TaxTMI 
TaxTMI 
2024 (9) TMI 16
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....confirming disallowance of Rs. 15,15,09,216 from out of total disallowance of Rs. 19,63,90,203 made by the Assessing Officer in respect of legitimate business expenditure incurred by the appellant-company for sponsorship expenses of medical practitioners/doctors. 2. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming disallowance of Rs. 21,29,612 made by the Assessing Officer in respect of employees' contribution to PF/ESI, on the ground that the same was not paid within the prescribed time limit under the PF/ESI Acts, even though the payment was made within the time limit for filing the return of income u/s 139(1) of the I.T. Act. 3. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the Assessing Officer's action in reducing the quantum of deduction u/s. 80-IC in respect of the Baddi Unit by excluding the following items of income from the profits of the Baddi Unit eligible for such deduction: Rs. (a) Cash discount 9,40,184 (b) Export benefits 3,72,14,846 (c) Insurance Income 8,418 (d) Government Grant 3,41,4....
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....and in the circumstances of the case, the learned CIT(Appeal) erred in confirming exclusion of the following items of income from the profits of the Sikkim Unit for the purposes of granting deduction u/s.80-IE of the I.T Act. Rs. (a) Insurance Income 49,259 (b) Government Grant 57,071 (c) Interest Income 68,809 Total: 1,75,139 11. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 3.1 The assessee vide letter dated 13-01-2023 also raised following additional grounds of appeal: The Appellant craves leave to raise these additional grounds of Cross Objections before the Hon'ble ITAT. This are legal grounds and therefore, as per the decision of Hon'ble Supreme court in the case of National Thermal Power (229 ITR 383), it can be raised before the Hon'ble ITAT. In view of the above, the appellant hereby raises following grounds as additional grounds of Appeal, which is without prejudice to the grounds raised by the appellant while filing appeal in Form 36A. 1. Without ....
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.... the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. 3.5 From the above, it is transpired that the view that the Tribunal is confined only to those issues arising out of the appeal before Commissioner (Appeals) is too narrow a view to describe the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. In view of the above judgment referred to above, we admit the additional grounds raised by the assessee. 4. The 1st issue raised by the assessee is that the Ld. CIT-A erred in confirming the disallowance of Rs. 15,15,09,216/- out of total disallowance of Rs. 19,63,90,203/- made by the A....
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....owed an amount of Rs. 5,30,61,002/- and Rs. 37,78,978/- respectively. 6. On appeal by the assessee, the learned CIT(A) allowed part relief to the assessee. As such the learned CIT(A) regarding the expenses claimed under the "Business Advancement and Sales Promotion" held that expenses under the impugned head includes gift items distributed to various stakeholders which were less than Rs. 1000/- only. Further, it is also not the case that the gift items were exclusively given to doctors/medical practitioners only. Therefore, same cannot be said to be incurred in violation of regulation issued by the Indian Medical Council in exercise of power conferred under section 33 of Indian Medical Council Act 1956 and the consequent CBDT circular bearing No. 05/2012 dated 01-08-2012. The learned CIT(A) also found that identical disallowance was made in the own case of the assessee for AY 2011-12 and 2012-13 which was allowed by predecessor CIT(A) in favour of the assessee. Accordingly, the learned CIT(A) deleted the disallowances of 10% of "Business Advancement and Sales Promotion" made by the AO for Rs. 5,30,61,002/- and Rs. 37,78,978/- respectively. 6.1 Regarding the expenses claimed u....
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.... AR and DR before us supported the order of the authorities below to the extent favourable to them. 8. We have heard the rival contentions of both the parties and perused the materials available on record. The Indian Medical Council (MCI) by exercising power conferred under section 33 of Indian Medical Council Act 1956 issued Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 wherein the MCI has imposed prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash, or monetary grant from the pharmaceutical and allied health sector Industries. Subsequently, the CBDT vide circular No. 05/2012 dated 01-08-2012 clarified that expenditure incurred by the pharmaceutical or allied health sector industries in the nature of freebie to doctors is in violation of above mentioned regulation of MCI and therefore, such expenditure will not be allowed as deduction to the pharmaceutical or allied health sector industries under the provision of explanation to section 37(1) of the Act being expenses incurred for a purpose which is either an offence or prohibite....
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....nt. 8.3 From the above, it is clear that the prohibition imposed by the MCI regulation and further by the CBDT circular is applicable on the pharmaceutical and allied health industries and the expenses incurred in providing the freebies to the doctors cannot by allowed as deduction under section 37(1) of the Act. 8.4 Now coming to issue whether the CBDT Circular 05/2012 dated 01-08-2012 shall be applicable prospectively or retrospectively i.e. whether applicable from the date on which circular was published (01-08-2012) or from the date on which MCI regulation was published (14-12-2009). In this regard we note that the Hon'ble Supreme court in case of M/s Apex Laboratories (P.) Ltd. (Supra) held that "The CBDT circular being clarificatory in nature, was in effect from the date of implementation of Regulation 6.8 of the 2002 Regulations, i.e., from 14-12-2009." Hence, it is settled position now that CBDT circular prohibiting allowance/ deduction of expenses incurred by the pharmaceuticals industries in nature of freebie to doctor is applicable retrospectively from 14-12-2009. 8.5 Coming to the facts of the case on hand, the assessee has claimed deduction of certain expendit....
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....r play, restrict the disallowance at 5% of the gross amount claimed by the assessee under the head "Business Advancement & Sales Promotion". 8.7 Coming to the expenses claimed under the head "Doctors Sponsorship", both the AO and the learned CIT(A) agree that expenses incurred under the impugned head are in nature of freebie to doctors. The learned AR for the assessee before us also failed to establish that the expenses under the head "Doctors Sponsorship" are not in the nature of freebies to doctor. However, the learned CIT(A) divided the amount incurred before and after the date of issue of CBDT circular bearing No. 05/2012 dated 1-8-2012. The learned CIT(A) accordingly held that the expenses incurred before 1st August 2012 shall not be subject to the disallowance. As such, the learned CIT(A) held the applicability of the impugned circular with prospective effect. On the other hand, we have already discussed in the preceding paragraph that the Hon'ble Supreme Court has taken the view that the impugned circular is clarificatory in nature and applicable with retrospective effect from 1st April 2009. Hence, we hereby set aside the finding of the learned CIT(A) and held that entir....
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..../- v) Net Foreign Exchange Gains of Rs. 54,93,768/- as income derived from eligible business by an appropriate enterprise of the assessee." 15. The AO during the assessment proceedings found that there were several incomes shown by the assessee under different heads which were not directly arising from the activity of manufacturing of article or things. The details of the same stand as under: (i) Notice pay Rs. 8,48,476/- (ii) Sale of Scrap Rs. 93,83,606/- (iii) Service tax refund Rs. 2,92,338/- (iv) Miscellaneous and rounding off Rs. 34,59,093/- (v) Forex gain Rs. 54,93,768/- (vi) Cash discount Rs. 9,40,184/- (vii) Export benefit Rs. 3,72,14,846/- (viii) Insurance income Rs. 8,418/- (ix) Interest Income Rs. 23,106/- (x) Government grant Rs. 3,41,469/- 15.1 Nevertheless, the assessee has claimed deduction under section 80-IC of the Act by treating them as profit derived from the business of eligible undertaking. However, the AO disputed the deduction with respect to such items of income by holding that such incomes are not derived from business of manufacturing of article or thi....
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.... of Kasar, discount and sales-tax set off. II Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Computation of deduction) - Assessment years 1994-95, 1996-97 and 1997-98 - Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA [In favour of assessee] II Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA." 73.2 In view of the above, we hold that the assessee is eligible for deduction in respect of the income as discussed above under section 80 IC of the Act. Accordingly we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed and the Revenue is dismissed. 69.3. Respectfully following the same, we do not find any reason to interfere in the order of the ld. CIT-A and thus direct the AO grant the deduction under section 80-IA of the Act on the items of income as discussed above. Hence, we hereby dismiss the ground of appeal of the Revenue. 16.1 Befor....
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.... to custom clearing agent, debited the profit and loss and account along with the amount of service tax. Thus, the profit of the eligible unit got reduced by the amount of service tax. Therefore, in our considered opinion when such services tax is refunded to the assessee, the same will reduce the expense of eligible unit. The assessee instead of reducing the expense has shown such receipt separately. Thus, it is just a manner of representation. Accordingly, we do not find any infirmity in the order of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IC of the Act with respect to the income being service tax discussed above in the given facts and circumstances. (vi) Miscellaneous income (Revenue appeal) 18. At the outset, we note that identical issue came before this Tribunal in own case of the assessee for A.Y. 2007-08 and 2008-09 in ITA No. 907 and 1634/AHD/2012 where the issue has been decided in favour of the assessee and against the Revenue vide order dated 15-05-2019. The relevant finding of the Bench is extracted as under: "73. We have heard the rival contention and perused the material available on record. The iss....
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....tfully following the order of the tribunal in the own case of the assessee discussed above, we do not find any infirmity in the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IC of the Act with respect to the income being Miscellaneous Income discussed above. (v) Forex Gain (Revenue appeal) 19. At the outset, we note that identical issue came before this Tribunal in the own case of the assessee for AY 2012-13 in ITA No. 1415/AHD/2018 where the issue has been decided in favour of the assessee and against the Revenue vide order dated 22-02-2022. The relevant finding of the Bench is extracted as under: 223. We have heard the rival contentions of both the parties and perused the material available on records. With respect to the foreign exchange income, we note that this issue has already been allowed in favour of the assessee in the series of judgments which have been reproduced in the order of the learned CIT-A. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT-A. 19.1 Before us, no material has been placed on record by the Revenue demonstrat....
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....ome should only be considered while excluding from the amount of deduction available under section 80IC of the Act. Thus the contention of the assessee with respect to income under the head cash discount is allowed. 20.1 Before us, no material has been placed on record by the Revenue demonstrating that the decision of Tribunal in own case of the assessee as discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing feature in the facts of the case of earlier AY and the year under consideration. Thus, respectfully following the order of the tribunal in the own case of the assessee discussed above, we hereby set aside the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IC of the Act with respect to the income being Cash Discount discussed above. (vii) & (viii) Export benefit & Insurance Income (Assessee's appeal) 21. At the outset, we note that identical issue came before this Tribunal in the own case of the assessee for AY 2010-11 in ITA No. 1286/Ahd/2017 where the issue has been decided in favour of the assess....
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....n under section 80-I is allowable in respect of Kasar, discount and sales-tax set off. II Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Computation of deduction) - Assessment years 1994-95, 1996-97 and 1997-98 - Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA [In favour of assessee] II Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA." 73.2 In view of the above, we hold that the assessee is eligible for deduction in respect of the income as discussed above under section 80 IC of the Act. Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed, and the Revenue is dismissed." 94.1. In view of the above order of the Tribunal, we do not find any disparity of facts and circumstances in the present year as that of earlier years. Therefore, we are unable to deviate from the view taken by the Co-ordinate Bench on this issue. We se....
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....anufacturing articles or thing. The provisions of Section 80-IC of the Act provide for deduction of the profits derived by the undertaking from the business of manufacturing articles or things. The expression 'derived from the business' has generated a lot of controversy. To our understanding, it refers to the effective source from which the income arises. But to find out the effective source, the term derived from indeed demands an enquiry into the genealogy of the product which should be stopped as soon as the effective source is discovered. 23.1 At this juncture it is important to refer the judgment of Hon'ble SC in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) which have interpreted the term 'derived from'. The relevant decision of the Supreme Court reads as under: "The Legislature has deliberately used the expression 'attributable to', having a wider import than the expression 'derived from', thereby intending to cover receipts from sources other than the actual conduct of the business of the specified industry." (p.85) 23.2 From the ratio of the aforesaid decision of the Hon'ble Apex Court, it emerges that the phrase 'deri....
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.... the expenditure incurred in earning such interest income which should be excluded for the purpose of under Section 80 HHC of the Act. To our mind, same would apply even when the revenue desirous to exclude certain interest income from the deduction available under Section 80IA of the Act. In our view, the Tribunal committed no error. 23.6 The above judgment of the Hon'ble High Court was in connection with the deduction under section 80IA of the Act but in our considered opinion, the same will also be applicable on the issue on hand as the provision of section 80IA and 80IC of the Act are perimetria. Therefore, following the above-mentioned judgment of Hon'ble Jurisdictional High Court, we hereby direct the AO to exclude the net interest income i.e. excluding the expenses incurred in earning such interest income. Hence the ground of appeal of the assessee in this regard is partly allowed. (x) Government grant (Assessee) 24. The assessee during the year under consideration receives a government grant of Rs. 3,41,469/- in the Baddi unit from the Department of Biotechnology under the scheme of Biotechnology Industry Partnership Program. Such grant was received by the assessee....
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....ssessee regarding the allowances of deduction under section 80IC of the Act on different type of receipts are partly allowed whereas the counter ground of appeal of the Revenue is hereby dismissed. 25. The next issue raised by the assessee vide ground Nos. 4 & 5 of its appeal is that the learned CIT(A) erred in confirming the action of the AO by allocating the administrative expenses to Baddi and Sikkim Unit eligible for deduction under section 80-IC and 80-IE of the Act respectively. 26. The assessee in the year under consideration has allocated common administrative expenses based on the number of employees between Baddi Unit and Sikkim unit. However, the AO was of the view that the basis adopted by the assessee for the allocation of the administrative expenses is not proper. As per the AO, the administrative expenses are required to be allocated based on the turnover of the respective units. Accordingly, the AO allocated an additional sum of Rs. 2,36,92,391/- to Baddi Unit and Rs. 5,50,80,826/- to the Sikkim Unit which resulted in a reduction in the deduction under section 80IC and 80IE of the Act of the respective eligible unit. 27. On appeal by the assessee, the learn....
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....e depreciation on office fixtures and equipment • Legal counsel and accounting staff salaries • Office supplies • Salary to the management • Audit Fees 21.3 These expenses are incurred by a company regardless of whether the company produces or sells anything, generates income or incurs a loss. Most of these expenses either are fixed or semi-fixed, and there is a limited scope to reduce them. The companies that have a centralized management system tend to have higher general and administrative expenses. On the contrary in the case of decentralizing system, certain functions are delegated to subsidiaries. 21.4 Similarly these expenses cannot be linked to any particular undertaking of the company in a case the assessee has more than one undertaking. Thus the dispute arises for the allocation of such expenses among the different unit/ undertaking of the assessee. Regarding the allocation, we are of the view that these expenses cannot be allocated based on the turnover. It is because the turnover of any undertaking is very much volatile and keep on changing depending upon the market forces, competition, Government pol....
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....pect also referred to various case laws holding that the deduction for the provision of leave encashment cannot be allowed in the year under consideration in the absence of actual payment. Thus, the AO added the same to the total income of the assessee. 32. The learned CIT(A) also confirmed the disallowance made by the AO by observing that the provision does not represent the actual expense and the same are created to meet the future expenses. Therefore, the same cannot be allowed as deduction considering the nature of the provision as well as the considering the clear provision of section 43B(f) of the Act. 33. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 33.1 The learned AR before us reiterated the arguments made before the lower authorities. 33.2 On the other hand, the learned DR vehemently supported the order of the authorities below. 34. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that an identical issue came before this Tribunal in the own case of the assessee for AY 2011-12 in ITA No. 1396/AHD/2018 where the issue has been decided again....
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.... 2289.09 Capital Expenses Furniture & Fixtures 34.82 Electrical equipment 12.71 Vehicles 5.42 Total (B) 52.95 Total (A+B) 2342.04 36.1 Besides the above, the AO further found that out of the above list of unapproved expenses, there were certain expenditures incurred outside the approved R&D facility. The details of the same stand as under: Particulars Expense Weighted Deduction claimed Clinical Research expenses 983.94 1967.88 Professional fees in and outside India 66.16 132.32 Patent Expense (Consulting Fees) outside India 515.05 1030.1 Interest on Loans 45.66 91.32 Labour & Job work charges 165.00 330.00 Other Studies Expenses 110.77 221.54 Total 1913.29 3826.58 The above expense of Rs. 1913.29 lacs are incurred outside the approved in house R&D centre and not on the in-house research and development centre which is very much required as per the provisions of section 35(2AB). The explanation in no way obliterates the primary condition that the expenditure must be approved by the prescribed authority (DSLR). When the prescribed authority has categorically....
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.... assessee preferred an appeal before the learned CIT(A) who partially allowed the appeal of the assessee. The learned CIT(A) found that the issue of weighted deduction on salary to Dr. C Dutt for Rs. 272.31 Lakhs, Building repairs for Rs. 91.63 Lakhs and Municipal tax for Rs. 11.86 Lakhs covered in favour of the assessee by the order of the Tribunal in own case of the assessee for AY 2003-04 to 2005-06. Hence, the learned CIT(A) deleted the disallowances made by the AO. 37.1 Likewise, the learned CIT(A) found that expenditure on clinical trial, patent registration and approval etc. incurred outside the approved facility are covered under the provisions of section 35(2AB) of the Act by the explanation inserted to section 35(2AB) of the Act vide Finance Act 2001 and also covered by the judgment of Hon'ble Gujarat High Court in the case of Cadila Healthcare reported in 31 taxmann.com 300. Hence, the learned CIT(A) deleted the disallowances made by the AO for the weighted deduction on the expenditure of clinical research for Rs. 983.94 Lakhs, professional fee for Rs. 66.16 Lakhs, patent registration expense for 26.71 & 515.05 Lakhs and studies expenses of Rs. 110.77 Lakhs. 37.2 R....
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....ur of the assessee by the order of this Tribunal in the own case of the assessee in ITA 1869/AHD/2009 vide order dated 31-5-2012 pertaining to the AY 2005-06. The relevant extract of the order is reproduced as under: 6. Another effective ground as raised by the Revenue is with regard to deleting the disallowance of weighted expenses on R & D of Rs. 1,03,25,000/-. Ld. CIT-DR submitted that order passed by Ld. CIT(A) is erroneous. On the contrary, Ld. Authorized Representative for the assessee submitted that weighted deduction on Rs. 33.33 expenses relating to repairing building expenses Rs. 9.01 lakh municipal tax paid by the assessee and Rs. 75.97 lakh, salary to Mr. C Dutta has been allowed in the earlier year. Ld. AR submitted that this issue is squarely covered in favour of assessee in ITA No.3569/Ahd/2004 A.Y. 2001-02. 7. We have heard the rival submissions, perused the materials available on record and judgment cited by the parties. So far the disallowance with regard to R&D, building, municipal tax and salary to Dr. C. Dutt are concerned this issue has been decided by the Hon'ble co-ordinate bench in ITA No.3569/Ahd/2004 (supra) in favour of assessee. In....
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....in an in-house research and development facility, the same become eligible for deduction under section 35(2AB)(1). [Para 3.8]. 50.1 Respectfully following the above finding of special bench of Tribunal, we hold that the assessee is eligible for weighted deduction on expenses incurred on clinical trial and patent registration. Accordingly, we do not find any infirmity in the order of learned CIT(A) and directed the AO to allow weighted deduction. Hence the ground of appeal of the Revenue is hereby dismissed. 39.3 Thus, respectfully following the order of this tribunal in own case of the assessee as discussed above, we do not find any infirmity in the order of the learned CIT(A) with respect to the claim of weighted deduction on the expenditure of clinical trials & studies and on product/ patent registration etc. 39.4 Coming to the issue of disallowance of weighted deduction confirmed by the learned CIT(A)with regard to interest on loan, labour& job works charges, furniture and fixture and electrical equipment. At the outset we note the present assessee in the A.Y. 2012-13 also claimed weighted deduction on the impugned expenditure being interest on loan, labour& job w....
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....only. However no disallowance was made while computing the book profit as per the provisions of clause (f) of explanation to section 115JB(2) of the Act. Accordingly, the AO made addition of Rs. 47,45,891 to the book profit. 42. On appeal by the assessee, the learned CIT(A) found that the income of the assessee under normal provisions of the Act is higher than the book profit even after making addition to the book profit by the amount disallowances computed under section 14A of the Act. Therefore, the issue of addition to book profit become infructuous. 43. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 43.1 The learned AR before us submitted that the ld. CIT-A should have decided the issue on merit instead of holding the same as infructuous. 43.2 On the other hand, the learned DR supported the order of the authorities below. 44. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the issue on hand are elaborated in preceding paragraph hence which are not in dispute. Therefore, we are not inclined to repeat the same. At the outset, we note that the Special Bench ....
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....iled as under: 1. Zao Torrent Pharma, Russia 2 Mn USD 2. Torrent Pharma Gmbh 2 Mn Euro 47.1 The assessee has not charged any fee from AE for extending such corporate guarantee. However, the assessee in TP report suo-moto offered ALP @ 1.5% of guarantee amount with respect to guarantee extended to its AE namely Zao Torrent Pharma Russa whereas no such ALP was offered with regard to the guarantee furnished to Torrent Pharma Gmbh. The assessee before the TPO contended that the corporate guarantee was not utilized by the AE, therefore there was no risk associated with unutilized guarantee. Accordingly, the question of charging commitment fee does not arise. The assessee further submitted that the corporate guarantee was extended to help the AE in their growth which ultimately be beneficial for its business. Therefore, no adjustment of ALP is required to be made. 47.2 However, the TPO disagreed and following the order of his predecessor AO/TPO for earlier years benchmarked guarantee fee with respect to Zao Torrent Pharma Russia @ 2.23% against the 1.5% offered by the assessee and @ 0.205% with respect to Torrent Pharma GmbH against the NIL offered by the assessee. The ....
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....arantees and that may be a reason that Finance provider insist on non-charging any commission from Associated Enterprise as a commercial principle. Further, it has been observed that his position indicates that provision of guarantee always involves risk and there is a service provided to the Associate enterprise in increasing its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on profit & loss account, but inherent risk cannot be ruled out in providing guarantees. U1 and adjustment are to be made on guarantee commissions on such guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise. In the light of the above decisions, the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and the order passed by the DRP is to be restored. [Para 76] 50.1 From the above observation of the Hon'ble Madras High court, it is discernible that the corporate guarantee extended by the company to the AE is in the nature of service and the AE by utilizing such services i....
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.... for the reason that the assessee poses strong financial base whereas the AE are comparatively financially weaker. Thus, the TPO determined the ALP of interest at LIBOR + 473 basis point and accordingly made addition of Rs. 4,39,625/- only. 52. On appeal by the assessee, the learned CIT(A) confirmed the order of the AO. 53. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 53.1 The learned AR before us submitted that the rate of interest between the corporates cannot be compared with loan extended by the banks whose main activity is extending loans to generate revenue. Therefore, the basis adopted by the AO/ TPO is not sustainable. 53.2 On the other hand, the learned DR vehemently supported the order of the authorities below. 54. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee has extended loans and advances to its foreign AEs on which credited interest in the books at LIBOR + 175 basis point. However, the assessee in TP report offered notional interest income by taking ALP at LIBOR + 400 basis point by taking internal cup. The notional interest offe....
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....s as under: 41. Before deciding ground of appeal, it would be useful to discuss some judicial precedents which have analyzed this issue before us. In the case of IPCA Laboratories Ltd.146 taxmann.com 28 (Mumbai - Trib.), the Mumbai ITAT held that where assessee- company had given interest Free loans to its AEs, since loan was given in foreign jurisdiction, LIBOR +200 points was correct benchmarking for interest. In the case of Bhansali & Co. 54 taxmann.com 131 (Mumbai - Trib.), the Mumbai ITAT held that interest charged as LIBOR plus 200 basis points on foreign currency loan given abroad is most correct benchmark. In the case of Motherson Sumi Systems Ltd. 58 taxmann.com 38 (Delhi - Trib.), the Delhi ITAT held that where TPO made addition to assessee's ALP in respect of interest on loan given to its AE, since interest rate charged by assessee from its AE was higher than LIBOR rate in the year under consideration, impugned addition was to be set aside. In the case of Soma Textiles & Industries Ltd.149 taxmann.com 163 (Ahmedabad - Trib.), the Ahmedabad ITAT held that ALP adjustment of interest on loan given to AE was to be benchmarked at LIBOR + 2 per cent. We observe th....
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....ation at Rs. 86,77,761/- in the following manner: S. No. Amount in Rs. Dt. of Payment Dt. of allotment Delay falling in C.Y. Interest in Rs. 1 20,51,66,850/- 08-08-2012 28-03-2013 232 72,24,571/- 2 15,19,72,500/- 16-11-2011 18-05-2012 63 14,53,190/- 56. The aggrieved assessee preferred an appeal before the learned CIT(A). The learned CIT(A) concurred with the alternative plea of the assessee that the interest if any is to be determined on the share application money then such interest shall be calculated for the period of delay beyond 180 days only but not for the period starting from the date of payment to date of allotment. 56.1 The learned CIT(A) accordingly found that there were total 184 days taken for completing the allotment of shares against the application money of Rs. 15,19,72,500/-paid. Thus, there was only a delay of 4 days for which interest shall be charged and the same has already been made subject to the addition in the AY 2012-13 by the order of the ld. predecessor CIT(A). Hence the learned CIT(A) deleted the addition of interest charged by the TPO/AO for Rs. 14,53,190/- 56.2 Likewise, the learned CIT(A....
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....ment of shares by the AE to the assessee, such delay cannot change the character of the transaction as loan. We note that the Delhi bench of ITAT in the case of Bharti Airtel Limited vs. ACIT reported in 43 taxmann.com 150 has held as under: 47. We find that in the present case the TPO has not disputed that the impugned transactions were in the nature of payments for share application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has, however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated as in the nature of lending or borrowing, the transactions can be subjected to ALP adjustments, and the ALP so computed can be the basis of computing taxable business profits of the assessee, but the core issue before us is whether such a deeming fiction is envisaged under the scheme of the transfer pric....
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....nfusion. Hence, the ground of appeal of the assessee with respect to capital infusion is hereby allowed whereas the ground of revenue's appeal in this regard hereby dismissed. 59. The next issue raised by the assessee vide ground No. 10 of its appeal is that the learned CIT(A) erred in confirming the disallowance of deduction under section 80-IE of the Act in Sikkim Unit on other incomes. 60. The AO during the assessment proceedings found that the assessee has claimed deduction of profit derived from Sikkim Unit under section 80-IE of the Act. As per the AO, there were certain incomes considered by the assessee eligible for deduction under section 80-IE of the Act but the same were not directly arising from the eligible business activity. The details of the same stand as under: (i) Miscellaneous Income Rs. 4,27,344/- (ii) Sale of Scrap Rs. 8,35,083/- (iii) Excise duty on sale of scrap Rs. 1,248/- (iv) Government Grant Rs. 57,071/- (v) Notice Pay Rs. 3,40,963/- (vi) Insurance income Rs. 49,259/- (vii) Forex gain Rs. 3,712/- (viii) Cash discount Rs. 2,56,886/- (ix) Interest Income Rs. 68,809/- 60.1 The AO disallowed the d....
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....have been made by the AO with regard to Baddi Unit of the assessee eligible under section 80-IC of the Act. The provision of section 80-IC and 80-IE of the Act are perimetria. Both the sections deal with the deduction against the profit and gains derived by the undertaking from eligible business i.e. manufacturing of articles or things. The AO also disallowed the deduction under section 80-IE of the Act on same reasoning used for disallowing the deduction claimed under section 80-IC of the Act. In the case of disputes under section 80-IC of the Act, the learned CIT(A) in identical manner has allowed deduction on certain income and simultaneously sustained the disallowances of deduction on certain item of incomes. Against the order of the learned CIT(A) with respect to deduction under section 80-IC of the Act both the assessee and Revenue were in appeal before us.The issue for the deduction under section 80-IC of the Act relating to different items of income has been adjudicated by us vide paragraph No. 16, 18, 19, 20, 21, 23, 24 of this order. Since the provisions of both the sections are in perimetria, therefore the findings given in the above-mentioned paragraph shall also be app....
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.... amount while computing the book profit under section 115JB of the Act, therefore, the issue is for our examination that "whether the excise duty exemption which is a capital receipt and not chargeable to tax under the normal provisions of the Act, is to be considered as a part of book profit for computing the book profit under section 115JB of the Act". 11. We will like to first go through the judicial jurisprudence available for the issue in hand. We find that in the case of Sunrise Biscuit Co. Pvt. Limited -vs.- ITO, ward -1(5), Guwahati ITA No. 92/Gau/2019 (page 87- 102 of the case law paper book), the Hon'ble Guwahati Tribunal was dealing with the issue whether subsidy received by the assessee was capital in nature and, therefore, not exigible to income-tax, both under normal computational provisions as well as book profit u/s 115JB. The Hon'ble ITAT relied upon of the judgement of the Hon'ble Supreme Court in the cases of Sahney Steel & Press Works (supra) & Ponni Sugar & Chemicals Ltd. (supra) and had held that the object or purpose for which the subsidy was given was relevant. It was held that the source of subsidy is immaterial, form of subsidy is equally immateri....
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....d below: ****************** 16. By placing reliance on the above decision in the case of Shree Cement Limited (Supra), carbon credit being a capital receipt was held to be excludible while computing Book Profit in the following cases- ACIT -vs.- Shree Cement Ltd. NTA No. 504/JP/2012, order dtd. 27-01- 2014 ACIT -vs.-M/s L.H. Sugar Factory Limited NTA No. 417 & 418/LKW/2013, order dtd. 09-02-2016. 17. Hon'ble Bombay High Court in the case of CIT -vs.- Harinagar Sugar Mills Ltd. (ITA No. 1132 of 2014), order dtd. 04-01-2017 (Refer Page No. 752-755 of Paper Book) has held that the object or purpose of the subsidy decides its character - whether on revenue or capital account. The point of time at which subsidy is paid and the source of subsidy are immaterial. Where the receipt was on capital account, the same needs to be excluded in computing Book Profit u/s 115JB. 18. In the case of DCIT -vs.- Binani Industries Ltd. (ITA No. 144/Kol/2013, order dtd 02-03- 20161. (Refer Page No. 772-789 of Paper Book), it was held that receipt from forfeiture of share warrants credited to the P & L A/c and disclosed in the notes to accounts being a ....
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....see being covered by the excise duty notification, such sum collected on the goods manufactured and sold is in the nature of incentive subsidy given for establishing the units in backward areas and to generate employment opportunities. The said fact is evident from the office memorandum dated 07.01.2003 of Ministry of Commerce and Industry, which reads as under:- 3.4 On perusal of the above, it can be seen that incentive in the form of Excise Duty Exemption has been given with an objective to achieve industrialization in the backward areas of Himachal Pradesh and Uttaranchal and to generate employment opportunities. The object of the assistance was not to enable the businessman to run the business more profitably but encourage a businessman to set up a new unit or expand the existing unit for overall economic development of the state. Hence, the incentives granted by the Government of India vide Office Memorandum No. 1(10)/2001-NER issued by DIPP, Ministry of Commerce and Industry, GOI dated 07-01-2003 read with Notification No. No.50/2003- CE dated 10-06-2003, will be treated as capital receipt and not liable to tax. In this regard, statement showing computation of excise....
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.... 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot be part of book profit computed u/s 115JB of the Act. Similarly, the ITAT Kolkata Bench, in the case of Sipca India (P.) Ltd. v. Dy. CIT [2017] 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit u/s 115JB of the Act. 49. Insofar as, case laws relied upon by the department , we find that all those case laws have been either considered by the Tribunal or High Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific p....
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....rs and in the year under consideration vide para 80 of this order had taken view in favour of the assessee that the R&D expenditureof capital nature and R&D expenditure on discovery stage are not liable to be allocated to the unit eligible for deduction under section 80-IC or 80IE of the Act. 69. Now the assessee videthis additional ground of appeal contended that the R&D expenditure on product development stagesuo-moto allocated to the eligible unit should be withdrawn. As per the learned AR of the assessee, no expense incurred on R&D are liable to be allocated to the eligible units in view of the judgment of Hon'ble Gujarat High Court in its own case reported in 88 taxmann.com 530 where it was held as under: 8.1 It is not in dispute that research centre is an independent centre and that its main object is to conduct research for the business of the assessee. The research centre, therefore, in our opinion, is not directly linked with the eligible undertaking. Thus, for the purpose of computing deduction u/s.80HH and 80I, profit from eligible undertaking is to be computed on the basis of gross income by reducing expenditure which has been incurred for the eligible under....
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....ting the disallowance of garden expenses of Rs. 43,54,892/-." 5) "that the Ld. CIT (A) has erred in law and on the facts in directing to allow depreciation on computer and computer software @ 60% instead of 25%." 6) "that the Ld. CIT (A) has erred in law and on the facts in deleting disallowance of Rs. 2,34,902/-made on account of treating capital investment subsidy of Rs. 30,00,000/- received from Government of India under the Central Capital Investment Subsidy Scheme, 2003 as received towards cost of capital asset and therefore not allowing depreciation on it." 7) "that the Ld. CIT (A) has erred in law and on the facts in deleting the disallowance of additional depreciation on Pallets, Trolley and Mobile racks of Rs. 29,55,245/-." 8) "that the Ld. CIT (A) has erred in law and on the facts in deleting the disallowance made by the assessing officer out of Rs. 23,42,01,943/- out of deduction claimed by the assessee u/s. 35(2AB) in respect of research and development expenditure consisting of: i) Salary to Dr. Dutt of Rs. 272.31 lakhs ii) Building repair expenses of Rs. 91.63 lakhs iii) Municipal Tax of Rs. 11.86 lakhs ....
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....e note the issue raised by the revenue in the captioned ground of appeal has been adjudicated along with the assessee's ground of appeal raised on the same issue in ITA No. 2365/Ahd/2018. The ground of appeal of the assessee has been adjudicated vide paragraph Nos. 16, 17, 18 and 19 of this order wherein we have decided the issue against the revenue and partly in favour of the assessee. For the detailed discussion, please refer to the said paragraphs of this order. Hence, the ground of appeal of the Revenue is hereby dismissed. 76. The next issue raised by the revenue is that the learned CIT(A) erred in deleting the allocation of R&D expenses to the Baddi and Sikkim unit eligible for deduction under section 80-IC and 80-IE of the Act. 77. The AO during the assessment proceedings found that the assessee during the year has incurred R&D expenditure in relation to discovery, development of product and capital expenses on building, furniture, and electrical equipment. The R&D expenses on development of product has been allocated to eligible unit (Baddi & Sikkim Unit) in sales ratio whereas 100% of R&D expenses on discovery and capital expenditure were allocated to head office. Th....
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....section 80-IC or 80IE of the Act as the case may be by following the order of his predecessor CIT(A) for the AY 2012-13 in the own case of the assessee. 79. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 79.1 Both the learned DR and the learned AR before us vehemently supported the order of the authorities below as favorable to them. 80. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that in own case of the assessee identical allocation was made by the AO in the assessment 2009-10. The issue came before this tribunal in the assessee's appeal being ITA No. 1285/Ahd/2017. The Tribunal vide order dated 22-02-2022 decided the issue in favour of the assessee by observing as under: 25. We have considered rival submissions and gone through the materials available on record. We have further considered order passed by the Coordinate Bench of the ITAT, Ahmedabad Bench in assessee's own case vide consolidated order in ITA No. 907/Ahd/2012 (Department) and 938/Ahd/2012 (assessee) for the assessment years 2007- 08 and ITA No.1634/Ahd/2012 (assessee's) and 172....
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....dinate Bench in ITA No.1347/Ahd/2007 for A.Y. 2003-04 dismissed the ground of appeal raised by Revenue. In view of the fact that issue has already been decided by Hon'ble co-ordinate Bench in ITA No. 4356/Ahd/2007 for A.Y. 2004-05 and ITA 44 ITA Nos. 907, 938, 1634 & 1725/Ahd/No. 1347/Ahd/2007 for A.Y. 2003-04 in assessee's own case. Respectfully following the order of the coordinate bench, this ground of Revenue's appeal is dismissed. 40.3 It is also important to note that, the AO in the subsequent assessment year 2008-09 has not allocated the cost on scientific research under the head discovery and capital cost to the eligible unit. Thus in our considered view the principle of consistency needs to be applied in the case on hand as held by the Hon'ble apex court in the case of Radhaswoami Satsang v/s CIT reported in 193 ITR 221 wherein it was held as under: "13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has ....
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....of the matter, we delete the impugned addition of Rs. 36,16,40,065/- disallowed by the ld.AO. Hence the ground of appeal of the assessee is allowed. 80.1 Before us, no material has been placed on record by the Revenue demonstrating that the decision of the Tribunal in own case of the assessee as discussed above has either been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing features in the facts of the case of earlier AY and the year under consideration. Thus, respectfully following the order of the tribunal in the own case of the assessee discussed above, we do not find any infirmity in the finding of the learned CIT(A). Thus, the ground of appeal raised by the revenue is hereby dismissed. 81. The next issue raised by the revenue is that the learned CIT(A) erred in deleting the garden expenses for Rs. 43,54,892/- only. 82. The Assessee during the year incurred garden expenses of Rs. 43,54,892/- only and claimed the same as revenue expense. The assessee contended that such expense was incurred for maintaining a good atmosphere within the factory premises as well as to comply with ....
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....l raised by Revenue is dismissed. 85.1 Before us, no material has been placed on record by the Revenue demonstrating that the decision of the Tribunal in own case of the assessee discussed above has either been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing features in the facts of the case of earlier AY and the year under consideration. Thus, respectfully following the order of the Tribunal in the own case of the assessee discussed above, we do not find any infirmity in the finding of the learned CIT(A).Thus, the ground of appeal raised by the revenue is hereby dismissed. 86. The next issue raised by the Revenue is that the learned CIT(A) erred in allowing the depreciation on computer software @ 60%. 87. The assessee in the books of account recorded computer software under intangible assets but in computation of income clubbed the same with the block of assets under the head computer and claimed depreciation on the same @ 60%. The assessee submitted that in the books of account, the software was recorded as intangible asset as per the requirement of AS-26 being "Intangible Asset....
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.... as under: 56. We have heard the rival contentions of both the parties and perused the materials available on record. The issue on hand confined to the extent whether the software purchased by the assessee is part of computer for purpose of depreciation or the same can be treated as intangible assets. At this juncture it is pertinent to refer the depreciation schedule as provided under Act. On perusal of the same we find that Part-A, block III sub block (5) of the Depreciation Schedule contain the rate of depreciation for computer including computer software which reads as under: III. MACHINERY AND PLANT *** (5) Computers including computer software [See note 7 below the Table] Notes: 7. "Computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device. 56.1. From the reading of the above, it becomes clear that software is part of computer. Hence, the depreciation on the same is allowable at the rate applicable for computer. In this regard we also find support and guidance from the judgment of Hon'ble Madras High Court in case of CIT vs. Computer Age Management Serv....
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....stment Scheme 2003 for its unit situated at Baddi Himachal Pradesh. The assessee treated such receipt as capital receipt. However, the AO was of the view that the subsidy was received on account of capital investment which is directly linked with capital assets deployed by the assessee in Baddi Unit. Therefore, the cost of capital assets should be reduced by the amount of the subsidy which has been provided to meet the cost of capital assets. Accordingly, the AO in A.Y. 2009-10 reduced the amount of Block Assets and disallowed the proportionate depreciation @ 15%. Following the same, the AO in subsequent years and in the year under consideration, has disallowed the proportionate depreciation for Rs. 2,34,902/- only. 92.1 We note that the disallowances made by the AO in A.Y. 2009-10 were deleted by the learned CIT(A) against which the Revenue was in appeal before this Tribunal in ITA No. 1327/Ahd/2017. The Tribunal vide order dated 22-02-2022 decided the issue in favour of the assessee by observing as under: 67. We have heard the rival contentions of both the parties and perused the materials available on record. The dispute on hand is whether the WDV of block assets can....
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....ourt in case of CIT vs. PJ Chemicals reported in 210 ITR 830, where in the similar facts and circumstances it was held as under: In the instant case, the reasoning underlying, and implicit in, the conclusion reached by the majority of the High Courts cannot be said to be an unreasonable view and on a preponderance of preferability that view commends itself particularly in the context of a taxing statute. The expression 'actual cost' needs to be interpreted liberally. The subsidy of the nature in the instant case did not partake of the incidents which attract the conditions for their deductibility from 'actual cost'. The Government subsidy, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost'. 67.2. In view of the above discussion and judgment of Hon'ble Supreme Court, we do not find any infirmity in the order of the learned CIT(A). Thus, the ground of appeal of the Revenue is hereby dismissed. 92.2 Onc....
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....e in favour of the assessee by observing as under: 230. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee during the year under consideration purchased certain Trolleys, Mobile Rackets and Pallets and treated the same as part and parcel of the plant and machinery and claimed depreciation accordingly whereas the AO treated the same as furniture and fixture and disallowed the excess deprecation which has been reversed by the learned CIT (A). 230.1. Now the question arises before us whether the assets being Trolleys, Mobile Rackets and pallets used in manufacturing plant for movement and safe storage of goods can be described as plant and machinery or furniture. At this juncture, we note that the coordinate of bench Pune Tribunal in case of Serum Institute of India (supra) in similar facts and circumstances observed that nature of the assets used in the business is to be decided on the basis of functional test of the assets and accordingly held that tables, stools, rackets etc. used in laboratories are part and parcel of plant and machinery. We also find that the learned CIT(A) in his order....
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....that the donation paid by the assessee is also to be allocated to the eligible unit as the HO paid such the donation. The AO accordingly allocated an amount of Rs. 96,50,814 (80G) & Rs. 58,78,048/- (80GGB) to the Baddi unit and an amount of Rs. 25,16,721/- (80G) & 15,32,866 (80GGB) to the Sikkim unit as per their turnover ratio. 101.2 The AO further found that both the unit are claiming 100% deduction under section 80-IC and 80-IE of the Act, therefore deduction u/s 80G and 80GGB of the Act cannot be allowed in respect of the eligible unit. Thus, the AO disallowed the deduction under section 80G and 80GGB of the Act in respect of these two units for Rs. 60,83,768/- and 74,10,914/- only. 102. On appeal by the assessee, the learned CIT(A) deleted the disallowance made by the AO by following the order of its predecessor CIT(A) in own case of the assessee for earlier years. 103. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 103.1 Both the learned DR and the learned AR before us vehemently supported the order of the authorities below as favorable to them. 104. We have heard the rival contentions of both the parties and perused the....
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....e in the facts of the case of earlier AY and the year under consideration. Thus, respectfully following the order of the Tribunal in the own case of the assessee discussed above, we do not find any infirmity in the finding of the learned CIT(A). Thus, the ground of appeal raised by the revenue is hereby dismissed. 105. The next issue raised by the revenue is that the learned CIT(A) erred in deleting the upward adjustment under TP provisions on account of liaison support, dossier licensing, custodian fee, and capital infusion. 106. In the captioned ground of appeal, the assessee has challenged the addition made by adjustment the ALP of different international transactions carried out with the AE. We, for the sake of better representation, proceed to adjudicate the same one by one. Liaison Support Services: 107. The assessee during the year has reimbursed cost of liaising support services to its different AEs along with markup on cost varying @ 0%, 5%, 10% and 13% which are detailed as under: AE Country Mark-up Laboratories Torrent Malaysia SDN Malaysia 0% TORRENT AUSTRALASIA PTY. LTD Australia 10% Laboratories Torrent S.A. de C.V Mexico ....
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....he factuality and nature of services rendered where mark up of 10% to 16% over costs has been considered as appropriate so as to compensate for these services. The AR also argued that in earlier years also the appellant company had compensated AL's at 10% mark up which has already been accepted in the assessment proceedings, The facts and circumstances have not changed in this year, still the TPO has taken a different view. Looking at the submission of the appellant and details therein it seems that the compensation paid to AEs @ 10% is justifiable. The view is also supported by Calcutta High Court in the 'case of CIT V. ITC. Infotech India Limited (2016) 66 taxmann.com 106/237 Taxman 476/384 ITR 380 (Cal.) A.Y.2006-07, where in respect of marketing and administrative services rendered by AEs assessee adopted a revenue sharing model whereby assessee kept 75 per cent of revenue and paid 25 per cent of revenue to AEs, since said model was duly supported by relevant documents, impugned addition made to assessee's ALP by adopting revenue sharing model of 1 5 per cent was to be set aside. In view of above discussion the adjustment of Rs. 1,51,247 /- on acco....
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.... support services and marketing of the product. Thus, the TPO attributed the profit in the Ratio 75% to the assessee and 25% to the AE and accordingly made an upward adjustment of Rs. 5,49,35,742/-. 108.1 On appeal by the assessee, the learned CIT(A) deleted the adjustment made by the AO by following the order of its predecessor for A.Y. 2012-13. 108.2 Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 108.3 The learned DR before us vehemently supported the order of the Assessing Officer. 108.4 On the other hand, the learned AR before us vehemently supported the order of the ld. CIT-A. 108.5 We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that in own case of the assessee, an identical adjustment was made by the TPO in the assessment 2012-13. The issue came before this Tribunal in revenue's appeal bearing ITA No. 1415/Ahd/2018. The Tribunal vide order dated 22-02-2022 decided the issue in favour of the assessee by observing as under: 241. We have heard the rival contentions of both the parties and perused the materials available on record. At the....
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.... authorization Fee per authorisation 0 to 250 500 Euro 251 to 500 250 Euro 109.1 The assessee further submitted that identical custodian fee to independent party namely Emifarma SA de C.V. for holding its Marketing Authorization in Maxico @ $ 2000 to $ 3500 whereas it paid custodian fee to TPG @ $ 320 (250 euro) to $ 640 (500 Euro). Thus, the same is at ALP. 109.2 The assessee with regard to reimbursement of administrative expenses to TPG submitted the transaction of custodian fee are different from reimbursing of administrative expenses. As such reimbursement of administrative expenses are in relation to traveling and freight expenses. Therefore, the allegation that there no need to pay custodian fee when administrative expenses already reimbursed does not hold ground. 109.3 However, the TPO, on the other hand, disagreed with the contention of the assessee. The TPO found that the assessee for benchmarking the transaction relied on the custodian fees paid to Emifarma S.A de C.V., but as per the form 3CEB report, such party is a related party of assessee to whom it sold finished goods of Rs. 2,21,94,712/-. Hence, the comparable submitted by the assessee were ....
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..../- by disallowing the entire custodian fee is not sustainable and same is deleted." 109.6 Being aggrieved by the order of the learned CIT(A), the revenue is in appeal before us. 109.7 The learned DR before us vehemently supported the order of the Assessing Officer. 109.8 On the other hand, the learned AR before us vehemently supported the order of the ld. CIT-A. 109.9 We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the TPO has determined the ALP of the custodian fees paid by the assessee to its AE at Rs. NIL. However, the learned CIT-A has held that the custodian fees paid by the assessee are at ALP. The basis of the ld. CIT-A was this that the assessee has paid custodian fee to another company which was much more than the amount in dispute and the same was also accepted by the Revenue. Likewise, the ld. CIT-A also observed that all the economic benefits were transferred to the assessee and there was no of sharing the income for the marketing of assessee's product. In our considered view, the ld. CIT-A has given the reason and detailed finding which has not been controverted by the learned DR ap....
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..... Gujarat Parafins Pvt Ltd in ITA No. 2335/Ahd/2011 and ACIT vs. Kiran Industries Pvt Ltd in ITA No. 1450/Ahd/2012. 116. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 116.1 The learned DR before us vehemently supported the order of the Assessing Officer. 116.2 On the other hand, the learned AR before us vehemently supported the order of the ld. CIT-A. 117. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that in the own case of the assessee, an identical addition on account of unutilized value of MODVAT/CENVAT was made by the AO in the assessment year 2009-10. The issue came before this tribunal in revenue's appeal bearing ITA No. 1327/AHD/2017. The Tribunal vide order dated 22-02-2022 decided the issue in favour of the assessee by observing as under: 61. Having heard both the parties, we have gone through orders of the authorities below and materials available on record. It is submitted by the ld. counsel for the assessee, that assessee is regularly following 'exclusive method', i.e. 'net method' of accounting, whereby cost of ....
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....s. 25,99,87,036 made by the Assessing Officer in respect of legitimate business expenditure incurred by the appellant-company for sponsorship expenses of medical practitioners/doctors. 2. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming disallowance of Rs. 1,87,614 made by the Assessing Officer in respect of employees' contribution to PF/ESI, on the ground that the same was not paid within the prescribed time limit under the PF/ESI Acts, even though the payment was made within the time limit for filing the return of income 139(1) of the LT. Act. 3. On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the Assessing Officer's action in reducing the quantum of deduction / 80-IC in respect of the Baddi Unit by excluding the following items of income from the profits of the Baddi Unit eligible for such deduction: (a) Cash discount 1,62,156 (b) Export benefits 5,91,95,648 (c) Insurance income 3,959 (d) Interest Income 2,50,787 Total : 5,99,12,550 4 On the facts and in the circumstances of the case, the learned (IT(Appeal) erred in upho....
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....and in the facts and circumstances of the appellant's case, the appellant requests Hon'ble ITAT for admission of its additional claim and for not including the Excise Refund of Rs 26,75,10,140/- received by the appellant, while computing the Book Profit u/s 115JB of the Act on the ground that it is income in the nature of "capital receipts as per the settled legal precedents. 2 Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, following the decision of the Honable Gujarat High Court in Assesse's own case, the Appellant craves that no R&D expenditure including development cost should be allocated to industrial unit eligible for deduction u/s 80-IC of Rs. 15,86,14,030 and section 80-IE of Rs. 10,59.25,615, though allocated while filing the return of income In view of the above, the additional grounds raised may kindly be admitted in view of natural justice to the appellant." 119.2 At the outset, we note that the additional grounds raised by the assessee in its appeal for the AY 2014-15 are identical to the additional grounds raised by the assessee in ITA No. 2365/AHD/2018 for the assess....
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....d interest income. 125. At the outset, we note that the issues raised by the assessee in its ground of appeal for the AY 2014-15 are identical to the issue raised by the assessee in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicable for the assessment year 2014-15. The relevant ground of appeal of the assessee for the AY 2013-14 with respect to receipt of cash discount, export benefit and insurance income has been decided by us vide paragraph No. 20 and 21 of this order in favour of the assessee whereas ground with respect to interest income has been decided by us vide paragraph No. 23 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the assessee is hereby partly allowed. 126. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the allocation of additional administrative expenses to Baddi and Sikkim unit and thereby reducing the deduction under section 80-IC and 80-IE ....
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.... No. 39 of this order in favour of the assessee after placing reliance on the judgment of Hon'ble Gujarat High court in own case of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the assessee is hereby allowed. 132. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of deduction under section 80-IE of the Act on the receipt of Interest, insurance, and export benefit. 133. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2014-15 is identical to the issue raised by the assessee in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicable for the assessment year 2014-15. The relevant ground of appeal of the assessee for the A.Y. 2013-14 has been decided by us vide paragraph No. 63 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be a....
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....on/publicity / Medical/Literature expenses s. 37(1) of the Act consisting of i) Selling and distribution expenses under the heads Business ii) advancement expenses of Rs. 5,51,37,4271 iii) Sales promotion expenses of Rs. 56,21,474 2) "that the LA CIT (A) has erred in law and on the facts in directing the AQ to allow deduction u/s. 80IC after allowing the claim of the assessee of i) Sale of Scrap of Rs. 96,73,002/- ii) Service Tax Refund Income of Rs. 33,575/- iii) Miscelleneous income and rounding off of Rs. 1,48,948/- as income derived from eligible business by an appropriate enterprise of the assessee 3) "that the Ld CIT (A) hat erred in law and on the facts in allowing the appeal of the assessee on the issue of reallocation of R & D Expenditure of Rs. 18,85,27,570/- to Baddi Unit and u/s. 8010 and Rs. 40,81,86,014/- to Sikkim Unit w/s. 801E made by the Assessing Officer. 4) that the Ld CIT(A) haserred in law and on the facts in directing to increase eligible profit for Baddi Unit by Rs. 6.28.27,394/- 5) "that the Ld CIT (A) hat erred in law and on the facts in deleting the diallowance of ga....
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.... in its ground of appeal for the AY 2014-15 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2014-15. The relevant ground of appeal of the revenue for the AY 2013-14 has been decided by us vide paragraph No. 8 and73 of this order partly in favour of the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the revenue is hereby partly allowed. 142. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of deduction claimed by the assessee under section 80- IC of the Act on the receipts representing sale of scrap, service tax refund and miscellaneous receipt. 143. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2014-15 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 sha....
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.... 147.2 However, the AO held that the amount of administrative expenses allocated by the assessee to Baddi Unit is higher than the amount calculated based on turnover ratio therefore no adjustment is required to be made to Baddi unit but allocated the additional amount of administrative expenses of Rs. 27,74,99,662/- to Sikkim unit based on turnover ratio. 148. On appeal by the assessee, the ld. CIT(A) confirmed the view of the AO that the common administrative expenses should be allocated based on the turnover of the respective units. The ld. CIT(A) was also of the view that if additional administrative expenses was allocated to Sikkim unit due to change in the basis from number of employees to turnover, then excess amount already allocated to Baddi Unit based on number of employees shall be reduced. Accordingly, the learned CIT(A) directed the AO to reduce the amount of administrative expenses allocated to Baddi Unit by Rs. 6,28,27,394/- (Rs. 19,75,94,583/- already allocated by the assessee less Rs. 13,47,67,189/- calculated based on turnover ratio. 149. Being aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 149.1 The learned DR before us vehem....
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....xpenses for Rs. 49,40,748/- only. 152. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2014-15 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2014-15. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 85 of this order against the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the revenue is hereby dismissed. 153. The next issue raised by the revenue is that Ld. CIT-(A), erred in deleting the disallowance of depreciation of Rs. 1,99,667/- made on capital investment subsidy of Rs. 30 lakhs by treating the same as related to cost of capital assets. 154. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2014-15 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14....
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....ce of deductions under section 80G and 80GGB of the Act. 160. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2014-15 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2014-15. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 104 of this order against the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the revenue is hereby dismissed. 161. The next issue raised by the revenue is that the learned CIT(A) erred in deleting the disallowance/ addition made to book profit u/s 115JB of the Act by the amount of disallowance made u/s 14A of the Act. 162. The AO found that the assessee under normal computation of income has made suo moto disallowance under section 14A r.w. rule 8D(2) of the IT rule for Rs. 18,14,792/- only. However no disallowance was made while comp....
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....upport from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below: "We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." 165.3 Now the question arises to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under ....
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....on. 5 On the facts and in the circumstances of the case, the learned CIT(Appeals) erred in not allowing weighted deduction u/s 35(2AB) in respect of the following items of expenditure incurred by the appellant- company on research and development Rs. in Lacs (a) Interest on loan 17.11 (b) Labour and Job work charges 228.16 (c) Capital expenditure on furniture, electrical equipments and vehicles (being 200% of exp Incurred of Rs. 427 42 lacs) 854.84 (d) Expenses on employees not having not having degree in science 365.16 (e) Expense not identified 12.32 Total: 1477.59 6. On the facts and in the circumstances of the case the learned CIT(Appeals) erred in confirming exclusion of the following items of Income from the profits of the Sikkim Unit for the purposes of granting deduction u/s 80IE of the IT Act:- (a) Insurance Income 2,83,757 (b) Other Income 18427 (c) Interest Income 1,10,040 Total 4,13,124 7 The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal." 168. The assessee vide le....
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....ses of Rs. 26,20,83,897/- only. 170 At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2015-16 is identical to the issue raised by the assessee in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the assessee for the AY 2013-14 has been decided by us vide paragraph No. 8 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the assessee is hereby dismissed. 171. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of employee contribution to PF/ESI of Rs. 3,28,550/- only. 172. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2015-16 is identical to the issue raised by the assessee in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicab....
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....ar 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the assessee is hereby allowed. 177. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowances of weighted deduction under section 35(2AB) of the Act on account of Interest cost, labour& Job work charges, furniture & fixture, electrical equipment, vehicles, and expenses on employee not having degree in science. 178. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2015-16 is identical to the issue raised by the assessee in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the assessee for the AY 2013-14 has been decided by us vide paragraph No. 39 of this order in favour of the assessee after placing reliance on the judgment of hon'ble Gujarat high court in own case of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-....
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....see in ITA No. 2365/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2365/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the assessee for the A.Y. 2013-14 has been decided by us vide paragraph No. 69 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the assessee is hereby allowed. 185. In the result, the appeal of the assessee is hereby partly allowed for statistical purposes. Coming to ITA No. 1279/Ahd/2019 an appeal by the Revenue for A.Y. 2015-16 186. The Revenue has raised following grounds of appeal:"1) that the Ld CIT (A) has erred in law and on the facts in allowing the disallowance made u/s 37(1) of the Act consisting of i) Selling and distribution expenses under the heads Business ii)advancement expenses of Rs. 17,06,29,200/- iii)Sales promotion expenses of Rs. 2,12,65,122/-" 2) "that the Ld. CIT (A) has erred in law and on the facts in directing the AO to allow de....
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....the assessee for eligible deduction u/s 80IE of the Income Tax Act, 1961. 13) "that the Ld. CIT (A) has erred in law and on the facts in deleting the addition of unutilized MODVAT/CENVAT credit of Rs. 8,71,14,462/-." 187. The first issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of expenses incurred in contravention of MCI regulation. 188. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2015-16 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 73 read with para 8 of this order partly in favour of the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the revenue is hereby partly allowed. 189. The next issue raised by the Revenue is that the learned CIT(....
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....he relevant ground of appeal of the revenue for the A.Y. 2014-15 has been decided by us vide paragraph No. 150 of this order in favour of the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the revenue is hereby allowed. 195. The next issue raised by the revenue is that the learned CIT(A) erred in deleting garden expenses for Rs. 64,20,381/- only. 196. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2015-16 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 85 of this order against the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the revenue is h....
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..../disallowing the claim of depreciation and additional depreciation. Accordingly, the AO was of the view that once the impugned assets are treated as part of furniture and fixtures, then the investment allowances under section 32AC(1) of the Act cannot be allowed on the same as part of investment in plant and machinery. Thus, the AO disallowed corresponding amount of investment allowances for Rs. 84,11,534/- only. 203. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO by observing as under: "11.3 Decision: It is observed that claim of additional depreciation on trolleys, mobile racks, pallets have been duly allowed in preceding years by the undersigned. These assets are used in manufacturing process and fulfil the functional test, hence, the same are held to be Plant and Machinery. Also, similar issue has been allowed in favour of appellant in A.Y. 2011-12, 2012-13, 2013-14 and 2014-15 by the undersigned. Even while deciding similar issue during the year under consideration in Para 10 hereinabove, the claim of additional depreciation on such assets has been duly allowed. As claim of additional depreciation has been allowed on such assets a....
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.... in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 99 read with para 39 of this order against the revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the assessment year 2015-16. Hence, the ground of appeal filed by the revenue is hereby dismissed. 208. The next issue raised by the revenue is that the learned CIT(A) erred in deleting the disallowance of deductions under section 80G and 80GGB of the Act. 209. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2015-16 is identical to the issue raised by the revenue in ITA No. 2369/AHD/2018 for the assessment year 2013-14. Therefore, the findings given in ITA No. 2369/AHD/2018 shall also be applicable for the assessment year 2015-16. The relevant ground of appeal of the revenue for the A.Y. 2013-14 has been decided by us vide paragraph No. 104 of this order against the revenue. The learned AR and the DR also agreed that whatever will be the findings for the ass....