9911796707
TMI Blog2021 (12) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment framed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 144C(3) on 20/03/2014. The Ld. AO has passed the order after incorporating certain Transfer-Pricing (TP) Adjustments as proposed by Ld. Transfer Pricing Officer-I(8), Mumbai (TPO) in its order u/s 92CA(3) dated 24/01/2014. The assessment order has subsequently been rectified by Ld. AO u/s 154 on 24/12/2014 to rectify certain errors. Though the assessee preferred further appeal before Ld.CIT(A), however, the appeal was partly allowed in impugned order dated 04/09/2018. Aggrieved, the assessee as well as revenue is in further appeal before us. 1.3 The grounds raised by the assessee read as under: - DETERMINATION OF ALP W.R.T PRODUCTS SOLD TO AE-FDC INTERNATIONAL LTD. UK 1) The Ld CIT(A) erred in holding that the Ld AO did not reject the Cost Plus Method as the Most Appropriate Method adopted by the Assessee in arriving at the Arms Length Price (ALP) for products sold to FDC International Limited, UK, (the Assessee's Associated Enterprise (AE)) and further failed to appreciate that the Cost Plus Method is the most appropriate method to arrive at the ALP in the facts of the present case. 2) The Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the facts of the present case and hence, deduction u/s 35(2AB) may be granted. 8) The Ld.CIT(A) erred in not adjudicating that deduction u/s 35(2AB) of Rs. 3,29,67,717 pertained to current year and not earlier years. DEDUCTION U/S 35(2AB) W.R.T. ROHA AND GOA UNIT-III R & D UNITS 9) The Ld CIT(A) erred in not admitting additional evidence u/r 46A w.r.t. claim of weighted deduction u/s 35(2AB) of Rs. 1,13,99,619/- on total expense of Rs. 75,99,745/- pertaining to R & D at Roha unit. 10) The Ld. CIT(A) erred in not admitting claim of weighted deduction u/s 35(2AB) of Rs. 39,93,818/- on total expense of Rs. 26,62,545/- pertaining to R & D at Goa Unit-Ill. 11) The Ld CIT(A) erred in not granting weighted deduction u/s 35(2AB) on Roha and Goa Unit-Ill R & D units on the ground that there is no Form 3CM without appreciating that as R & D activity was being carried out and DSIR Approval was in existence and thus in the facts of the present case Form 3 CM was not a mandatory requirement and hence deduction u/s 35(2AB) may be granted. 12) The Ld. CIT(A) erred in not considering Form 3CK filed by the Company with DSIR on 23.03.2010. 13) The Ld. CIT(A) erred in not grantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in disallowing genuine purchases of Rs. 7,31,027/- from Shakti Trading Company having valid TIN as on 31st March 2010 since its TIN cancellation date was w.e.f. 30.11.2010. ALLOCATION OF CERTAIN CORPORATE EXPENSES TO S.80IB/ 80IC UNITS 18) The Ld. CIT(A) erred in holding that interest to others of Rs. 95,83,830/- needs to be partly allocated to S. 80IB / 80IC units without appreciating that entire interest expenses pertains to Head Office and no allocation is called for. 19) The Ld. CIT(A) erred in holding that depreciation on factory building, plant and machinery [excluding ETP] and pallet trucks of Rs. 11,08,126/- needs to be allocated to S. 80IB / 80IC units without appreciating that said depreciation pertains to Head Office exclusively and no allocation is called for. DEDUCTION U/S 80IB / 80IC ON SCRAP SALES AND EXPORT INCENTIVES 20) The Ld. CIT(A) erred in not granting deduction u/s 80IB/ 80IC on scrap sales of Rs. 8,25,985/- without appreciating said income is derived from business undertaking and is thus eligible for deduction u/s 80IB / 80IC. 21) The Ld. CIT(A) erred in not granting deduction u/s 80IB / 80IC on export incentives of Rs. 4,34,365/- without apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is going to give discount / adjustment on account of product license and lab analysis cost and these expenses are part of business of the AE and any adjustments on account of these expenses will impact the profitability of the AE. 6. Whether on the facts and in the circumstances of the case and in law, was Ld.CIT(A) right in allowing depreciation on intangible asset of Rs. 2,19,78,478/- commencing from A.Y.2010-11 when such depreciation is not claimed by the assessee in the grounds of appeal? 7. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) is right in allowing depreciation on intangible asset for A.Y.2010-11 when the asset was acquired and put to use in A. Y. 2004-05. 1.5 The assessee, vide letter dated 26/12/2020, has raised certain additional grounds of appeal which read as under: - 1.0 That on the facts and in the circumstances of the case, the disallowance, imposition of tax and interest with reference thereto, the quantification of taxable income and the tax liability, has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the Ld. AO to give appropriate relief in accordance with law. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refully heard the rival submissions and perused relevant material on record. We have also deliberated on various judicial pronouncements as cited before us during the course of hearing. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 1.10 The assessee being resident corporate assessee is stated to be engaged in manufacturing of drugs. As per return of income, the assessee has paid taxes on Book-Profits u/s 115JB. While framing the assessment, the assessee has been saddled with Transfer-Pricing Adjustments of Rs. 817.56 Lacs as proposed by Ld. Transfer Pricing Officer (TPO) as well as various other additions / disallowances which is the subject matter of cross-appeal before us. The same are enumerated as well as adjudicated as under: - 2. Transfer Pricing Adjustments 2.1 Since the assessee carried out certain international transactions with its Associated Enterprises (AE), the same were referred to Ld. Transfer Pricing Officer-I(8), Mumbai (TPO) u/s 92CA(1) for determination of Arm's Length Price (ALP). It was noted by Ld. TPO that assessee was engaged in the manufacturing of formulation (final medicinal products) and Active Pharmaceu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by considering selling price of product sold in local market as the starting point and giving reasons for difference in adjustments. In other words, benchmarking was sought to be done as per Comparable Uncontrolled Price method (CUP). Taking product wise selling price of non-AE sales as the base, the assessee adjusted the same for various factors and arrived at Arm's Length Selling Price per unit and compared the same with actual selling price to AE. In para-9, the adjustment made in domestic selling price of a product namely Sodium Cromoglicate Eye-drops 13.5 ml was tabulated which were then compared with selling price per unit of AE sales. The selling price was adjusted for various factors viz. effect of raw material cost, packing material cost, non-variable costs, effect of excise duty, effect of functional differences, effect of marketing costs, effect of sales return, effect of competition in foreign market etc. Similar working was done for other products sold to AE. On the basis of the same, it was submitted by the assessee that the transactions were at Arm's Length Price (ALP). The margin on one product namely Timolol 0.5% eye-drops were slightly lower than margins earned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO on account of lack of data based evidence. (ii) Functional difference The Ld. TPO refused to grant this adjustment. However, Ld. CIT(A), allowed the same by observing that these were part of contract between the assessee and the AE and therefore, the adjustment was to be granted. (iii) Marketing Costs The Ld. TPO did not grant this adjustment. However, Ld. CIT(A) concurred that the reasons supplied by assessee were valid. The nature of marketing would be different in different geographical locations. Marketing costs also vary. (iv) Sales Return The assessee factored sales return in cost of sale which was denied by Ld. TPO. The Ld. CIT(A) rejected assessee's plea by observing that this adjustment could be considered only in the year when the sales return have actually taken place. (v) Competition The Ld. TPO denied this adjustment which was confirmed by Ld. CIT(A). The aforesaid adjudication by Ld. CIT(A) has reduced the TP adjustment from Rs. 802.26 Lacs to Rs. 151.16 Lacs. Aggrieved, the assessee as well as revenue is in further appeal before us. Our findings & adjudication 2.7 Upon careful consideration of factual matrix, we find that the assessee has benchmarke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local markets are prescription drugs and therefore, sale promotion forms major expenses. In exports, the marketing expenses are not as high as compared to local markets as the sale would be made to fixed distributors. Marketing costs may not vary with pack size but it would vary with selling price as marketing costs are calculated as percentage of selling price. Since Ld. TPO is comparing local sale price with that of export sale price, the adjustment of marketing expenses need to be allowed as the same are already incorporated in the selling price since expenses incurred in local markets would be high and therefore, selling price of products sold in local market would also be high. We concur with the aforesaid submissions made by Ld. AR since the marketing costs would vary with geographical locations and would impact the ultimate selling price. Therefore, this adjustment has rightly been allowed by Ld. CIT(A). (iii) Non-variable cost The Ld. TPO has denied the same on the ground that overheads would not vary with pack size. The Ld. CIT(A) upheld the same in the absence of data based evidence. However, we find that this adjustment would be available to the assessee since pack-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct Ld. AO / TPO to grant this adjustment. 2.8 In the result, Ground No.2 of assessee's appeal stand allowed which render ground no.1 as infructuous. Ground Nos.1 to 5 of revenue's appeal stands dismissed. Corporate Issues 3. Wrong claim of R & D Deduction u/s 35(2AB) for Jogeshwari Unit 3.1 The assessee claimed weighted deduction u/s 35(2AB) for Research & Development (R&D) expenditure at 3 units viz. (i) Jogeshwari Unit; (ii) Roha Unit; & (iii) Goa Unit. Upon perusal of details, it transpired that the expenses claimed for Jogeshwari Unit include expenditure of Rs. 219.78 Lacs towards purchase of technology for genetically modified E-coli clone for R & D Biotech. This technology was purchased in the year 2004 from M/s Prospec Tany Technogene Ltd., Israel. This technology was stated to be scaled up from 5 liters to 15 liters fermentation scale. Thereafter, various R&D activities and clinical trials were conducted to make the technology commercially viable. After making the technology commercially viable, the expenditure was charged and claimed @150% during the year u/s 35(2AB) in terms of decision of Hon'ble Madras High Court in CIT V/s Sundaram Fasteners Ltd. (223 ITR 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of experimental batches of recombinant protein Filgrastim in pre-filled syringes from third party and the technology acquired by the assessee would be made available in market on containerization. Since, in this year, the asset was ready for use, the assessee capitalized the same and claimed weighted deduction of 150% u/s 35(2AB). The Ld. AO denied the same on the ground that the deduction was to be claimed in the year in which the expenditure was incurred and the assessee did not give any proof that the technology became operative in this year. During appellate proceedings, the assessee furnished aforesaid permission which would substantiate the assessee's claim that the technology became operative only in this year. However, Ld. CIT(A) denied the same on altogether new ground by observing that in the absence of Form 3CM, the deduction would not be available which is the grievance of the assessee. The Ld. CIT(A) has allowed depreciation on the intangible asset which is the grievance of the revenue. 3.5 Upon careful consideration of factual matrix, we find that incurring of the expenditure on R&D activity is not under dispute at all. It is also not under dispute that the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of non-issuance of approval for certain period in prescribed Form 3CM by competent authority, weighted deduction as claimed u/s 35(2AB) could not be denied. Similar is the view of Pune Tribunal in Minilec India (P.) Ltd. V/s ACIT (2018; 93 Taxmann.com 213) wherein it was observed by the bench that non-receipt of Form No. 3CM is at best a procedural lapse and is not fatal for denial of claim of deduction u/s 35(2AB). Therefore, considering the entirety of facts and circumstances, we reverse the adjudication of Ld. CIT(A) and direct Ld. AO to grant weighted deduction u/s 35(2AB) as claimed by the assessee. 3.7 Ground Nos. 7 & 8 of assessee's appeal stand allowed which renders revenue's ground nos. 6 & 7 as infructuous. The revenue's appeal stand dismissed. 4. Disallowance of R & D Exp. pertaining to Roha and Goa unit-III 4.1 It transpired that the assessee had three R&D units viz. (i) Jogeshwari Unit which is stated to be lab-scale R&D unit; (ii) Roha unit which is stated to be Plant-scale R&D Unit for producing kilo scale level of APIs for testing purposes; (iii) Goa unit-III which is stated to be pilot scale unit for formulations. 4.2 The assessee claimed weighted deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the assessee is in further appeal before us. Our findings and Adjudication 4.5 During the course of hearing, Ld. AR submitted that there were ample evidences in support of the fact that R & D activities were being carried out at both the units. It was also pleaded that deduction was denied merely on the basis of statement recorded during survey. These statements recorded u/s 133A, in terms of various judicial pronouncements, would not have any evidentiary value. As against this, the assessee had filed additional evidences in the shape of DSIR approval for in-house R & D activities at these units for the relevant period (Pg. 453 to 456 of the Paper Book-2), patents filed for products (Amlodipine and Lornoxicam) developed at Roha R & D unit (Pg. 439 to 452 of the Paper Book-2) along with affidavit of all the five officials clarifying their earlier statements and confirming that R & D activity took place outside Jogeshwari unit also (Pg. 459 to 479 of Paper Book-2). In the remand report, Ld. AO could not give any adverse comment on these additional evidences but again denied the deduction altogether on the new ground that Form 3CM was not submitted. The Ld. CIT(A) confirmed the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R&D activities. (v) Photos of R&D facility at Roha and Goa Unit III. (vi) List of equipments available at Roha Unit to carry out R&D activities. (vii) List of equipments available at Goa Unit III to carry out R&D activities. The copies of all these documents have also been placed before us on page nos. 439 to 452 and 480 to 494 of the paperbook. Upon perusal of the same, it could be concluded that the assessee has sufficiently demonstrated the carrying out of R & D Activities at Roha as well as Goa-III Unit. The Ld.AO, in the remand report, has accepted the affidavit of officials clarifying their statements and has not re-examined them. Therefore barring statements taken during survey proceedings, the revenue is unable to controvert the assessee's documentary evidences and bring on record any cogent material to dislodge the same. Another undisputed fact is that Survey Team never visited Goa Unit and therefore, the conclusion that no R & D activity was being carried at this unit has no legs to stand. 4.8 So far as the observation of lower authorities that Form 3CM was not available, is concerned, we find that the aforesaid units had valid approvals from DSIR during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Items given for use in dispensary (stethoscope, BP apparatus, Thermometers) Rs. 21.54 Lacs 5. Promotional / Recall items with product names embossed on them Rs. 633.13 Lacs Total Rs. 714.12 Lacs In addition, another expenditure of Rs. 137.61 Lacs stated to be incurred on promotional items given to stockiest as incentive was also disallowed on the allegation that these items were distributed to doctors and no supporting documents were filed by the assessee. In other words, Ld.AO computed aggregate disallowance of Rs. 851.73 Lacs which was reduced by an amount of Rs. 37.13 Lacs since the same was already disallowed as alleged bogus purchases. 5.4 During appellate proceedings, the assessee furnished additional evidences which were in the shape of Extract of minutes of General Body Meeting of Medical Council of India held on 11/03/2010, details of promotional items given to stockiest as incentives, details of promotional items given to doctors which were not in the nature of gifts, value-wise bifurcation of promotional items given to doctors as brand reminders, details of stockiest to whom items were given under incentive scheme for the appellant's product 'Electra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd knowledge of the existence of its product range to doctors. The same is supported by the fact that the company's logo and product names are embossed on all the items distributed as gifts and therefore, these items were also intended to serve as retentive reminder of brand name of assessee's products and not to influence the decision of the doctors. The nature and the type of items distributed amongst doctors are not the type which can be considered as intended to influence the decisions of the Doctors. It could be gathered that the value of items given to doctors is generally below Rs. 1000/- per article. 5.7 In the above background, we find that the expenditure incurred by the assessee post 10/12/2009 (date on which the stated rules have come into force) and finally allowed / disallowed by lower authorities could be tabulated as under: - Sr. Details of Publicity Expense Amount (Rs.) Remarks I. Promotional items given to other than Doctors 1. Promotional items given to Stockiest 1,37,61,757 Disallowed 2. Market research and related reports 22,69,793 Allowed by AO 3. Bags given to our marketing representative 6,06,479 Allowed by AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s PHL Pharma Ltd. [2017; 78 Taxmann.com 36). In the decision of ICPA Health Product Ltd. (ITA Nos.6244-45/M/2017; 20/04/2018) it has been held by the bench as under: "The expenditure on distributing glass, face mask, pen, writing pad, towel set, wall clock, paper cups except Voltas Cooler and stabilizer cannot be regarded as freebies given to doctors. Hence except the cost of Voltas Cooler and Stabilizer of Rs. 29,990/-, all the remaining expenditure incurred by assessee on account of sale promotion expenses, is allowable." In the decision of Mumbai Tribunal in DCIT V/s PHL Pharma Ltd. [2017; 78 taxmann.com 36), it has further been held that MCI Regulation prohibits medical practitioners and do not have prohibitory effect on pharmaceutical companies. Further, expenses incurred by assessee could not be reckoned as freebies given to doctors as they were purely promotional materials which were distributed to doctors for brand recognition and not for purpose of granting gift or any other form of inducement to doctors. Also, expenditure incurred by pharma companies for customer relationship management, key account management, gift articles, free medicine sample, advertisement and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order so. 5.11 So far as the remaining items viz. books, journals, reference articles, prescription pad / chit block, calendars / new-year dairies & items given for use in dispensaries (item nos. II-2 to 5) are concerned, we find that the expenditure have been incurred throughout the year. The nature of these items is similar as incurred by the assessee before 10/12/2009 which has been fully allowed by Ld. AO himself. Therefore, there is no reason as to why these are not allowable thereafter. We find that the assessee, during assessment proceedings as well as during remand proceedings, has filed sufficient documentary evidences including sample confirmations from stockiest, copies of invoices etc. in support of the expenditure and no infirmity could be found in the same by Ld. AO except for the allegation that these documents were not sufficient. Therefore, we would hold that all such expenses were incurred for business purposes and allowable u/s 37(1). 5.12 The expenditure incurred on stockiest for Rs. 137.61 Lacs was for the purpose of promoting the sale of one of the products i.e. 'Electral' (ORS). The assessee has distributed 'Thali-vati' under an incentive scheme to the Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts, bank statements etc. These were subjected to remand proceedings. However, Ld. AO brushed aside these evidences and justified the additions. The Ld. CIT(A) concurred with the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us. 6.3 We find that this issue has been subject matter of adjudication by Tribunal in assessee's own case for AY 2009-10, ITA No.2060/Mum/2017 order dated 12/09/2018 wherein, on identical factual matrix, the additions have been estimated at 12.5%. Respectfully following the same, we direct Ld. AO to restrict the additions to the extent of 12.5% of suspicious purchases. The same comes to Rs. 8,19,552/-. The balance addition stand deleted. Ground No.17 & 17.1 stand partly allowed. 7. Allocation of Corporate Expenses to 80-IB / 80-IC Units 7.1 The assessee claimed deduction u/s 80-IB @ 30% on two units viz. Goa (ORS) and Goa (Unit-III) whereas it claimed deduction u/s 80-IC @100% on Baddi Unit as per following details: - Unit Deduction Claimed Goa ORS-80-IB-30% 5,84,63,784/- Goa Unit - III 80-IB - 30% 17,00,05,765/- Baddi - 80-IC- 100% 54,20,05,593/- Total 77,04,75,142/- The net profit shown by these units was found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the deduction u/s 80-IB / 80-IC. Similarly, export incentives as well as excess provision of expenses written-back was to be excluded while computing the deduction. 7.6 Incorporating the above adjustments, Ld. AO revised quantum of deduction in the following manner: - Unit Deduction Claimed Deduction Allowed Goa ORS-80IB-30% 5,84,63,784/- 5,42,54,162/- Goa Unit - III 80IB - 30% 17,00,05,765/- 15,47,17,200/- Baddi - 80IC- 100% 54,20,05,593/- 48,75,88,838/- Total 77,04,75,142/- 69,65,60,200/- 7.7 During appellate proceedings, the assessee assailed the re-allocation of operating expenses, finance expenses and depreciation. The Ld. CIT(A) after considering the submissions, dealt with each of the head of expenditure and held that few of the expenditure need not be allocated to the three units. Further excess provision of expenses written-back would not be excluded whereas export incentives as well as scrap sale would be excludible while computing the deduction. The ground relating to allocation of R&D expenses was partly allowed. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 8.1 The Ld. AR, in the chart, has tabulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) could be summarized as under: - No. Particulars of R&D Deduction Amount (Rs.) Remarks 1 Formulation Centre 8,43,15,810/- Accepted by the appellant 2 Biotech Centre 6,98,55,625/- Allowed by CIT(A) 3 Expenditure on Scientific Research u/s 35(l)(i) 1,57,56,469/- -do- 4 Contribution to Vision Research Foundation 12,50,000/- Disallowed by CIT(A) 5 Amount Paid to National Chemical Laboratory 9,40,250/- Allowed by CIT(A) It could be seen that the only grievance of the assessee is reallocation of expenditure of Rs. 12.50 Lacs as paid to Vision Research foundation. It is the submissions of Ld. AR that the same may not be reallocated since such contribution is in the form of contribution / donation and is not in any way related to any of the plants. Since it is in the nature of a corporate expense, no such allocation should be made. Concurring with the same, we direct Ld. AO consider the nature of receipt and if the same is in the form of donation, no allocation thereof should be made while computing the deduction. 8.4 Regarding exclusion of other income while computing the deduction, the only grievance of the assessee is exclusion of scrap sale. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the assessee would also generate scrap in the process of manufacturing. The receipts from sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from the industrial undertaking for the purpose of computing deduction under Section 80-IB. 6. Applying the ratio / law laid down by this Court in the case of Harjivandas Juthabhai Zaveri (supra) as well as Delhi High Court in the case of Sadhu Forging Ltd (supra), to the facts of the case on hand, it cannot be said that the learned Tribunal has committed any error in holding that the deduction under Section 80-IB of the Act is allowable for the income from sale of scrap. Under the circumstances, substantial question of law raised is answered against the revenue. Hence, present appeal deserves to be dismissed and is accordingly dismissed. Since facts are similar before us and no contrary decision is on record, we direct Ld. AO to include the scrap sale while computing the deduction u/s 80-IB / 80-IC. 8.6 Consequently, Ground Nos. 18, 19 & 22 stand allowed for statistical purposes. Ground No. 20 stand allowed. Ground No.23 is general in nature. Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Rs. 105.97 Lacs in terms of the decision of Hon'ble Bombay High Court in Sesa Goa Ltd. Vs. JCIT (117 Taxmann.com 96) and the decision of Hon'ble Rajasthan High Court in Chambal Fertilizers and Chemicals Ltd. V/s JCIT (ITA No.52/2018 dated 31/07/2018). 10.2 After going through these decisions, we find that this issue is covered in assessee's favour. The Hon'ble Bombay High Court in the case of Sesa Goa Ltd. Vs. JCIT (117 Taxmann.com 96) has held that while the income tax is not allowable as deduction in view of Sec.40(a)(ii) of the Act, the expression 'Cess' cannot be read into the said provisions and hence the amount of education cess and higher and secondary education cess are allowable as deduction in computing the income of the assessee. Therefore, Ld. AO is directed to verify the claim of the assessee and allow the deduction in terms of the cited decision. This ground stand allowed for statistical purposes. 11. Erroneous levy of interest u/s 234C on tax liability determined under MAT provisions 11.1 The Ld. AR has submitted that the assessee has paid taxes under MAT provisions and accordingly, it has paid interest u/s 234C for Rs. 20.64 Lacs. However, no interest is le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion 12. The assessee's appeal stand partly allowed whereas the revenue's appeal stand dismissed. 13. ITA No. 6840/Mum/2018, Assessee's Appeal for AY 2011-12 13.1 It is admitted position that the facts as well as issues are substantially the same in this year and therefore, our adjudication as in AY 2010-11 shall also be equally applicable for this year. In the said background, the material facts are that the assessee has been assessed for this year u/s 143(3) r.w.s. 144C(3) on 21/05/2015 pursuant to the directions of Ld. Transfer Pricing Officer-2(1)(2), Mumbai. The assessee has been saddled with various corporate additions / adjustments which form the subject matter of assessee's appeal. This appeal arises out of the order of Ld. CIT(A)-56, Mumbai dated 05/09/2018. 13.2 Though the assessee has raised various grounds, however, ground nos.1 & 2 have not been pressed during hearing and therefore, these grounds stand dismissed. The remaining ground as urged before us read as under: - DEDUCTION U/S 35(2AB) W.R.T. ROHA AND GOA UNIT-III R&D UNITS 3) The Ld CIT(A) erred in not admitting additional evidence u/r 46A w.r.t. claim of weighted deduction u/s 35(2AB) of Rs. 8,12,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt expenses and sales promotion expenses amounting to total of Rs. 1,19,060,255/- to Ld AO though Ld CIT(A) has no power to do so and thus said direction may be set-aside and balance publicity expenses, advertisement expenses and sales promotion expenses may be allowed. DISALLOWANCE OF ALLEGED BOGUS PURCHASE 11) The Ld CIT(A) erred in disallowed alleged bogus purchases of Rs. 1,03,12,048/- without appreciating that purchases were genuine and purchases of articles were made in the regular course of business duly supported by the goods received note from its godown, bills received from the supplying parties (who at that material point of time were not declared as defaulters by the Sales Tax department), payment by A/c Payee cheques, bank certificate reflecting amount credited to party's A/c, stock register, dispatch advice alongwith lorry receipts and distribution of articles so purchased in its normal course of business, and hence the disallowance may be deleted. ALLOCATION OF CERTAIN CORPORATE EXPENSES TO S.80IB/80IC UNITS 12) The Ld CIT(A) erred in holding that interest to others of Rs. 85,61,097/- needs to be partly allocated to S. 80IB / 80IC units without apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs. 14. Gr. Nos. 3 to 7 : Deduction u/s 35(2AB) for Roha & Goa-III Units 14.1 Similar to AY 2010-11, relying upon survey action, Ld. AO denied deduction claimed by the assessee against Roha & Goa-III units on the allegations that no R&D activity was carried out at these units. 14.2 During appellate proceedings, the assessee furnished additional evidences in the shape of DSIR approval for in-house R & D activities at these units for the period 01/04/2008 to 31/03/2018, patents filed by the assessee for products (Amlodipine and Lornoxicam) developed at Roha R & D unit along with affidavit of all the five officials clarifying their earlier statements and confirming that R&D activity took place outside Jogeshwari unit also. In the remand report, Ld. AO could not give any adverse comment on these additional evidences but again denied the deduction on the ground that the assessee failed to submit Form 3CM for R&D Units. The Ld. CIT(A) confirmed the disallowance on the basis of non-availability of Form 3CM and also refused to admit the affidavits. Aggrieved the assessee is in further appeal before us. 14.3 Facts being similar as in AY 2010-11 qua this issue, our findings & adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases. In other words, the entire expenditure of Rs. 3483.26 Lacs was disallowed in the assessment order. 15.2 The Ld. CIT(A), relying on the findings of AY 2010-11, confirmed the disallowance of Rs. 2134.34 Lacs stated to be incurred by the assessee on various items distributed as brand reminders to doctors and another disallowance of Rs. 247.23 Lacs as promotional items given to stockiest in the absence of confirmation from recipients and correct and complete description and demonstration of nature of gifts proving it as an item for medical / pharmaceutical business. We find that the facts qua this issue are quite identical as in AY 2010-11. The assessee has filed requisite details in support of the claim. Therefore, applying our adjudication for AY 2010-11, the additions of these two items stand deleted. 15.3 The addition of Rs. 844.69 Lacs (item nos. II-1 & 2, 4 to 6 & 8 to 10) has been remanded back to the file of Ld. AO for verification of the fact that transaction of procurement of material / service is genuine and pertains to medical / pharmaceutical field. These items are similar to items dealt by us in AY 2010-11. Therefore, taking the same view, we would hold that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The balance addition stand deleted. The ground stand partly allowed. 17. Allocation of Corporate Expenses to 80-IB / 80-IC Units In this year, the deduction claimed by the assessee for Goa (ORS), Goa (Unit-III) and Baddi unit has been disturbed by reallocation of expenses as done in AY 2010-11. The Ld. CIT(A) has granted partial relief to the assessee. Aggrieved, the assessee is in further appeal before us wherein the only grievance of the assessee is reallocation of Depreciation (other than ETP) and depreciation on Pallet Trucks / Trolly. The Ld. AR has submitted that these assets pertain to head office only and does not have any connection with 80-IB/80-IC units. Similar submissions are with respect to allocation of interest. Concurring with same, we direct Ld. AO to examine the submissions of the assessee and re-adjudicate the same on similar lines as per our directions in AY 2010-11. Ground Nos. 12 & 13 stand allowed for statistical purposes. 18. Deduction u/s 80-IB / 80-IC on scarp sale The Ld. AO has also denied the deduction on scarp sale. This issue has been adjudicated by us in assessee's favor in AY 2010-11. Therefore, following the same, we direct Ld. AO to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing Book-Profits u/s 115JB. The Ld. AR drew attention to the scheme to submit that the objective of scheme was to promote export of products which have high intensity / employment potential so as to off-set infrastructural inefficiencies and other associated cost involved in marketing of these products. Considering the purpose test as per the scheme, the aforesaid subsidies / incentives are capital in nature and not chargeable to tax under normal provision of the Act as well as under Book profit u/s 115JB. Reliance has been placed on various judicial decisions including the decision of Hon'ble Rajasthan High Court in the case of PCIT v. Nitin Spinners Ltd.(2020; 116 Taxmann.com 26) as well as the decision of Hon'ble Apex Court in CIT V/s Ponni Sugars & Chemicals Ltd. (306 ITR 392). For the proposition that capital receipts which do not have any element of income or profit embedded therein are neither chargeable to tax under the Income Tax Act nor can be included in the Profit & Loss account prepared under Part-II and Part-III of Schedule-VI of the Companies Act, reliance has been placed on the decision of Hon'ble High Court of Calcutta in Pr.CIT V/s Ankit Metal and Power Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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