TaxTMI 
TaxTMI 
2022 (9) TMI 1594
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....ermining the arm's length price ("ALP") of the international transaction of the Appellant and making an adjustment of Rs. 1,307,427,111/- u/s 92CA of the Income Tax Act with respect to: • Manufacturing of pharmaceutical products, • Corporate guarantees provided; and • Investment made in subsidiaries. 2. The learned AO and TPO ought to have accepted the arm's length price as determined by the Appellant. 3. That on the facts and circumstances of the case, the learned AO and the learned TPO erred in rejecting the Transfer Pricing ("TP") documentation without appreciating the contentions, arguments, and evidentiary data put forward by the Appellant during the course of the proceedings before them, and in doing so have grossly erred: 3.1. in rejecting Cost Plus Method adopted in the TP documentation and conducting a fresh comparability analysis (using external comparable companies) for determining the arm's length price by the learned TPO. 3.2 in adopting the Transactional Net Margin Method ("TNMM") as the most appropriate method and considering entity level margins by taking recourse to an independen....
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....ring the fact that the guarantee given was in the nature of a corporate comfort only and that no cost was incurred by the Appellant in extending such guarantee. 4.2 in assuming that various risks in the form of country risk, currency risk, and administration costs in respect of the guarantees provided are borne by the Appellant. 4.3. in finding out corporate guarantee fees charged by banks in Mumbai / India when the right approach is to find out the guarantee fees charged in the countries where the subsidiary is located. 4.4. In assuming that the risk on account of granting a corporate guarantee is extremely high for the Assessee purely based on the fact that the details regarding the entity whose assets are subjected to mortgage has not been specified. 4.5 in considering arbitrary numbers for arriving at various basis points during the course of computing the transfer pricing adjustment. 4.6 in considering that providing bank guarantee is an "international transaction" for the Assessment Year under reference. 4.7 in ignoring the bank guarantee commission payable in the respective countries in the ordinary course. 4.8 I....
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....the closing balances of investments Be Rs. 2,577,029,686/- for Strides Arcolab International Limited, UK) instead of average value of investments during the year or based on the actual date of investments. II. Corporate Tax 6. Disallowance of deduction claimed under section 108: 6.1. That on the facts and circumstances of the case, the Honorable Dispute Resolution Panel ("DRP") and the Learned AO has erred in disallowing the deduction of Rs. 96,094,021/- claimed u/s 108 in respect of profits of 'Strides Technology & Research Division' ("STAR"). 6.2. The Honorable DRP and the Ld. AO has erred in not considering the activity of producing the 'Dossier as manufacture or production of an article or thing. Instead the Honorable DRP and the Ld. AO have held that the deliverables under the contracts is granting of the license and not the preparation of the dossiers. 6.3 The Honorable DRP and the Ld. AQ erred in concluding that the agreements are titled "License and Supply Agreement", "Co-operation and Supply Agreement", "Development, Licensing and Supply Agreement" without appreciating the fact that the Dossiers are prepared under "S....
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.... per the requirement. 6.11 Without prejudice to the above, the learned AO has erred in not appreciating that, the definition of 'Information Technology Enabled. Services' as per the provisions of the Act is very wide and covers any product. or service and includes any data processing and is not restricted to computer software. 7. Reworking of deduction claimed under section 108 on account of allocation of R & D expenditure: 7.1. The Honorable DRP and the Ld. AO have failed to appreciate the fact that only Rs. 430,503,695/- being the revenue expenses has been debited to profit and loss account of 'STAR' unit and the balance Rs. 21,979,554/- and Rs. Rs. 746,050/- being the Capital expenditure for Plant and Machinery and Buildings respectively have been capitalized in the books of accounts. The Honorable DRP and the Ld. AO has further erred in allocating the R & D expenditure to the manufacturing units in the ratio of turnover of each unit. 7.2 The Honorable DRP and the Ld. AO ought to have appreciated the fact that the extent of R & D undertaken has no bearing on the respective turnover of the other units. 8. Disallowance o....
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....ike difference in time frame at which the rental agreements were entered into, terms of agreements, development of the locality at the time of entering into the rental agreements, quality of construction of the properties, age of the properties, the property structure (s) etc.; amongst the others. 9.3 The Honorable DRP and the Ld. AO erred in arriving at Rs. 15 per sq. ft. as the rent payable to related party without providing the basis on arriving at the same. Further, the locational and logistical advantages and the terms of the rental agreements have not been considered. 9.4. Notwithstanding the above, the learned AO while determining the amount to be disallowed has adopted Rs. 39,607,940/-, being the amount of rent including service tax as disclosed in the tax audit report in Form No.3CD instead of Rs. 35,509,280/, being the actual expenditure debited to the P& L Account. The Ld. AO and Honourable DRP failed to observe that only the actual expenditure debited to the P & L Account alone can be disallowed and the service tax component of Rs. 4,098,660/- (Rs. 39,607,940/- less Rs. 35,509,280/-), which was not debited to P & L Account in the first place. ....
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....d not equity. 10.9 The Honorable DRP and the Ld. AO have erred in not relying on the following decision which have held that liability to pay premium is only a revenue expenditure: • Madras Industrial Investment Corporation Ltd. v. CIT-225 ITR 802 • CIT v. First Leasing company of India Ltd. 292 ITR 110 • CIT v. Chemicals and Plastics India Ltd. 292 ITR 115 11. Disallowance of FCCB issue expenses: 11.1. The Honorable DRP and the Ld. AO erred in disallowing Rs 9,897,774/-, being 1/5th of total issue expenses on FCCB. 11.2. The Honorable DRP and the Ld. AO have erred in not appreciating the fact that 1/5th of total issue expenses was allowed as a deduction in AY 2006-07. 12. Disallowance under section 14A: 12.1. The Honorable DRP and the Ld. AO have erred in law and on facts by invoking Rule 8D read with section 14A of the Act in determining expenditure in relation to earning exempt income viz. dividend income of Rs. 22,996,317/-. 12.2. The Honorable DRP and the Ld. AO have erred in not appreciating the fact that out of Rs. 5,719,707,238/-, an amount of Rs. 3,971,499,575/- relates to....
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....ht to have appreciated the fact that, Starmore is a foreign subsidiary and the dividend income, if any, earned from it is taxable in India. 12.10. Notwithstanding the above, having computed the imputed interest on the share application money in Starmore Ltd. and the same being assessed to tax, the learned AO has further erred in considering such investment for computing disallowance under section 14A The Ld. AO ought to have observed the fact, considering the investment in Starmore Ltd for the purpose of computing notional interest adjustment under transfer pricing regulations and also for the purpose of disallowances under section 144 is not correct in law. 13. Forex losses on Forward Contracts: 13.1. The Ld. AO has erred in making adjustment for forex loss of Rs. 373,342,488/- instead of Rs. 244,845,926/-, which is the actual amount of Forex Loss. 14. Adjustment to Book Profit u/s 115JB: 14.1. The Ld. AO has grossly erred in making adjustment to book profits u/s 115JB on account of provision for leave encashment amounting Rs. 21,693,226/- treating the same as liabilities of unascertainable nature. 14.2. The Ld. AO has failed t....
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....aceutical products and has operations in various countries. Assessee filed its return of income electronically on 30.09.2008, declaring loss of Rs. 69,75,59,894/-. Thereafter a revised return was filed on 26.03.2010 declaring loss of Rs. 93,26,73,915/ -. Return of income was picked up for scrutiny. 04. As assessee has entered into several international transactions, therefore, reference was made to the learned transfer-pricing officer to examine the arm's-length price. The assessee has manufacturing activity, trading activity and research and development activity. Assessee has also several transactions with respect of intangible property. Assessee entered into following international transactions:- serial number particulars amount of international transaction Assessee's benchmarking methodology Manufacturing activity 1 purchase of raw material and consumables Rs. 4,952,783 CPM adopting internal benchmarking 2 sale of formulations 113,76,90,442 CPM - internal Trading activity 3 sale of raw material 3,01,74,804 TNMM 4 sale of spares 20,50,892 TNMM 5 s....
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....unts do not mention any such bifurcations vi. allocation of such expenses which move with the cost of material towards making of goods were also not explained not demonstrated to be accurate vii. The assessee has different activities within Pharma segment and drawing up different profit and loss segment is reliably is not possible. 07. Therefore, the learned transfer-pricing officer rejected the CPM as the most appropriate method and proposes to use the Transactional Net Margin Method [TNMM] at entity level using a set of external comparables belonging to Pharmaceutical segments. He selected 65 comparables whose average OP/OC [profit level indicator] is 19.94% and computed the assessee's margin at (-) 0.02 %. Accordingly he found that there is a shortfall in profit of Rs. 823,094,471/-. Accordingly, the above adjustment was proposed. 08. The learned transfer-pricing officer further found that the investment made by the assessee in various subsidiaries as well as in joint ventures is in the form of loan, whereas the claim of the assessee is that it is share application money. The learned transfer-pricing officer rejected the same and computed interest at the ....
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....280/- out of which the payment to related party is 3,96,07,940. Therefore he found that rent paid to related concern is higher by 133% and accordingly he disallowed a sum of Rs 1 71,64,640/-. v. The AO found that assessee has also claimed 1/5 of FCCB premium amounting to Rs. 128,023,824 during the year as the same was not debited to the profit and loss account. He disallowed the above sum holding that premium is only a notional expenditure and is contingent on the bondholder exercising the option of not converting the bonds into the share and therefore it is neither expenditure and not incurred during the year. vi. The learned AO also found that assessee has received dividend income of Rs. 22,996,317/- as exempt income and no disallowance u/s 14 A of the act is made. The learned AO held that disallowances required to be made in accordance with rule 8D and computed the total disallowance of Rs. 133,728,752/-. vii. The identical adjustment was also made to the book profit u/s 115JB. viii. On examination of the book profit AO found that assessee has debited provision for leave encashment expenses and provision for doubtful debts, which are not allow....
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....he assessee dated 13 August 2010 and order passed by the learned transfer pricing officer accepting the cost plus method as the most appropriate method for assessment year 2007 - 08. He further referred to the assessment proceedings for assessment year 2009 - 2010 wherein letter dated 21 January 2013 filed by the assessee in response to the show cause notice explaining the selection of the most appropriate method was accepted and as per order dated 30 January 2013 passed by the learned TPO no adjustment was made. Therefore, he submitted that the rule of consistency should be applied in selection of the most appropriate method to be adopted for benchmarking the transaction. He submitted that there is no change in the facts and circumstances of the case for this assessment year as compared to assessment year 2007 - 08 and 2009 - 10. Further, the Ld. Counsel for the Assessee stressed that the business profile of the Assessee has not changed in AY 2008-09 and AY 2009-10 vis-à-vis earlier assessment years. Considering the above, there was no justification for the AO / TPO to make any exception /deviation for AY 2008- 09 by disputing CPM as MAM. For this proposition, the learned a....
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....terprises (AE) & non-AE segment is not given and no bills/ vouchers etc. were produced: The Appellant submitted a detailed statement of Gross Margin and Net Margin analysis vide letter dated 08 September 2011 (refer page Nos. 186 to 188 of the compilation). This working clearly provides detailed break up of sales and costs incurred into the identified segments such as Formulations, R&D and trading. ii. While computing the margins, the Assessee has allocated sales and consumption of materials based on actual and allocated costs to respective segments based on the nature of costs such as consumption, sales ratio, etc. iii. The TPO never requested for any detailed statement or back up documentation such bills/ vouchers including the basis for allocation of costs and revenue and hence, the same were not submitted (refer page No. 243 of the compilation being the rectification application dated 23 November 2011) Not demonstrating the fact that separate books, stock register, etc. are maintained for AE & nonAE segment: iv. There is no such requirement in law for maintaining separate books, stock registers, etc. for AE and Non AE Segments. v. Fu....
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....activities within pharma segment and drawing up different Profit & Loss A/c. segments reliably is not possible: xv. The TPO had proposed to make adjustments only with regard to formulations segment (defined as pharma segment in the TP order). The TPO has accepted the allocation in the R&D and trading segment (since there is no upward adjustment made with regard to the said two segments). This also proves the fact that keys used by the Appellant for allocation of costs to formulation, R&D, and trading segments has been correctly drawn and accepted by the TPO. xvi. Since the Appellant has applied the CPM method for benchmarking the R&D and trading segments and for reasons aforesaid, the gross margins need to be compared between AE and non-AE transactions and there is no requirement of drawing separate P&L account for each segments. xvii. Appellant also conducted a supplementary analysis using internal TNMM (after excluding the extraordinary items) (refer letter dated 08 September 2011, page No. 168 of the compilation) in terms of which the Appellant derived a net margin on the transactions with non AES at 7.56% and the net margin derived by the Appellant on....
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....arable companies ought to be taken at 11.70% (refer letter dated 17 October 2012 (page Nos. 361 to 365 of the compilation) xxv. In case the correct margin of the 62 comparable companies is considered along with the adjustment vis-à-vis the operating income and exchange fluctuation loss, the transaction will be at arm's length. xxvi. The adjustment made should be restricted to prices/margins adopted in the international transactions for AE only and not the prices/ margins adopted in transactions with non-AES. Reliance is placed on the following decisions:- i. CIT v/s. Hindustan Unilever Ltd. (2016) taxmann.com 325 (Bombay) - SLP filed by the Tax 72 Department rejected by the Supreme Court reported in (2018) 99 taxmann.com 135 (SC) ii. CIT v/s. Phoenix Mecano (India) Pvt. Ltd. (2019) 108 taxmann.com 124 (Bombay) iii. CIT v/s. Tara Jewels Exports (P.) Ltd. (2017) 80 taxmann.com 117 (Bombay) iv. CIT v/s. Thyssen Krupp Industries Pvt. Ltd. (ITA No. 2201 of 2013) (Bombay High Court) v. CIT v/s. Petro Araldite Pvt. Ltd. (ITA No. 1804 of 2013) (Bombay High Court) vi. DCIT v/s. Thyssenkrupp Electrica....
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....ining separate quantitative details with respect to quantity dealt with AE and Non AE, or maintaining separate books of accounts under any law applicable to assessee. If a particular requirement is not mandated by law, no fault can be found on the part of assessee and then rejected a method accepted by both the parties over a time. The TNMM adopted by ld TPO also saddled with several flaws for which there is no answer. Assessee claims that if the margins are corrected, margins of assessee is better than comparables is los not looked in to by ld TPO as well as Ld DRP. Ld TPO did not provide basic working of all those 65 comparables and how these comparables are selected and what are the filters applied is also not shown. Therefore, there is no justification for adopting transactional net margin method where in earlier year as well as in subsequent year the cost plus method adopted by the assessee has been accepted. We therefore direct the ld AO/ ld TPO to delete the adjustment made in adopting entity level TNMM but accept CPM as MAM. In view of above, other grounds relating to arm's length price by way of entity level TNMM adjustments has become infructuous and same are not required....
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....linpharm Pvt Ltd. v/s DCIT (ITA No. 2618/Mum/2014) ii. Bombay Dyeing & Mfg. Co. Ltd. v/s. DCIT (2017)87 taxmann.com 213 (Mumbai Trib) iii. Micro Ink Ltd. v/s. ACIT (2015) 63 taxmann.com 353 (Ahmedabad - Trib.) iv. DCIT v/s. CCL Products (I) Pvt. Ltd. (ITA No. 191/Viz/2018) v. DCIT v/s. EIH Ltd. (2018) 89 taxmann.com 417 (Kolkata Trib) 025. The Ld AR further contended that providing corporate guarantees to overseas AE's is a shareholder activity and hence no transfer pricing adjustment on account of corporate guarantee is required. Reliance was placed on the following decisions: a. Tega Industries Ltd. v/s. DCIT (2016) 76 taxmann.com 24 (Kolkata Trib.) b. Bombay Dyeing & Mfg. Co. Ltd. v/s. DCIT (2017) 87 taxmann.com 213 (Mumbai Trib) c. Micro Ink Ltd. v/s. ACIT (2015) 63 taxmann.com 353 (Ahmedabad - Trib.) 026. The Ld AR submitted the corporate guarantee should be charged @ 0.20% p.a. as held by the Mumbai Bench of the Tribunal in the case of -Asian Paints Ltd. v/s. ACIT (ITA No. 7801/Mum/2010) which has been affirmed by the Bombay High Court reported in 75 taxmann.com 152. 027. The Ld. AR further submitted that....
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....irect the AO to limit the adjustment to 0.5% p.a. on the amount of corporate guarantee provided based on the period for which the guarantee was operative in respect of each of the AE's during the year under consideration. The learned transfer-pricing officer is directed to compute the arm's-length price of the corporate guarantee at the rate of 0.5%. Accordingly ground number 4 of the appeal is allowed with above directions. 031. The issues arising in ground no.5 in assessee's appeal is with regard to imputation of share application money paid to Associated Enterprises (AE's). The brief of the case pertaining to this issue as emanating from the record are, during the relevant assessment year , the assessee had invested towards Shares and share application money in the following entities: Particulars Nature of Investment Date from when they became a Subsidiary Nature of Subsidiary Int as per TPO A Investment in Overseas Subsidiaries 1 Starsmore Limited Equity 24-Jul-07 Incorporated Entity 22,19,68,743 (Share applic....
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....rtain shares and share application money. Aggrieved by the order of AO / TPO, the Assessee approached DRP for relief. During the course of Hearings, the Assessee made the following submissions: i. Out of the total interest amount of Rs. 52,40,43,116/- computed by TPO , the interest on investments in the form of share application money was Rs.43,22,54,366/- only and balance amount of Rs. 9,17,88,750/- was in the form of shares. i.e. the TPO had imputed interest on Shares as well as mentioned in the table above. The Assessee submitted that the amount of Rs. Rs. 9,17,88,750/- should be deleted since the interest pertains to shares allotted. ii. Further, the TPO had calculated the interest @ 8.16% p.a. on the investments (for both share application money as well as certain shares) ,the rate of interest being the cost of capital of the assessee as per the TPO. The Assessee submitted that interest should be calculated at LIBOR rate instead of cost of capital of the Assessee Company. iii. Further, the TPO had computed interest on the closing balance of investments as on March 31,2008 while ignoring the opening balances for computing the average balances. ....
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....06.2009 and 01.08.2013 of Starsmore Ltd. (Strides Pharmaceuticals (Holdings) Limited, Cyprus (vii) Sample Share Certificate dated 01.12.2012 of Strides Arcolab International Ltd., UK (viii) Statement showing the reconciliation of the share application money in respect of investments made during the year under consideration in Starsmore Ltd. (Strides Pharmaceuticals (Holdings) Limited and Strides Arcolab International Ltd. b. The TPO, DRP and the AO failed to appreciate that share application money in Starsmore Limited was made for the first time and until the time the application money is converted into equity, it cannot be termed as an associated enterprise. c. The TPO, DRP and the AO failed to appreciate that only real income can be brought within the ambit of taxation. In this case, no income has been earned or can be said to have been earned by the Appellant and imputing interest on a hypothetical income would be unwarranted and unjustified. d. The TPO, DRP and the AO failed to appreciate that investment in equity is not always made with a view to earn a fixed return even in a transaction between independent third parties. e....
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.... considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in Assessee's own case in (a) Strides Pharma Science Ltd. v/s DCIT 15(3) (2) in ITA no. 7370/Mum/2018 for the assessment year 2014-15 , vide order dated 07.02.2020 and (b) Strides Pharma Science Ltd. v/s DCIT 15(3) (2) in ITA no. 7992/Mum/2019 for the assessment year 2015-16 , vide order dated 06.04.2022 has decided the issue in favour the assessee. In both the Orders the Co-ordinate Bench of the Tribunal has made detailed observations before coming to the conclusions. I ITA No 7992/Mum/2019 [2022-TII-96-ITAT-MUM-TP] coordinate bench held as under :- "9. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no.7370/Mum./2018, for the assessment year 2014-15, vide order dated 07.02.2020, has decided the issue in favour of the assessee by observing as under:- "14. We have heard both the parties, perused the materials available on record and gone through orders of the authorities be....
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....the share application money to the assessee and therefore such transactions could not be subjected to transfer pricing provisions. The Hon'ble Jurisdictional Bombay High Court in the case of Shell India Markets Pvt. Ltd. vs. ACIT and others has also held that the provisions of chapter 10 of the Act would apply only when income arises from the international transactions. The relevant portion of the said order is reproduced as under: "9. We shall now consider the above submissions on behalf of the Revenue. So far as the availability of alternative remedy is concerned, the petitioner has at the beginning of today's hearing itself undertaken to withdraw its objection on the issue of jurisdiction before the Dispute Resolution Panel. This was accepted by us before considering the issue on the merits. Moreover, this petition was filed on April 24, 2013, challenging the impugned orders dated January 30, 2013, of the Transfer Pricing Officer and the draft assessment order dated March 28, 2014, of the Assessing Officer, on the issue of jurisdiction. This issue has been decided in Vodafone IV and would be binding on all authorities within the State till the apex court takes a....
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....n view of the variation in the shareholding pattern amongst different shareholders of the petitioner during the year clearly brought the issue of shares within clause (e) of the Explanation to section 92B of the Act. In terms of the above provision an international transaction would include a transaction of restructuring entered into by an enterprise with an associated enterprise. Mr. Pardiwala, learned counsel appearing for the petitioner, points out that there has been no restructuring of the organization but there has been a mere change in the shareholding of different shareholders of the petitioner. However, in the present facts we need not examine this for the reason that even if it is assumed that it is an international transaction, the jurisdictional requirement for Chapter X of the Act to be applicable is that income must arise. In this case, admittedly following Vodafone IV no income has arisen. Thus, the jurisdictional requirement for application of Chapter X of the Act is not satisfied. 12. As held in Vodafone IV, the jurisdiction to apply Chapter X of the Act would occasion only when income arises out of international transaction and such income is chargeable t....
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....s a capital account transaction not separately brought within the definition of 'income' as per the provisions of section 2(24) as well as sections 4 & 5 of the Act. Therefore, such capital account transaction not falling within a statutory exception cannot be brought to tax. Even income arising from international Transaction between AE must satisfy the test of income under the Act and must find its home in one of the above heads i.e. charging provisions. There is no charging section in chapter X of the act. Only if there is income which is chargeable to tax under the normal provisions of the act, then alone Chapter X of the act could be invoked. Further, since there is no income arising from the transaction of issue of shares, the provisions of chapter X would not apply. The Hon'ble Bombay High Court in the said case has quashed and set aside as Being without jurisdiction, null and void, the reference made by the TPO, and the order of the TPO making a transfer pricing adjustment on issue of shares. Respectfully following the decision of the jurisdictional Bombay High Court, the adjustment proposed by the' TPO on account of issue of shares is deleted. Accordingly, g....
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....rocess outsourcing facility in R&D, Analytical Method Development, stabilities studies, clinical studies, valuation method etc. For this the assessee claimed deduction for an amount of 9,60,94,021/-. The AO asked the assessee to furnish the details of items manufactured by assessee's contract manufacturing and research division including various agreements for ._export entered into by the said unit of the assessee. The assessee furnished the details but according to the AO, assessee's activity constituted development of generic version of pharmaceuticals product as pro-type and compiling of the data relating to such product as dossier; which is used for getting sanction from regulatory authorities and assessee claimed that it is producing the dossier which is to be considered as goods and hence it falls within the definition of manufacture or production of article or thing and thus the same is eligible for claim of deduction under Section 10B of the Act. The AO and the DRP rejected the claim stating that, the preparation of the dossier is only regulatory and intermediary process and not an end - product in it self in so far as the assessee's main obligation is concerned....
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.... Section 10B as it has established that the relevant conditions of section 10B that there must be a production of article or thing and export of such article . or thing and consideration thereof brought into India within the time permissible under the foreign exchange regulations are fulfilled and accordingly allowable. We allow this issue of assessee's appeal." 042. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co- ordinate Bench of the Tribunal in assessee's own case cited supra, we direct the Assessing Officer to allow the deduction claimed under section 10B of the Act. Accordingly, ground no.6, raised in assessee's appeal is allowed. 043. The issue arising in ground no.7, raised in assessee's appeal is with regard to reworking of the deduction claimed u/s. 10B of the Act on account of allocation of R & D expenditure. During the course of hearing, the learned A.R. did not intended to press this ground. Consequently, ground no.7, raised by the assessee is dismissed as not pressed. 044. The issue arising ....
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....being rental expenditure claimed by assessee and rent paid to related parties is unreasonable in term of section 40A(2)(b) of the Act and therefore, disallowed the same. The assessee explained before the lower authorities that the differential rent paid to Chayadeep properties Pvt. Ltd. and K Narayanraju & K Bhaskaraju was based on quality of construction for the respective properties and further Chayadeep properties Pvt. Ltd.. to whom the assessee paid this rent has declared it as rental income in its tax return and for the same amount and there is no tax evasion/leakage. 048. During the course of hearing, the learned A.R. submitted that identical issue was decided in favour of the assessee by the Co-ordinate Bench of the Tribunal in assessee's own case for the preceding assessment year. 049. The learned D.R. vehemently relied on the orders passed by the lower authorities. 050. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no.8614/Mum./2011, for the assessment year 2007-08, vide order dated 08.06.2018, deleted t....
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.... show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co- ordinate Bench of the Tribunal in assessee's own case cited supra, we direct the Assessing Officer to delete the disallowance under section 40A(2)(b) of the Act. Accordingly, ground no.9, raised in assessee's appeal is allowed. 052. The issue arising in ground no. 10 and 11, raised in assessee's appeal is with regard to disallowance of FCCB premium and expenses. The brief facts of the case pertaining to this issue as emanating from the record are that the AO and DRP has considered that the sum of Rs. 12,80,23,824/-being 1/5th of total redemption premium and 1/5th of the FCCB issue expenses amounting to 98,97,774/- as deduction has been claimed by assessee u/s 37(1) of the Act. According to AO, the premium of redemption is neither due nor incurred during the year and it is just a provision for liability arising in future. Accordingly, the AO disallowed the claim of deduction and the assessee carried the matter to DRP, who also confirmed by holding that the FCCB premium of redemption is just a ....
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.... perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA No.8540/Mum/2010 for the assessment year 2006-07, vide order dated 31.03.2017 and in ITA no. 8614/Mum./2011, for the assessment year 2007-08, vide order dated 08.06.2018, had deleted the said disallowances. 056. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law were alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co- ordinate Bench of the Tribunal in assessee's own cases cited supra, we are of the view that the assessee has rightly claimed the liability as expense direct the Assessing Officer to delete the said disallowance u/s 37(1) of the Act. Accordingly, ground no.10 and 11, raised in assessee's appeal is allowed. 057. The next ground in this appeal of assessee is ground no.12 is against the order of AO and the DRP in disallowing the expenses relatable to exempt income i.e. disallowance under section 14A of the Act r/w rule 8D of the I.T. Rules., 1962 ("Rules"). During the relevant assessment year, the ....
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.... expenditure incurred by the assessee (and debited to Profit & Loss Account) for earning the exempt income. 061. We find that while making a further disallowance under section 14 A of the Act, over and above suo-motu disallowance offered by the assessee, the Assessing Officer has not considered any of the submissions made by the assessee which have bearing on the issue. We also noticed that the Co-ordinate Bench in assessee's own case in Strides Pharma Science Ltd. v/s DCIT, in ITA no. 7370/Mum/2018, for the assessment year 2014-15, vide order dated 07.02.2020 and in ITA no. 7992/Mum/2019, for the assessment year 2015-16 vide order dated 06.04.2022 has restored the issue to the file of the Assessing Officer by observing as under:- "30. ........ The sum and substance of ratio laid down by above judgments is that only those investments which yield exempt income needs to be considered for computation of average value of investments. In this case, we notice that the Assessee has himself disallowed an amount of Rs.21,27,797/- which has not been found to be accepted by the AO or the DRP. Further, the facts with regard to total investments and investments which yield exempt in....
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....o- ordinate Bench of the Tribunal in the orders cited supra and the law applicable after consideration of the submissions of the assessee. Further, we a l s o direct the Assessing Officer to delete the addition of disallowance under section 14A while computing book profit under section 115JB of the Act. Accordingly, ground no.12, raised in assessee's appeal is allowed for statistical purpose. 065. The issue arising in ground no.13, raised in assessee's appeal is with regard to computation error in calculating the amount of forex loss on the forward contracts. During the course of hearing, the learned A.R. did not intended to press this ground. Consequently, ground no.13, raised by the assessee is dismissed as not pressed. 066. The issue arising in ground no.14, raised in assessee's appeal is with regard to adjustments made to "book profits" computed in terms of section 115JB of the Act vis-à-vis provision for leave encashment and forex losses on forward contracts. Brief facts of the case are during the assessment proceedings, the AO has considered the provision for leave encashment as unascertained liability and added to the computation of book profits. Further, the am....