TMI Blog2020 (1) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... al set of facts, the Tribunal by following the decision of Hon'ble Bombay High Court in the case of CIT vs Raychem RPG Ltd. [ 2011 (7) TMI 953 - BOMBAY HIGH COURT] held that expenditure incurred on purchase of a software and licenses are in the nature of revenue expenditure deductible u/s. 37(1) . Disallowances of deduction claimed u/s. 35(2AB) in respect of Ennore Unit, Goregaon Unit - Deduction denied on the ground that the assessee had failed to placed on record Form 3CM issued by the DSIR for approval and quantification of expenditure incurred for research and development activities - HELD THAT:- We find that for AY 2008-09 [ 2018 (7) TMI 1887 - ITAT MUMBAI] and 2009-10 [ 2019 (5) TMI 689 - ITAT MUMBAI] the issue has been restored back to the file of the Ld. AO to provide an opportunity to the assessee to furnish required approval in form 3CM from the competent authority - consistent with view taken by the co-ordinate bench for earlier years, we restored this issue to the file of the Ld. AO and direct him to follow the directions given by the Tribunal for AY 2008-09 and 209-10, while adjudicating the issue. Disallowances of claim of depreciation on additions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Professional Conduct Etiquette and Ethics) Regulations - HELD THAT:- While deciding the issue in assessment year 2009-10 [ 2019 (5) TMI 689 - ITAT MUMBAI] the Tribunal has allowed assessee s claim holding that the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations does not apply to the assessee and further, the CBDT circular also applies prospectively. The same view was reiterated by the Tribunal while deciding the issue in assessment year 2010-11. Respectfully following the consistent view of the Tribunal in assessee s own case as discussed above, we allow assessee s claim by deleting the disallowance. Deduction claimed u/s. 80IC - HELD THAT:- We find that an identical issue has been considered by the co-ordinate bench of ITAT for AY 2008-09 and 2009-10, where the issue has been restored back to the file of the Ld. AO for re-adjudication. Eligibility criteria for claiming deduction u/s. 80IC - HELD THAT:- AO was erred in disallowed deduction claimed u/s. 80IC of the I.T. Act, 1961, on examination of eligibility criteria for claiming said deduction without appreciating the fact that eligibility criteria for claiming deduction needs to be exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : J.D. Mstri and Madhur Aggarwal, ARs For the Respondent : Shishir Dhamija, DR ORDER G. Manjunatha, Member (A) 1. These cross appeals filed by the assessee, as well as the revenue are directed against final assessment order passed by the Ld. AO u/s. 143(3) r.w.s. 144C(13) of the I.T. Act, 1961, in pursuant to directions issued u/s. 144C(5) of the I.T. Act, 1961 by the Ld. Dispute Resolution Panel -III, Mumbai, dated 30/12/2014 for the AY 2010-11. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed-off, by this consolidated order. ITA. No. 1754/Mum/2015:- 2. The assessee has raised the following grounds of appeal:- GROUND NO- I: DISALLOWANCE OF PAYMENTS MADE TO PIRAMAL CORPORATE SERVICES LTD (FORMERLY KNOWN AS PIRAMAL ENTERPRISES LTD) (PCSL) OF ₹ 2,03,08,000/- 1. On, the facts and in the circumstances of the case and in law. the AO erred in following the erroneous direction of Dispute Resolution Panel ('the DRP ) in disallowing part of payment made to PCSL of ₹ 2,03,08,000/- on the alleged ground that same is not wholly and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice to the above, if the AO is right in saying that the expenditure on computer software has resulted only in granting a right to use software then, the AO be directed to allow the said expenditure as revenue expenditure. GROUND NO. V: DISALLOWANCE OF CLAIM OF DEPRECIATION PERTAINING TO BOEHRINGER MANNHEIM INDIA LTD. (BMIL), PIRAMAL HOLDINGS LTD. (PHL) AND GLASS AND BULK DRUG DIVISION (GBDD) AMOUNTING TO ₹ 94,43,089/- 1. On the facts and in the circumstances of the case and in law, the AO erred in not following the direction of the DRP in allowing depreciation as claimed in respect of assets of Boehringer Mannheim India Limited ( BMIL ) merged with the Appellant on the alleged ground that the Appellant has not provided working of depreciation. 2. The AO failed to appreciate and ought to have held that the depreciation chart for AY 1997-98 was submitted before him. 3. On the feels and in the circumstances of the case and in law, the AO erred in Mewing the erroneous direction of the DRP in recomputing depreciation allowable in respect of assets of Pharma Division taken over from Piramal Holdings Ltd. in a manner different from the one calculated by the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expenses are not incurred wholly and exclusively for the purpose of the business and are inadmissible u/s. 37(1) of the Act, being an expense prohibited by law. 2. The Appellant prays that the entire expenditure incurred towards advertising and business promotion be allowed as deduction, GROUND No. IX: ADDITION OF ₹ 21,25,00,000/- TOTAL INCOME AND REDUCTION OF DEDUCTION UNDER SECTION 80IC AMOUNTING TO ₹ 22,25,00,000 1. On the facts and circumstances of the case and in law, the AO erred in following the erroneous direction of the DRP in reducing deduction u/s. 80IC by allocating Research and development expenditure of ₹ 11,23,00,000/- and interest expenditure of ₹ 11,02,00,000/- to fee Baddi unit eligible for deduction u/s. 80IC on the alleged ground that such expenditure are attributable to the said Baddi Unit. 2. The AO failed to appreciate and ought to have held that the Research and development expenditure are incurred mainly on Process Development for customs manufacturing (PDG) and it has no connection directly or indirectly with the manufacturing activity carried out at Baddi unit. The assesses has not made any borrowing specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociated Enterprise ( AE ). The TPO has charged commission @ 1.75% normally charged by banks for guarantees and 1.25% charged for risk involved on account of exchange rate risk, country specific risk and AE risk involved in giving guarantee on loans. 2. The AO failed to appreciate and ought to have held that, the transactions of a corporate guarantee is not an international transaction of a corporate guarantee is not an international transaction. 3. Without prejudice, the AO be directed to restrict the addition to 0.5% i.e. the rate at which the Appellant has recovered guarantee commission from AE's. GROUND NO. XIII: ADDITION OF DISALLOWANCE UNDER OECTION 14A BF THE ACT TO COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT AMOUNTING TO ₹ 4,55,36,000/- 1. On The facts and circumstances of the case and in law, the AO erred in following the erroneous direction of the DRP in adding back the amount disallowed u/s. 14A to the book profit computed u/s. 115JB of the Act. 2. The AO failed to appreciate and ought to have held that the disallowance made under sub-sections (2) and (3) of section 14A is not to be added while computing the book profits u/s. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09 reported in (2018) 97 taxmann.com 352, where the Tribunal under identical set of facts deleted additions made by the Ld. AO towards proportionate reimbursement of expenses, as well as royalty payment, as per agreement dated 29/04/1995. The Ld. DR present for the revenue, fairly accepted that this issue is squarely covered in favour of the assessee by the decision of ITAT for AY 2008-09. 5. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the co-ordinate bench of ITAT, Mumbai in assessee's own case for AY 2008-09 and after considering relevant facts, including agreement between the parties dated 29/04/1995 held that the Ld. AO is under a misconception of fact has disallowed payment made to PCSL towards reimbursement of expenses, as well as payment of royalty, on the ground that PCSL has charged more to the assessee, then what is contemplated in the agreement. The relevant findings of the Tribunal are as under:- 21. We have considered rival submissions and perused materials on record. On a reading of the agreement dated 29th April 1995 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred towards purchase of software licenses are in the nature of revenue expenditure and thus, are allowable as deduction u/s. 37(1) of the I.T. Act, 1961. The Ld. DR, on the other hand fairly accepted that this issue is covered in favour of the assessee, however he strongly supported findings of the ld. AO, as well as the Ld. DRP. 8. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that this issue has been subject matter of deliberation by the co-ordinate bench of ITAT, Mumbai 'J' bench in assessee's own case for AY 2009-10 in ITA No. 1257/Mum/2014, where under identical set of facts, the Tribunal by following the decision of Hon'ble Bombay High Court in the case of CIT vs Raychem RPG Ltd. (2012) 346 ITR 138 held that expenditure incurred on purchase of a software and licenses are in the nature of revenue expenditure deductible u/s. 37(1) of the I.T. Act, 1961. The relevant findings of the Tribunal are as under:- 11. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to subscribe to the view taken by the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as disallowed weighted deduction claimed u/s. 35(2AB), on the ground that the assessee had failed to placed on record Form 3CM issued by the DSIR for approval and quantification of expenditure incurred for research and development activities. 11. The Ld. AR for the assessee, at the time of hearing submitted that this issue is also covered by the decision of ITAT, Mumbai benches for AY 2008-09 and 2009-10, where under identical set of facts, the issue has been restored back to the file of the Ld. AO for providing opportunity to the assessee to furnish required approval in form No. 3CM. The Ld. DR, on the other hand, fairly accepted that this issue may be set aside to the file of the Ld. AO and direct him to follow the directions given by the ITAT for earlier assessment years. 12. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that for AY 2008-09 and 2009-10 the issue has been restored back to the file of the Ld. AO to provide an opportunity to the assessee to furnish required approval in form 3CM from the competent authority. The relevant findings of the Tribunal are as under:- 13. Admittedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom ground No. 4 of assessee appeal is disallowances of claim of depreciation on additions to computer software of ₹ 2,82,05,985/-. The facts with regard to the impugned disputes are that during the course of assessment proceedings, the Ld. AO noticed that the assessee had incurred software expenses on up gradation of its existing software namely MFGPRO, MS-office, etc and claimed depreciation @ 60% as applicable to computer software. The Ld. AO was of the opinion that as per Rule 5 of the I.T. Rules, 1962 only computers, including software were eligible for depreciation @ 60%, when the computers were purchased along with software. In case, the software is purchased separately, then the same would be an acquisition of intangible assets as envisaged in part- B of depreciation schedule and such intangible asset is entitled for depreciation @ 25%. Accordingly, disallowed excess depreciation claimed by the assessee. 15. The Ld. AR for the assessee submitted that this issue is also squarely covered in favour of the assessee by the decision of ITAT, Mumbai bench in assessee's own case for AY 2009-10, where under identical set of facts, the Tribunal held that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the view taken by the aforesaid coordinate benches of the Tribunal and respectfully follow the same. Further, as observed hereinabove, the assesses claim of depreciation on software expense @ 60% which was allowed by the CIT(A) had also been accepted by the revenue and the same had also not been carried any further in appeal before the Tribunal. In terms of our aforesaid observations, we are of the considered view that the assessee had rightly claimed depreciation on computer software @ 60%. We thus set aside the order of the CIT(A) in context of the issue under consideration and vacate the disallowance of ₹ 17,63,425/- made by the A.O. on the said count. The Ground of appeal No. III is allowed. Disallowance of claim of depreciation on assets of BMIL and PHL : ₹ 68,75,396/-: 17. In this view of the matter and consistent with view taken by the co-ordinate bench, we direct the Ld. AO to allow depreciation as claimed by the assessee. 18. The next issue that came up for our consideration from ground No. 5 of assessee appeal is disallowances of claim of depreciation pertaining to BMIL and PHL of ₹ 94,43,089/-. The Ld. AR for the assessee submitted that this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the assessee, the same could not have been thrust upon it even if the particulars were available with the AO. We have perused the order of the Tribunal for A.Y. 2008-09 and finding no reason to take a different view, respectfully follow the same. Apart there from, we are also in agreement with the ld. A.R that now when the DRP while disposing off the objections filed by the assessee had specifically directed the A.O. to allow claim of depreciation as was raised by the assessee in respect of BMIL, therefore, there was no reason for the A.O. to have not followed such directions while passing the final assessment order u/s. 143(3) r.w.s 144C(13), dated 28.01.2014. In terms of our aforesaid observations, we direct the A.O. to allow the assesses claim of depreciation insofar the assets of BMIL are concerned. 19. As regards the claim of depreciation raised by the assessee on the assets of PHL which w.e.f 01.06.1996 were taken over by the assessee under a scheme of arrangement duly sanctioned by the Hon'ble High Court of Bombay, vide its order dated 14.08.1997, we find that the assessee subsequent to the takeover had taken the WDV on the basis of the Income Tax records of PH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the outcome of the main appeal. In terms of our aforesaid observations the Ground of appeal No. IV raised by the assessee is partly allowed. 20. In this view of the matter and consistent with view taken by the co-ordinate bench, we direct the Ld. AO to allowed depreciation as claimed by the assessee on BMIL and PHL units. 21. The next issue that came up for our consideration from ground No. 6 of assessee appeal is adjustment of valuation of inventory as per section 145A of the I.T. Act, 1961 for ₹ 1,20,83,000/-. The Ld. AR, for the assessee, at the time of hearing, submitted that this issue is also covered by the decision of ITAT, 'J' bench in assessee's case for AY 2009-10, where the issue has been restored back to the file of the Ld. AO to verify the claim of the assessee that the impact of grossing up of tax, duty, cess, etc., by restating the values of purchases and inventories by inter alia, including the effect of CENVAT credit would be nil subject to section 43B that the duty, taxes, cess, etc is paid before the due date of filing the return of income. The Ld. DR, on the other hand strongly supported order of the Ld. AO, as well as the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiate its claim before him. The Ground of appeal No. V is allowed for statistical purposes. 23. In this view of the matter and consistent with view taken by the co-ordinate bench in all fairness, we restored the matter to the file of the Ld. AO for re-adjudication in light of the claim of the assessee that impact of grossing up of tax would be nil to profit and loss for the year, if taxes are paid before the due date of filing the return of income. 24. The next issue that came up for our consideration from ground No. 7 of assessee appeal is disallowances of expenditure, in relation to exempt income u/s. 14A of the I.T. Act, 1961 for ₹ 4,55,36,000/-. The facts with regard to the impugned disputes are that the assessee has earned tax free income being dividend from shares, but has not declared any expenses attributable to the earning of exempt income. The Ld. AO has determined disallowances contemplated u/s. 14A by invoking Rule 8D(2)(ii) (iii) of I.T. Rules, 1962 and has worked out total disallowances of ₹ 4,55,36,000/-. The claim of the assessee before the authorities was that when, own funds is in excess of investments made in shares and securities, which yiel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s. 14A r.w. Rule 8D(2)(ii) is concerned, we are in agreement with the ld. A.R that in case an assessee has sufficient interest free funds which would explain the source of the investments made in the exempt income yielding assets, then no disallowance of any part of the interest expenditure can be made u/s. 14A r.w Rule 8D(2)(ii). Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of (i) HDFC Bank Ltd. Vs. DCIT (2016) 383 ITR 529 (Bom); (ii) CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom); and (iii) CIT Vs. Reliance Utilities Power Ltd. (2009) 313 ITR 340 (Bom). In fact, a similar issue had came up before the Tribunal in the assesses own case for the immediately preceding year i.e A.Y. 2008-09 viz. M/s. Piramal Enterprises Ltd. Vs. Asst. CIT (ITA No. 5471/Mum/2017, dated 30.07.2018). The Tribunal after deliberating on the issue under consideration, had directed the A.O. to verify the assesses claim of availability of sufficient interest free funds for the purpose of making investments in exempt income yielding assets, and if the said claim was found to be in order, then no disallowance of interest expenditure U/rule 8D(2)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisement and business promotion expenses of ₹ 30,47,33,208/-. The facts with regard to the impugned disputes are that the assessee has debited advertisement and business promotion expenses broadly under three heads, i.e (i) key accountant manager expenses (ii) customer relation manager expenses (iii) gift articles. The Ld. AO has disallowed 50% of the said expenses for the reasons that the expenses were not incurred wholly and exclusively for the purpose of business and also, being in the nature of expenses incurred for any purpose, which is prohibited by any law in force and are inadmissible u/s. 37(1) of the I.T. Act, 1961. The Ld. AO had also taken support from circular of CBDT No. 05/2012 and also, provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 and held that any expenditure in violation of the above Act is in the nature of expenditure incurred for the purpose, which is prohibited by law and accordingly, disallowed 50% of said expenditure. 30. The Ld. AR for the assessee, at the time of hearing submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai 'J' benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenses incurred by the assessee towards giving various freebies to doctors for promotion of its business was inadmissible under Sec. 37(1), as incurring of such an expense was prohibited by law. In the backdrop of the objections raised by the ld. A.R before us, we find that the adverse inferences drawn by the lower authorities as regards the admissibility of the aforesaid expenses has been assailed by the assessee before us on multiple grounds viz. (i) that the Medical Council Regulations, 2002 would though apply to medical practitioners, however, the same were not applicable to the pharmaceutical companies; (ii) that as the CBDT Circular No. 5 of 2012, dated 01.08.2012 imposing prohibition on the medical practitioners and their professional associations from taking any gifts, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied healthcare sector industries was applicable prospectively, therefore, the same was not applicable in the case of the assessee for the year under consideration i.e A.Y. 2009-10; (iii) that in any case the MCD guidelines which came into effect from 10.12.2009 itself were not applicable in the year under consideration; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Council (Professional Conduct, Etiquette and Ethics) regulations, 2002, however as the same only regulates the code of conduct of the medical practitioners/doctors, therefore, in the absence of any prohibition on the pharmaceutical companies in incurring of such sales promotion expenses, it cannot be held to have incurred an expenditure for a purpose which is an offence or is prohibited by law. The Tribunal while concluding as hereinabove, had observed as under: 20. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the cross appeals filed by the assessee and the revenue has been sought for adjudicating the allowability of the sales promotion expenses incurred by the assessee on the distribution of articles to the stockists, distributors, dealers, customers and doctors, in the backdrop of the CBDT Circular No. 5/2012, dated 01.08.2012 and the MCI regulations. We find that it is the case of the revenue that as per the CBDT Circular No. 5/2012, dated 01.08.2012 any expense incurred by a pharmaceutical or allied health sector industry in providing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the aforesaid deposition of MCI that its jurisdiction stands restricted to the registered medical professionals, it can safely be concluded that the MCI regulations would in no way impinge on the functioning of the assessee company which is engaged in the business of manufacturing and sale of pharmaceutical and allied products. We thus, in the backdrop of our aforesaid deliberations are of the considered view that the code of conduct enshrined in the MCI regulations are solely meant to be followed and adhered by medical practitioners/doctors, and such a regulation or code of conduct would not cover the pharmaceutical company or healthcare sector in any manner. We are further of the view that in the backdrop of our aforesaid observations, as the Medical Council of India does not have any jurisdiction under law to pass any order or regulation against any hospital, pharmaceutical company or any healthcare sector, then any such regulation issued by it cannot have any prohibitory effect on the manner in which the pharmaceutical company like the assessee conducts its business. On the basis of our aforesaid observations, we are unable to comprehend that now when the MCI h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries. 3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expenses, if the same has been incurred for a purpose which is either an offence or prohibited by law. Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income. 4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the violation of the code of conduct is only for the medical practitioners and not for the pharmaceutical companies or allied health sector industries. We are thus of the considered view that the regulations issued by MCI are qua the doctors/medical practitioners registered with MCI, and the same shall in no way impinge upon the conduct of the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of Explanation to Sec. 37(1), then the same would debar the doctors or the registered medical practitioners and not the pharmaceutical companies and the allied healthcare sector for claiming the same as an expenditure. 31. Apart there from, we are also in agreement with the alternative contention advanced by the ld. A.R that though a benevolent CBDT Circular may apply retrospectively, but a circular imposing a burden has to apply prospectively only. As a result thereof, now when the CBDT Circular No. 5/2012 was issued only as on 01.08.2012, therefore, the same would not be applicable to the case of the assessee before us i.e for the period relevant to A.Y. 2009-10. In fact, the aforesaid issue as regards the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 23. We find that the CBDT as per its Circular No. 5/2012, dated 01.08.2012 had enlarged the scope and applicability of Indian Medical Council Regulation, 2002, by making the same applicable even to the pharmaceutical companies or allied healthcare sector industries. We are of the considered view that such an enlargement of the scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provision either under the Income Tax Act or under the Indian Medical Council Regulations. We are of a strong conviction that the CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. Still further, though the CBDT can tone down the rigours of law in order to ensure a fair enforcement of the provisions by issuing circulars for clarifying the statutory provisions, however, it is divested of its power to create a new impairment adverse to an assessee or to a class of assessee without any sanction or authority of law. We are of the considered view that the circulars which are issued by the CBDT must confirm to the tax laws and though are meant for the purpose of giving administrative re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 55,81,68,692/- incurred by the assessee towards advertisement and its business promotion under three heads viz. (i) Key Account Manager (KAM) Expenses; (ii) Customer Relation Manager (CRM) Expenses; and (iii) Gift Articles would not be hit by the Explanation to Sec. 37 of the I-T Act. 34. Insofar the observations of the lower authorities that the assessee had not been able to fully substantiate its claim of expenses, we are unable to subscribe to the same. As a matter of fact, the A.O. in the course of the assessment proceedings had vide his letter dated 06.03.2013 directed the assessee to file sample bills of expenses in respect of (i) Key Account Manager (KAM) Expenses; (ii) Customer Relation Manager (CRM) Expenses; and (iii) Gift Articles, which admittedly were filed by the assessee. Thereafter, the A.O. without pointing out any specific instance with reference to any such sample bill or had made a general observation, that the assessee besides the statement that was made by it in the ledger that a certain amount was given to CRM/KAM Manager, had no other primary evidence. Further, it is also observed by him that as in certain cases it was also not known as to who was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, fairly accepted that the issue may be set aside to the file of the Ld. AO to reconsider, in light of the findings given by the Tribunal for AY 2008-09 and 2009-10. 35. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the co-ordinate bench of ITAT for AY 2008-09 and 2009-10, where the issue has been restored back to the file of the Ld. AO for re-adjudication for the reasons stated therein. The relevant findings of the Tribunal are as under;- 40. We have deliberated on the aforesaid claim of the assessee and are of the considered view that bypassing the specific claim of the assessee, the A.O. had carried out part allocation of the interest R D expenditure to its Baddi unit, only for the reason that there was a disparity between the profit rate of Baddi unit and the other units. As is discernible from the records, the department had failed to place on record any cogent and irrefutable material which would conclusively establish that the borrowed funds were utilised in setting up the Baddi unit and further the R D expenditure incurred was in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on the other hand, fairly accepted that the issue is covered in favour of the assessee by the decision of ITAT for AY 2009-10. But, he strongly supported order of the Ld. AO, as well as the Ld. DRP. 38. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that a similar issue has been considered by the co-ordinate bench of ITAT 'J' bench for AY 2009-10, where under identical set of facts, it was held that eligibility criteria for claiming deduction u/s. 80IC of the Act, needs to be examined in the year of formation, as envisaged u/s. 80 IC (4) of the Act, 1961. The relevant findings of the Tribunal are as under:- 50. In the backdrop of our aforesaid observations that the satisfaction of the conditions prescribed in Sec. 80IC(4) are required to be satisfied only in the year of formation , we shall now deliberate on the facts involved in the case before us. Admittedly, the assessee had set-up its Baddi unit on 10.06.2006, being the date on which production had commenced in the said unit. The said date of formation of the Baddi unit is discernible from the certificate issued by a Chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Sec. 147 for the purpose of reallocating certain expenses to its Baddi unit, which he was of the view that the assessee company had allocated to its said unit on the lower side. However, at no stage the claim of deduction raised by the assessee for the said initial year i.e the year of formation of the Baddi unit was sought to be declined or dislodged on the ground that as the assessee had failed to have satisfied the conditions prescribed in Sec. 80IC(4), thus it was not eligible for the same. On the basis of our aforesaid observations, we are of the considered view that now when admittedly the Baddi unit was formed by the assessee on 10.06.2006 i.e the period relevant to A.Y. 2007-08, therefore, in the backdrop of the settled position of law as had been deliberated by us at length hereinabove, the satisfaction of the conditions prescribed in Sec. 80IC(4) was confined to the initial year i.e year of formation viz. A.Y. 2007-08. In fact, we are of the considered view that now when the A.O. had vide his assessment framed u/s. 143(3), dated 18.12.2009 for A.Y. 2007-08, had allowed the assesses claim of deduction u/s. 80IC, therefore, there could have been no reason for him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, perused the material available on record and gone through orders of the authorities below. We find that an identical issue has been decided by the co-ordinate bench of ITAT, Mumbai, in assessee own case for AY 2008-09, where under identical set of facts, it was held that when, loan is advanced in foreign currency, the appropriate method for bench marking rate of interest is by applying either LIBOR or EUROBOR rate and therefore, the ALP of interest chargeable to the AE cannot be determined by applying Indian PLR. The relevant findings of the Tribunal are as under;- 70. We have considered rival submissions and perused materials on record. Undisputedly, the AE of the assessee is located in Switzerland and the loan availed by the AE is also in the currency of its residence. It is well settled, in case of such loan availed by the AE in foreign currency, the appropriate method for bench marking the interest rate is by applying either LIBOR or EUROBOR. Therefore, the arm's length price of interest chargeable to the AE cannot be determined by applying Indian PLR as the loan given was not in Indian currency. This view of ours gets support from the decisions cited by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to exempt income u/s. 14A of the I.T. Act, 1961. We find that an identical issue has been considered by the co-ordinate bench of ITAT, Mumbai in assessee's own case for AY 2009-10 and after considering relevant facts and also, by following the decision of Hon'ble Bombay High court, in the case of CIT vs Bengal Finance and investments Pvt. Ltd. in ITA No. 337 of 2013 held that disallowances made u/s. 14A is not to be considered for the purpose of computing the book profit u/s. 115JB of the I.T. Act, 1961. We, further noted that the ITAT, bench in the case of ACIT vs Vireet Investments Pvt. Ltd. had considered a similar issue and after considering relevant facts held that computation under Clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated u/s. 14A r.w. Rule 8D of the I.T. Rules, 1962. Therefore, by respectfully following the decision of Hon'ble Bombay High court, in the cases discussed hereinabove, we direct the Ld. AO to delete additions made towards book profit computed u/s. 115JB of the Act, in respect of disallowances made u/s. 14A of the I.T. Act, 1961. 46. In the result, appeal filed by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant findings of the Tribunal are as under:- 27. We have perused the observations of the lower authorities and deliberated on the contentions advanced by the authorised representatives for both the parties before us. Admittedly, the issue as regards allowability of the assesses claim of deduction u/s. 35A in respect of trademarks under consideration, had came up before the ITAT, Mumbai in the assesses own case for the immediately preceding year viz A.Y. 2008-09. It was observed by the Tribunal that SPPL had paid an amount of ₹ 34 crore towards purchase of trademark from ASE , as per agreement dated 03.10.1997. After making the said payment, SPPL and thereafter the assessee had amortized the expenditure and claimed deduction of 1/14th of ₹ 34 crores paid, in each subsequent year, which was allowed by the CIT(A) and the Tribunal in the said preceding years. It was noticed by the Tribunal that despite the fact that the A.O. had accepted that in the preceding years CIT(A) and the Tribunal had allowed the assesses claim for deduction u/s. 35A, however, he had disallowed the claim of deduction for the year before him i.e A.Y. 2008-09 by following the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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