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2019 (9) TMI 438

..... ITAT Delhi Bench in the AY 2008-09 [2016 (5) TMI 157 - ITAT DELHI] held that AE’s are accepted as tested party being the least complex for comparability analysis of international transaction of the assessee. Allowance of compensation on ESOP and reversal of compensation of ESOP - HELD THAT:- As decided in own case [2016 (5) TMI 157 - ITAT DELHI] factum of the employees becoming entitled to exercise options at the end of the vesting period and it is only then that the actual amount of discount would be determined, is akin to the quantification of the precise liability taking place at a future date, thereby not disturbing the otherwise liability which stood incurred at the end of the each year on availing the services. As regards the contention of the ld. DR about the contingent liability arising on account of the options lapsing during the vesting period or the employees not choosing to exercise the option, if some of the options remain unvested or are not exercised, the discount hitherto claimed as deduction is required to be reversed and offered for taxation in such later year. We, therefore, hold that the discount in relation to options vesting during the year cannot be hel .....

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..... ooks about the correctness of disallowance made by the assessee which in this case has been made by assessee of ₹ 3311708/-. We have also held that disallowance cannot exceed the amount of exempt income. Hence, now no disallowance survives u/s 14A of the act so far as normal computation of total incomeof the appellant. The AO has added to the book profit amount of expense disallowed u/s.14A applying rule 8D of the Income tax act. As per our considered view, no addition u/s.115JB is warranted for amount of disallowance u/s.14A Deduction u/s 80IB/IC - year of assessment - HELD THAT:- As decided in own case [2016 (5) TMI 157 - ITAT DELHI] claim u/s 80IB which is in the 7th year of its claim out of 10 years, has earned eligible profit and deduction thereon is claimed at the rate of 30% thereof and New Tablet Plant-I u/s 80IC for which this is the 4th year of the claim and assessee has claimed 100% of the eligible profit as deduction, cannot be disallowed in this year. Re-computing the capital gain/loss on leasehold land along with building during the year under consideration - HELD THAT:- Sale proceeds allocated by the assessee towards the land appear to be un-reasonable. In most .....

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..... this ground of appeal to the file of AO to verify the amount of expenditure incurred by the assessee on account of fluctuation of foreign exchange; and if they are on capital account related to acquisition of asset then to grant depreciation thereon in accordance with the provisions of law. In case if this expenditure is found to be of revenue, nature then allows the same u/s 37(1) of the Act. Addition treating the MTM gain as taxable income under the normal provision of tax and u/s 115JB - HELD THAT:- Amount written back by the assessee has already suffered the tax in the immediate preceding AY 2009-10. Accordingly, we hold that the amount written back by the assessee cannot be subject to tax either under normal computation of income or under section 115JB of the Act in the year under consideration. However, we find that the provision for ₹ 1431.63 crores was suffered to tax under section 115JB of the Act in the immediate preceding AY 2009-10 whereas it has been written back in the year under consideration for ₹ 1969.13 crores. Thus the difference between amount of provision disallowed under section 115JB of the Act in the immediate preceding assessment year 2009-10 vi .....

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..... erred on facts and in law in not directing the assessing officer to delete various additions/ disallowance, which were squarely covered in favour of the appellant by the order(s) of the appellate authorities for earlier years. 1.3 That the DRP erred on facts and in law in not independently considering/ directing the assessing officer to consider certain claims made by way of notes forming integral part of the return on the ground that the said claims were not made in the return and no variation was proposed on the said claims in the draft assessment order. 2. That the Ld. DRP erred, both on facts and in law, in confirming the addition of ₹ 145,13,17,725 by holding that the appellant's international related party transactions do not satisfy the arm's length principle as envisaged under the Act and in doing so the Ld. DRP has grossly erred in agreeing with the Ld. Transfer Pricing Officer's ('TPO') action of: 2.1 disregarding the arm's length price ('ALP') and the methodical benchmarking process carried out by the appellant in the Transfer Pricing ('TP') documentation maintained by it in terms of section 92D of the Act read with Rule 10D .....

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..... ansactions entered into with the appellant company. 4. On the facts and in the circumstances of the case and in law, the Ld. AO/DRP has erred in disregarding sound TP principles and judicial pronouncements in India in undertaking the TP adjustment. 5. That the Ld. AO/DRP erred on facts and in law in holding that deferred employee compensation debited to the Profit & Loss Account (P&L) pursuant to company's Employees Stock Option Scheme (ESOP) amounting to ₹ 6,84,523 is not allowable as deduction. 5.1 That the AO/DRP erred on facts and in law in holding that employees compensation expense claimed by the appellant did not represent a crystallized liability and the claim being without any evidence, random in nature, hence not allowable as deduction. 5.2 That the AO/DRP further erred on facts and in law in holding that since the appellant did not deduct any tax at source, the amount claimed was disallowable under section 40(a)(ia) of the Act. 5.3 Without prejudice, that the AO/DRP failed to appreciate that: (a) tax was not deductible on mere issuance of options and (b) no disallowance, in any case, can be made under section 40(a)(ia) of the Act on account of alleged n .....

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..... there is nothing on record to dispute the contention of the appellant that no expenditure, over and above expenditure suo-moto disallowed by the appellant was actually incurred in relation to the exempt income; (b) preconditions for applying Rule 8D as prescribed in sub-sections (2)1 (3) of section 14A of the Act were not satisfied. 8.2 That the AO/ DRP erred on facts and in law in not appreciating that there was no nexus between any interest expenditure incurred by the appellant and the exempt income and consequently, no part of interest expenditure was, in any case, disallowable under section 14A of the Act. 8.3 That the AO / DRP erred on facts and in law in holding that the primary reasons for making investment was to earn exempt income, for making disallowance under section14A of the Act, which is in complete disregard to material placed on record by the appellant. 8.4 Without prejudice, that the AO erred on facts and in law in computing the amount of disallowance as per Rule 8D of the Rules. 9. That the Ld. AO/DRP further erred on facts and in law in making upward adjustment of ₹ 11,68,23,115 while computing book profit under section 115JB of the Act, without appreciatin .....

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..... , disregarding the method prescribed under the Act. 10.8 That the Ld. AO/DRP erred on facts and in law in not evaluating the additional information filed by the assessee in support of deduction claimed under section 80-lB and section 80-IC of the Act and establishing conclusions merely on the basis of previous assessment year's order. 11. That the Ld. AO/DRP erred on facts and in law in disallowing mark to market losses of ₹ 3,331.61 crores, suffered by the appellant in relation to forward contracts entered into for protection against currency fluctuation, by holding the same to be 'contingent in nature'. 11.1 Without prejudice, that in case mark to market loss is held to be nondeductible for the year under assessment, the reversal of loss / gain on mark to market, if any, in subsequent year(s) be not held as taxable. 11.2 That the AO/ DRP erred on facts and in law in disallowing the mark to market lossess primarily relying upon the Instruction issued by the CBDT. 12. That the Ld.DRP erred on facts and in law in enhancing the book profit by ₹ 14,316,320,000 under section 115JB of the Act on account of Mark to Market losses debited to Profit & Loss Accoun .....

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..... ismiss the same. 4. The interconnected issue raised by the assessee in Ground Nos. 2 to 4 is that the Ld. DRP erred in confirming the addition made by the AO /TPO amounting to ₹ 145,13,17,725/- on account of the transaction with AE s by considering the assessee as a tested party. 5. The briefly stated facts are that the assessee is a limited company and engaged in the business of manufacturing and trading of pharmaceuticals products, bulks drugs and trading activity. The case of the assessee for the year under consideration was selected under scrutiny under section 143(3) of the Act. The AO during the assessment proceeding observed that the assessee has entered into various international transactions with its associate's enterprises as detailed under: No. Nature of transaction Method Value of transaction 1. Sale of APIs TNMM 191,97,60,604 2. Sale of dosage formulations TNMM 11,61,56,39,623 3. Sale of machines, spares and consumables TNMM 32,28,25,272 4. Purchase of dosage formulations TNMM 166,72,389 5. Allocation of SAP license and maintenance charges CUP 170,28,507 6. Market research and support services availed TNMM 98,09,41,232 7. Provision of technical services TNMM .....

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..... m it entered into the international transactions during the year under consideration as recorded on page 6 & 7 in the order of the TPO. Further the assessee categorized all its 30 AE s in the different regions based on geographical location. 5.6. Such categorization of AE s as per region and class of transaction is being established to carry out the benchmarking with the comparables in the relevant regions for the specific class of transaction. In view of the class of transaction and region wise AE s, assessee identified the various comparables from database which are available on Para 5.3/5.4 on pages 7 to 9 of TPO order and shows the PLI of the comparables of each region and class of transaction. 5.7. Accordingly, after comparing the PLI of the comparable with the PLI of AE s, assessee claimed that the margin earned by the AE s falls within the parameters set out for benchmarking of the respective transactions. 5.8. The TPO after considering the Transfer Pricing approach adopted by the assessee observed two situations for benchmarking of transaction as detailed under: • Comparing the results of one AE situated in X country with a comparable situated in Y country or &bull .....

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..... response to show cause notice the assessee without prejudice to its above contention filed the revised TP study treating itself as the tested party. The assessee in the revised TP study used TNMM as most appropriate method and used OP/TC as the PLI before the economic condition and after economic condition and arrived at the PLI 6.32% and 19.47% respectively. The assessee made the economic adjustment in respect of R&D cost and loss of contribution due to US regulatory conditions while determining its PLI after adjustment. 5.17. The assessee in its revised TP study has selected 8 comparable and taken three years average margin calculated at 14.55%. Accordingly, the assessee claimed that its transactions with the AE s had been entered at arm length price. 5.18. The TPO after considering the revised TP study rejected the claim of the assessee for using multiple year data after referring to the provision of Rule 10B(4) and various judgment in this regard. In view of the above TPO finally held that single year data should be used for calculating ALP. 5.19. Further, the TPO also modified the filter used by the assessee for selecting the comparables. Accordingly, all the companies sel .....

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..... e assessee during the TP proceedings. TPO has given the supplementary analysis of the assessee in Para 6 of his order and given the reasons why the same needs to be rejected in subsequent paragraph 7 and in the show cause notice. The reasons given by the TPO are valid and cogent. The DRP has examined the matter and comes to the conclusion that the TPO was right in rejecting even the supplementary TP documentation for the reasons given in the TP order. 5.2. Objection 3.2 is on the issue of use of single year data. This issue regarding use of single year data has been examined in detail in TPO's order. Briefly summarized, DRP finds that, the arguments put forth by TPO are based on the law 35 it exists. There are various rulings in favour of using single year data. As per well settled law, single year data has to be considered unless the assessee demonstrates that prior year's data has had an influence on the setting of transfer price of international transaction either at the time of setting them or by way of adjusting them subsequent to entering into the international transaction to align them to the arm's length price. This is a condition precedent for user of the multi .....

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..... lter should be at 30% rather than 25%. Since the TPO has used different filters in the multiply of 25, it is appreciable if the same is retained it is seen that this is the normal filter applied in across the cases by the TPO. It may … arbitrary to change them. As there is no much difference between 25% and 30% filter, the objection of the appellant is rejected. 5.3.4. RPT filter TPO has rejected the company having more than 25% related party transactions (RPT). To determine the arm s length price of the international transaction under consideration, such transactions should be compared with uncontrolled transactions of similar nature, i.e. transactions between who unrelated parties. The companies having more than 25% related party transactions could not be treated as operating in uncontrolled environment and RPT could have substantial impact on margins of such companies. The taxpayer has argued that there is no rational basis for applying the threshold limit of 25% of total cost. The AR referred to the Delhi's, ITAT decision in the case of Sony India where a limit of 10-15% was upheld. We have carefully considered the above objections of the taxpayer. We are not incline .....

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..... essee as comparable. Some variation bound to exist. We find that the TPO had made efforts to identify the comparables whose functions are similar to the assessee company by applying filter quantitatively and qualitatively to eliminate the differences between the assessee companies with that of comparable companies to neutralize the aforesaid risk factors. In view of this, there is no merit in the argument of the assessee that TPO has chosen or rejected comparables arbitrarily. 5.3.6. In the following paragraphs, the comparable chosen and rejected by the TPO are discussed. Cadila Healthcare The assessee has objected to this comparable because it has RPT of 24%. The DRP has justified the filter of RPT at 25% as above. Therefore, this company should be retained in the list of comparables as it is in the similar line of business using similar functions, assets and risks. Torrent Pharmaceuticals Ltd. This company has export turnover of around 25%. It appears that assessee wanted to exclude this company by adopting 30% export filter. This company is known as competitor to the assessee in the market. Therefore, there is no justification to exclude this company. It is the market condition, .....

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..... be proportional adjustment to the extent of international transaction. The DRP, placing reliance on the rulings pronounced by the Hon'bie Delhi Bench of the ITAT in the case of IL Jin Electronics (I) Pvt. Ltd. [2010 36 SOT 227], and by the Hon'bie Bangalore Bench in the case of Genisys Integrating Systems (India) Pvt Ltd. (IT 1231/ Bang-2010), is of the view that proportional adjustment is justified. In the said rulings, the ITAT has held that the adjustment made to the transfer prices of the taxpayer should be proportional to the quantum of international transactions entered into by it. Respectfully following the same it is held, in the facts and circumstances of this case, that proportionate adjustment is justified. TPO is directed to calculate the proportional adjustment and restrict the addition on account of determination of ALP to that extent only. 5.6. In objection 3.8, the assessee has argued that the total adjustment cannot exceed the total profit made by the overseas associated entities. 5.6.1. DRP has carefully considered this issue. It is of the considered view of the DRP that the adjustment being carried out in the determination of the international transaction .....

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..... vehemently submitted that the facts of the case in ITA 196/Del/2013 were different from the present facts of the case. As per the ld. DR these factual differences include regarding conditions mentioned in the APA, calculation of the PLI, financial data of AEs, etc which were not brought to the notice of the Hon ble ITAT in ITA 196/Del/2013. Therefore, the ld. DR argued in length that the Hon ble Tribunal can differ with the view of the Delhi Tribunal which was taken in the immediate preceding AY 2008-09 in ITA 196/Del/2013. The ld. DR also filed the comparison sheet to high light the differences between the facts of the case for the year under consideration viz a viz in the immediately preceding assessment year 2008-09 which is placed on record. The ld. DR vehemently supported the order of the lower authorities. 9. The ld. AR in his rejoinder submitted that the facts of the case on hand are identical to the facts of the case of the preceding AY 2008-09. Therefore the Hon ble Tribunal cannot change the stand taken in the immediate preceding AY in the year under consideration. The ld. AR further submitted that the High Court is the right forum which can alter the stand of the ITAT or .....

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..... t reliable data and requiring the fewest and most reliable adjustments, and for which reliable data regarding uncontrolled comparables can be located. Consequently, in most cases the tested party will be the least complex of the controlled taxpayers and will not own valuable intangible property or unique assets that distinguish it from potential uncontrolled comparables. Thus, in a sense, the tested party would have lesser risk as compared to the other transacting party or the real entrepreneur. 22. As per the OECD Transfer Pricing Guidelines 2010, when applying a cost plus, resale price or transactional net margin method, it is necessary to choose the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit indicator) is tested. The choice of the tested party should be consistent with the functional analysis of the transaction. As a general rule, the tested party is the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparables can be found, i.e. it will most often be the one that has the least complex functional analysis. 23. As per UNTPM 2013, 5.3.3. Selection of the .....

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..... ngibles such as valuable patents and trademarks, and for which B acts as a distributor. Assume that in this P2 transaction, B only performs simple functions and does not make any valuable, unique contribution in relation to the transaction. The tested part for the P2 transaction would most often be B. 25. From the above guidance certain principles emerges in selection of tested party (a) The choice available of tested party for comparability only in CUP method, TNMM and 'Other method', in other methods such as RPM and CPM choice of selecting a tested party is not available. In any case, it is not required in Profit split method. (b) The tested party normally should be the least complex party to the controlled transactions. (c) Availability of Most reliable data of tested party and requirement of minimum adjustments is also one of the most important aspects in selection of tested party. (d) There is no bar against the selection of Tested party either Local party or Foreign party. Neither Income Tax Act and nor any guidelines on Transfer pricing provides so. Therefore selection of tested party is to further the object of comparability analysis by making it less complex and re .....

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..... tions performed by each of the AEs and risk assumed is discussed. It shows that the functions performed by AEs are very limited and naturally, consequent risks assumed are less. After that at page no 525 and 526 of the paper book where in it is agreed that manner in which segmentation of the AEs would be computed being December/March year end which would be certified by the independent cost accountants. It is further provided that in case of AES are secondary manufacturers as well as low risk distributors margins would be computed separately. Therefore, APA has been agreed on the whole mechanism of computation of Alp of International transactions of the assessee. 27. It is also important 28. The issue that arises is though APA is signed for AY 2014-15 can it have any impact on the transactions for the year under appeal. According to The APA it shall apply in respect to previous year 2013-14 relevant to AY 2014- 15, however principals laid down for comparability analysis in that does have a greater persuasive value. It is not the case of the assessee that APA should be applied for this year but it is the prayer that principles laid down by the highest revenue authority should be acc .....

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..... n is same as the international transaction to which the agreement (other than the rollback provision) applies; (ii) the return of income for the relevant rollback year has been or is furnished by the applicant before the due date specified in Explanation 2 to subsection (1) of section 139; (iii) the report in respect of the international transaction had been furnished in accordance with section 92E; (iv) the applicability of rollback provision, in respect of an international transaction, has been requested by the applicant for all the rollback years in which the said international transaction has been undertaken by the applicant; and (v) the applicant has made an application seeking rollback in Form 3CEDA in accordance with sub-rule (5); (3) Notwithstanding anything contained in sub-rule (2), rollback provision shall not be provided in respect of an international transaction for a rollback year, if,- (i) the determination of arm's length price of the said international transaction for the said year has been subject matter of an appeal before the Appellate Tribunal and the Appellate Tribunal has passed an order disposing of such appeal at any time before signing of the agreement .....

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..... see compared the operating margin of all the overseas AEs with reference to a single set of comparables selected from around the world without any regard to the functional and geographical dissimilarities. In that set of facts, coordinate bench has held that such comparability analysis is not appropriate and therefore in absence of comparable data there was no option but to uphold the appellant as a tested party. Therefore, coordinate bench has upheld the principle that tested party should be least complex but on the facts of the case for that year on non-availability of comparable data, it is so held. In the current year, the appellant has adduced reasonably comparative data based on region and country for comparing the foreign AEs. Therefore the facts in the present year are quite distinct than the year decided by ITAT i.e. A.Y. 2004-05. In view of this, we reject the reasons assigned by ld. TPO for rejecting the selection of overseas AE as the tested party. 33. Ld. AR has cited many decisions, which are on the principle of selection of tested party, which is least complex. We are of the view that there is no dispute on this principle as it is well recognized and well accepted in .....

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..... assets and risk analysis was made available but that is to be correctly understood in the light of the nature of International transaction carried out by the assessee with the said AE. A similar problem was considered by ITAT Delhi Bench in the case of Bechtel India Pvt. Ltd. v. DCIT (2011- TII-07-ITAT-DEL-TP) where the assessee stated to be engaged in the business of providing electronic data support service to AE and the difficulty arose that the said function was compared with the companies engaged in the business of development of software. So the question was that whether a minute examination of functional profile is necessary for the purpose of selection of comparables and the answer given was that functional profile must be first examined and after that proceeds to select the comparables. Interestingly, in the present case now before us, comparables chosen by the assessee were discussed by the TPO and those were discarded. The basic reason for rejection of those comparables was that the companies those were quoted by the assessee were dealing in product distribution whereas the TPO was of the view that the AE was nothing but 'front office' of the assessee and simple .....

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..... w of the discussion on tested part earlier, the assessee was selected as the tested party being least complex of the two entities. Hence, the transfer pricing analysis in this case was done from the Indian side, wherein, the margins of the assessee with respect to services provided to TKC were compared internally with services provided to other third parties in foreign market. Taking into account the divergent submissions, the Hon'ble Tribunal had recorded its findings that - 33. Based on facts and our findings of the case, after due consideration of all the facts, we conclude that the analysis undertaken by the assessee to determine the arm's length price of the international transaction with Datacore USA is correct and on the basis of the analysis it is seen that transaction undertaken by the taxpayer with Datacore US is at arm's length for both the assessment years. (iii) In the case of Ranbaxy Laboratories Ltd. v. Addl. CIT110 ITD 428, the Hon'ble Delhi Tribunal had recorded its findings that - 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The tested party normally should be the .....

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..... t must ensure that the necessary relevant information about it and sufficient data on comparables is furnished to the tax administration and vice versa in order for the latter to be able to verify the selection and application of the transfer pricing method. With regard to the challenges emerging in transfer pricing in India, it has been observed as under:- 10.4. Emerging Transfer Pricing Challenges in India 10.4.1. Transfer pricing Regulations in India 10.4.1.3 The Indian transfer pricing administration prefers Indian comparables in most cases and also accepts foreign comparables in cases where the foreign associated enterprise is the less or least complex entity and requisite information is available about the tested party and comparables. 11.2.1 It was also vouched during the course of hearing by the learned Sr. Counsel that the financial details including operating margin of comparable companies along with the back-up computations were furnished before the TPO in the transfer pricing documentation [Source: Pages 113 to 210 of the Transfer Pricing Study]. This contradicts the assertion of the learned DR that the assessee had not furnished any financial information of the compara .....

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..... ctions raised by the petitioner have not been decided, secondly, in view of the directions issued by the Dispute Resolution Panel, the petitioner would not be in a position to avail of the remedy of appeal before commissioner (Appeals) against the draft assessment order; and thirdly, in the light of the observation made by the dispute Resolution Panel that the petitioner has chosen to withdraw the objections, preferring any appeal against the impugned order before any forum would be an exercise in futility, as no appeal would be entertained against an order passed on a concession. Thus, the dispute Resolution Panel has virtually closed all doors for the petitioner. In the circumstances, impugned order of the Dispute Resolution Panel suffers from the vide of being contrary to the record as well as non-application of mind, in as much as the petitioner had never sought withdrawal of the objections filed by it. The impugned order also causes immense prejudice to the petitioner as recorded hereinabove. In the circumstances, the impugned order of the Dispute Resolution Panel, therefore, cannot be sustained. . . . . . . 11.3 We shall now peruse the case laws on which the learned DR had pl .....

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..... , as under: So, it is the profit actually realized by the Indian assessee from the transaction with its foreign AE which is compared with that of the comparables. There can be no question of substituting the profit realized by the Indian enterprise from its foreign AE with the profit realized by the foreign AE from the ultimate customers for the purposes of determining the ALP of the international transaction of the Indian enterprise with its foreign AE. The scope of TP adjustment under the Indian taxation law is limited to transaction between the assessee and its foreign AE. It can neither call for also roping in and taxing in India the margin from the activities undertaken by the foreign AE nor can it curtail the profit arising out of transaction between the Indian and foreign AE at arm's length. The contention of the ld. AR in considering the profit of the foreign AE as 'profit A' for the purposes of comparison with profit or comparables, being 'profit B', to determine the ALP of transaction between the assessee and its foreign AE, misses the wood from the tree by making the substantive section 92 otiose and the definition of 'internal transaction' u/ .....

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..... available. It may be the local or the foreign party. If a taxpayer wishes to select the foreign associated enterprise as the tested party, it must ensure that the necessary relevant information about it and sufficient data on comparables is furnished to the tax administration. . . . . . 11.4. Considering the divergent views expressed by various Tribunals (supra) and majority of them were in favour of selecting the 'tested party' either from local or foreign party and the United Nation's Practical Manual on transfer pricing for developing countries had observed that 'It may be the local or the foreign party', we tend to agree with the same.' 34. Above decision reproduced by us covers many divergent views of the coordinate benches and after considering them coordinate bench has reiterated all the principles noted by us for selection of tested party. Hence, we also draw staunch support from that decision. 35. Therefore, for the reasons stated above, ground no 2.2 of the appeal is allowed with a direction that overseas associated enterprises are accepted as 'tested party' being the least complex of the transacting entity for the year for comparability an .....

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..... Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal, so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the IT Act itself. 10.2. We also find that the Hon ble supreme court case of .....

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..... of Article 31A in unequivocal terms. That decision binds, on the simple score of stare decisis and the constitutional ground of Art. 141. Every now discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. In this view, other submissions sparkling with creative ingenuity and presented with highpressure advocacy, cannot persuade us to re-open, what was laid down for the guidance of the nation as a solemn pre-posion by the epic Fundamental Rights case. From Kameshwar Singh and Golak Nath (supra) through Kesavananda (supra) and Kanan Devan to Gwalior Rayons and after Art. 31A has stood judicial scrutiny although, as stated earlier, we do not base the conclusion on Art. 31A. Even so, it is fundamental that the nation's Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blowup. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national. crisis of great moment to the life, liberty and safety of t .....

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..... account. 12.1. The assessee during the year under consideration has debited/amortized ₹ 6,84,523/- and credited/ reversed ₹ 21,79,471/- on account of ESOP which was not exercised by the employees. Thus the assessee in effect credited net amount of ₹ 14,94,948/- in its P&L account. However, the company has not claimed the expense of ₹ 6,84,523/- in ITR due to the fact that Hon ble ITAT Delhi in assessee s case in ITA No. 1855/D/2004 for the AY 2001-02 vide order dated 12- 06-2009 held that ESOP expenses are not allowable. 12.2. The assessee also not offered tax on the reversal of ₹ 21,79,471/- as the company has filed an appeal in Delhi high court and in notes to account the assessee mentioned that company reserves its right to offer the tax u/s 41(1) in case matter decides against it. 12.3. AO noted the facts above from the notes to accounts and issued a notice to the assessee to explain the same. 12.4. In response to the notice, the assessee submitted that the difference between market price and the issue price is a benefit to employees. Therefore, deferred employee compensation is a component of employee remuneration and actual loss to the compan .....

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..... expenses amounting to 6,84,523/- 15. The Ld. AR before us submitted that the issue is covered in favor of the assessee in its case by the order of Delhi Tribunal in ITA No. 196/Del/2013 vide order dated 25-04-2016. 16. The Ld. DR before us submitted that the benefit under ESOP extended to the employees is treated as perquisites. Accordingly, the assessee was under the obligation to deduct the TDS under section 192 of the Act. But the assessee has claimed such expenses without deducting the TDS. Thus the impugned expenses cannot be allowed under section 40(a)(ia) of the Act. The ld. DR vehemently supported the order of the lower authorities. 17. We have heard the rival contentions of both the parties and perused the material available on records. At the outset, we find that in the identical facts & circumstances in the own case of the assessee, the ITAT in the AY 2008-09 being ITA No. 196/Del/2013 vide order dated 25-4- 2016, reported in 68 taxmann.com 322, held as under: 41. We have carefully considered the rival contentions. The issue is now squarely covered in favour of the assessee by the decision of Hon'ble Madras high court in PVP Ventures (supra), where in it is held .....

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..... hence can't be covered u/s 37(1), also does not hold water in the light of the above judgment. In view of the above discussion, we, with utmost respect, are unable to concur with the view taken in Ranbaxy Laboratories Ltd. (supra). Further whether the ESOP expenditure is a contingent loss has also been considered in the same decision as under :- 'B. Is discount a Contingent liability ? 9.3.1 The learned Departmental Representative supported the impugned order by contending that the entitlement to ESOP depends upon the fulfilment of several conditions laid down under the scheme. It is only when all such conditions are fulfilled and the employees render services during the vesting period that the question of any ascertained liability can arise. He submitted that during the entire vesting period, it is only a contingent liability and no deduction is admissible under the provisions of the Act for a contingent liability. The options so granted may lapse during the vesting period itself by reason of termination of employment or some of the employees may not choose to exercise the option even after rendering the services during the vesting period. It was, therefore, argued that t .....

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..... ccumulated up to certain days. The assessee created provision of ₹ 62.25 lakh for encashment of accrued leave and claimed deduction for the same. The Assessing Officer held it to be a contingent liability and hence not a permissible deduction. When the matter finally came up before the Hon'ble Supreme Court, it was held that the provision for meeting the liability for encashment of earned leave by the employee was an admissible deduction. In holding so, the Hon'ble Apex Court observed that : the law is settled : if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. From the above enunciation of l .....

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..... : and (c) a reliable estimate can be made of the amount of the obligation . Resultantly, the provision was held to be deductible. 9.3.5 When we consider the facts of the present case in the backdrop of the ratio laid down by the Hon'ble Supreme Court in Bharat Earth Movers (supra) and Rotork Controls India (P.) Ltd. (supra), it becomes vivid that the mandate of these cases is applicable with full force to the deductibility of the discount on incurring of liability on the rendition of service by the employees. The factum of the employees becoming entitled to exercise options at the end of the vesting period and it is only then that the actual amount of discount would be determined, is akin to the quantification of the precise liability taking place at a future date, thereby not disturbing the otherwise liability which stood incurred at the end of the each year on availing the services. 9.3.6 As regards the contention of the ld. DR about the contingent liability arising on account of the options lapsing during the vesting period or the employees not choosing to exercise the option, we find that normally it is provided in the schemes of ESOP that the vested options that lapse due .....

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..... ision written back in the year under consideration has suffered tax in the earlier years. Therefore, the matter can be set aside to the file of the AO for fresh examination as per the provisions of law. The learned DR vehemently supported the order of the authorities below. 21. We have heard the rival contentions and perused the materials available on record. Regarding the reversal of deferred employees compensation credited to profit & loss account, we find force in the argument of the learned AR that if the same amount of provision has suffered tax the in the earlier years, then this the cannot be made subject to tax in the year under consideration. The learned AR in support of his claim has also filed the details demonstrating the years in which such amount was suffered to tax. The details are placed on record. 22. However, we note that such details were not provided by the assessee before the lower authorities. Therefore we are inclined to restore this issue to the file of the AO for fresh adjudication in accordance with the provisions of law after considering the details filed by the assessee before us. Hence the ground of appeal of the assessee is allowed for statistical .....

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..... T in the AY 2008-09 being ITA No. 196/Del/2013 vide order dated 25-4- 2016, reported in 68 taxmann.com 322, held as under: 6. We have carefully considered the rival contentions. In view of the decision of Hon'ble Delhi high court in case of assessee for AY 1997-98 order dated 17.03.2012 in ITA no.743/2008 and 20.11.2012 for AY 2002-03 to 2005-06, We reverse the decision of the AO and direct to delete the disallowance of ₹ 47 lacs and ₹ 1250000/- of contribution made by appellant to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation. Furthermore regarding failure to deduct tax on this sum, Ld. DR. could not point out particular section, which warrants deduction of tax at sources on this payment. Therefore, we also hold that in absence of specific section under which the tax is required to be deducted on such contribution without their being any service rendered by the recipient of the contribution disallowance u/s 40a(ia) also cannot be made. In the result ground no.9 of the appeal is allowed. 30. In view of the identical issue raised before us in the ground of appeal no. 7 which has already been considered by the ITAT Delhi as discussed above, we ar .....

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..... y basis for suo-moto disallowance. The assessee has also not maintained any separate books of account or separate details for the purpose of investment activity. 34. Being aggrieved by the order of the Ld.DRP the assessee is in appeal before us. 35. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee for the A.Y. 2008-09, ITAT Delhi Tribunal in ITA No. 196/Del/2013 dated 25.04.2016 has decided the impugned in its favor. 36. On the other hand, the Ld. DR vehemently supported the order of authorities below. 37. We have heard the rival contention and perused the material available on records. At the outset, we find that in the identical facts & circumstances in the own case of the assessee, the ITAT in the AY 2008- 09 being ITA No. 196/Del/2013 vide order dated 25-4-2016, reported in 68 taxmann.com 322, held as under: 51. We have carefully considered the rival contentions. In this case assessee himself has disallowed ₹ 3311708/- which itself is far more in excess of exempt income. Hon'ble Delhi high court in Joint Investments (P.) Ltd. v. CIT [2015] 59 taxmann.com 295/233 Taxman 117/372 ITR 694 has held that:- 9. I .....

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..... 4 A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the ass .....

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..... ome under the said Act for such previous year, the Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of Rule 8D. We may observe that Rule 8D (1) places the provisions of Section 14A(2) and (3) in the correct perspective. As we have already seen, while discussing the provisions of Sub-sections (2) and (3) of Section 14A, the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee or with the correctness of the claim made by the assessee that no expenditure has been incurred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income not includable in total income in the manner indicated in sub-rule (2) of Rule 8D of the said Rules. It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard. If one .....

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..... ing of the expression prescribed in section 2(33), must be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income. Moreover, the satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Hence, sub-section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The Assessing Officer must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfac .....

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..... bed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated . (M.A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249*). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub-section (2) of section 14A. As we shall note shortly hereafte .....

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..... in the identical facts and circumstances in the own case of the assessee for the A.Y. 2008-09, ITAT Delhi Tribunal in ITA No. 196/Del/2013 dated 25.04.2016 has decided the impugned issue in its favor. 44. On the other hand, the Ld. DR before us vehemently supported the order of authorities below. The ld. DR also submitted that the suo moto disallowance made by the assessee should be considered for the disallowance in conformity with clause (f) of the explanation 1 to section 115JB. 45. We have heard the rival contention and perused the materials available on records. At the outset, we find that in the identical facts & circumstances in the own case of the assessee, the ITAT in the AY 2008- 09 being ITA No. 196/Del/2013 vide order dated 25-4-2016, reported in 68 taxmann.com 322, held as under: 55. We have carefully considered the rival contentions. The ld. AO has imputed the addition u/s 115JB of the Act as disallowance computed u/s 14A, read with Rule 8D of the Income Tax Rule, 1962. As we have already deleted the disallowance as per ground No.10 of the appeal wherein we have held that the amount of disallowance cannot be worked out by ld. AO without recording satisfaction on .....

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..... is claim with the Return of Income as per statements to Computation of Income vide attachment 11. The assessee has claimed the same on undertaking in backward area for deduction u/.80IB and facilities at Paonta Sahib, Himachal Pradesh for deduction u/s.80IC. The chart brings out the sales and claimed net profit of the various facilities along with the deduction claimed. Name of the Plant Sales Net Profit Deduction u/s.80IB/80IC GOA PLANT (80IB) 122.21 21.70 06.51 NEW TABLET PLANT-1 57.72 2.45 2.45 NEW TABLET PLANT -II 290.95 - (No deduction claimed) NEW SGC PLANT 108.62 40.25 40.25 NEW TABLET PLANT-III 96.77 9.64 9.64 TOTAL 385.32 74.04 58.85 48. The AO during the assessment proceedings observed that the auditor in the form no. 10CCB issued by him made certain comments as narrated below: i) The sale effected by the industrial undertakings eligible for deduction under section 80IB/ 80IC of the Act have been recorded at the sale price which was charged from the customers. Thus the assessee has violated the provisions of section the 80IA read with section 80IC(7) of the Act. As such the assessee was required to record the sales at a price at which the products were transferred by the .....

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..... C of the Act was accepted by the Revenue. iii. The research and development expenses incurred by it in the year under consideration have no connection with the products manufactured by the eligible undertaking. Thus only 30% of the total research and development expenses were considered reasonable to apportion to these eligible undertakings. As such in the earlier year the basis of allocation of 30% of the total research and development expenses was accepted by the Revenue. iv. There was an established system to work out the profit for each industrial undertaking which is eligible for deduction. Further profit determined for each industrial undertaking was duly certified by the auditor in his audit report in form 10CCB. The miscellaneous income in respect of which the deduction was claimed was having direct nexus with the activities of the industrial undertaking. Accordingly these were determined as per the established system applicable to the eligible undertakings. v. The other incomes which are not eligible for deduction under section 80IB/80IC of the Act were not considered while determining the profit of the eligible undertakings. As such there was the proper compliance of the .....

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..... of the Act. iii. The deduction is claimed by the assessee in the earlier years under section 80IB/80IC of the Act were pending for the assessments under section 147 of the Act. Therefore it cannot be concluded that the deduction was allowed to the assessee in the identical facts and circumstances in the earlier years. iv. The selling and the distribution unit of the assessee is in itself are profit centre and carries out a distinct activity. Therefore the income of such unit cannot be attributed to the manufacturing activity of the eligible undertaking. Therefore the profit of this unit needs to be reduced from the profit of the eligible undertaking. As such the activity carried out by the eligible undertaking cannot be merged with the activity of selling and distribution unit. v. Similarly the profit earned by the assessee on account of the use of the brand name namely Ranbaxy cannot be merged with the profit of the eligible undertaking. 50. In view of the above, the AO disallowed the deduction claimed by the assessee under section 80IB/80IC of the Act for ₹ 58,85,85,232/- and added to the total income of the assessee. 51. Aggrieved assessee preferred an appeal before the Ld .....

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..... the assessee under section 80IB/80IC of the Income tax Act, 1961, is rejected. 53. In view of the above order of predecessor DRP on the identical issue, it did not examine the issue again and therefore followed the decision of DRP-II in AY 2008-09. Accordingly, DRP upheld the order of AO. 54. Against the order of the DRP, the assessee preferred an appeal before us. 55. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee for the A.Y. 2008-09, ITAT Delhi Tribunal in ITA No. 196/Del/2013 dated 25.04.2016 has decided the impugned issue in its favor. 56. On the other hand, the Ld. DR vehemently supported the order of authorities below. 57. We have heard the rival contention and perused the materials available on record. In view of the brief facts and circumstances discussed in the previous paragraph, we find that the impugned issue is covered by the order of Delhi ITAT in the case of assessee in which the exactly the same issue was adjudicated for the assessment year 2008-09 in ITA No. 196/Del/2013 dated 25.04.2016 in its favour. The relevant extract of the order is reproduced as under: 68. We have carefully considered the rival c .....

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..... of the Act as the gross total income of the assessee was negative. 73. In case of New Tablet Plant-III, this is the first year of deduction and assessee has claimed the same in return of income and it is under dispute in this appeal. 74. It is argument of the ld. AR that it is the well settled proposition of law that where the act provides for the deduction for a certain term period the revenue is required to examine the claim of deduction and its eligibility to examine whether all statutory conditions are satisfied in the first year in which the appellant claims the deduction. If revenue does not disturb the claim of the assessee in that year, it is not open to revenue to disallow the deduction in the subsequent years. The various authorities cited by the ld. AR are specifically on the point in favour of the assessee. The contention of the revenue that this is the first year in which the methodology of claim of deduction of the assessee is being verified is not accordance with the previous assessment orders passed by the AO with respect to deduction u/s 80IB with respect to Goa plant and deduction u/s 80IC of the Act for New Tablet Plant- I. On perusal of those orders, it is appa .....

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..... ing begins to manufacture or produce articles or things (such assessment year being the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. This necessarily implied once the issue as to eligibility under section 80-I of the Act was examined and allowed in the initial assessment, the same was allowable in the subsequent years also unless there was any material change in the succeeding years. 70. It is well settled law that the principles of res judicata do not apply to income tax proceedings and assessment for each year is an independent proceeding. It is now equally well established that issues that have been settled and accepted over a period of time should not be revisited in subsequent assessment years in absence of any material change which would justify the change in view. 71. The Supreme Court in the case of RadhasoamiSatsang (supra) has held that unless there is a material change in justifying the revenue to take a different view the earlier view which has been settled and accepted of a several years should not be disturbed. The relevant extract from the said judgment is quoted below:- We are aware of the fact t .....

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..... s High Court held as under:- The second question relates to the claim of the assessee for deduction under Section 80J of the Income Tax Act in respect of its new unit namely 10 ton Furnance Division and Steel Unit 'B'. This case pertains to the assessment year 1976-77. A perusal of the order of the Assessing Officer would reveal that for the first time, claim under section 80J of the Act was made by the assessee in the assessment year 1973-74. The assessee was denied that claim by the Assessing Officer. For this reason, the Assessing Officer denied the claim in this assessment year as well, taking note of the fact that the matter pertaining to 1973-74 was pending before the Income Tax Tribunal. It is a matter of record that the appeal filed by the assessee for the assessment year 1973-74 was allowed by the Income Tax Appellate Tribunal. The effect thereof was that the assessee was granted the requisite deduction under Section 80J of the Act for the assessment year 1973-74. The Department has sought reference under Section 256(1) of the Act which reference application was also rejected by the Tribunal. Likewise, for the assessment yea₹ 1974-75 and 1975-76, the claims o .....

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..... t year) relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft. Such deduction is also available for the seven assessment years immediately succeeding the initial assessment year. Surely in cases where an assessee is held to be eligible for deduction in the initial assessment year, the same cannot be denied in the subsequent assessment years on the ground of ineligibility since the set of facts which enable an assessee to claim to be eligible for deduction under section 80-I of the Act occur in the previous year relevant to the initial assessment year and have to be examined in the initial assessment year. In such cases, where the facts on the basis of which the deductions are claimed are subject matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without alt .....

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..... in Saurashtra Cement & Chemical Industries (supra) is quoted below:- The next question to which the Tribunal addressed itself, and no our opinion rightly, was whether the Tribunal was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of s. 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under s. 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. 79. The Division Bench of the Bombay High Court in the case of Paul Brothers (supra) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement .....

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..... g at this conclusion, this Court referred to an interesting passage from Hoysteadv.Commissioner of Taxation 1926 AC 155 (PC) wherein it was said: Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. 30. Reference was also made to Parashuram Pottery Works Ltd. v. ITO [1977] 106 ITR 1 (SC) and then it was held: We are .....

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..... ee has made a claim of various units, which is submitted before us from Page Nos.974 to 1038 of Paper Book Volume No.IV. The details of this is tabulated as under:- Name of the unit Date of Audit report as per Rule 18BBB Supported by the balance sheet and profit and loss account of the unit Page No. of PB Volume IV Goa Unit 31.01.2012 Yes 974-986 New Tablet Plant-I 31.01.2012 Yes 987-999 New Tablet 31.01.2012 Yes 1000-1012 Plant-II New SCG Plant 31.01.2012 Yes 1013-1025 New Tablet Plant-III 31.01.2012 Yes 1026-1038 79. On examination of the above stated balance sheet and profit and loss account of the above industrial undertaking where the claim of the deduction of the assessee is worked out and certified by the Independent accountant is prepared based on similar accounting policies and practices. It is also apparent that the profit and loss and the balance sheet have been prepared on rational basis after allocation of proper expenditure, which has been followed by the assessee consistently and based on the accounting practices followed in earlier years. The main reason for asking of separate books of accounts of the eligible undertaking is only to verify that whether the assessee .....

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..... 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form40 duly signed and verified by such accountant. 80. Rule 18BBB of the Income tax rules governing the certificate by an accountant provides as under :- 98 [Form of audit report for claiming deduction under section 80-I or 80-IA or 99[80-IB or section 80-IC]. 18BBB . (1) The report of the audit of the accounts of an assessee, which is required to be furnished under sub-section (7) of section 80-IA or sub-section (7) of section 80-I, except in the cases of multiplex theatres as defined in subsection (7A) of section 80-IB or convention centres as defined in sub-section (7B) of section 80-IB 1[or hospitals in rural areas as defined in sub-section (11B) of section 80-IB], shall be in Form No. 10CCB. (2) A separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction under section 80-I or 80-IA or 80-IB1[or 80- IC] and shall be accompanied by the Profit and Loss Account and Balance Sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity. (3) In the case of an enterprise carrying on the busi .....

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..... ection 80IA of the Act on the total sum of ₹ 51,82,666/- at the rate of 30%. Department found that the assessee has not maintained the accounts for manufacture of yarn actually produced as a part of industrial undertaking. Consequently, the Assessing Officer worked out, on his own, the manufacturing account, as indicated in his Order, giving a bifurcation in terms of quantity of raw wool produced. On Appeal before hon'ble court it was held as under :- 4. In our view, the findings given by ITAT and the High Court are findings of fact. In this case, we are not concerned with the interpretation of Section 80IA of the Act. On facts, we find that the assessee ought to have maintained a separate account in respect of raw material which it had sold during the assessment year. If the assessee had maintained a separate account, then, in that event, a clear picture would have emerged which would have indicated the income accrued from the manufacturing activity and the income accrued on the sale of raw material. We do not know the reason why separate accounts were not maintained for the raw material sold and for the income derived from manufacture of yarn. On reading of the above de .....

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..... rimary purpose of maintaining separate books of account in any provision of the Act is only to enable the assessing officer to verify that deduction under any particular provision has been correctly computed. If from any system/ software, identified and separate accounts relatable to any particular unit/ undertaking are discernible and are capable of being generated, the same, in our view, is sufficient compliance with the requirement of maintenance of separate books of account, if any. However, it is to be noted in present era of technological evolution that old age notions of the maintenance of accounts and business records do not survive and business entity today survives on real time information on each aspect of its business process. In this era when an entity maintains its accounting and business records on Enterprise Resource Planning system, which is a standard procedure or program to optimize all business processes including Sales, Logistics, Production, Quality, Finance of an entity and SAP is a name of software product and it's a company name too which a leading provider of these solutions, it is rather incorrect to say that separate books of accounts are not maintai .....

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..... arned Royalty Income of ₹ 18.91 Crs, (ii) export Incentives of ₹ 78.93 crores, (iii) sundries and miscellaneous income ₹ 33.74 Cr and Income from trading activity of ₹ 94.25 Crores totalling to ₹ 225.83 Crs. It was stated that the gross total income of the assessee is ₹ 178.64 Crores and if the above stated income are excluded i.e. of ₹ 225.83 Crores the total income of the assessee will result in to loss and therefore there is no profit in manufacturing activity of the assessee and hence no deduction is allowable to the assessee. On this aspect we have carefully perused the computation of total income filed by the assessee which is at page no 1145 to 1155 of the paper book where the gross total income of the assessee is ₹ 3347340467 and claim of the deduction u/s 80 IB/IC of the act of ₹ 1366821506/-. Therefore, it is apparent that assessee's deduction is not exceeding the gross total income of the assessee. We have perused the provision of section 80A of the act which provides as under :- Deductions to be made in computing total income. 80A. (1) In computing the total income of an assessee, there shall be allowed from his .....

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..... dia (P.) Ltd.(supra) where in allocation of expenses based on head counts and turnover is upheld to stress that there is no bar in law for common expenses to be allocated on a scientific/ rational basis to the eligible unit has held as under :- '10. The provisions of sub-section (4) of section 10A, relied upon by the Assessing Officer, apply for the purpose of segregating the profits of the business into export profits and domestic profits. It is a statutory formula for ascertaining what are profits derived from the export of the eligible items. It has to be read with sub-section (1). It says that the export profits have to be apportioned on the basis of the ratio which the export turnover bears to the total turnover of all the businesses of the eligible undertaking. We are not in the present case concerned with sub-section (4). That sub-section will apply when the combined profits - profits of the exempt unit and those of the non-exempt unit - have been ascertained; the next step will be to apportion them on the basis of the ratio which the export turnover bears to the total turnover. What we are concerned herein is the stage before that. We are concerned herein with the metho .....

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..... , which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method. Further, in the present cases, we find from the various statements produced before us, that the entire exercise, arising out of change of method from the completed contract method to deferred revenue expenditure, is revenue neutral. Therefore, we do not wish to interfere with the impugned judgment of the High Court. In the light of the observations of the Supreme Court in Hukam Chand Mills Ltd. (supra), in a case where alternative methods of apportionment of the expenses are recognized and there is no statutory or fixed formula, the endeavour can only be towards approximation without any great precision or exactness. If such is the endeavour, it can hardly be said that there is an attempt to distort the profits. On the contrary, as we have already pointed out, distortion of profits may arise if the consistently adopted and accepted method of apportionment is sought to be disturbed in a few years, especially in a case such as the present .....

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..... one of the contention of revenue that selling and distribution activity is itself a separate profit center and therefore whatever services have been provided by the selling and distribution arm of the company to the eligible undertaking should have been charged and reduced from the profit of the industrial undertaking after valuing service of selling and distribution arm of the company at market rate. At present assessee has allocated it at cost. Therefore, ld. AO has invoked provisions of section 80 IA (8) of the act. It is not dispute that that products manufactured by these industrial units are sold by selling and distribution arm of the assessee and the cost incurred is allocated to these respective units on the basis of appropriate allocation key of 'sales'. Ld. AR of the appellant relying on the decision of coordinate bench of Cadila Healthcare Ltd. (supra) has submitted that there cannot be any specific demarcation between manufacturing and selling activities of the assessee and profit accrues only at the time of sales of the goods only. Therefore, the contention of the revenue that selling and distribution function of the assessee is a separate profit center is req .....

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..... n that the only source of income should be the eligible source of income and not other sources of income, such as, profits of marketing division or profits on account of established brand. For the allocation of profit of manufacturing unit the mandate is very clear because Income Tax Rule, 1962 contains Rule 18BBB wherein as per sub-rule(2) a separate report is to be furnished by each undertaking and that report shall be accompanied by a profit & loss account and balance-sheet of that Undertaking as if the Undertaking is a distinct entity. He has therefore argued that the allocation of the profit of a manufacturing unit should be made on stand alone basis. He has questioned that how the sale price of the products of the Baddi Unit were determined and recorded. Because of the brand value the sale price must have been determined by the management as if the profit is earned by the assessee-company on sale of the products of the Baddi Unit. It was recorded on the presumption that the sales were executed by the Head Office by charging brand value, the name of the product and the goodwill of the Company. In any case, according to Ld. DR, a reasonable expenditure should have been prov .....

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..... ction (2) in the following manner : (2) This section applies to any undertaking or enterprise (a) which has begun or begins to manufacture or produce any Article or thing ……… Therefore, 'manufacturing' is the first criteria for the eligibility of the 'business' to qualify for the deduction. Hence the 'profits' are required to be derived from a manufacturing undertaking which is producing the specified article. That 'profit' is inclusive in the 'gross total income'. As already noted, the terminology profit has not been defined in this Act therefore we have taken the help of other resources. The basic question is that what is the profit of a manufacturing unit? Firstly, the term Profit implies a comparison between the stage of a business at two specific dates separated by an interval of a year. Thus fundamentally the meaning is that the amount of gain made by the business during the year. This can be ascertained by a comparison of the assets of the business at the two dates. To determine the profit of a manufacturing Unit the accounting standard has given certain guidelines, enumerated in short. In the accounting the profit .....

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..... pute that for Baddi Unit the assessee has maintained separate books of accounts and therefore drawn a separate profit and loss account. In such a situation, whether the AO is empowered to disturb the computation of profit, is always a subject matter of controversy. From the side of the assessee, reliance was placed on Addl. CIT v. Delhi Press PatraPrakashan [2006] 10 SOT 74 (Delhi) (URO). In this case, the assessee was claiming deduction u/s.80IA in respect of a Unit No.4. The said Unit was showing profit @ 62%. As against that, AO has noticed that a margin of profit shown by the assessee as a whole was only to the extent of 10%. The AO has therefore recomputed the profit of the said Unit by applying sub-section (10) of section 80IA and restricted the profit of the said Unit to 10% only. While dealing this issue, the Respected Coordinate Bench has concluded that it was not justified to disturb the working of profit merely because the profit rate of eligible unit was substantially higher than overall rate of profit of other Units of the assessee, more so when separate books were maintained by the assessee in respect of the said eligible Unit. In the present case as well the AO has p .....

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..... directly or indirectly to the non-resident. On those facts, since it was found that R&D activities were carried out by the assessee, therefore, 15% of the profit was allocated to the R&D activities and balance of the profit was attributable to the marketing activities in India. The said decision was entirely based upon the connectivity of the marketing operations with the profits. The CBDT Circular No.23 of 1969 dated 23/07/1969 was also taken into account wherein it was opined that where a non-resident's sales to Indian customers are secured through the services of an agent in India then that profit is attributable to the agent's services. Meaning thereby because of the close connection of the agent's marketing activity the proportionate profit was attributed to the said activity. Contrary to this, there was no finding that upto the extent of 80%, the profit was attributed to the assessee-company. The segregation between 80% and 6% was not on account of any evidence through which it could independently be established that the major portion of the profit could be attributed to the assessee-company and rest of the profit could only be attributed to the Baddi Unit .....

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..... he manufacturing profit, per A.O. It is true that section 80IC does recognized the provisions of section 80IA. Refer, Sub-section (7) of section 80IC which prescribes as follows:- Section 80IC(7) : The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. Due to this reason, our attention was drawn on the provisions of section 80IA(5) of IT Act; reads as under:- Section 80IA(5) : Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. As per this section, the profits of an eligible undert .....

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..... t the market price, which is easily ascertainable, that was recorded in the Baddi Unit account, the scope of controversy gets minimal. Rather, the intense contention of the Ld.AR is that the facts of the case have explicitly demonstrated that the goods manufactured at Baddi Unit were transported to various C&F agents across the country for sale purpose. Therefore, the eligible business is the manufacturing of pharmaceutical products and the only source of income was the profit earned on sale of the products. 10.8 An interesting argument was raised by ld. Special Counsel that the provisions of section 80IA(8) prescribes the segregation of profit in case of transfer of goods from one Unit to another Unit. But section 80IA(8) reads as follows:- 'Section 80IA(8) : Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods [or services] held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not corresp .....

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..... . The AO has suggested two things; first that there must be inter-corporate transfer, and second that the transfer should be as per the market price determined by the AO. Both these suggestions are not practicable. If these two suggestions are to be implemented, then a Pandora box shall be opened in respect of the determination of arm's length price vis a vis a fair market and then to arrive at reasonable profit. Rather a very complex situation shall emerge. Specially when the Statute do not subscribe such deemed intercorporate transfer but subscribe actual earning of profit, then the impugned suggestion of the AO do not have legal sanctity in the eyes of law. 10.9 A very pertinent question has been raised by ld.AR Mr. Patel that what should be the line of demarcation to determine the sale price of a product if not the market price. As far as the present system of fixation of sale price of the product is concerned, a consistent method was adopted keeping in mind the several factors, depending upon the market situation, we have been informed. But if the assessee is compelled to deviate from the consistent method of pricing, then any other suggestion shall not be workable because .....

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..... ked incentives and profit linked incentives. The Court was discussing Chapter VIA which provides incentive in the form of tax deductions to the category of profit linked incentives . The incentive is linked with generation of 'operational profit'. Therefore, the respected Parliament has confined the grant of deductions only derived from eligible business. Each eligible business constitutes a stand alone item in the matter of computation of profit. The Court has said that because of this reason the concept of segment reporting was introduced in Indian Accounting Standards. Ld. Counsel Mr. Srivastava has argued that the deduction u/s.80IC is a profit linked incentive. Only the Operational Profit has to be claimed for 80IC deduction. According to him, each of the eligible business constitutes a stand alone item in the matter of computation of profit. For the computation of profit of an eligible business the word used is derived in section 80IC which is a narrower connotation, as compared to the word attributable . In other words, by using the expression profits derived by an undertaking , Parliament intended to cover such sources not beyond the first degree, i.e. the first deg .....

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..... he assessee. On one hand, it was argued that the accrual of profit must necessarily be at the place where the sale proceeds are received or realized. But on the other hand, it was argued that the profits received relate (i) firstly to his business as a manufacture, (ii) secondly to his trading operations and (iii) thirdly to his business of export. On that basis, it was opined that the profit or loss has to be apportioned between these businesses in a business like manner and also according to well established principle of accountancy. This apportionment of profits between a number of businesses which are carried on by the same person at different places determines also the place of accrual of profit. The act of sale is the mode of realizing the profits. If the goods are sold to a third person at Mill premises, one could have said that the profits arose by reason of sale. The Profit would only be ascribed to the business of manufacture and would arise at the Mill Premises. Merely because a Mill owner has started another business organization in the nature of sale depot, that cannot wholly deprive the business of manufacture of its profits, though there may have to be apportionment .....

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..... e meaning of the said proviso and thereupon it was claimed as exempt being carried out within the territorial jurisdiction of Indian State. So the Court has observed that to succeed in their claim, it is incumbent upon the assessee to show that there was in fact a part of a business and that the profit had actually accrued or arose in that part of an Indian State. The Court has clearly stated in para-41 that both the elements should found exist and then only the business could be treated as a separate business. However, the said proviso has propounded only deeming provisions, as is apparent from the language of the section itself. For the purpose of the said section, it was deemed to be a separate business. The whole of the profits of which accrue in an Indian State and the other part of the business be deemed to be a separate business. In para- 44, the Hon'ble Court has discussed the problem with reference to certain decisions of English Courts and then made an observation that it had been held that if separation is possible in such cases, the proper course is to follow that sever the profits of the two businesses and assess accordingly. The result of the discussion was that t .....

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..... apportionment in the third proviso to section-5 of EPT Act. The opinion expressed was very specific that a profit can accrue in respect to that part of a business only when apportionment is possible. The Hon'ble Court has said that only on the said assumption that apportionment was possible the said proviso was based upon that presumption only. If no apportionment can be made in respect of the process of a particular business, then that will not be considered to be a part of the business at all and held that the proviso will not apply. It was concluded that the principle of apportionment was implied therein. After this detailed discussion, we thus arrive at the conclusion that the principle of apportionment was the criteria for segregating the manufacturing profit if it was feasible to do so. As against that in the present case the assessee has computed the profit of the Baddi Unit on the basis of the well accepted principle of accountancy that a profit is accrued where a transaction is closed, meaning thereby the profit arises solely at the time of sale. 10.13 After the detailed discussion, before we close the controversy we would like to express that the AO's proposition .....

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..... ing the above decision of coordinate bench hold that provisions of section 80IA(8) of the act does not apply to the assessee on transfer of services of marketing division of the company to the eligible industrial undertaking whose profits are claimed as deductible. 88. Further ld. AO has also given one of reason that the claim of the assessee is not admissible because of the reason that along with Form NO.10CCB assessee was required to file the balance sheet and profit and loss account of the eligible undertaking. It is admitted fact that assessee did not file balance sheet along with Form No.10CCB but has filed profit and loss accompanied with that audit report. Subsequently, before ld. DRP, those were filed and were available with ld. DRP as well as with AO at the time of framing final assessment order. Hence it is contended by the ld. AR that substantial compliances has been made by the assessee by filing the profit and loss account and complete compliance before passing of the final assessment order by filing the balance sheet. Hence, ld. AR contended that if the full details are available with the AO before passing of assessment order merely because there is some technical def .....

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..... ction cannot be denied if same is filed before finalization of assessment. Therefore case of the assessee stands on the better footing. No other contrary decision was put before us by revenue. Hence, we do not wish to agree to the contention of the revenue that as the balance sheets were not filed by the assessee of those eligible industrial undertaking whole of the deduction is not allowable to the assessee. 89. Coming to the computation of the eligible income of the assessee for all the eligible units, Ld. AO could not point out any error except dealt with by us which are not on the issue of facts of the case but all of them are on legal grounds, which we have answered in preceding paragraphs of this order. In view of claim of the assessee supported by the audited certificate as provide u/s 80IA(7) of the act read with rule 18BBB and supported by the profit and loss account and balance sheets of the assessee, allocation of all the expenses based on the accepted formula which the assessee is applying for last several years and which has also not been disputed by the ld. AO in past years and allocation key of 'sales' of the units is also not disputed, it deserves to be acce .....

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..... unlike in the case of Hukumchand Mills Ltd. (supra). But, in my view, it makes no difference. The department is aggrieved by the deletion of disallowance of expenditure which disallowance was made under one particular provision. The subject-matter of the appeal was whether the expenditure claimed by the assessee was allowable or not. If it was not disallowable under one particular provision but is disallowable under any other provision, the subject-matter, viz., the allowability of expenditure remains the same. There are a number of decisions in which it has been held that the Tribunal can base its decision on a ground not raised before the appellate authority or in the grounds of appeal before it but is not bound to do so. It is not precluded from considering a point which arises out of the appeal merely because such point had not been raised or urged by either party at the earlier stage of the proceedings. Some of these decisions, only to name a few, are CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 (Mad.), CIT v. AC Paul [1983] 142 ITR 811 (Mad.) and CIT v. Ice Suppliers Corpn. [1967] 64 ITR 195 (Punj.). In fact, the jurisdictional High Court has explained the rat .....

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..... se the issue as set aside to the file of the ld. AO to decide and examine the facts in the course of hearing before the Tribunal, the revenue raised a fresh plea that the Assessing Officer should have invoked the provisions of section 37(1) and requested the Bench to remit back the matter to the file of the Assessing Officer to consider the allowability or otherwise of the expenditure under section 37(1). We do not find that any such fresh plea is raised by the revenue during the course of hearing which is not taken by the LD. AO or Ld. DRP. On factual points, nothing has been alleged by revenue, which remains to be examined, which is brought to our notice. In absence of any fresh plea by the revenue, we are afraid that we cannot agree with the contention of revenue. Our this reason also gets the support from the decision of coordinate bench in Zuari Leasing & Finance Corpn. Ltd. v. ITO [2008] 112 ITD 205 (Delhi) (TM) where in its held that :- 10. It is clear from above that primary power, rather obligation of the Tribunal, is to dispose of the appeal on merits. The incidental power to remand, is only an exception and should be sparingly used when it is not possible to dispose .....

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..... ,20,000/- while computing the book profit u/s 115JB of the Act by treating the mark to market loss as contingent in nature. 62. At the outset, the ld. AR before us submitted that he has been instructed by the assessee not to press ground no. 12 as discussed above. Therefore we dismiss the same as not pressed. 63. The issue raised by the assessee in the ground no 13 is that the AO/DRP erred in re-computing the capital gain/loss on leasehold land along with building during the year under consideration. 63.1. The assessee during the relevant assessment year shown LTCL amounting to ₹ 8,24,560/-on sales of land at Jejuri. The assessee to substantiate its claim submitted copy of two Sale deed along with calculation showing the LTCL on Land. The necessary details of the loss on the sale of the lands stand as under: Sl.No . Particular s Date of Acquisition Cost of Acquisitio n Index in the year of Acquisitio n Index in the year of Disposa l Indexed Cost Date of Disp osal Sale Proceed s Long Term Capita l Gains 1. On Sale of Land Jepuri Land 1- Apri- 90 B) 1- April- 95 Total (a+b) 331,506 147,468 478,974 162 281 582 582 1,060,090 305,432 1,365,522 30th Jul- 08 540,962 (824,5 60) 64. F .....

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..... ad been arrived from the value as per the Audited Financial statement as well as Tax Audit report for the relevant AY. 66. However, the ld. DRP after considering the submission of the assessee disregarded the valuation report by observing that the assessee was not in a position to verify whether the building exists or not as on date. Accordingly, the Ld. DRP upheld the action of the AO. 67. Being aggrieved by the order of the ld. DRP the assessee is in appeal before us. 68. The Ld. AR before us filed the valuation report obtained from the approved valuer and reiterated the submission made before the ld. DRP. 69. The Ld. DR vehemently supported the order of the authorities below. 70. We have heard the rival contentions of both the parties and perused the materials available on record. On verification of such valuation report, it is observed that the value of such land has been calculated as per the circle rate prevailing for such land during the relevant period. Accordingly, Land value of Plot No E2 and E3 as of 2008 as per MIDC Rate was calculated @ ₹ 28,58,800/- and @ 14,26,250/- respectively. 70.1. Accordingly, considering such a valuation report, we are of the view that sa .....

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..... ssue raised by the assessee in the ground no. 15 is that the Ld. DRP erred in not adjudicating the claim of weighted deduction u/s 35(2AB) of the Act on the cost of assets provided to employees working in approved R&D facilities. 74. At the outset, we note that the similar grounds of appeal was raised before ITAT Delhi in the own case of assessee Vide ITA no 196/Del/2013. The Delhi Tribunal has set aside such ground of appeal to the AO by observing as under: We have carefully considered the rival contentions and we are of the view that the issue is squarely covered in favour of the appellant by decision of ITAT in assessee's own case. However, neither the AO nor the ld. DRP has applied its mind to the facts of this case and has not adjudicated on the issue. Facts of this expenditure with adequate details are also not record before us. Therefore we set aside this ground of appeal to the file of AO to verify the claim made by the assessee and if the facts and circumstances are similar to the issue decided by the ITAT in case of assessee for earlier years same may be allowed. In the result, ground 13 of the appeal is allowed with above direction. 74.1. The ground raised before .....

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..... , that the Tribunal has not committed any serious and grave error of law as projected. The Tribunal has in accepting the stand of the Assessee concluded that the liability is for contribution to the DrugPrice Equalization Account. The Assessee may have disputed the liability insofar as this contribution, however, the liability is clearly ascertainable one. There was no stay against accrual of the liability under clause 7(2) of the Drug Price Control Order. This being a statutory liability it is allowable in the year in which it arises irrespective of whether the Assessee disputes it or accepts the same. 5. Mr.Pardiwalla submits that this is the consistent view and which also finds favour not only in the case of the Assessee, but in the case of M/s Glaxosmithkline Pharmaceuticals Limited. Mr.Pardiwalla places reliance on the order passed by the Division Bench of this Court on 05.03.2012 in Income Tax Appeal No.972/2009 (CIT v. Glaxosmithkline Pharmaceuticals Ltd.). He submits that the issue was answered in favour of the Assessee and against the Revenue. Our attention has been invited to paragraph 5 of this order and it is submitted that in relation to M/s Glaxosmithkline the Tribuna .....

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..... Del/2013 by observing as under. We have carefully considered the rival contentions and we set aside this ground of appeal to the file of AO to verify the amount of expenditure incurred by the assessee on account of fluctuation of foreign exchange; and if they are on capital account related to acquisition of asset then to grant depreciation thereon in accordance with the provisions of law. In case if this expenditure is found to be of revenue, nature then allows the same u/s 37(1) of the Act. In the result ground No.15 of the appeal is allowed. 80. In view of the above order of Delhi ITAT in the own case of the assessee, we are of the view to follow the same. Hence the ground of appeal of the assessee is allowed with the direction for fresh adjudication as per the provision of law. Hence the ground of appeal of the assessee is allowed for statistical purposes. 81. In the result, the appeal of the assessee in IT(TP)A No.1782/Del/2014 for AY 2009-10 is partly allowed for statistical purposes. Now coming to IT(TP)A No.781/Del/2015 for AY 2010-11 82. The assessee has raised the following grounds of appeal as under: 1. That on the facts and in circumstances of the case, and in law, the A .....

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..... part of the return on the ground that the said claims were not made in the return and no variation was proposed on the said claims in the draft assessment order. 4. That the DRP erred, both on facts and in law, in: 4.1 not accepting the overseas Associated Enterprises ('AEs') as the tested party, being the least complex of the transacting entities and instead considering the assessee as the tested party, thus violating the basic principles of Transfer Pricing [TP]. 4.2 disregarding the approach adopted by the assessee of undertaking a regional benchmarking in the TP report which is in line with the globally accepted TP principles. 5. That the AO/DRP erred on facts and in law in treating ₹ 53,98,567, being reversal of deferred employees compensation credited to the Profit & Loss account on account of non-exercise of options by its employees, as income of the assessee, without appreciating the fact that the expense in relation to such income had already been disallowed in earlier year(s). 5.1 That the AO erred in holding that the assessee had failed to substantiate whether the expenditure incurred in relation to the reversed employee compensation was not claimed as .....

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..... formula prescribed in Rule 8D of the Rules, without appreciating that: (a) there is nothing on record to dispute the contention of the assessee that no expenditure, over and above expenditure suo-moto disallowed by the assessee was actually incurred in relation to the exempt income; (b) pre-conditions for applying Rule 8D as prescribed in sub-sections (2)/ (3) of section 14A of the Act were not satisfied. 7.2 That the AO/DRP erred on facts and in law in disallowing the aforesaid amount without appreciating that no fresh investments were made during the relevant previous year. 7.3 That the AO/ DRP erred on facts and in law in not appreciating that there was no nexus between any interest expenditure incurred by the assessee and the exempt income and consequently, no part of interest expenditure was, in any case, disallowable under section 14Aof the Act. 7.4 That the AO / DRP erred on facts and in law in holding that the primary reason for making investment was to earn exempt income, for making disallowance under section14Aof the Act, which is in complete disregard to material placed on record by the assessee. 7.5 That the AO/DRP erred on facts and in law in not appreciating that even .....

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..... e under sections 801B & 1C of the Act was duly supported by audit report(s) in Form 10CCB and accounts maintained in SAP/ ERP based elaborate, comprehensive and robust accounting system/ software. 9.6 That the AO/ DRP exceeded jurisdiction in holding that the assessee was not eligible to claim deduction under sections 80-IB & 80-IC of the Act for the year under consideration, without appreciating that on identical facts, deduction had always been allowed in the earlier year(s) (except for assessment yea₹ 2008-09 & 2009-10). 9.7 That the AO/ DRP erred on facts and in law in alleging that the assessee violated the provisions of sub-sections (5) and (8) of section 80IA of the Act. 9.8 That the AO/DRP erred on facts and in law in disregarding the additional information/ documents filed by the assessee in support of deduction claimed under section 80-IB and section 80-IC of the Act and establishing conclusions merely on the basis of order of the previous assessment years. 10. That the AO/DRP erred both on facts and in law in holding Mark to Market ('MTM') gain of ₹ 1983,86,34,040 as taxable 'income' of the assessee under normal provisions and S .....

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..... claim of ₹ 8,64,70,548 on account of adjustment of hedging charges pertaining to the cost of fixed assets against their cost and allowing depreciation thereon under the provisions of the Act. 15. That the AO/DRP erred in making arbitrary/ extraneous observations based on conjectures/ surmises and unsound presumptions, which are not in accordance with the facts of the case. 16. That the Ld.AO erred on facts and in law in law in charging interest under sections 234B, 234C and 234D of the Act 17. That the above grounds of objection are independent of, and without prejudice to one another. 18. That the assessee craves leave to alter, amend or withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing. The assessee has raised additional grounds of appeal vide application dated 20/01/2018 which read as under: In addition to the grounds already taken with respect to the issue of taxability fo mark to market gains in the present appeal vide Ground No.10, the Appellant wishes to raise the following additional grounds, which are without prejudice to the original grounds: Taxability of Mark to Market (MTM) Gains -  .....

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..... he assessee in ground no 6 is that the Ld. DRP erred in confirming the disallowance made by the AO on account of payment to RCHS u/s 37 of the Act. 89. An identical issue has been considered and decided by us in Assessee's appeal vide ITA No. 1782/DEL/2014 in the ground no. 7 vide Para no. 29 & 30 of this order in favor of the assessee. Please refer the relevant Para for our detailed discussion therein, we direct accordingly. Hence Ground no. 6 of the assessee s appeal is allowed. 90. The issue raised by the assessee in the ground no. 7 is that the Ld. DRP erred in confirming the addition made by the AO amounting to ₹ 4,89,02,774/- u/s 14A of the Act. 91. An identical issue has been considered and decided by us in Assessee's appeal vide ITA No. 1782/DEL/2014 in the ground no. 8 vide Para no. 37 & 38 of this order in favor of the assessee. Please refer the relevant Para for our detailed discussion therein, we direct accordingly. Hence Ground no. 7 of the assessee is allowed. 92. The issue raised by the assessee in ground no 8 is that the Ld. DRP erred in confirming the addition made by the AO amounting to ₹ 4,89,02,774/- while computing the book profit u/ .....

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..... ng of the AO as reproduced under: The assessee pointed out that the AO vide order dated 30/01/2014 for AY 2009-10, did not allow the MTM loss considering the same to be contingent loss, resulting in consequent reduction in carried forward loss to AY 2010-11 by ₹ 6094.43 Mn. It was therefore submitted by the assessee that : It is respectfully submitted that the Company continues to bonafidely believe that MTM gains/losses on forward contracts represents crystallized gains / losses and are, therefore, taxable/allowable as deduction in the relevant year. The company has, therefore, rightly claimed MTM loss in the assessment year 2009-10 and also consistent with its stand, rightly offered for tax MTM gains in the assessment year 2010-11. After verying the submissions of the assessee, it is observed that during the year under consideration, assessee has earned gain on MTM and has requested not to consider the same as taxable and to be excluded from income pending adjudication of appeal filed before ITAT. However, the contentions of the assessee are not acceptable. It is noted that the assessee has not accepted that MTM loss as not deductible being contingent in nature and has file .....

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..... treating the same as capital expenditure. An identical issue has been considered and decided by us in Assessee's appeal vide ITA No. 1782/DEL/2014 in the ground no. 14 vide Para no 72 of this order which has been dismissed by us as the same was not pressed before us. Please refer the relevant Para for our detailed discussion therein, we direct accordingly. Hence Ground no. 11 of the assessee s appeal is dismissed. 101. The issue raised by the assessee in the ground no. 12 is that the Ld.DRP erred in not adjudicating the claim of the assessee on account of weighted deduction u/s 35(2AB) of the Act. 102. An identical issue has been considered and decided by us in Assessee's appeal vide ITA No. 1782/DEL/2014 in ground no. 15 vide Para no. 74 of this order which has been set aside to the AO for fresh adjudication as per the law. Please refer the relevant Para for our detailed discussion therein, we direct accordingly. Hence Ground no. 12 of the assessee s appeal is allowed for statistical purposes. 103. The issue raised by the assessee in ground no 13 is that the Ld. DRP erred in not adjudicating the claim of the assessee on account of hedging charges towards investment amount .....

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