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2023 (10) TMI 652
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.... Assessee reads as under: The Appellant raises the following grounds which are mutually exclusive, independent of and without prejudice to one another 1. On the facts and in the circumstances of the case and in law, the order passed 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: Disallowance of deduction claimed under section 80-IB pertaining to Dadra Unit Rs. 6,99,78,8951/- 2.1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has grossly erred in denying the deduction u/s 80-IB in respect of the industrial undertaking set up at Dadra without appreciating that the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from any earlier date. 3. Re: Disallowance of deduction under section 80IB/80IE in respect of interest on staff advances & statutory/bank deposit (Jammu Unit 1- Rs. 1,58,611/ Jammu Unit-II - Rs. 20,770/-; Dadra Unit Rs. 2,89,353/- totaling to Rs. 5,57,601/-) - Rs. 88.867/- and Sikkim Unit Rs. 2,89....
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....tax Act, 1961 (Act') read with rule 8D of the Income- tax Rules, 1962 ('Rules') in relation to earning of income exempt u/s 10 of the Act without appreciating that invocation of rule 8D is not automatic and recording of satisfaction and establishing a direct nexus between the expenditure incurred and the exempt income u/s 10 is a sina qua non 5.2.Without prejudice to the above, the Ld. CIT(A) has failed to consider that the Appellant had sufficient interest free funds and that the investment in instruments producing exempt income were made out of such non-interest-bearing funds thereby making the interest disallowance under rule 8D(2)(ii) uncalled for 5.3. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that the Appellant had in fact earned net interest income and hence, there was no case for disallowance of interest expenditure under section 14A read with rule 8D. 5.4 Without prejudice to the above, the Ld. CIT(A) grossly erred in not appreciating that exempt income earning investments were made for strategic purposes in pursuance of Appellant's business objectives without any intention of earning exempt income th....
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....circumstances of the case, in adding back the amortization of Intangibles amounting to Rs 15,23,97,50,000/- while computing book profits under section 115JB on the grounds that the depreciation on revalued assets is not allowable under clause (na) of Explanation 1 to section 115JB without appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld. CIT(A) failed to appreciate that - (i) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 7.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 7.3 The Ld. CIT(....
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....such unit was formed by splitting up or reconstruction of existing business, hence even on this ground, the assessee is not eligible for deduction. This observation of the AO in A.Y. 2010-11 is followed by the Ld. AO in current Asst. Year 2013-14 and entire deduction under Section 80- IB for Dadra unit was denied. 4.1. Being aggrieved by the assessment order, the assessee has preferred an appeal before the Ld CIT(A) who has dismissed the relevant ground of appeal in para - 5.1 of his order and he relied upon order dated 11-06-2010 in ITA No.184/ASR/2009 of the Coordinate Bench of this Tribunal in the case of erstwhile Sun Pharmaceutical Industries [SPI], later on merged with assessee company, wherein it is held that Dadra unit had started its manufacturing activity in the Asst. Year 2002-03 and considering the same being the first year of commencement of business, requisite period of ten years eligibility has already lapsed in current year. 4.2. Aggrieved by the Appellate order, the assessee is appeal before us. At the outset of the hearing of the above appeal, Ld. Senior Counsel Sri S.N. Soparkar appearing for the assessee fairly conceded that similar issue was decided again....
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....s order, wherein he has observed that identical issue has been decided against the erstwhile Sun Pharma, Sikkim [SPS] by CIT(Appeals)-37, Mumbai, for A.Y. 2010-11 following the order of Hon'ble ITAT in the case of Sun Pharmaceutical Industries which was also merged with assessee in ITA No.184/ASR/2009, dated 11th June, 2010. 6.1. Aggrieved by the appellate order, the assessee is in appeal before us. Ld. Senior Counsel Sri S.N. Soparkar appearing for the assessee fairly conceded that similar issue was decided against the assessee by Co-ordinate Bench of the Tribunal in ITA No. 3507/ Mum/2016 in A.Y. 2011-12 in the case of erstwhile SPI which was later on merged with Assessee Company. Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribunal. 7. We have heard the rival contentions and perused the materials available on record. Identical issue has been decided against the Assessee by the Co-ordinate Bench in A.Y. 2011-12 to 2013-14 as [cited supra] and relevant portion of the said order is reproduced as follows: "... 34. We have heard the rival contention of both the parties and perused the material available on record. We found th....
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....fully following the above order of the Coordinate Benches of the Tribunal in assessee's own case, we uphold the finding of the learned CIT(A). Thus, the Ground no.3 raised by the assessee is hereby dismissed. 8. The Ground No. 4 relates to disallowance of expenditure incurred for Doctors towards business promotion and accommodation of Rs. 3,44,85,728. The Ground No. 6 in Departmental Appeal also relates to disallowance of business/conference fee and sponsorship expenses of Rs. 6,65,79,145/-. As both the grounds of appeal are interlinked with each other, they are adjudicated together. 8.1. The Ld AO at para - 7 of the assessment order has observed that the assessee has incurred various expenditure being accommodation, Business Promotion Expenses, Conference Fees aggregating to Rs. 10,10,64,882/ which are freebies and gifts paid to Doctors. The Ld. AO has referred to CBDT Circular No. 5/2012 in F.No. 225/142/2012 - ITA II, dated 1st August, 2012 wherein it is stated that expenditure incurred for providing freebies of the above nature by pharmaceutical and allied healthcare sector is inadmissible expenditure u/s. 37(1) of the Act. The above addition made by Ld. AO was partially ....
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....fect from 10.12.2009 prohibiting from accepting of gifts, travel facility or hospitality, from any pharmaceutical company or the health care industry by the doctors/medical professionals. Thus regulation is issued by the statutory body created under the Act of Parliament i.e. Medical Council Act, 1956. CBDT has also issued a Circular No. 5 of 2012 in this regard stating that expenditure on freebies given to medical professionals and their professional associations in violation of the regulation issued by the Medical Council of India which is a regulatory body constituted under Medical Council Act, 1956, will not be allowed as expenditure in view of the Explanation below section 37(1). The validity of this circular is also been upheld by the Hon'ble High Court of Himachal Pradesh vide order dated 26.12.2012 in CWP No. 10793 of 2012. Since Medical Council of India has prohibited expenditure on freebies given to the medical professional with effect from 10.12.2009, in my considered view, the Circular No. 5 of CBDT dated 01.08.2012 only reasserts the legal position and hence the expenditure on freebies will not be allowable u/s. 37(1) being an expenditure prohibited by law....
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....tion expenses also fall under the category of freebies. Accordingly, I further hold that accommodation expenses as well as business promotion expenses are hit by the Circular No. 5/2012 and amended guidelines of MCI. Accordingly, the action of Assessing Officer in this regard is upheld. However, 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 appear to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. The Ld. Authorized Representatives have also argued that the Circular No. 5/2012 is applicable to the Doctors/Medical practitioner only but not to the companies offering gifts/freebies. This argument is not acceptable because if accepting/demanding of illegal gratification is bad, then paying of the same is also bad. This view gets support from the ratio laid down in the following cases:- CIT Vs. Kap Scan and Diagnostic Centre (P) Ltd. (2012) 344 ITR....
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....ontentions, perused the materials available on record and given our thoughtful consideration. The assessee has claimed accommodation, business promotion and conference expenses incurred for Rs. 10,10,64,882/-, which are mainly gifts and freebies to doctors. While passing the assessment order, the Ld. AO has verified the ledger account of such expenditure and found that such expenditure are freebies that include sponsorship for attending conferences, medical equipment, travel facilities and hospitality to be distributed to such medical practitioners, which is prohibited by Medical Council of India [MCI]. It is found that Ld. CIT(A) has confirmed the expenditure in nature of accommodation and business promotion but deleted Conference and Sponsorship expenses incurred for Doctors on the ground that same are incurred for sharing the knowledge in the medical field, which is not hit by Circular No.5/2012 and amended MCI guidelines. The Ld. CIT DR on the other hand placed reliance on the decision of the Supreme Court in the case of Apex Laboratories cited supra. 9.1. Ld. Sr. Counsel on the other hand pointed out that the facts in the case before the Apex court were completely different....
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....Section 14A r.w. Rule 8D for Rs. 81,63,728/-. The Ld AO at para 9 of the assessment order has observed that assessee has claimed exempt income of Rs. 334.02 crores being share of profit from partnership firm and not made any disallowance u/s. 14A of the Act. The A.O has observed that assessee has debited interest expenditure of Rs. 12,62,902/- in profit & loss account along with other administrative expenditure and part of such expenditure is attributable to earning of exempt income. The Ld. AO has referred to the decision of Hon'ble Supreme Court in the case of Wallfort Shares & Brokers Ltd 310 ITR 421 and Godrej Boyce & Manufacturing Co. Ltd and observed that Rule 8D is applicable and he computed such disallowance at Rs. 81,63,728/-. The above disallowance was confirmed by CIT(A) in para 14.2 of his order observing as follows: "14.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, average value of investment resulting into exempt income is Rs. 163.06 Crs against which share capital & share application money etc. amounted to Rs. 90 Crs only (excluding revaluation capital reserve). Since investment was more....
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....ded that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the Ld. CIT(A) has given adverse findings in this regard. Considering these facts, we direct the AO to verify whether the assessee has sufficient interest-free funds or not. 11.1. So far as the disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, the ground no.5 raised by the assessee is hereby allowed for statistical purpose. 12. Ground No. 6 of the Appeal relates to disallowance of Registrar of Company and Stamp Duty charges of Rs. 30,18,600. The Ld AO at para 10 of the assessment order has observed that RoC filing fees paid for increase in share capital is capital expenditure in view of decision of Brooke Bond India Ltd Vs CIT 225 ITR 798 and Punjab State Industrial Development Corptn Ltd Vs CIT 225 ITR 792. The above addition was upheld by Ld. CIT(A) mainly relying on the findings of the Ld. AO in para 16.2 of his order. 12.1 Aggrieved against the above order, the assessee is an appeal before us. Durin....
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....nt, but no adjustment is carried out while computing book profit under clause (iia) to Explanation 1 to section 115JB(1) of the Act. Accordingly, the assessee company was required to explain the same vide show cause notice dated 08.11.2016. Assessee's reply was considered by the Ld AO and rejected the same by observing as follows: "13.1. In response, the assessee company submitted a detailed explanation duly reproduced in the assessment order. After considering the submission of the assessee company, the Ld AO held that intangible assets were transferred without any cost and hence the value reflected was on account of revaluation and accordingly, no deduction for depreciation/amortization as a result of revaluation is allowed u/s. 115JB of the Act." 14.1. Aggrieved against the assessment order, the assessee preferred an appeal before Ld. CIT(A) who confirmed the order of the AO. Being aggrieved by the appellate order, the assessee is in appeal before us. For better understanding of the facts, relevant portions of the findings of the CIT(A) is reproduced as under: '.... 17.1 During the course of appellate proceedings, the Ld. Authorized Representative has submit....
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....d that the Appellant has, in the previous year ended 31.3.2012 relevant to the AY 2012-2013, acquired the Domestic Formulation Undertaking (DFU) under the arrangement of spin off from its holding company, SPIL. The DFU comprised various assets including intangible assets. The intangible assets so received under the spin off arrangement were recognized for the first time by the Appellant at a value reflective of their fair value based on the express stipulation in the scheme of spin off duly approved by the Hon'ble High Court of Gujarat as well as High Court of Bombay. 1.4 It appears that the Assessing Officer has failed to appreciate the distinction between revaluation and first-time recognition of intangible assets in books of accounts. In the present case, pursuant to the receipt of intangibles assets by the Appellant by virtue of the scheme of spin off, the Appellant has recognized the intangibles assets so received for the first time in its books of accounts at their respective fair values to reflect the true position of the Appellant's assets and liabilities as on 31.03.2012. This, in no way, can be considered similar to the revaluation as understood in the ac....
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....t is fair valuation on initial recognition permissible within the Indian GAAP. 1.9 Hence, in light of the above definitions and considering the principle being regularly laid down by the various appellate authorities, it could be most appropriate and logical to state that there is no revaluation carried out by the Appellant. Accordingly, there ought not to be any adjustment in computation of the book profit in terms of section 115JB. To substantiate our claim that no revaluation is carried out and that revaluation is distinct from first-time recording of the asset at fair value, we also wish to draw your attention to the provisions Income-tax Act. Although the Income-tax Act per se does not contain any definition of revaluation, it still recognizes the difference between the revaluation and initial recognition of assets at fair value. In this context, we draw your honor's kind attention to the newly introduced sub-section (2B) to section 115JB of the Act which provides that - "(2B) In the case of a resulting company, where the property and the liabilities of the undertaking or undertakings being received by it are recorded at values different from val....
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....distinct accounting framework provided qua recognition of assets at fair value and qua revaluation signifies that the act of recognition of the assets at fair value is different from the exercise of revaluation. It is submitted that wherever the Accounting Standards has permitted the entities to revalue the assets, it has correspondingly required that requisite amount be credited to revaluation reserves and not to capital reserve. 1.13 In light of the above, we submit that since the recording of the assets in the books of the Appellant, as proposed by the court approved scheme, is the process of initial recognition and not a case of restatement of assets having existing book value, the same cannot be treated as revaluation of assets. In absence of any revaluation of assets carried out by the Appellant, there should not be any adjustment to the computation of the book profit u/s 115JB as erroneously contemplated by the Assessing Officer. Further, it is reaffirmed that the impugned action of the Assessing Officer to recharacterize the accounting of intangible assets as revaluation is ultra vires and amounts to usurping one's powers as unequivocally declared by the Hon....
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....n the relevant year / initial year of recording i.e. AY 2012-13 in the instant case, it is not open to the revenue authorities to question the same in any of the succeeding years merely because the Appellant has claimed depreciation of the intangible assets in the current year. 2.4 Thus, the action of the Assessing Officer is ultra vires and exceeding one's powers. The Appellant vehemently objects to the action of the Assessing Officer to disregard the initial recognition of the intangible assets at fair value in accordance with the scheme duly sanctioned by the respective High Courts because the same does not pertain to the year under consideration and hence, on this very g r o u n d t h e disallowance of depreciation of intangible assets be set aside. 3. Accounting treatment is in consonance with generally accepted accounting principles 3.1 During the year under consideration, the Appellant, in respect of the intangible assets acquired by it under spin off, has charged a sum of Rs. 1523.975 crores towards depreciation of the intangible assets. 3.2 At the outset, it is stated that there is no specific accounting treatment prescribed in the I....
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....iew is an overriding consideration in selection of an accounting policy. 3.7 From the harmonious reading of the above provisions of the Companies Act, it can be gathered that firstly, the profit & loss account must disclose the result of the working of the company during the period. It has been broadly laid out that the accounts prepared for the purpose of section 115JB have to be prepared in accordance with the Companies Act, 1956. No other condition is laid out for the preparation of the financial statements for the purpose of section 115JB. Schedule VI, Parts II and III of the Companies Act, 1956 deal with requirements of disclosure of the various items in the profit and loss account. They do not enunciate any accounting principles. The same are absolutely silent on the accounting treatments of the various profit and loss account items. Thus, Parts II and III do not lay down any scheme of computation of book profit; they deal mainly with the requirements of disclosure in the profit and loss account. There is no prohibition and no compulsion in Schedule VI in respect of any particular accounting policy, so long as following the accounting policy does not affect the discl....
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....the company. The statutory auditors of the Appellant namely, M/s Deloitte Haskins and Sells is a highly reputed and a premier auditing firm in the world known for auditing. It may be noted that the statutory auditors have not given any adverse findings or qualifications which only proves that the accounting treatment was rightly accorded in the financial statements of the Appellant. The Statutory Auditors have categorically mentioned in their 'Emphasis of Matter' paragraph of their Auditor's report that their opinion is not qualified in respect of accounting treatment given pursuant to the scheme of arrangement duly sanctioned by the High Courts. 3.11 Thus, there is no adverse or negative observations / remarks made by the statutory auditors of the Appellant regarding the accounting treatment followed in respect of the intangible assets. It may be noted that the 'General Instructions for preparation of Balance Sheet' in the Schedule VI of the Companies Act, 1956 requires making specific disclosure in the Balance Sheet with respect to revaluation of assets. The fact that the statutory auditors of the Appellant have not made any qualifications or expresse....
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....the Companies Act, 1956 read with the generally accepted accounting principles in India. Judicial Precedents 3.15 Reliance is placed on the following decisions: • Binani cement limited [ ITA No.239/KOL/2011] • Sterlite Industries (India) Ltd. v. Additional Commissioner of Income Tax [2006] SOT 497 (MUM.) • CIT v. Virtual Soft Systems Ltd. [2012] 341 ITR 593/205 Taxman 257/18 taxmann.com 119 (Del HC) • PCIT V. Sun Pharmaceutical Industries Ltd. [2017] 293 CTR 489 (Gujarat) Thus, the accounting treatment accorded by the Appellant is in accordance with the Indian accounting framework. Furthermore, the above accounting treatment is also duly approved by the Statutory Auditors, who are one of the reputed firms in India, the Shareholders as well as the Regulatory Authorities being, recognized Stock Exchanges where the securities of the Appellant are listed, Registrar of Companies, Ministry of Corporate Affairs etc. Besides, the accounting treatment accorded by the Appellant is also sanctioned by the Hon'ble High Courts under the scheme of spin off of domestic formulation business from SPIL to the Appellant....
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....ies Act, 1956. The same was scrutinized and certified by the statutory auditors and was approved by the assessee company in its annual general meeting. As such the assessing officer has no jurisdiction thereafter to question the correctness of the accounts. Reliance is placed on the judgement of the Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 and Malaya la Manorama Co. Ltd. v. CIT [2008] 300 ITR 251/169 Taxman 471. 5.2 The above views expressed in Apollo Tyres Ltd.'s case (supra) were followed by the * Hon'ble Calcutta Court in the case of CIT v. Ispat Industries Ltd. [2008] 2 DTR 13. * The Hon'ble Bombay High Court in the case of CIT v. Adbhut Trading Co. (P.) Ltd. [2011] 338 ITR 94 (Bom.) 5.3 Hence, in view of the decision in case of Apollo Tyres Ltd.'s case (supra), it is a settled proposition that the Registrar of Companies, Statutory auditors and shareholders are the only authorities to check whether accounts are in accordance with Part II and III of Schedule VI of the Companies Act 1956 and it is not open to the Income-tax authorities to vitiate from the net profit as shown in....
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....nd loss account for the relevant previous year prepared under subsection (2), as increased by- (a) ...; or (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC: or (c) ....; or (d) ....; or (e) ....; or (f) ....; or (g) the amount of depreciation , or (h) ....; or (i) ...; or (j) ....; or if any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and... (iia) the amount of depreciation debited to the profit and loss account excluding the depreciation on account of revaluation of assets);" 6.3 Thus, as per Explanation 1, the net profit as shown in the profit and loss account is the starting point for the purpose of determination of book profits. Further, the said amount is inter alia increased by the amount of depreciation as debited in the books of accounts as per clause (g). Furthermore, the amount of depreciation (excluding the depreciation on account of revaluation) is to be inter a....
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....r the applicable framework, then in such case the tax department does not have the jurisdiction to go behind the net profit as shown in the profit and loss account except to the extent provided in section 115JB. 6.7 The Appellant, based on the approved audited accounts, has determined the book profit as per provisions of section 115JB of the Act. While computing the book profits, the Appellant had made adjustment on account of the line items explicitly specified u/s 115JB. It is submitted that the section 115JB is a deeming provision, which has been inserted by Finance Act 2000, w. e. f. 01.04.2001, wherein the Appellant being a company, is required to compute its income tax liability based on the book profits as worked out u/s 115JB of the Act. Since section 115JB being a deeming provision, therefore, the provisions are to be read in strict sense and accordingly, it is submitted that no further adjustments is required in addition to the items specified in Explanation 1 to section 115JB(2). 6.8 It is submitted that the provisions of section 115JB have been introduced as a deeming fiction. It is respectfully submitted that the deeming provisions of an Act ought to ....
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....G and another valuation report dated 24.05.2013 issued by E&Y. On the basis of these valuation reports, the appellant company had recorded value of all assets transferred in at Rs. 185,654,000,000/- including intangible assets at Rs. 182,877,000,000/- in its books of account including the Balance Sheet as on 31.03.2012 but prepared on 27.05.2013. The Fair Market Value of tangible assets was recorded at Rs. 3,80,81,928/. As a result of estimation of Fair Market Value of the assets received from the transferor company without any consideration, capital reserve was created to the tune of Rs. 185,654,286,282/-. 17.2.1 During the year under consideration, the appellant has debited a sum of Rs. 15,34,41,73,610/- in the Profit and Loss Account being the depreciation and amortization of expenses in respect of the assets claimed to have been received from the holding company as mentioned above without any consideration. The about amount includes "depreciation and amortization expenses" at Rs. 1523,97,50,000/- on intangible assets being l/12th of the revaluation amount. Although for the purposes of computation of income under normal provisions of Income-tax Act, the appellant has di....
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....it is a case of revaluation of assets. Therefore, I hold that estimation of the Fair Market Value of the assets transferred in which is different from the book value recorded in the books of transferor company, has to be treated as revaluation of assets. As per Explanation-1 to section 115JB(2), the depreciation debited in the Profit and Loss Account shall first be added to the book profit and then only the depreciation debited in Profit and Loss Account excluding the depreciation on account of revaluation of assets shall have to be reduced. The Assessing Officer has accordingly worked out the book profit of appellant. 17.2. In view of the above factual & legal position, thus it is also emerged that the claim of appellant of depreciation on assets or amortization of expenses, without incurring any actual cost or expenditure and even not by the predecessor company, certainly amounts to a colourable device in order to avoid incidence of tax u/s. 115JB. In any of the cases relied upon by the Ld. Authorized Representative, the claim was not made on hypothetical values without incurring actual cost and hence they are distinguishable on facts. It was also argued that the Scheme ....
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....3. The Ld Sr Counsel also referred to Audited annual accounts of earlier year, wherein accounting entries relevant to above assets were passed on last day of financial year and argued that then Assessing Officer has never objected to such accounting treatment. Thus the Ld Sr Counsel submitted that accounting treatment is in consonance with generally accepted Accounting principles and Scheme approved by the High Courts, hence Ld AO cannot deviate from such accounting entries. He has further argued that Section 115JB, being a deeming provision, to be interpreted strictly and as adjustment provided therein does not include any such adjustment as stated by the Assessing Officer, therefore he has no power to disturb duly certified and audited books of accounts as held by Hon'ble Supreme court in the case of Apollo Tyres Ltd 255 ITR 273. Ld Sr Counsel also relied upon submission filed before CIT(A) which was part of the appellate order. 14.4. On the other hand, the Ld. CIT DR Mr. Aarsi Prasad vehemently supported the orders passed by the lower Authorities and argued that addition made by the Ld AO and confirmed by the Ld CIT[A] deserves to be sustained. 15. We have heard the ri....
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....in the Paper Book at pages 7 to 65. 15.2. Further under the Scheme approved by the Hon'ble High Courts which inter-alia also includes the obligation of the assessee company to record the assets acquired under the Scheme at Fair Value. Thus the assessee company has the right to record the Assets at a Fair Value in its books of accounts. The relevant extracts of the High Court Judgement (Co. petition no. 31 of 2013 connected with Company Application No. 373 of 2012) permitting the assessee company to recognize the asset at fair value is as reproduced below: "9. Accounting by Transferor Company and the Transferee Company in respect of transfer of domestic formulations undertaking (i) Accounting treatment in the books of the Transferor Company: ....... (ii) Accounting treatment in the books of the Transferee Company: a) Upon coming into effect of this scheme and upon the arrangement becoming operative, the Transferee Company shall record the assets transferred to and vested in them pursuant to this Scheme, at the estimated fair values of the respective assets as on the Appointed date. The decision of the Board of Directors of the Transfer....
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....ived in the office of the Assessing Officer on 18.05.2015. The Assessing Officer/ Department nowhere had objected to said Scheme at any point of time, neither in pursuance of circular issued by Ministry of Corporate Affairs nor when the notice was issued by the High Court. Thus, Scheme of Amalgamation sanction by Hon'ble High court had become final. Such an order has a binding effect upon all. Hon'ble Supreme Court in the case of J.K. (Bombay) Pvt. Ltd. (supra) held that once the scheme has been sanctioned by the Court that does not operate as mere agreement between the parties, but it becomes binding on the company, their creditors and the share holders and other statutory force. The relevant observation of the Hon'ble Apex Court reads as under: "The principle is that a scheme sanctioned by the court does not operate as a mere agreement between the parties. It becomes binding on the company, the creditors and the shareholders and has statutory force, and therefore, the joint-debtor could not invoke the principle of accord and satisfaction. By virtue of the provisions of sec. 391 of the Act, a scheme is statutorily binding even on creditors, and shareholders wh....
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....he facts of this case will have to be examined keeping in view the colour and content of the expression "public interest". The scheme of amalgamation must have some purpose or object to achieve. It was repeatedly inquired what purpose or object was to be achieved by a scheme of amalgamation offered for court's sanction. It was said that the property belonging to the transferor-company will be available to the transferee- company. Now, the property belonging to the transferor- company is situated in Calcutta. The transferor-company is having its factory at Billimora. The transferor-company appears to have not done any business except acquiring capital asset from its parent company of which it was a subsidiary company and got it revalued so that by the process of revaluation, the equity shareholders of the transferor-company can get large number of shares of the transferee company by the exchange ratio prescribed in the scheme of amalgamation. No apparent understandable purpose or object behind the scheme is discernible. The purpose and the only purpose appears to be to acquire capital asset of the DOC Pvt. Ltd. through the intermediary of the transferor-company which wa....
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....be made to book profit. 15.7. Further, section 115JB is a deeming provision and the same is required to be interpreted strictly and that no further adjustment is required in addition to the items specified under section 115JB. The Assessing Officer has no power to tinker book results by any adjustments other than adjustments provided in explanation to Section 115JB of the Act and addition made by the AO does not fall within any ambit of adjustments. The impugned action of the Ld. AO to re-characterize the fair valuation as revaluation, is contrary to the provisions of section 115JB and also contrary to the law enshrined by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd [255 ITR 273]. The Hon'ble Supreme Court in Apollo Tyres Ltd (supra) has categorically stated that where the accounts are prepared in accordance with Companies Act and certified by the Auditor, then the assessing officer should not go beyond the net profit, except to the extent specifically provided under section 115JB of the Act observing as follows: "...the assessing Officer while computing the income under Section 115-J has only the power of examining whether the books of account are cer....
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....n, "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 increased by- ... (g) the amount of depreciation, ... if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss, and as reduced by,- ... (iia) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); ..." Section 115JB has laid down specific approach for computation of Book Profit. The book profit is to be computed by making adjustment to the net profit as per statement of profit and loss account of items as specifically provided for. 16.2. It is observed that as seen from above, clause (iia) to Explanation 1 to section 115 JB(1) provides for reduction from the book profit of the amount of depreciation debited to the statement of profit and loss, excluding the amount of depreciation on account of revaluation of assets. Therefore, the moot question for consideration is that Whet....
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....ed assets and investments received on amalgamation at fair value, however the AO treated it to be in the nature of the revaluation and adjustment was made to book profit under clause (j) of Explanation 1 to section 115JB of the Act on sale thereof. The co-ordinate bench quashed the adjustments made by the assessee by making following significant observations: "47. We find that the Assessing Officer failed to appreciate that a "Revaluation Reserve" is created when an enterprise revalues its own assets, already acquired and recorded in its books at certain values. In other words, when an entity makes reinstatement of the book value of its existing assets, it amounts to revaluation of assets. In the instant case, the assessee has not revalued its existing asset but has only recorded the fair values of various assets and liabilities "acquired" by the assessee from the transferor/ "amalgamating companies" pursuant to the scheme of amalgamation as its "cost of acquisition" in accordance with the terms of the court-approved scheme of amalgamation and the provisions of AS14." 16.5. We note that the intangible assets are acquired and owned by the assessee company pursuant to the....
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....eduction under Section 80-IB/80-IE. However, Ld.CIT(A) has not adjudicated the alternate ground of appeal wherein assessee has claimed that excise duty refund is a capital receipt and not liable for tax in view of decision of Hon'ble Supreme Court in the case of Shree Balaji Alloys -Vs- CIT reported in 333 ITR 335. The Ld. Sr. Counsel has contended that additional claim being legal claim needs to be considered in view of decision of Hon'ble Supreme Court in the case of National Thermal Power Corporation 229 ITR 383 and Hon'ble Gujarat High Court in the case of Mitesh Impex 46 taxman.com 30. On the other hand, Ld. CIT-DR has contended that additional claim should not be allowed, as same was not raised in appeal filed by the Assessee. 17.2. We have heard the rival contentions and perused the records available on record. So far as admission of additional grounds of appeal are concerned, it is observed that assessee has already taken alternate plea before CIT (Appeals) on this issue. Both the grounds of appeal are legal grounds and therefore no bar in admitting such legal grounds as held by the Hon'ble Supreme Court in NTPC case and Hon'ble Gujarat High Court in ....
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....sons set out in the previous paragraph held that refund of central excise duty is a capital receipt in nature, this ground of appeal relating to non-taxability of such refund under the book profit u/s 115JB of the Act is allowed consequently. Hence, this Additional Ground No.9 raised by the assessee is allowed. 19. In result, the appeal filed by the assessee ITA No. 1464/Ahd/2018 is partly allowed. 20. ITA Nos: 1521/Ahd/2018 relating to the Assessment Year 2013-14 the Grounds of Appeal raised by the Revenue reads as under: 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. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 600,15,55,635/- in respect of Sikkim Unit without appreciating the facts and reasons mentioned by the AO in the assessment order. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 600,15,55,635/- in respect of Sikkim Unit, without appreciating th....
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.... is allowable without appreciating the A.O's finding on the issue of period of use, and depreciation of plant and machinery used by Sun Pharma Industries & Sun Pharma Sikkim. 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80 IB/80 IE in respect of receipt of interest of Rs. 15,52.03,577/- on delayed payments on sales, without appreciating the facts and reasons mentioned by the AO in the assessment order. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the assessee's ground on disallowance of deduction u/s 80IB/80IE in respect of receipt of interest on delayed payments on sales without appreciating the fact that the interest was not derived from manufacturing activity and deduction u/s 80IB/80IE was rightly disallowed by the AO. 4.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction u/s 80IB(13)/ 80IE(6) r.w.s. 80IA(10) on apportionment of research and development expenses of Rs. 1,69,05,303/- incurred by Sun Pharma ceutical Industries Ltd. (SPIL) without appreciati....
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....ng and distribution expenses without appreciating that this expenditure cannot be considered as incurred for protecting assessee's interest as partner in the partnership firm SPI and SPS, and it would even then not be allowable expenditure u/s 37(1). This is without prejudice to the disallowance made u/s 14A. 5.4 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. 6.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of Rs. 6,65,79,145/- 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. 6.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of Rs. 6,65,79,145/- in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the real nature of these expenses which were actu....
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....ssessee filed an appeal before CIT(A), whereby the CIT(A) deleted the addition by following the order of his predecessor CIT(A) in the case of erstwhile firm being M/s Sun Pharma Sikkim for AY 2010-11 which has been subsequently followed for AY 2011-12 and AY 2012-13. Aggrieved by the order of CIT(A), department is in appeal before us. 22.1. We have heard the rival contentions and perused the materials available on record. The Ld. CIT DR mainly relied upon the findings of AO in the Assessment Order, whereas the Ld. Senior Counsel has relied upon the order of CIT(A) as well as the decision of Co-ordinate Bench for AY 2010-11 to 2012-13. The brief facts of the case are that one of the group concerns of the Sun Pharma Group, M/s. Sun Pharma Industries was in the process of setting up a new industrial undertaking located at Sikkim. The firm Sun Pharma Industries agreed to assign all assets and liabilities on 'as is where is' basis together with all capital work in progress. In pursuance thereof, the said new undertaking was acquired by Sun Pharma Sikkim (SPS) on 05.03.2009 as a 'going concern' basis. The claim of deduction u/s 80IE was made for the first time by SPS in AY 2010-11. I....
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....he plant & machinery. In the grounds of appeal, Revenue has nowhere raised any ground challenging permission for admission of additional evidence under Rule 46A. In order to habour a belief that the assessee-firm was formed by splitting up and reconstruction of existing business of SPI, the ld.AO has narrated first circumstances that the application for grant of licence to manufacture or for sale or for distribution of drugs bear the date of 21.2.2007; whereas as per partnership deed, the firm has come into existence on 15.1.2009. The AO assumed that unit was functioning from earlier time as a unit of SPI Dadra and Jammu. By this plea, it was contended by the assessee that the said date is taken on account of typographical error and drawing attention to the fact that both the cover letter and form no.24 to the application clearly mentioned the correct date of 21.2.009. The ld.CIT(A) verified this fact and accepted that licence was taken on 21.2.2009 and not 21.2.2007 as inferred by the AO. Thus, on re-appreciation of this fact, we are of the view that the ld.AO has taken wrong facts which goaded him to a wrong conclusion. This circumstance cannot be used as a corroborative factor f....
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.... FDI approval to Jammu unit was ultimately abandoned as, such approval was denied to other applicants. It was further submitted that production of medicine at the Jammu unit was suffered loss due to fire and accident, besides, due to general disturbances in the region of Jammu. On analysis of the above details, the ld.CIT(A) did not concur with the view of the AO, and observed that decline in production in these units was on account of business strategy adopted by the group in Jammu and productivity was suffered due to disturbances in the area. The ld.CIT(A) thereafter made reference to the circular issued by the CBDT and took into consideration the definition of expression "industrial undertaking" and "initial year" provided in section 80IE(7) of the Act. The discussion made by the ld.CIT(A) in this regard is worth to note. It reads as under: "4.2.6 With regard to the deduction under section 80IE, it is to be noted that the same is available to an 'industrial undertaking' and the deduction is available from the Initial assessment year'. 'Initial assessment year' is defined in section 80IE(7)(i) to mean that the assessment year in which the industrial u....
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....sessee has been established by splitting up and reconstruction of the existing business of SPI. The circumstances considered by the AO for arriving at a conclusion that it has been formed by splitting up are not sufficient to prove the view point of the AO. A perusal of the CIT(A)'s order would indicate that the ld.CIT(A) has minutely examined each circumstance considered by the AO, and thereafter held that the AO failed to bring any specific instance which can buttress his conclusion. Thus after going through a well reasoned finding of the CIT(A) on this issue, we are of the view that the assessee firm has not been formed by splitting up and reconstruction of existing business of SPI. 22. Next circumstances assigned by the AO is that total value of plant & machinery installed in the industrial undertaking included more than 20% of old plant & machinery. 23. Brief facts with regard to the above are that total amount of plant & machinery of Rs. 49.33 crores were stated to be installed by the assessee. According to the AO, the plant & machinery having value of Rs. 14.98 crores represented old and second-hands machinery. To counter this plea of the AO, the assessee h....
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....ated purchases. Further there is nothing to establish that the machinery evidenced by duplicate/xerox bills was second hand, Also, in relation to the bills lost due to fire at Sikkim, it is seen that the appellant has supported the explanation with the press clippings and FIR. The ledger accounts of the parties from whom the said assets were made interalia indicate receipt of goods through valid bills for which payments are made by cheques. No enquiry was undertaken by the AO from these suppliers. As observed earlier, to my mind, simply the fact of supporting evidence existing In the form of duplicate bills, cannot lead to the conclusion that machinery was proven as old/used. In view of these facts, it cannot be concluded that the AO's computation of the value of machinery held to be old/second hand/used is based on fact. For these reasons, I find that it is not established that proportion of old machinery in Sikkim unit exceeded the stipulation of 20% as required by the Act and so the claim of the appellant cannot be on this ground. 4.2.12 The appellant has also given detailed submissions relating to the observations made by the AO in the assessment order for the succ....
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....ment and is to be accepted in total, In these proceedings it has been emphasized that the date of commercial production given in the said certificate is confirmed by other records also. A perusal of the copy of the said certificate does not indicate any overwriting etc, that may be cause for any suspicion. The office address and telephone numbers of the issuing authority are clearly mentioned on the document but other than express doubt, the AO has not made any independent enquiry to bring on record any evidence to establish that the date of commencement mentioned in the said certificate was incorrect. Thus, the fact that the certificate itself is issued at a later date cannot be considered evidence of fabrication of date of commencement of commercial production particularly when such date of commencement is supported by other documents also. 4.2.13 The third aspect highlighted in A.Y. 2011-12 by the AO as giving rise to doubt, is that key components of plant and machinery including a clit mill, blister pack machine, fluid bed dryer and blender were found to be operational on dates after 20/04/2009 i.e. after the declared date of commercial production. In this regard the a....
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....ect of notional disallowances in respect of selling and distribution expenses etc. was also duly adjudicated upon. Subsequent to the passing of the ITAT orders, the matter is pending in appeal before the High Court. To my mind the fact that further appeal is pending does not by itself lend greater solidity to the AO's conclusion. 24. The ld.CIT(A) thereafter discussed each judgment in detail which were considered by the AO for construing the meaning of old plant & machinery and how it has to infer that the assessee has used old plant & machinery. Such detailed discussion of the ld.CIT(A) is available from pages 22 to 31. Thereafter, the ld.CIT(A) concluded on this aspect as under: "4.2.18 Therefore on close study of the case laws relied on by the AO, it is seen that the judicial pronouncements actually support the facts of the appellant's case to show that in the present case, there is no reconstruction or splitting up of an earlier existing business. The appellant's case is also further strengthened by the decisions discussed In Para 4.2.17. above. Thus the inescapable conclusion is that there is no splitting up or reconstruction in the case of the appell....
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....ather presumed certain facts that machineries are old one. In the finding recorded by the first appellate authority extracted (supra) reveals a detailed analysis and a finding of fact that total machinery having value of Rs. 14.98 crore considered by the AO as representing old was not sustainable. Therefore, after going through the detailed analysis made by the ld.CIT(A) we are of the view that Revenue failed to demonstrate that machineries exceeding 20% of the total value of the plant & machinery were old machinery. Therefore, considering the facts on this fold of grievance of the Revenue, we do not find any error in the order of the ld.CIT(A). Assessee is entitled for deduction under section 80IE of the Act. 8.1 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, the learned DR 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, respectf....
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....ales Ltd. and others being interest due on overdue payments outstanding as a result of trading liability. Similar issue was decided by the Coordinate Bench of ITAT Amritsar in the case of erstwhile firm M/s Sun Pharma Industries (now merged with the assessee company) for AY 2005-06 to 2009-10, which was subsequently followed in AY 2010-11 and 2011-12 wherein following the decision of Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. Vs. CIT (2006) 155 Taxman 330 and decision of Hon'ble Madras High Court in the case of CIT Vs. Rane Ltd. 238 ITR 377 (Mad.) wherein it has been held that interest received by the assessee from its trade debtor towards late payment of sale consideration is not required to be excluded from the profit of industrial undertaking for the purposes of computation of deduction u/s.80IB/80IE as the same is income derived from business of industrial undertaking. The relevant finding of the coordinate bench for AY 2011-12 reads as under: "......45. 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 ....
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....f appeal raised by the Revenue is hereby dismissed ' 23.2. 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 of this tribunal, the assessee is entitled to claim deduction u/s. 80IB/80IE in respect of the interest earned on overdue payments being the debts arising from trading liability. Hence ground NO.3 raised by revenue is dismissed. 24. Ground No. 4 of Department's appeal related to disallowance of deduction u/s 80IB/80IE in respect of R & D expenses incurred by holding company M/s. Sun Pharmaceuticals Industries Ltd. (SPIL) by allocating the same totaling to Rs. 1,69,05,303/- to the eligible units in view of provisions of section 80IB(13)/80IE(6) r.w.s. 80IA(10). The AO at para 6.4.6 of his order has observed that the assessee company does not have any R&D centre and is available only with the Sun Pharma Industries Limited [SPIL]. Thus, the R&D work is being conducted through SPIL, and the only expenses incurred towards the Research & Development....
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....in the manufacturing activities and R&D facilities were included in the same. The Ld. CIT(A) has further based its findings on the ground that the notional disallowance on account of R&D expenses has been made by the AO on similar lines as have been made in respect of royalty, management fees and selling and distribution expenses and the said pounds were found not tenable by the Tribunal. Following the rationale behind the deletion in respect of royalty, management fees and selling and distribution expenses, by the ITAT Amritsar, we uphold the deletion made by the Ld. CIT(A) and dismiss this ground of appeal of the revenue." 51.1 Thus, respectfully taking the consistent view of Tribunal in the own case of the assessee, we do not find any infirmity in the finding of the learned CIT(A). Hence the ground of appeal raised by the Revenue is hereby dismissed." 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 of the Co-ordinate Bench of the Tribunal ....
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....nd accordingly disallowance made was deleted. Since the facts are identical in this year also, in view of the orders of CIT(A) in earlier years as also order of ITAT, Amritsar, in the case of SPI, no disallowance out of selling and distribution expenses appears to have been made for reducing the eligible profit u/s 80IB/80IE. In fact, the A.O. has disallowed selling & distribution expenses in the ratio of turnover on the ground that the same were incurred for the purposes of business of firms also and accordingly not allowable u/s 37 to that extent. 11.2.2 As a matter of facts, selling and distribution network of Sun Pharmaceutical Industries Ltd. (SPIL), a flagship company of the group, was being used for carrying out business of various concerns including the SPI and SPS. Accordingly, in earlier years similar disallowance out of selling and distribution expenses incurred by SPIL was made in the ratio of turnover of SPIL, SPI and SPS. As already discussed, no consequential adjustment in the cases of SPI/SPS was made for reducing the deduction claim u/s. 80IB/80IE. The disallowance made out of deduction claimed u/s. 80IB/80IE in the cases of firm viz. SPI/SPS has consisten....
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....om the findings emerged during the course of survey conducted u/s. 133A. However, the Ld. Authorized Representative has strongly submitted that the incurring of expenditure in order to protect the interest of majority shareholder (75.5%) in the partnership firm viz. SPI and SPS is an allowable expenditure u/s. 37. This stand has also been upheld by the Hon'ble ITAT, Ahmedabad in the case of SPIL in A.Y. 2004-05 to 2009- 10. The decision of Hon'ble jurisdictional ITAT in A.Y. 2004-05 was also followed in the appellate order dated 31.03.2016 contained in Appeal No. CAB/A-2/368/14-15(A.Y.2009-10) in the case of SPIL by me and accordingly it was held that incurring of expenditure for the purposes of protecting interest in the partnership firms which stands remunerated as share profit, cannot be considered as non-business purposes. Accordingly, respectfully following the binding decision of Hon'ble ITAT, the disallowance made out of selling and distribution expenses in the case of SPIL was deleted. However, since the income arising from the partnership firms to SPIL was exempt from taxation, the expenditure incurred out of selling and distribution expenses for earning such e....
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....year is dealt with by Co-ordinate Bench in ITA No.1467 and 1468/Ahd/2018 wherein it is held as under: "... 24. The next issue raised by the Revenue are that the learned CIT(A) erred in deleting the disallowances of deduction u/s 80IE of the Act made on account of apportionment of selling & distribution expenses, R&D expenses, royalty expenses, managerial fee and remuneration to partner SPIL. 25. 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. 1397/Ahd/2017 for the assessment year 2012-13. Therefore, the findings given in ITA No. 1397/Ahd/2017 shall also be applicable for the year under consideration i.e. AY 2013-14. The ground of appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph nos. 12 to 12.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 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. .....................................
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.... 41.2 Thus, respectfully following the consistent view of Amritsar & Mumbai Tribunal in the own case of the assessee for A.Y. 2005-06 to A.Y. 2010-11, we do not find infirmity in the finding of the learned CIT(A). Hence the ground of appeal raised by the Revenue is hereby dismissed. 92. The next issue raised by the Revenue vide ground Nos. 4 to 6 of its appeal are that the learned CIT(A) erred in deleting the allocation of notional royalty expenses, managerial fee, selling and distribution expenses to Jammu and Dadra unit by invoking the provision of section 80IB(13) r.w.s. 80IA(10) of the Act. 93. 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. 4096/Mum/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 4096/Mum/2016 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 no. 41 to 41.2 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the asses....
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....ocating 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 partnership deed has a provision for the payment of remuneration to the whole time working partner by virtue of which the assessee was entitled for the remuneration. There is also no denying that as per the provisions of section 40(b) of the act, the remuneration is payable to a whole time working partner who is an individual and the assessee is a limited company. Therefore the assessee could not have shown this remuneration as part of its computation of income. It is also a fact that the partnership firm has also not debited this remuneration to its Profit and Loss account. However, the assessee company using its network has incurred certain expenditure which according to the revenue authorities are not directly related to earning of income. In our ....
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....round No. 6 of Department's appeal relates to disallowance of business/conference fee and sponsorship expenses of Rs. 6,65,79,145/-. This issue is already adjudicated in Paragraph 9 to 9.2 of this order in assessee's appeal in ITA NO.1464/Ahd/2018 and disallowance made the Ld AO is confirmed and thereby ground no.6 in Revenue's appeal is fully allowed. 28. Ground No. 7 of Department's appeal relates to disallowance of depreciation on Solar Power Generating System at Rs. 16,55,00,000/- The AO at para - 8 to 8.5 of the Assessment Order has observed that the Assessee company was unable to prove that the said machinery was in fact received by it in the month of March 2013. Further, the Assessee company was unable to furnish the evidence of receipt of these equipment from M/s Real Gold Developers LLP & evidence of delivering these equipment at the site of M/s Alpha Infraprop Pvt. Ltd (for lease of assets), before the end of the relevant financial year so as to justify its claim of depreciation on the said solar power plant. The AO further observed that lessee has started production of power in September 2013 hence no income was shown during the period under consideration. In the abse....
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....n records and submission of the Ld. Authorized Representative including the decisions relied upon by him. Undisputedly, the solar Power Generating System was purchased and leased out by the appellant jointly with other co-owner of the group as detailed below:- In the case of first co-owner i.e. Aditya Medisales Ltd., the CIT(A)-1, Vadodara vide his order dated 12.06.2017 contained in Appeal No. CIT(A)- 1/10004/16-17(A.Y. 2013-14) has decided this issue in the favour of appellant. The findings recorded by the CIT(A)-1, Vadodara in para-8.2 to 8.4.6 of the above mentioned appellate order are reproduced as under:- ........................................................................... 13.2.1. Since the facts are identical in the case of appellant also, I respectfully following the order of CIT(A)-1, Vadodara in the case of Aditya Medisales Ltd. hold that the appellant is entitled to claim the depreciation on the Solar Power Generation Plant owned by it and leased out during the year under consideration for earning lease rentals duly assessed as business income. Accordingly, the Assessing Officer is directed to allow the depreciation to the appellant. Thu....
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....ted was deleted by coordinate bench in ITA No. 1636/Ahd/2018 and 1835/Ahd/2018, dated 11th May, 2020. The relevant part of such order is reproduced hereunder: " ... 2. Revenue has taken two grounds of appeal in each case. It contained five sub-grounds, hence, grounds of appeal in both the cases are not in consonance with Rule 8 of Income Tax (Appellate Tribunal) Rules; they are descriptive and argumentative in nature. In brief, its grievance in both the appeals relates to grant of depreciation on Solar Power Plant ("SPP" for short) by the ld.CIT(A). First of all, we notice that vital points in both the cases are common. Therefore, for the facility of reference, we take up the facts from Unimed Technologies Ltd. ("UTL" for short), as this appeal has been extensively argued by ld. representatives. 3. Brief facts of the case are that Unimed Technologies Ltd. has filed its return of income electronically on 18.9.2013 declaring total income at Rs. 4,45,94,808/-. The case of the assessee was selected for scrutiny assessment, and notice under section 143(2) was issued on 2.9.2014. The assessee at the relevant time was engaged in manufacturing and dealing with pharmaceuti....
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....Block 10 1.33 1.85 10.50 Sun Petrochemicals Pvt Ltd Block No. 15 & 18 Tables of Block 10 1.33 1.87 10.65 Unimed Technologies Ltd. Block No. 16, 18 Tables of Block 10 1.33 1.87 10.65 Sun Medications Pvt Ltd (Now known as Sun Pharma Laboratories Ltd.) Block No. 9, 11, 12, 13 4 5.81 33.10 Real Gold Developers LLP Block No. 1 to 8 8 11.61 51.13 Total 16 23 116.03 4. In order to satisfy himself that assessees have acquired assets and put them for use of their business purpose, the ld.AO has called for various details, and issued a detailed questionnaire. ... ... ... 8. We have duly considered rival contentions and gone through the record carefully. Section 32 of the Income Tax Act has directed bearing on the controversy, and therefore, it is imperative upon us to take note of relevant part of this section. It reads as under: 32. (1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of....
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....se total 16 blocks of solar power plant. In the case of Aditya Medisales Ltd., department has accepted the establishment of solar power plant and allowed the depreciation. This order of the ld.CIT(A) was not challenged, thus, the same treatment be given to the purchase agreement and installation of SPP of the present assesses. 10. On due consideration of these facts, we are of the view that to some extent discrepancies pointed out by the AO and brought to our notice by the ld.CIT-DR do create a suspicion in our mind about the user of the assets for the purpose of business by the present assessees, but simultaneously if it is to be looked in such a manner that MP Power Management Co. Ltd. an instrumentality of Madhya Pradesh State Government, has awarded a contract for establishment of 16 blocks of solar power plant, and such blocks were established, thereafter it as sold to Real Gold Developers LLP, and RGD LLP further sold these 16 blocks in part to five concerns including the present two assessees. It is to be appreciated that if this solar power plant of 16 blocks is an integrated power plant and part of the block purchased by present two assessees cannot work independe....
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....he Revenue is hereby dismissed. 30. Ground No. 8 of Department's appeal relates to CIT(A) erred in deleting the addition of Rs. 81,63,728/- to Book Profit u/s. 115JB on the issue of disallowance u/s 14A. This issue is already dealt by us in paragraphs 16.1 to 16.5 of this order in ITA No. 1464/Ahd/2017, holding no adjustment be made in the Book Profit u/s. 115JB of the Act, thus following the same principle this Ground No.7 raised by the Revenue is hereby dismissed. 31. In the result, the Department's appeal is partly allowed. 32. ITA No: 1465/Ahd/2018 relating to the Assessment Year 2014-15. The Grounds of Appeal raised by the Assessee reads as under: The Appellant raises the following grounds, which are mutually exclusive, independent of and without prejudice to one another 1. On the facts and in the circumstances of the case and in law, the order passed 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: Disallowance of deduction under section 80IB/80IE in respect of interest on overdue bills, st....
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....f Rs 14,325-/ towards interest and Rs 60,50,750/- towards administrative expenses] made by the Ld. AO u/s 14A of the Income-tax Act, 1961 ('Act) read with rule BD of the Income- tax Rules, 1962 (Rules) in relation to earning of income exempt u/s 10 of the Act without appreciating that invocation of rule 8D is not automatic and recording of satisfaction and establishing a direct nexus between the expenditure incurred and the exempt income u/s 10 is a sina qua non. 4.2 Without prejudice to the above, the Ld CIT(A) has failed to consider that the Appellant had sufficient interest free funds and that the investment in instruments producing exempt income were made out of such non-interest-bearing funds thereby making the interest disallowance under rule 8D(2)(i) uncalled for. 4.3. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that the Appellant had in fact earned net interest income and hence, there was no case for disallowance of interest expenditure under section 14A read with rule 8D 4.4. Without prejudice to the above, the Ld CIT(A) grossly erred in not appreciating that exempt income earning investments were made for strateg....
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....rship of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In the process, the Ld CIT(A)/Ld. AO failed to appreciate that: (i) the ownership in respect of trademarks, being the major portion of the intangible assets, was transferred to the Appellant: (ii) in respect of patents and technical know-how etc. so recorded, the Appellant had acquired perpetual & irrevocable license to use and exploit the said patents, technical know-how etc. which constituted an asset in itself, eligible for being accounted as an intangible asset and consequently amortization was carried out. 5.4 The Ld. CIT(A) / Ld. AO grossly erred in alleging that claiming amortization of intangibles was a colourable device to make an unsustainable claim as the same amount was added back and reduced for computing book profit under section 115JB without appreciating that the addition and reduction was in accordance with the requirement of section 115JB of the Act. 33. Ground No. 1 is general in nature, which does not require any adjudication and hence dismissed. 34. Ground No. 2: Disallowance of deduction u/s. 80IB/80IE....
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....nd circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit, without appreciating the facts and reasons mentioned by the AO in the assessment order of erstwhile firm Sun Pharma Sikkim (SPS), which after its conversion into a Part IX company, has amalgamated with the assessee company. 2.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit, without appreciating the fact that erstwhile Sun Pharma Sikkim was formed by the splitting up and reconstruction of the existing business of Sun Pharmaceutical Industries (SPI), and the condition that used machinery is less than 20% of the stipulated limit, has not been fulfilled by the assessee. 2.4. On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of the appellant in respect of deduction u/s. 80IE is allowable without appreciating that in the absence of proper details and bills, it could not be ascertained as to whether plant and machinery were new and not used earlier,....
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....s 80IB(13)/80IE(6) r.ws. 80IA(10) on apportionment of research and development expenses of Rs. 7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the facts and reasons mentioned by the AO in the assessment order. 4.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.w.s. 80IA(10) on apportionment of research and development expenses of Rs. 7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the fact that expenditure related to R&D was debited only in the books of SPIL, but no allocation was made to eligible units of assessee company, as revealed during the proceedings of survey action u/s 133A, and the working of allocation of R&D activity on the basis of turnover in the ratio of 3:1 is justifiable and reasonable. 4.3 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.w.s. 80IA(10) in respect of research and development expenses without appreciating that R & D work requires specialized skill and knowledge....