Annexure-2" respectively. 3. Section 40(a)(ii) of the Act, provides, inter alia, for disallowance of any rate or tax levied on profits or gains of any business or profession in computing the total income of a taxpayer. Section 10 of the Income Tax A....
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....by dismissed. 40. In the result, the appeal of the assessee is hereby partly allowed for statistical purposes. 41. Coming to ITA NO. 1519/Ahd/2018 an appeal by the Revenue for A.Y. 2011-12 42. The Revenue has raised the following grounds of appeal: "1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee and in not confirming the additions made by the AO on these issues. 2. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the transfer pricing addition of Rs. 1,39,76,444/- towards interest on loans given to Associated Enterprise (AE) on which no interest was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order. 3. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the transfer pricing addition of Rs. 27,60,411/- towards interest on 0% Optionally Fully Convertible Debentures (OFCD), without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order. 4. On the facts and circumstances of the case and in law,....
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....d distribution expenses as they pertained to Sun Pharmaceutical Industries and Sun Pharma Sikkim, without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the assessee had failed to demonstrate that the expenditure was wholly and exclusively for the purpose of business in terms of section 37(1). 10.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses as they pertained to Sun Pharmaceutical Industries and Sun Pharma Sikkim, without appreciating that this expenditure cannot be considered as incurred for promoting the business of the firm in which the assessee is partner, and it would even then not be allowable expenditure u/s 37(1). This is without prejudice to the disallowance made u/s 14A. 10.3 Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in restricting the disallowance u/s 14A and in not directing computation of the disallowance in terms of all the three limbs of Rule 8D. 11. On the facts and circumstances of the case and in law, the C....
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....nd in law, the Ld. C.I.T. (A) erred in deleting the disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners. 18.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the A.O. to verify the expenses not certified by D.S.I.R. and to allow consequential relief without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that weighted deduction u/s. 35(2AB) is not allowable in excess of what has been approved by D.S.I.R. that this decision pertained to disallowance of weighted deduction u/s. 35(2AB) due to non-certification of expenditure on scientific research by the DSIR, whereas in the present case, the DSIR has specifically excluded the excess expenditure as per norms. 19. The appellant craves leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal. 43. The issues raised by the Rev....
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....t, we find that the issue on hand is covered in favour of the assessee by the order of this Tribunal in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under: 13. We have given a thoughtful consideration to the rival contentions qua the facts in issue before us. 14. The crucial fact relates to the balance as at 31st March, 2007 shown under the head advances as share application money to Sun Pharma Global Inc. BVI at Rs. 1469.7 million and the same has been reflected as on 31.03.2008 at Rs. 1007.4 million. If these figures are considered it emerges that shares worth 462.3 million were allotted to the assessee company during the year under consideration and the balance were allotted in the subsequent financial years. This means that the balance of the application money remained so pending allotment. In our considered view, relevant provisions of Indian Companies Act will not be applicable to this case and deferent countries have separate laws/ regulation on such issue. Adjustment on account of notional interest on share application money which is not disputed be to be so are not liable to be recharac....
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.... since the assessee was only shareholder of the subsidiary company, the fruits of this investment belong to the assesse only and in entirety. On giving this money to the subsidiary and on use of this money by the subsidiary, the assessee, in its capacity as sole owner of the subsidiary, is beneficiary of all the gains of the subsidiary company. Whether the assessee was allotted these shares or not, the assessee was the only shareholder of the subsidiary company and beneficial owner of all the earnings and all the assets of the company. Non allotment of these shares, during the period of payment of share application money till the actual date of allotment, did not, therefore, prejudice assessee's position anyway. All the earnings of the subsidiary company belonged to the assessee in any situation. For example, if the funds available for dividend distribution for this year were say Rs 1,00,000 and the assessee had 100 shares before new allotment of shares and 1000 shares after the allotment, the assessee would be entitled to Rs 1,00,000 only the either way- whether as Rs 1,000 per share for 100 in pre new allotment situation or whether as Rs 100 per share for 1,000 shares in post....
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....or the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 51. The next issue raised by the Revenue in ground No. 3 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment under the provision of Transfer Pricing for Rs. 27,60,140/- on account of investment in 0% OFCD of the AE. 52. During the course of assessment proceedings, the TPO noticed that the assessee has made investment of Rs. 22,39,00,000/- in "0% Optionally Fully Convertible Debenture (OFCDs) in its AE namely Sun Pharma Global BVI. The TPO was of the opinion that OFCDs being hybrid instrument convertible at the option of the investor is in the nature of debt and required to be determined at arm length. Thus the TPO computed the arm length interest rate at 3.60% and accordingly made upward adjustment of Rs. 27,60,411/- only. 53. On appeal by the assessee, the learned CIT(A) found that the adjustment made in the year under consideration is ide....
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....hri Soparkar ld. senior counsel replying to the submissions of revenue stated that the decision of the Hon'ble Supreme Court in the case of Sahara India Real Estate (Civil Application) No. 9813 of 2011 relied upon by the learned DR is not applicable to the issue before the Hon'ble ITAT. Even if it is held that OFCD is a hybrid instrument as laid down by the Supreme Court, in applying the Transfer Pricing Provisions, the entire instrument has to be considered and the same cannot be re-characterized partly as loan and partly as equity so as to enable any transfer pricing adjustment for the same. In this regard, we rely on the decisions cited earlier, which have been appropriately followed by the Hon'ble ITAT in A.Y. 2007-08 and the decision of the Supreme Court (supra) cited by the ld. DR does not in any way justify any departure from the decision laid down in A.Y. 2007-08. 21. Adverting to ld. DR's contention that the terms of OFCDs and comparables have not been submitted, it is contended that the terms of OFCDs were duly submitted before the lower authorities in the form of Annexure B which is part of the PB. Similarly the allegation that assessee has not brought on rec....
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.... reasons, or the genera! grounds upon which the decision of the court is based, or on the test or abstract, of the specific peculiarities of the particular case, which finally gives rise to the decision. (Vide Somawanti v. State of Punjab, Ballabhadas Mathurdas Lakhani v. Municipal Committee, Matkapui, Ambika Prasad Mishra v. State of U.P and Director of Settlements v. M.R. Apparao.) 24. The Hon'ble Jurisdictional High Court of Gujarat in the case of Core Healthcare Ltd. 251 ITR 61 has observed as under:- As laid down by the apex court in the case of Ambika Prasad Mishra v. State of U.P., AIR 1980 SC 1762 ; [1980] 3 SCC 719 (page 1764 of AIR 1980 SC): "Every new discovery or/argumentative novelty cannot undo or compel reconsideration of a binding precedent . . . a decision does not lose its authority 'merely because it was badly argued, inadequately considered and fallaciously reasoned' . . ." Similarly in the case of Kesho Ram and Co. v. Union of India [1989] 3 SCC 151, it is stated by the Supreme Court thus (page 160): "The binding effect of a decision of this court does not depend upon whether a particular argument was considered or not, provided the point with....
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....t Libor Plus 290 bps and the interest was to be computed at annual rates and payable at maturity that is 5 years from the date of first disbursement. The rupee value of the amount of loan as on 31.03.2008 was Rs. 108.32 crore. It was also noticed that Assessee has not shown any income from the aforesaid loan. In response, Assessee interalia submitted that Assessee had not opted for conversion of the loan during the year and therefore it was loan for the year and as per the terms of agreement, no interest accrued to the Assessee and therefore no income was considered. The TPO did not find the contention of the Assessee acceptable. He considered the Optionally Fully Convertible loan as debt and considering the average six month Euro Libor rate for the year @ 4.48% to which he added the interest rate of 2.90 basis point as per the agreement and thereafter considered the rate of interest to be @ 7.38% and accordingly computed the interest on Rs. 108.32 Crore for 171 days at 7.38%. The aforesaid adjustment made by the TPO was considered by the Assessing Officer and the addition of Rs. 3,99,74,4267- was made to the income. Aggrieved by the order of Assessing Officer, Assessee carried the....
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....as been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier years nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 58. The next issue raised by the Revenue in ground no. 4 of its appeal is that the learned CIT (A) erred in not confirming the upward adjustment of Rs. 9,95,440/- under the provision of Transfer Pricing on account of corporate guarantee. 59. At the outset we note issue raised by the Revenue in its ground of appeal has been adjudicated along with the assessee's ground of appeal in ITA No. 1462/Ahd/2018, where we have vide paragraph no. 10 to 10.6 of this order in set aside the issue to the file of the AO for fresh adjudication as per law. Thus ground of appeal raised by the Revenue is hereby allowed for statistical purposes. 60. The next issue raised by the Revenue in gro....
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....r hand the learned AR before us and submitted that identical upward adjustment was also made in AY 2008-09, 2009-10 and in 2010-11 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154, ITA No. 1663 & 1666/Ahd/2016 and ITA No. 922 & 1234/Ahd/2017 respectively. The ITAT in all these appeal allowed the issue in favour of the assesse. 66. 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 on hand is covered in favour of the assessee by the order of this tribunal in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under: 76. SPG BVI purchased the Technology to manufacture Pantoprazole Sodium from Sun Pharma Advance Research Company Ltd. (SPARC). SPARC was incorporated on 01.03.2006 as a research company. With effect from 28.02.2007, the appellant company demerged its Innovative Research and Development business to SPARC. This is supported by the order of the Hon'ble High Court of Gujarat exhibited at pages 475 to 518 of the paper book. On 28.10.2007, SPARC sold a basket of 38 Technologies to SPG includin....
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....ery instructions shall be submitted by SPGI to SPIL well in advance SPIL agrees to dispatch at the cost of SPGI, the finished Product to SPGI or to its nominees within the time frames stipulated by SPGI from time to time as per the orders placed by SPGI and accepted by SPIL. SPIL further undertakes to supply the product with adequate packing and coverage to ensure that the Product reaches SPGI or its nominee adequately packed and acceptable as per CGMP guidelines. 3.1 SPGI's Technical Assistance,, SPGI shall supply on a continuing basis all necessary information relating to the manufacturing of the Products, including, but not limited to product specifications, packaging and labeling practices and processes regarding the production of Products, and such other information as SPGI deems to be reasonable and necessary, From time to time, SPGI at its own expense may send a representative to visit SPIL to provide such technical knowledge as shall be mutually agreed to by SPGI and SPIL. 3.2 Intellectual Property Representation: Except for the rights expressly under the terms of the Agreement this Agreement does not transfer any intellectual property rights, specifically with resp....
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....ts manufactured and delivered to SPGI hereunder shall conform to the product specifications communicated by SPGI to SPIL. SPGI shall notify SPIL of any non-conforming manufactured Products within sixty days after receipt of Products or within sixty (60) days after any hidden defects are discovered. Any notification or nonconformance under this section shall include proof of non-conformity/defect. SPIL may, at its discretion, have the defective Product tested at any other reputable laboratory and SPGI shall accept the report thereof. In case of a disputed result by such laboratory, the Product will be tested with an independent laboratory reasonably acceptable to both parties whose result shall be binding on both parties. SPIL shall replace all nonattributable to SPIL. SPIL shall also bear & reimburse to SPGI the cost of freight and insurance for such non-conforming Products Upon SPIL's instructions, SPGI shall destroy or return to SPIL at SPIL's cost, all non-conforming Finished Products. 4.6.4 SPIL agrees to invoice and dispatch at SPGI's cost and risk, the finished products to SPGI or its nominees as specified by SPGI according to the orders placed by SPGI and instructions give....
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....me phonetically or otherwise similar to trade names connected with the products as mentioned in Appendix A. 78. Appendix-A of this agreement reads as under;- No Name of Product BULK PRODUCT (Active Ingredient) 1 Pantoprazole Sodium Delayed Release Tablets 20Mg., 40mg Pantoprazole Sodium 2 Amifostine Inj. 500mg. Amifostine 79. Copy of Orange Book reflected title of ANDA of Pantoprazole Sodium with SPG BVI is exhibited at pages 569 & 570 of the paper book which conclusively proves that the ANDA rights were with SPG BVI. 80. Adverting to the allegations of Ld Shri Shrivastava that these arrangements by the assessee is a brutal form of tax evasion , the Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. vs. Union of India and Another reported in 341 ITR 1 has laid down the ratio : "It is the task of the court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not adopt a dissecting approach. All tax planning is not illegal or illegitimate or impermissible". 81. The Hon'ble Supreme Court further held. :- (iv)The Income-tax Act, 1961, in the matter of corporate taxation, i....
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....tax avoidant. (vi) The legal position of any company incorporated abroad is that its powers, functions and responsibilities are governed by the law of its incorporation. Though it may be advantageous for parent and subsidiary companies to work as a group, each subsidiary will look to see whether there are separate commercial interests which should be guarded. Whether the parent company has "power" over the subsidiary depends on the facts of each case. In the case of multinationals their subsidiaries have a great deal of autonomy in the country concerned except where subsidiaries are created or used as a sham. The directors of the subsidiary under their articles are the managers of the companies. They are not to be dictated by the parent company if it is not in the interests of those companies (subsidiaries). The fact that the parent company exercises shareholder's influence on its subsidiaries cannot obliterate the decision-making power or authority of its (subsidiary's) directors. The decisive criteria is whether the parent company's management has such steering interference with the subsidiary's core activities that the subsidiary can no longer be regarded to pe....
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....bined profits between the associated enterprises on an economically valid basis that approximates the division of profits that would have been anticipated and reflected in an agreement made at arm's length. See paragraphs 2.132 -2.145 for a discussion/6f how to split the combined profits. C.2 Strengths and weaknesses 2.109 The main strength of the transactional profit split method is that it can offer a solution for highly integrated operations for which a one-sided method would not be appropriate. For example, see the discussion of the appropriateness and application of profit split methods to the global trading of financial instruments between associated enterprises in Part III, Section C of the Report on the Attribution of Profits to Permanent Establishments. 2 A transactional profit split method may also be found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions (e.g. contribute unique intangibles) to the transaction, because in such a case independent parties might wish to share the profits of the transaction in proportion to their respective contributions and a two-sided method might be more appropria....
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....t read with Rules. Determination of arm's length price under section 92C. 10B. (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction -[or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely:- (d) profit split method, which may be applicable mainly in international transactions - [or specified domestic transactions]involving transfer or unique intangibles or in multiple international transactions [or specified domestic transactions] which are so interrelated that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction, by which- (i) the combined net profit of the associated enterprises arising from the international transaction -[or the specified domestic transaction] in which they are engaged, is determined; (ii) the relative contribution made by each of the associated enterprises to the earning of such combined net profit, is then evaluated on the basis of the functions performed, assets employed or to be employed and risks assumed by eac....
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....tween the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realized by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction [or the specified domestic transaction]; 88. PSM is applicable when the international transaction involved transfer of unique intangibles (in the case in hand there is no such transfer from SPG BVI to SPIL), or in multiple international transaction which are so inter related that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction. This is also absent (in the case in hand as the appellant company has done only manufacturing of Pantoprazole Tablets for SPG BVI). 89. Coming to the application of TNMM, we find that the profit margin benchmark by the assessee at 21.57% on sales transactions is much higher than the margin shown by the assessee with Eli Lily. ....
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....even if the Profit Split Method is applied than the set off of each year losses has to be given for the corresponding year. The undisputed compensation being settled on the base of all yearly profits made by the AE during the exclusivity period PSM cannot be worked by divorcing the business realities. The contention of revenue that it is not concerned with the settlement which is pass event is untenable. Even if the PSM is applied the relatable losses which were so apparent by the time assessment was framed cannot be given a go by on unsustainable revenue stand. In such eventuality even the ALP offered by assesse as a contract manufacturer also will be wiped out. The PSM application may actually result in reduction of returned ALP working. Thus, considering the issues from all possible angles, the assessee has, undisputedly and as accepted by revenue, ultimately suffered losses which are not claimed in its books or tax purposes. Even the alternative application of PSM fails and would do no good to the Revenue. 92. To summarize in nutshell , by the order of the Hon'ble High Court Innovative Research and Development /division of the appellant company was demerged and given to Sun P....
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....eby dismissed. 67. The next issue raised by the Revenue in ground No. 7, 8 and 9 is that the learned CIT(A) erred in deleting the disallowance of weighted deduction under section 35(2AB) of Act. 67.1 The assessee in the year under consideration claimed weighted average deduction @ 200% on certain R&D expenditure detailed as under: Trade Mark Registration Charges Rs. 77,73,773/- Overseas Product Registration Charges Rs. 3,44,83,670/- Repairs of buildings Rs. 54,58,900/- Municipal taxes Rs. 19,93,648/- Lunch & Refreshment expenses Rs. 8,92,819/- Brokerage for property Rs. 19,500/- 67.2 The AO was of the view that benefit under section 35(2AB) is only available for the expenditure incurred in product registration in India whereas assessee incurred Trademark registration and overseas product registration charges outside India. Hence disallowed the weighted deduction of Rs. 4,22,57,443/- on the same. 67.3 The AO further disallowed the weighted of Rs. 54,58,900/- and Rs. 19,93,648/- claimed on building repair expenses and municipal tax respectively by holding as under: "I have carefully gone through the reply of the assessee but I do not find it convincing and sat....
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....13 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under: 34. We find that an identical issue was considered by the Co-ordinate Bench in assessee's own case in ITA No. 1589/Ahd/2011 qua ground no. 3 wherein the Bench has followed its earlier decision in ITA No. 2430/Ahd/2009. The findings thereon read as under:- Ground no. 4 relates to the disallowance of trade mark registration and overseas product registration charges u/s. 35(2AB). 11. On perusing the details of R & D expenditure, the A.O found that the assessee has claimed weighted deduction @ 150% on - (a) Trade Mark Registration Charges : 2,42,56,296/- (b) Overseas Product Registration Charges : 2,00,00,508/- 12. The assessee was asked to justify its claim. Assessee filed a detailed reply justifying its claim of weighted deduction. It was explained that the expenditure incurred for product registration although named as Product Registration Expenditure is not merely an expenditure for registration of the product, but in large measure constitutes expenditure for validation and confirmation of the Research carried out. The A.O did not accept the claim of the asses....
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.... as under: 72. Ground no. 2 relates to the deletion of the disallowance of Rs. 42,46,000/- claimed u/s. 35(2AB) of the Act on repairs and municipal taxes paid for building utilized for R & D activity. 73. An identical issue was considered by the Co-ordinate Bench in ITA No. 1592/Ahd/2011 qua ground nos. 2 & 3 of that appeal. In ground no. 1 of the present appeal, we have extracted the relevant part of the decision of the Co-ordinate Bench. For the reasons given therein, ground no. 2 is also dismissed. 74. Ground no. 3 relates to the deletion of the disallowance of Rs. 7,91,222/- claimed u/s. 35(2AB) of the Act incurred for lunch, refreshment and brokerage paid for property used by R & D unit employees. 75. This issue is identical to the issues covered by ground nos. 1 & 2 hereinabove. For the reasons given therein, ground no. 3 is dismissed. 72.2 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for t....
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....TAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assesse. 79. 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 on hand is covered in favour of the assessee by order of this tribunal in the own case of the assessee for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under: 50. After giving a thoughtful consideration to the orders of the authorities below, in our considered opinion, so far as the disallowance made by the Assessing Officer is concerned, we find that this issue has been decided in favour of the assessee and against the revenue by the Co-ordinate Bench in assessee's own case in ITA No. 2430 & 2400/Ahd/2009 wherein the bench has followed the decision of the Tribunal in earlier assessment years in ITA No. 1193/Ahd/2008. The relevant part in ITA No. 1193/Ahd/2008 is as under:- Ground no. 13 relates to the disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries....
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....stribution should be allocated and accordingly directed the A.O to recalculate the disallowance. 91. Aggrieved by this finding of the ld.CIT(A) both assessee and the revenue are in appeal before us. The ld. D.R. strongly stated that since the assessee has not shown any income from remuneration from the partnership firm. The assessee was not entitled for the claim of deduction. The ld. D.R. further stated that no bifurcation have been provided by the assessee to show the expenses incurred for the purpose of the business of the partnership firm and for the assessee company. The D.R. concluded by saying that there is no error in the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated the claim and stated that there is no basis for allocating the expenses pro rata. The ld. counsel further stated that the First Appellate Authority further erred in disallowing the expenditure on pro rata basis only on incremental expenses. It is the say of the ld. counsel that the disallowance is unjustifiable. 92. We have carefully perused the orders of the authorities below. We have also given a thoughtful consideration to the rival submissions. There is no denying that the....
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....nsideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 80. The next issue raised by the Revenue in ground No. 11 & 12 is that the learned CIT (A) erred in partly deleting the addition made under section 14A instead of confirming in full under normal provisions of the Act and MAT provision specified under S.115JB of the Act. 81. The assessee during the year claimed exempted income on account of share of profit from the partnership firm and dividend income amounting to Rs. 1099,81,09,217/- and Rs. 2,820/- respectively. Thus, the AO invoked the provision of section 14A read with rule 8D of Income Tax Rule and worked out the disallowances of Rs. 3,71,89,198/- consisting of Rs. 6,15,128/- on account of interest expenditure and Rs. 3,65,74,067/- on account of administrative expenses. 82. On appeal by the assessee, the learned CIT(A) found that the addition made in the year under consideration is identical to the addition made in the AY 2008-09 and 2009-....
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....llowance for administrative expenditures, the formula given under Rule 8D is the most appropriate method for the computation of the disallowance. We accordingly direct the A.O. to compute the disallowance so far as administrative expenditures are concerned as per Rule 8D of the ITAT Rules r.w.s. 14A of the Act. We accordingly set aside the disallowance of Rs. 27,55,18,783/- made by the First Appellate Authority and direct the A.O. to recompute the disallowance as directed hereinabove. Ground no. 8 is allowed in part for statistical purpose. 86.1 Thus in view of finding of the coordinate bench we are of the view that the only disallowances of administrative expenses need to be made as per rule 8D(iii) which has already been done. Hence we do not find any infirmity in the order of the learned CIT (A) as far as issue of disallowances under section 14A is concern. 86.2 Coming to next controversy where the AO while computing the book profit under section 115JB of the Act made addition by the amount of disallowances made under section 14A of the Act in pursuance to the clause (f) of explanation 1 to section 115JB of the Act. 86.3 However, we note that in the recent judgment of Special....
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....he question arises 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 litigation. Thus we direct the AO to make the adhoc disallowance of Rs. 20 lacs as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restricted the disallowance 1% of the exempted income in other cases involving identical facts and circumstances in order to comply the clause (f) to Explanation-1 of Sec. 115JB of the Act. But we note that the assessee in the present case has earned exempted income more than Rs. 1000 crores and the disallowance will be worked out at Rs.10 crores which appears not in commensurate as per the mandate provided under the clause (f) to Explanation-1 of Sec. 115JB of ....
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....ble on record. At the outset, we find that the issue on hand is covered in favour of the assessee by the order of this Tribunal in the own case of the assessee for AY 2009-10 bearing ITA No. 1663 & 1666/Ahd/2016. The relevant finding of the coordinate bench reads as under: 58. We have given a thoughtful consideration to the facts in issue before us. There is no dispute that the assessee did incurred expenditure under the head "Research & Development" activity. The only dispute relates to the allegation that part of such expenditure belong to the business activity of the partnership firm SPI. There is also no denying by the lower authorities that the entire Research and Development activities are done by the appellant company only being the flagship company of Sun Pharma Group. In our understanding of the facts, the appellant company had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Since the assessee is holding 97.5% of share in the partnership firm, SPI it becomes the duty of the assessee to promote the business of the partnership firm in the capacity of the majority stake holders. Incident....
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....ner's remuneration exempted in its hand. Thus, the AO made the addition of Rs. 73,45,33,442/- by recharacterization of partner's remuneration. 96. On appeal by the assessee, the learned CIT(A) found that the addition made in the year under consideration is identical to the addition made in the AY 2008-09 and AY 2009-10 in own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297Ahd/ 2014 and ITA No. 1666 & 1663/Ahd/2014, where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT (A) following the order of the ITAT in own case of the assessee for AY 2008-09 and 2009-10 allowed the appeal of the assessee. 97. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 98. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order. 99. On the other hand the learned AR before us submitted that identical addition was also made in A.Y. 2008-09 by the AO and the matter travelled upto the ITAT in ITA No. 3297 & 3240/Ahd/2014 where the issue was allowed in favour of the assessee. 100. We have heard the rival contentions of both....
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....as been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier years nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 101. The next issue raised by the Revenue in ground No. 16 of its appeal is that the learned CIT (A) erred in deleting the addition made on account of foreign exchange gain. 102. The assessee while computing the income reversed the amount of gain on foreign currency exchange of Rs. 14,87,19,890/- only. The assessee contended that this gain was pertaining to the assets/liabilities being part of fixed capital assets and therefore was not liable to be taxed. The AO was not convinced with the contention of the assessee and treated the gain of Rs. 14,87,19,890/- as taxable income on the reasoning that loan to AE or investment are made in course of business. Therefore, the same is....
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.... direct for the deletion of the addition of Rs. 14,33,80,289/-. Ground no. 9 is allowed. 107.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 108. The next issue raised by the Revenue vide ground No. 17 of its appeal is that the learned CIT(A) erred in deleting the disallowances of Freebies to doctor. 109. At the outset we note issue raised by the Revenue in its ground of appeal has been adjudicated along with the assessee's ground of appeal in ITA No. 1462/Ahd/2018, where we have decided the issue vide paragraph no. 37 to 37.1 of this order in favour of the Revenue and against the assessee. Th....
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....15. On the other hand, the learned AR before us submitted that the issue on hand is covered by the order of the Tribunal in favour of the assessee in its own case bearing ITA No. 1390/Ahd/2016 which was also confirmed by the Hon'ble Gujarat high court on appeal by the revenue in Tax appeal No 541 of 2017 reported in 85 taxmann.com 80. 116. 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 on hand is covered in favour of the assessee by the order this tribunal in own of the assessee bearing ITA No. 1390/Ahd/2016. The relevant finding of the coordinate bench reads as under: 7. We have given our thoughtful consideration to rival contentions as well as ld. PCIT's concern expressed in order revising the above regular assessment. We deem its appropriate at this stage to throw some light on the nature and ambit of Form 3CL. The same comes under Rule 6(7A) of the Income Tax Rules, 1962 framed under the provisions of the Act. The above sub-rule is relevant for approval of expenditure incurred on in house research & development facility by a company u/s. 35(2AB). Subclause (b) thereof is the spe....
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....erfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under section 35(2AB) was not allowable. However, neither the prescribed authority nor the Assessing Officer has applied the mind as to the expenditure, be it revenue or or capital in nature, actually incurred in developing the in-house research and development facility. To the limited extent, the Commissioner desired the Assessing Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee. 116.2 Therefore respectfully following the above finding of the coordinate bench in own case of the assessee and subsequent confirmation by the Hon'ble high court we do not find any infirmity in the order of the AO. Hence the ground of appeal raised by t....
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....Re: Addition on account of transfer of electricity by Captive Power Plant ("CPP") - Rs. 13,08,07,000/-: 3.1 The CIT(A) has grossly erred in upholding the order of the AO/TPO who grossly erred in rejecting the benchmarking carried out the Appellant and determined the Arm's Length Price by taking average of two rates i.e. rate fixed by GERC and the market clearing price (as per I EX). 3.2 Without prejudice to the above, the Ld. AO/TPO grossly erred in adopting the rate at which distribution entity purchases power from CPP unit without appreciating that the power was generated by the Appellant for captive consumption and not for sale to any distribution entity. 3.3 Without prejudice to the above, the Ld. AO/TPO grossly erred in ignoring the fact that there is only one prime seller in Appellant's region i.e. GEB, therefore, the open market rate for such power at which all these buyers are paying to GEB/Distribution Companies should be considered. 4. Re: Deduction of Remuneration received from Partnership firm for determination of Book Profits under section. 115JB - Rs 8.29.23.691/: 3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erre....
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....t development services to its AE namely MSD Sun FZ LLC (MSD). The AE is a joint venture (JV) of Sun Pharma Group and Merck Group (MSD Group) and as per the joint venture agreement both group were providing product development services to JV and charging fee at cost plus 10% markup. 122.1 The TPO from the TP report of the assessee observed that in similar transaction of pilot pivotal study done for TARO USA was benchmarked by the assessee under TNMM with average margin of comparable at cost plus 13.54%. Accordingly TPO proposes to benchmark the impugned transaction at cost plus 13.54%. 122.2 The assessee in response submitted that the margin rate of cost plus 10% markup was decided at the initial stage of JV between two independent parties being assessee group and MSD group, therefore ALP should be taken at cost plus 10% only. It was further submitted that pivotal study done for TARO USA are different from product development services provided to JV. 122.3 However, the TPO found that assessee has not submitted independent comparables, therefore taking the margin rate worked out for TARO USA i.e. cost plus 13.54% made upward adjustment of Rs. 99,88,000/- 123. On appeal by the ass....
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.... account are also rejected. 6.2.1. It is also worthwhile to mention that under TNMM margin are calculated on gross sales and if such margins are converted into Cost Plus Mark up, then the percentage will be even higher. For example, 25% margin under TNMM is equivalent to 33.33% in Cost Plus Method. Therefore, by adopting 13.54% margin of TNMM under Cost Plus Method, the TPO has not over estimated the upward adjustment in any manner. Thus, considering the above mentioned factual and legal position, I uphold upward adjustment of . Rs.99,88,000/- made in respect of transaction of Product Development / Services with AE. Hence Ground No. 3 is dismissed." 124. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 125. The learned AR before us submitted that the other partner in the JV being M/s Merck was also charging the markup of 10% on cost on the same terms as provided in the agreement. The learned AR also filed the copy of the JV agreement which is available on record. According to the learned AR cost +10% markup can be taken as one of the internal comparable for the purpose of benchmarking. 125.1 The learned AR further contended that the rate ....
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.... 128. The next issue raised by the assessee is that the learned CIT-A erred in confirming the downward adjustment for Rs. 13,08,07,000/- in TP on account of power supplied to domestic AE. 129. The assessee is having a power generating undertaking which is eligible for deduction under section 80IC of the Act. The electricity generated form from captive power plant was also supplied to domestic AE and the assessee in the year under consideration has shown the sale price of the power generated by it at Rs. 7 per unit to its domestic AE. However, the AO/TPO found that the assessee is charging excessive rate for the electricity generated by it despite the fact that it is used for captive consumption and there is no cost for its transmission/distribution of the electricity. Thus the AO reduced the sale price of the electricity generated by the assessee by observing as under: "47. In view of the above discussion the ALP of the transaction is determined in line with the reasoning given in the show cause. The assessee company has failed to submit any agreement between the CPP and the distribution / transmission company for the, evacuation of excess power produced by the CPP. In view of t....
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....is directed accordingly." 131. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 132. The learned AR before us contended that the Tribunal in the case of Gujarat Fluorochemicals Ltd in ITA No. 805/Ahd/2017 has held that the price at which Gujarat electricity Board (GEB) is charging from customer would be taken at market rate for captive power plant also. 133. On the other hand, the learned DR vehemently supported the order of the authorities below. 134. We have heard the rival contentions of both the parties and perused the materials available on record. The controversy in the present set of facts relates what should be the rate of the electricity generated by the assessee and supply for captive consumption. In this regard we note that the ITAT in the case of Gujarat Fluorochemicals Ltd. v. Deputy Commissioner of Income tax, reported in 97 taxmann.com 10 vide order dated 13-08-2018 has held as under: This was followed in case of CIT v. Shah Alloys Ltd. in Tax Appeal No. 2093/2010. This was reiterated in Tax Appeal No.1646/2010 in case of ACIT v. Pragati Glass Works (P.) Ltd. (order dated 30.1.2012), in which following observations were ma....
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....missed." 134.1 The facts of the case on hand are identical to the facts of the case as discussed above. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to delete the downward adjustment in transfer pricing report in pursuance to the finding of this ITAT in the case of Gujarat Fluorochemicals Ltd. (supra). The ld. DR at the time of hearing has not brought anything on record contrary to the arguments advanced by the ld. AR for the assessee. Thus the ground of appeal of the assessee is allowed. 135. The next issue raised by the assessee in ground no. 4 of its appeal is that the learned CIT(A) erred in confirming the order of the AO by not allowing the deduction of remuneration received from partnership firm while computing book profit under section 115JB of the Act. 136. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 1462/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1462/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessme....
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.... for education cess and secondary & higher education cess (collectively referred to as 'cess'). The amount of cess incurred as tax liability can be very well reflected in the tax computation sheet issued by the Ld. AO along with its order giving effect to order of CIT(A) dated 31.07.2018 whereas cess levied on account of payment of Dividend Distribution Tax under section 115-O of the Act is disclosed [ included in total payment ] in clause 29 in the FORM 3CD as "Annexure-1" and "Annexure-2" respectively . 3. Section 40(a)(ii) of the Act, provides, inter alia, for disallowance of any rate or tax levied on profits or gains of any business or profession in computing the total income of a taxpayer. Section 10 of the Income Tax Act, 1922 which is pari-materia with section 40(a)(ii) of the Act, provided for disallowance of "any cess, rate or tax levied on......". The word "cess" was present in the section 10(4) of the Income Tax Act, 1922. The said word was omitted from provisions of section 40(a)(ii) of the Act. In this regard, CBDT Circular No. 91/58/66-ITJ(19) dated 18-05-1967, states that the effect of the omission of the word 'cess' from section 40(a)(ii) of the ....
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....circumstances of the case and in law, the Ld, C.I.T. (A) erred in deleting the transfer pricing addition of Rs.17,72,09,7937- towards interest on loans given to Associated Enterprise (AE) on which no interest was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of Pantaprazole and Para IV drugs, to Sun Pharma Global FZE, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order. 4. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of other drugs to Sun Pharma Global FZE, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order. 5.1 On the facts and circumstances of the case and in law, CIT(A) erred in directing the A.O. to allow weighted deduction u/s. 35(2AB) of the Act on trade mark registration charges and overseas product registration charges without ap....
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....ssment order. 11. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of proportionate R & D capital expenses incurred by the assessee on behalf Sun Pharmaceutical Industries, Sun Pharma Sikkim, the firms, and Sun Pharma Laboratories Ltd. without appreciating the facts and reasons mentioned by the AO in the assessment order, 12. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition made towards recharacterization of 'remuneration' received from partnership firms Sun Pharmaceuticals Industries (SPI) and Sun Pharma Sikkim (SPS) as consideration for use of trademarks, brands, etc. without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the amount received from SPI and SPS as "exempted partnership profit" actually represents royalty from the partnership firm. 13.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the A.O. to verify the expenses not certified by D.S.I.R. and to allow consequential relief without appreciating the facts and reasons mentioned by the AO in the assess....
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....sment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 66 to 66.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 149. The next issue raised by the Revenue in ground Nos. 5, 6 and 7 are that the learned CIT(A) erred in deleting the disallowances of weighted deduction under section 35(2AB) of Act. 150. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 72 to 72.2 of this order again....