TMI Blog2023 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... to employees and bank deposits as such interest income is not income derived from industrial undertaking as held in the case of CIT -Vs- Sterling Foods [ 1999 (4) TMI 1 - SUPREME COURT] and Liberty India [ 2009 (8) TMI 63 - SUPREME COURT] Disallowance u/s 14A r.w. Rule 8D - assessee has claimed exempt income being share of profit from partnership firm and not made any disallowance u/s. 14A - A.O has observed that assessee has debited interest expenditure in profit loss account along with other administrative expenditure and part of such expenditure is attributable to earning of exempt income - HELD THAT:- So far as proportionate interest disallowance is concerned, Counsel contended that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the Ld. CIT(A) has given adverse findings in this regard. Considering these facts, we direct the AO to verify whether the assessee has sufficient interest-free funds or not. Disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) TMI 763 - GUJARAT HIGH COURT] held that Excise duty refund is capital receipt. Similar issue was also considered in the case of Hitachi Home Life Solution (India) Ltd [ 2019 (3) TMI 1741 - ITAT AHMEDABAD] wherein as held that excise duty is capital receipt and application under Rule 27 of ITAT Rules filed by assessee was allowed. Respectfully following the same, refund of excise duty is held as capital receipt. Hence this Addl. Grounds of Appeal no.8 raised by the assessee is allowed. MAT computation - As refund of central excise duty is a capital receipt in nature, this ground of appeal relating to non-taxability of such refund under the book profit u/s 115JB of the Act is allowed consequently. Hence, this Additional Ground No.9 raised by the assessee is allowed. Disallowance of deduction u/s 80IE in respect to Sikkim Unit - Since the eligibility of deduction was upheld in the first year of claim being AY 2010-11, the same cannot disputed in the subsequent year of claim on the same ground of ineligibility. More particularly when the AO himself has observed that there is no change in facts and circumstances of the case during the year under consideration. Before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on expenses after allocating such expenditure to SPI and SPS who have claimed deduction u/s 80-IB/80-IE - HELD THAT:- As decided in assessee own case [ 2022 (8) TMI 1443 - ITAT AHMEDABAD] assessee company using its network has incurred certain expenditure which according to the revenue authorities are not directly related to earning of income. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee and not for the purposes of earning profit. As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively - it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Rs. 88.867/- and Sikkim Unit Rs. 2,89,353/- totaling to Rs. 5,57,601/-) 3.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in disallowing the interest income earned in respect of staff advances and statutory/bank deposits on the basis that the same have not been derived from the industrial undertaking without appreciating that the deduction under section 80- IB/80-IE is allowable in respect of the profits and gains derived from the specified business as opposed to profits derived from the industrial undertaking' 4. Disallowance of expenditure incurred for doctors towards business promotion and accommodation - Rs. 3,44,85,728/- 4.1. On the facts and in the circumstances of the case and in law. the Ld. CIT(A) has grossly erred in disallowing expenses allegedly incurred towards providing gifts and freebies to the doctors/medical practitioners by invoking the provisions of Indian Medical Regulations, 2002, without appreciating that the same are not applicable to pharmaceutical companies and hence, there cannot be any violation in the first place to attract the rigors of Explanation 1 to section 37(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom. 5.5 Without prejudice to the above, while considering the investments in the partnership firm for the purpose of disallowance under section 14A, only the actual investment by the Appellant ought to be considered ie the share of profit credited to the partner's capital account is to be excluded while computing the value of investment. 5.6 Without prejudice to the above, the Ld. CIT(A) ought to have appreciated that investments from which no exempt income is earned during the year, cannot be considered while applying rule 8D 5.7. Without prejudice to the above, the Ld. CIT(A) grossly erred in confirming the computational errors committed by the Ld. AO while ascertaining the quantum of disallowance under section 14A read with rule 8D. 6. Re: Disallowance of ROC Stamp Duty Charges Rs. 30,18,600/- 6.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) and Ld. AO grossly erred in disallowing the stamp duty and filing fees paid to Registrar of Companies (ROC) amounting to Rs 30.18,600/- without appreciating that the expenditures so incurred towards conversion of the partnership firms into the corporate entity was for the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In the process, the Ld. CIT(A)/Ld. AO failed to appreciate that: (i) the ownership in respect of trademarks, being the major portion of the intangible assets, was transferred to the Appellant, (ii) in respect of patents and technical know-how etc. so recorded, the Appellant had acquired perpetual irrevocable license to use and exploit the said patents, technical know-how etc. which constituted an asset in itself, eligible for being accounted as an intangible asset and consequently amortization was carried out. 7.4. The Ld. CIT(A) / Ld. AO grossly erred in alleging that claiming amortization of intangibles was a colourable device to make an unsustainable claim as the same amount was added back and reduced for computing book profit under section 115JB without appreciating that the addition and reduction was in accordance with the requirement of section 115JB of the Act. 3. The Ground No.1 is General in nature, which does not require any adjudication and hence dismissed. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/2016 in A.Y. 2011-12, ITA No.2595/Mum/2018 for A.Y. 2012-13 and 2597/Mum/2018 for A.Y. 2013-14 (for five months). Ld CIT DR Mr. Aarsi Prasad appearing for the Revenue supported the order passed by this Tribunal. 5. We have given our thoughtful consideration and heard the rival contentions and perused the materials available on record including Paper Book and Case Laws relied thereon. It is seen identical issue was decided against the Assessee by the Co-ordinate Benches of the Tribunal in Asst. Years 2011-12 to 2013-14 [cited supra] relevant portion of the said order is reproduced herein below for ready reference: 29. The next issue raised by the assessee vide ground No. 2 of its appeal is that the learned CIT(A) erred in upholding the year under consideration as 10 year of claim u/s 80IB(4) of the Act with regard to Dadra undertaking against the 8th year claimed. 30. At the outset we find that the issue has been decided against the assessee by the coordinate bench of Amritsar Tribunal in ITA 184/ASR/2009 for A.Y. 2005-06 where the coordinate bench held the A.Y. 2002-03 as initial year of claim u/s. 80IB(4) of the Act for Dadra business undertaking instead of initial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amritsar Tribunal in the own case of the assessee for AY 2004-05 followed in subsequent years being AY 2006-07 to 2010-11. The relevant finding of the coordinate bench in ITA No.2465/Mum/2014 reads as under: 23. Ground No IV pertains to adjustment of delayed payments, staff advances and statutory/bank. The issue regarding interest on delayed payments from customers is covered in favour of the assessee. But the issues regarding interest on staff advances and FDRs are covered against the assessee by the orders of the Amritsar Tribunal passed in assessee's own cases pertaining to the financial years 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10. The relevant paras of the order passed by the Amritsar tribunal are reproduced as under:- ''51. As - regards ground No 3 of the Revenue, regarding disallowance of deduction under section 80-16 in respect of delayed payments from M/s Aditya Medisales Ltd. Amounting to Rs. 48,20,32,772/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same/ this ground of the Revenue is dismissed, 54. As regards ground No 5 6 of the assessee with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. I find that the Assessing Officer has not examined nature of expenditure in detail and he has simply disallowed the entire expenditure incurred on accommodation, business promotion and conference fees sponsorship. As is evident from the submission of the appellant filed before the Assessing Officer as well as before me, the accommodation expenses for boarding and lodging of the Doctors are in the nature of freebies given to the Doctors for direct benefit. Similarly, the business promotion expenses are in the nature of various equipments gifted to the medical professionals. However, the conference fees and sponsorship expenses were for the purposes of conference and seminars held in India and abroad for sharing knowledge and obtaining feedback in order to develop into product and research and development. Under the identical facts, this issue has been decided by the CIT(A) in the case of Sun Pharmaceutical Industries Ltd., A.Y. 2012-13 vide order dated 23.02.2017 contained in Appeal No. CAB/(A)- 2/351/16-17 relevant portion of which is reproduced as under:- 23.2. I have careful considered the facts on record and submission of the Ld. Authorized Representative. Admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of business or profession and hence the disallowance to this extent is confirmed. As regards the balance expenditure on Accommodation (Lodging Boarding) at Rs. 28,91,444/- and Conference fees and sponsorship at Rs. 84,99,194/-, the appellant has submitted that these expenses pertained to reimbur sement of accommodation expenses to the Doctors and medical practitioner during their stay to attend the conference and seminars organized in furtherance of business objections of upgrading the medical knowledge. Similarly, conference fees and sponsorship has been also stated to be reimbursement of fees for conference and seminars held in India and abroad. It has further been claimed that conference and seminars were organized to gain the knowledge by the medical practitioner which is, then shared with the appellant for improving the product quality and Research and Development. From the submission of appellant itself, it is crystal clear that the reimbursement of accommodation expenses have directly benefited the medical practitioner and Doctor and hence the same is in the nature of gift hit by Circular No. 5/2012 and amended guidelines of Medical Council of India. Accordingly, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of commission paid to the practicing doctors who referred the patients to the assessee for various tests. It was held that the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 provide that no physician shall give, solicit, receive, or offer any gift, gratuity, commission or bonus in consideration of a return for referring any patient for medical treatment against the public policy. Accordingly, it was held that if demanding of such commission was bad, then paying of it was also equally bad and hence both were privies to a wrong. Therefore, payment of commission to private doctors was held as not allowable expenditure. CIT Vs. Pt. Vishwanath Sharma (2009) 316 ITR 419 (All.). In this case, commission paid to the Government doctors was held to be illegal gratification/bribe and hence the expenditure thereon was treated to be not allowable u/s. 37. In view of the above factual and legal position, disallowance of accommodation and business promotion expenses is confirmed and balance is directed to be deleted. Thus Ground 9 is partly allowed 8.2. Aggrieved by the above appellate order, both the Assessee and Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby it had solicited favourable prescriptions at the cost of patients. The Hon ble Supreme Court also observed that there was an quid pro quo arrangement between the parties requiring the medical practitioners to prescribe the products of the company in lieu of receiving the freebies. Accordingly, the ratio of the said decision should not be made applicable in the case. Alternatively, he also submitted that in order to avoid litigation and uncertainty, Assessee Company out of abundant caution would like to NOT PRESS the ground on allowability of said expenditure for the years under consideration. Thereby the Ld. Counsel specifically requested the Bench not to make this decision binding on subsequent years and any other years as facts in every year shall vary. Ld. Senior counsel also argued that any disallowance of such expenditure if relatable and attributable to the Undertaking eligible for deduction u/s.80IB/IE of the Act, it should be increased to that extent. 9.2. We have gone through the facts as well as the orders of the lower authorities. We find that since the Senior Counsel appearing for the assessee has not pressed this ground of appeal for the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hable on facts. Thus I am of the considered view that the interest expenditure incurred by the appellant at Rs. 12,62,902/- was also relatable to the exempt income warranting application of Rule 8D. Accordingly, disallowance made out of interest under Rule 8D at Rs. 10,978/- is confirmed. As regards the disallowance made at 0.5% of average value of investment on account of administrative cost, undisputedly, time and energy of the management and resources of the company have been utilized for earning huge exempt income from the partnership firms. The disallowance on this account under Rule 8D has been upheld by the Hon'ble ITAT, Ahmedabad in the case of Flagship Company of this group i.e. Sun Pharmaceutical Industries Ltd. in various years including A.Yrs. 2008-09 and 2009-10. Respectfully, following the same, disallowance on account of administrative cost under Rule 8D is also confirmed. Thus, Ground No. 11 is dismissed. 10.1. Aggrieved by the above appellate order, the assessee is in appeal before us. During the course of hearing, the Ld. Senior Counsel appearing on behalf of assessee has vehemently argued that as evident from the audited financial statements, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards e-filing fees for Form 37, Form 39, Form 18, etc. It was argued that payment was in nature of statutory and has been incurred wholly and exclusively for the purpose of business, hence such expenditure needs to be allowed. On the other hand, Ld. CIT DR appearing for the Revenue relied upon finding of lower authorities. 13. We have heard the rival contentions and perused the materials available on record. It is an undisputed fact that assessee was Partner in two Partnership Firms which were converted into Private Limited Companies under Part IX of the Companies Act, 1956 and both the companies were amalgamated with assessee company in the year under consideration. Due to such business re-organization, the authorized share capital of the company has been increased which is not in dispute. The expenditure incurred by the assessee is directly connected with such increase in authorized capital and such expenditure cannot be allowed in view of decision of Punjab State Industrial Development Corporation and Brooke Bond India Limited (cited supra). Thus, the addition made by the Ld.AO of Rs. 30,18,600 is confirmed. This ground no. 6 raised by the of assessee is dismissed. 14. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognition of intangibles at fair value does not amount to revaluation as on 31.03.2012 1.1 The Assessing Officer all along in his assessment order has harped only on one issue that intangible assets have been revalued by the Appellant as on 01.04.2012. At para no. 11.9.1 on page no. Ill of his assessment order, the Assessing Officer remarked, The said intangible assets were claimed to have been received without consideration as a result of spun off / transfer of DFU from the transferor company. i.e. SPIL and that the said DFU along with all these intangibles were transferred to the assessee at nil value as on 31.03.2012. It was also claimed that subsequently assessee company got these intangibles revalued as on 01.04.2012. 1.2 At the outset, it is submitted that the appellant has never claimed that it has got the intangibles revealed as on 01.04.2012 as alleged by the Assessing Officer (please see underlined and bold portion above). It is stated that neither the Appellant nor SPIL has carried out any kind of revaluation in relation to the intangible assets in question. The Assessing Officer is therefore highly mistaken on facts in making such observations. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een defined under the Income- tax Act, 1961, however as the term clearly indicates, it is understood that revaluation means valuing again. Numerous judicial precedents have held that if any term is not defined within the Income-tax Act, then such term shall derive its meaning either from the General Clauses Act, 1897 or the dictionary or as understood in the commercial sense. Since in the present case, we are dealing with the addition made for the purpose of computing the book profits, the meaning as understood in the accounting sense should prevail. 1.6 As per the Guidance Note on Terms Used in Financial Statements issued by the Institute of Chartered Accountants of India, 'revaluation reserve' has been defined as 'a reserve created on the revaluation of assets or net assets of an enterprise represented by the surplus of the estimated replacement cost or estimated values over the book values thereof.' 1.7 As per the Stroud's Judicial Dictionary, revaluation refers to the 'practice whereby company puts a new value on its fixed assets, because nominal values and real values of such assets as property and machines have changed'. 4s per Black' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed) 1.10 The above sub-section (2B) has been introduced vide Finance Act, 2017 to be effective from 01.04.2017. It is interesting to note that despite the presence of specific clause under Explanation 1 to section 115JB(2) providing for treatment of depreciation arising due to revaluation of assets, the Legislature has still inserted sub-section (2B) in section 115JB to expressly provide for adjustment where the assets have been recorded by the resultant company at a value different than those recorded by the demerged company. This directly leads to an inference that the Legislature, being well conscious of the fact that the existing clause (iia) to Explanation 1 to section 115JB could not be extended to even cover the cases of initial recording of assets at fair value brought the said amendment to widen the scope of adjustments. It may also be appreciated that Legislature has employed the phrase 'recorded at values different from values appearing in the books of account' in the above sub-section (2B) in contrast to using the term 'revaluation' which only goes to prove that initial recognition at fair value and revaluation of assets are two different concepts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justments under Explanation 1 to section 115JB of the Act. Elaborative submission have been made on this point at paragraph number 5. 2. Initial recording of Intangible Assets was subject matter of AY 2012-13 and was duly accepted and allowed by the tax department 2.1 The Domestic Formulations Undertaking ( DFU ) of SPIL was spun off to the Appellant, as on the 'appointed date' being 31st March 2012, vide orders of the Hon'ble Bombay and Gujarat High Courts, on a going concern basis. Thus, the assets including the intangibles have been vested and recorded in the books of account of the Appellant as on 31.03.2012. 2.2 However, the Assessing Officer has stated in the order that the Appellant got the intangible assets subsequently revalued as on 01.04.2012 which is a sheer contradiction to the facts of the case wherein the intangible assets have been accounted at fair value as on 31.03.2012, the date of spin off itself. Thus, the relevant year to question the fair valuation of intangibles is AY 2012-13 rather than AY 2013-14. 2.3 It is brought to your honors kind attention that the assessment of the Appellant for AY 2012-13 has already been completed af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the grant related to depreciable assets are treated as deferred income which is recognized in the profit and loss statement on a systematic and rational basis over the residual life of the asset and grants related to non-depreciable assets are credited to capital reserve. For this treatment to be applied, the assets need to be initially booked at a fair value on the date of the acquisition. An inference can also be drawn from the purchase method of accounting for amalgamation as specified in the para 12 13 of AS-14, and accordingly, all the assets can be recorded at fair value. 3.4 Attention is invited to the provisions of sub-section (2) of section 115JB of the Income-tax Act, 1961 which requires that the financial statements must be prepared in accordance with the requirements of provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The moment the financial statements are in accordance with requirements of Schedule VI, the Assessing Officer cannot find faults and has to restrict himself to the adjustments prescribed under Explanation 1 to section 115JB(2) of the Act as has been judicially settled. 3.5 The Schedule VI to Companies Act 1956 lays d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he result of the working of the company. As long as the method employed for accounting the income meets with the rudimentary principles of accountancy, the accounting treatment is said to be consonance with the generally accepted accounting principles. 3.8 Thus, there is nothing in the Schedule VI of the Companies Act, 1956 which prohibits the initial recognition of intangibles assets at fair value received pursuant to the scheme of business reorganization and the debiting of consequential depreciation in the profit and loss account. Appropriateness of accounting treatment accorded 3.9 With a view to disclose the true revenue earning potential of assets owned by the Appellant and keeping in mind the overriding principle of showing true and fair view of the financial statements as well as the requirements laid down by Part II and Part III to Schedule VI to the Companies Act 1956, recognizing the intangible assets at fair value is very much in accordance with the generally accepted accounting principles in India. 3.10 With respect to crediting the corresponding amount to the capital reserve, attention is invited to para 17 of AS-14 on 'Accounting for Amalgamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, as per the 'Framework for the preparation and presentation of Financial Statements' issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, the terms 'income' and 'expenses' are defined as follows: (a) Income is increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. (b) Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. 3.13 The said framework further states that 'when economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined, expenses are recognized in the statement of profit and loss on the basis of systematic and rational allocation procedures. This is often necessary in recognizing the expenses associated with the using up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue in accordance with the accounting framework specified in the Scheme and further the said accounting treatment given in the Scheme is confirmed by the Hon'ble High Court of Gujarat allowing the Appellant to record the assets at fair value and making corresponding credits to the capital reserve. In this regard, it is relevant to note the provisions of paragraph 23 of AS-14 dealing with Accounting for Amalgamation, drawing inference wherefrom we submit that the accounting treatment duly sanctioned by the High Court in a scheme of arrangement which has been merely given effect by the Appellant is deemed to be an appropriate accounting treatment and cannot be tampered with. More so when the accounting treatment in the case of proposed scheme of arrangement does not contradict any Accounting Standards or any express provision under any Law for the time being in force. 4.2 Even otherwise, while granting its approval to the scheme of arrangement, the Hon'ble Courts of Gujarat and Bombay have expressly mentioned in their order that said scheme has binding effect on the Appellant Company. As a result, even the accounting treatment provided under the scheme of arrangement has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Ganesh Beedi Works vs. CIT (Civil Appeal Nos. 10547/10548 of 2011) and various other decisions where it has been held that the taxing authorities have no jurisdiction to rewrite the arrangements. Under the taxing system, it is up to the Assessee to conduct the business in his wisdom. In this context; it is respectfully submitted that the action of the Assessing Officer to characterize and link the recording of assets at fair value to revaluation of assets and consequently characterizing the capital reserves as revaluation reserve is beyond his jurisdiction and hence bad in law. 5.5 Accordingly, the Assessing Officer is not empowered to merely disregard the transaction per se and re-characterize as per his whims and fancies. Thus, the attempt by the Assessing Officer in the present case, to paint the transaction of initial recognition at fair value by the Appellant as a case of revaluation of intangibles is bad in law. 6. Section 115JB, being a deeming provision to be interpreted strictly 6.1 The Assessing Officer failed to appreciate that section 115JB is a deeming provision, therefore, the provisions are to be read in strict sense and that no further adjustment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revaluation of assets ....... Rs. 0 (h) Others (including residuaI unadjusted items and provision for diminution in the value of any asset) Rs. 15,436,152,918 . Deductions Others (including residual unadjusted items and the amount of deferred tax credited to P L A/c) .... Rs. 15,344,173,610 Book Profits u/s 115JB . Rs. (4,696,332,843) 6.5 As can be seen from the above summary, nothing has been added against the line item 'Depreciation attributable to revaluation of assets' in computing the book profits since no revaluation of assets has been undertaken by the Appellant. /4s already submitted at great lengths in earlier part of the submissions that depreciation on intangible asset debited the books of accounts is not on account of revaluation. /4s evident, the MAT provisions as well as the aforesaid Schedule of MAT to the ITR, require only that portion of the depreciation which is arising on account of revaluation to be added back in computing book profits. As no revaluation of asset has been carried out in the current year, nothing has been added back. This is perfectly in accordance with the provisions of section 115JB of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decisions relied upon by him. Undisputedly, Domestic Formulation Unit of Sun Pharmaceutical Industries Ltd., the holding company, has been spun off/transferred to the assessee company in term of Scheme of Arrangement approved by Hon'ble Bombay High Court u/s. 391 to 394 of Companies Act, 1956 vide order dated 03.05.2013 in company claim Petition No. 283 of 2013 and also by Hon'ble Gujarat High Court vide order dated 03.05.2013 in company Petition No. 31 of 2013 connected with the company Application No. 373 of 2012. As per the scheme approved by the Hon'ble High Courts all existing trademark except the trademark Sun and Sun Logo etc. pertaining to the domestic formulation have been transferred. Further, the patents, Technical Know- How, Process Know-How and other Intellectual Property Rights have been allowed to be owned possessed by the SPIL and the appellant company has been allowed to use the same perpetually. Admittedly no consideration has been paid by the appellant company to the transferor company in respect of the above mentioned assets. However, vide para-9 of the order, Hon'ble Bombay High Court has allowed the transferor company to record the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Part-II III of Schedule-VI of Companies Act, 1956, the Profit and Loss Account of the company has to be prepared in accordance with the Accounting Policy Accounting Standards adopted for preparation such accounts and after following the method and rate of depreciation adopted according to such policy and standards. Under the Income-tax Act as well as Companies Act, the depreciation has to be calculated on the actual cost of the assets. Since the appellant company has not incurred any cost for acquiring the assets, in my considered view, the depreciation cannot be calculated on hypothetical values though determined by the valuers. If it is permitted, then any company can put any hypothetical figures in it books of account and claim the depreciation thereon resulting into book profit always negative and hence will avoid MAT u/s. 115JB for indefinite period. In this manner, the provisions of section 115JB will be rendered useless and this is never the intention of any legislation. Under these circumstances, I hold that the appellant has not worked out book profit as per the provisions of law. 17.2.2 During the course of appellate proceedings, the Ld. Authorized Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities are entitled to raise the issue that amalgamation itself is a device designed to evade the taxes legitimately payable by the subsidiary company. Accordingly, the arguments of Ld. AR are rejected. Therefore, I agree to views of the Assessing Officer and confirm the disallowance/addition made at Rs. 15,23,97,50,000/- on this account. Thus, Ground no. 14 is dismissed. 14.2. Against the above order of Ld. CIT(A), the assessee is in appeal before us. During the course of appellate proceedings, the Ld. Sr Counsel Sri S.N. Soparkar appearing on behalf of the assessee has vehemently argued that initial recognition of intangibles at fair value does not amount to revaluation, as revaluation means valuing again. He has referred to Guidance note on terms used in Financial statements issued by ICAI which defines revaluation reserve means reserve created on the revaluation of assets or net assets of an enterprise represented by the surplus of the estimated replacement cost or estimated values over the books values thereof. Ld. Sr Counsel thus further referred to black law dictionary which states that revaluation means the adjustment up of the book value of assets . As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Company Application No. 373 of 2012. The assets received by the assessee company have been recorded at fair value pursuant to said Scheme. The entire objective of the above action was to enable the assessee company to focus on the domestic formulation business which significantly differed from the rest of the parent company in terms of the customer base, regulatory environment, supply chain, risks and rewards, etc. thereby resulting into significant value addition in the hands of the stakeholders. 15.1. Pursuant to the above arrangement, the intangibles have been recorded by the assessee company for the first time at their value as on 31-03-2012 based on the valuation report obtained from two independent Valuers like Earnest Young and KPMG. The Ld AO has held that the assessee company revalued intangibles as on 01-04-2012, which is contrary to the facts as intangible assets have been accounted as on 31-03-2012 based on valuation report as on the date of spin off, thus the Ld AO misunderstood the whole transaction as revaluation of assets and failed to understand that valuation is for purpose of recording value of assets which is already with the assessee company. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: From the above provisions of section 394A of the Companies Act, 1956, legal position enunciated in the decisions of Hon ble Gujarat High Court in the case of Wood Polymer Ltd., in re and Bengal Hotels Pvt. Ltd. in re, supra and Vodafone Essar Gujarat Ltd., supra, evidently makes the purpose clear that if the revenue wants to object to the proposed scheme of amalgamation, it has to do so in the course of proceedings before the High Court but before the final order is passed. Whenever such objections have been raised, these have been considered on merits by the concerned High Court and also incorporated the condition for safeguarding the interest of revenue in the very scheme. As a matter of public policy, once a scheme of amalgamation is approved by Hon ble High Court no authority should be allowed to tinker with the scheme. In the present case of the appellant, neither the official liquidator nor the Regional Director nor Central Government raised any objection to the scheme of amalgamation. In such circumstances, we are of the view that the revenue has nothing to say at the time of approval of scheme by Hon ble High Court in the present case. 15.4. The above referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of a company which, if, scheme of amalgamation is sanctioned, is likely to lose its identity by getting merged with the transferee-company. It is to be dissolved without winding up. In winding up the manner in which affairs of a company are conducted can be probed in depth; but a scheme of amalgamation which provides for merger of the transferor-company with the transferee-company, would destroy any opportunity for examination of the affairs of the transferor-company. The second proviso would provide the last opportunity to peep into the affairs of the transferor company before it gets virtually extinct. The court is, therefore, charged with a duty before it finally confirms burial-cum-cremation of the transferor-company, to peep into its affairs to ascertain whether they have been carried on not only in a manner not prejudicial to its members but in even public interest. The expression public interest must take its colour and content from the context in which it is used. The context in which the expression public interest is used should permit the court to bring out why the transferor-company came into existence, for what purpose it was set up, who were its promoter, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, when amalgamation scheme has been approved by the Court, it is not open for the Assessing Officer and CIT (A) to hold that amalgamation has been used by the assessee company as a tool for tax evasion. The amalgamation order passed by the High Court is a judicial order and has statutory force and in case, the department had any objection, then same should have been given before the Hon'ble High Court for which sufficient time was allowed. Now, the department cannot clamour that such an amalgamation have been used by the assessee as a tool for tax evasion or as colourable device. 15.6. In the above referred decision, Co-ordinate Bench of Delhi Tribunal had concluded the issue based on the reading of clause (j) of Explanation to section 115JB for calculation of book profit u/s. 115JB, provisions of Section 129 of the Companies Act, AS14 of the recognized accounting standard, keeping in view the fact that the revenue has not brought any tangible material to prove that the scheme is a colourable device to avoid taxes, keeping in view of the amalgamation of the companies and keeping in view of the accounting resorted by the group companies regarding the book value of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. The action of the Ld. AO in the present case is therefore contrary to the provisions of the law and therefore the adjustment made by the Ld AO is hereby quashed. 16. It is relevant to place on record that the Institute of Chartered Accountants of India (ICAI) had come out with a Compendium of Accounting Standards, wherein they had specifically covered the impugned scenario and clarified that the accounting treatment prescribed by the High Court/ITAT shall have legal force. Further, as pointed out by the Ld. Sr Counsel that the assets received under restructuring are allowed to be recorded at fair value under various Accounting Standard namely AS-14 and AS-10 and it is a fundamental requirement that the accounts must present true and fair view. To re-iterate Paragraph 12 of AS-14, which is to be mandatorily followed by the assessee company, which permits the Transferee Company to record the assets and liabilities of the amalgamating companies, acquired under the scheme of amalgamation, at Fair Values as on the date of amalgamation. Therefore, recording of the assets received on spinoff date at fair value is also in line with the accounting framework. Furthermore, the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar to the revaluation. The recording of intangibles at Fair Value in the books of accounts by the assessee company is part of the process of initial recognition of the assets and not revaluation of existing assets held by it. The LD Sr. Counsel has correctly referred to dictionary meaning of revaluation of assets which means that assessing the value of something again which is not the case of the assessee. We are in absolute agreement with the principle that for revaluation, there must be an existing ownership in first place. It is a fundamental principle that revaluation requires an existing value that is sought to be revalued. In the case on hand, there was no previous ownership of the intangible assets with the assessee company, instead these assets were transferred to and acquired by the assessee company as a consequence to the Scheme of Arrangement approved by the Hon'ble High Court of Gujarat. The recording of these assets in the books of the assessee company at Fair Value is in accordance with the generally accepted accounting principles and cannot be treated as revaluation of assets. In absence of any revaluation of assets carried out by the assessee company, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO by way of order of scrutiny assessment order passed under section 143(3) of the Act dated 19-01-2015. Once the recording of the intangible assets at fair value have been accepted and not questioned in the relevant year being the initial year of recording i.e. A.Y. 2012-13 in the instant case, it is not open to the revenue authorities to question the same in succeeding years. 16.7. In view of the above, we set aside the findings of the lower authorities and direct the AO to delete the adjustment made by him to the book profit under section 115JB of the Act. Hence, the ground of the assessee company is allowed. 17. The assessee has filed Additional Grounds of Appeal vide letter dated 26th April, 2019 as follows: Ground No. 8: Non-consideration of refund of central excise duty as capital receipt under normal provisions: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have treated the central excise duty refund granted pursuant to the industrial policy of the State Government as a capital receipt not taxable under the Act. Ground No. 9: Non-taxability of refund of central excise duty under MAT provisions: On the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial units in pursuance of incentives announced in terms of new industrial policy for accelerated industrial development in State of Jammu and Kashmir for creation of such industrial atmosphere and environment which would provide additional regular sources of employment to unemployed in State, were, in fact, in nature of creation of new assets of industrial atmosphere and environment, having potential of employment generation to achieve a social object and such incentives would be capital receipts in hands of such industrial units - Held, yes 18.1. It is brought to our notice that the Revenue s appeal against the above judgement was also dismissed by the Hon'ble Supreme Court as reported in [2017] 80 taxmann.com 239. Further the Hon'ble Gujarat High court in the case of CIT Vs Tripti Menthol Industries [2013] 35 taxmann.com 515 has followed above judgements and held that Excise duty refund is capital receipt. Similar issue was also considered by Co-ordinate Bench of Ahmedabad ITAT in the case of DCIT -Vs- Hitachi Home Life Solution (India) Ltd 2019] 107 taxmann.com 551 wherein following above decision, Hon'ble ITAT has held that excise duty is capital receipt and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s. 80IE is allowable without appreciating that in the absence of proper details and bills, it could not be ascertained as to whether plant and machinery were new and not used earlier, and without appreciating that plant and machinery transferred by Sun Pharmaceutical Industries to Sun Pharma Sikkim was used by Sun Pharmaceutical Industries prior to put to use by Sun Pharma Sikkim, and hence such plant and machinery could not be regarded as new plant and machinery. 2.5 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in holding that the claim of deduction u/s. 80IE in respect of Sikkim Unit, is allowable without appreciating that mere submission of journal entries generated in computer cannot be treated as an authentic document for having purchased plant and machinery and accordingly the A.O. had clearly established that Sun Pharma Sikkim was constituted by reconstruction of existing business of Sun Pharmaceutical Industries. 2.6 On the facts and circumstances of the case and in law, the Ld. C.I..T. (A) erred in holding that the claim of deduction u/s. 80IE is allowable without appreciating that the assessee could not substantiate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB(13)/80IE(6) r.w.s. 80IA(10) in respect of research and development expenses without appreciating that R D work requires specialised skill and knowledge, and consequently payment towards R D activity cannot be termed as remuneration but would be termed as professional payment 5.1 On the facts and circumstances of the case and in law, the Ld CIT. (A) erred in delisting the disallowance u/s 37(1) in respect of selling and distribution expenses of Rs. 111,49,00,000/- incurred by SPLL. before amalgamation of SPS and SPI without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the assessee had failed to demonstrate that the expenditure was wholly and exclusively for the purpose of business in terms of section 37(1) 5.2 On the facts and circumstances of the case and in law, the Ld. CIT. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses of Rs. 111,49,00,000/- incurred by SPLL on behalf of erstwhile SPS and SPI before amalgamation, in which assessee was a partner, without appreciating the fact that all the sales and distribution expenses, including those pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the facts in this case, and without appreciating that the assessee had failed to controvert the findings of the AO, and failed to substantiate its claim. 8.1 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs. 81,63,728/- to Book Profit u/s, 115JB on the issue of disallowance u/s 14A. without appreciating the facts and reasons mentioned by the AO in the assessment order. 8.2 On the facts and circumstances of the case and in law, CIT(A) erred in deleting the addition of Rs. 81,63,728/- to Book Profit u/s. 115JB without appreciating the fact that the said amount was disallowed u/s. 14A and hence was required to be added to the book profit as per clause (f) to Explanation 1 of section 115JB(2). 21. The Ground No.1 is General in nature, which does not require any adjudication and hence dismissed. 22. Ground No. 2 of the Revenue appeal relates to disallowance of deduction u/s 80IE in respect to Sikkim Unit. The AO at para 6.3.2 has after following the Assessment Order of AY 2010-11 in the case of erstwhile firm M/s Sun Pharma Sikkim which now stands merged with the assessee, has disallowed the deduction u/s. 80IE claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it appropriate to keep in mind that the assessee has moved an application under rule 46A of the Income Tax Rules, 1962 for permission to adduce additional evidence. In such application, it was contended by the assessee that the AO has issued a questionnaire on 12.11.2012 directing the assessee to file details on 29 counts. He directed the assessee to submit details of plant machinery as on 16.1.2009 as well as on 31.3.2010 along with relevant bills chronologically arranged and grouped as appearing in accounts. The assessment order has been passed on 19.3.2013. Since it was the first year of the firm, the bills were kept at the factory at Gangtok (Sikkim) and staff was not well conversant with the assessment proceedings. Due to this limitation, it took more time to get bills from them. Hence, the assessee could not submit complete details in a short span of time, and therefore, sought to submit complete details. The ld.CIT(A) called for a remand report from the AO on the admission of the additional evidences, and thereafter putting reliance upon the judgment of Hon ble Bombay High Court in the case of Smt.Prabhavati Shah, 231 ITR 1 (Bom) allowed such application. She took the evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief that the assessee-firm has been established by splitting up and reconstruction of existing business which is a violation of sub-section (3) of section 80IE of the Act. On appeal, the ld.CIT(A) has reappreciated this aspect and it was contended before the ld.CIT(A) that group was seeking its consolidated shares in the US market and to that end, it was required to secure US FDI approval which mean that unit(s) earmarked for production of export products could not be used for the purpose of domestic manufacture also. The assessee has further submitted that process of compliance with US FDI regulation is time consuming and spanned over 18 to 25 months. It demonstrated these facts before the ld.CIT(A) which have been noted on page no.10 as under: Dadra Unit: Date of application : May, 2008 Date of acceptance (EOU authority): July, 2008 Date of acceptance (US FDA authority): July, 2008 various compliances : during July 2008 to December 2009 Date of actual export/s : January, 2010 and onwards Jammu Unit: Date of application submitted to NSEZ; April 2009 Date of US FDA application: April 2009 Letter of Permission issued by the Development Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. from SPI to SPS. Everything else remains the same. SPI had also filed an application vide letter dated 5th March 2009 (enclosed in Pages 124 125 of the paper book) before the Assistant Commissioner, Central Excise surrendering its Central Excise Registration for the Sikkim unit and stating that ownership of the undertaking has changed and that the capital goods purchased were never installed by SPI. There is also no dispute of the fact that the undertaking was under construction at the time when SPI sold it to the Appellant. Accordingly, the unit is transferred before commencement of undertaking. Thus from the facts on record, the irresistible conclusion is that the undertaking at Sikkim is not formed by splitting up or reconstruction and is a new unit and therefore, is entitled to the claim of deduction under section 80-IE of the Act. 21. With the assistance of the ld. representatives, we have gone through the record carefully. The ld. counsel for the assessee submitted that identical aspects have been considered in the case of Jammu unit. He made reference to the ITAT order of Amristar Bench as well as ITAT, Mumbai Bench in the case of Dadra unit. We will be taking note o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the appellant's contention is borne out as follows: 4.2.11 After considering the submissions of the appellant and the observations of the AO in the remand report, I find that on the issue of duplicate bills the AO has not carried out any independent enquiry to establish that such bills pertained to machinery that had already been put to use prior to its installation in the appellant's unit. In my considered opinion, the mere fact that a particular piece of plant or machinery is supported by a duplicate bill, by itself does not prove that the said item is second hand or used. The appellant's contention that many a time the original bills are retained by the State Government Check Post authorities etc. is not without weight. The bills purchased in the prior period are seen to be pertaining to the infra structural part of the new unit and nothing has been brought on record to show that such installation was utilized prior to the commencement of commercial production by the appellant, It is also seen that in most cases where the bills are duplicate or photocopies, the appellant has made other purchases from the same parties also for which original bills are availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to excavation, filling, steel reinforcement, masonry, plaster and water-proofing work. In its submissions the appellant has continuously been stating that work relating to the Sikkim unit was initially undertaken by SPI and that it was only at a later stage that the appellant firm was brought into existence and that the plant and machinery etc. was duly assigned to the appellant firm. That being the case, civil work would have certainly begun much prior to 2009 and the fact that M/s Yuksom Engineering Works has Issued the final bill dated 31/03/2007 can only be taken as proof for completion of the works Indicated therein and not as evidence to show commencement of commercial production as the mere existence of an outside structure cannot by itself be taken to indicate that commercial work was going on inside it. 4.2.12 The AO has further observed that the commencement certificate issued by the Dept. of Commerce Industries, Govt. of Sikkim was issued on 14/12/2009 and from this fact inferred that the genuineness of the certificate was doubtful since while it gave the issue of date of commencement of production as 20/04/2009, it was issued 7 months later. In this regard the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kim for the period October 2006 to March 2011. In this regard, the appellant has stated that the said notice was issued taking into account date of beginning of factory construction and that the appellant has only paid a fraction of the demand. From a perusal of the said document I find that it is merely a show cause which has been duly replied to by the appellant and that the document itself does reflect any adverse inference drawn by the Commercial Tax Division, Sikkim. 4.2.15 The AO has further sought to draw inference from the denial of deduction u/s 80IB(4) in the case of the sister concern Sun Pharma Industries Dadra Unit and Jammu Unit for A.Y. 2004-05 and 2005-06 to support his conclusions in the case of the appellant firm, stating that while the ITAT has decided the issue, the Department has not accepted the decision and the matter is pending adjudication before the High Court. A perusal of the orders passed by the Hon'ble ITAT in the case of SPI reveals that the Tribunal considered the issues related to disallowance of deduction u/s 80IB to SPI Jammu (on similar footing as in the present case), in detail in the orders passed for A.Y. 2005-06 (dated 11.06.2010 and 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contentions and gone through the details. According to the AO, bills having value of Rs. 6.88 crores with regard to certain additions to plant machinery were not furnished. Therefore, he presumed such machinery as second-hand machinery. Against his presumption, the assessee has filed an application for permission to adduce additional evidence. It was contended therein that questionnaire issued on 12.11.2012; bills were lying at factory premises in Sikkim; staff was not well conversant with income tax proceedings; they were lying in boxes; hence in a short span of time, complete details could not be submitted. Thereafter, the assessee produced complete details. The remand report was called for by the ld.CIT(A) on those details. In the remand proceedings, each bill was analysed and objection of the AO were noted. The bills have been discussed by the CIT(A) and the details are available in tabular form extracted (supra). We also have perused such details and are of the view that the defects are not substantive. They have only shown that some of the bills are photocopies, LRs are not available etc. The ld.CIT(A) while considering these defects observed that the AO should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO at para 6.4.7 of the assessment order has observed that interest income cannot be said to have been 'derived from' the Industrial undertaking as held by the Hon'ble Supreme Court. Aggrieved by the Assessment Order, the assessee filed an appeal before Ld. CIT(A), whereby the Ld. CIT((A) has allowed such deduction u/s 80IB/80IE in respect of interest on delayed payments by following the decision of Hon'ble Jurisdictional High Court as well as the decision of ITAT Amritsar in the case of erstwhile firm M/s. Sun Pharma Industries (which is also merged with the assessee company). Aggrieved by the order of CIT(A), the revenue is in appeal before us. 23.1. We have heard the rival contentions and carefully perused the materials available on record. The Ld. CIT DR Sri Aarsi Prasad has mainly relied upon the findings of the AO in the Assessment Order, whereas the Ld. Senior Counsel Sri S.N. Soparkar appearing on behalf of the assessee vehemently relied upon the order of CIT(A) as well as ITAT in the case of M/s Sun Pharma Industries, wherein the decision of Hon'ble Jurisdictional High Court is followed. It is undisputed fact that during the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 48,20,32,772/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed. 54. As regards ground No 5 6 of the assessee with respect to the interest on FDR amounting to Rs. 3,27,599/- (correct figure Rs. 2,27,599/-) and loan to employees with regard to disallowance of deduction u/s 80-IB, the facts of the issues In hand are identical to the facts decided by the tribunal in assessee's own case dated 11.06.210 in ITA No 184(Asr)/2009 for the assessment year 2005-06. Following the same, the ground No 5 6 of the assessee are dismissed. 24. Following the orders of the decisions of the Amritsar Tribunal in the identical issues, we allow the assessee's claim of deduction under section 80-IB of the Act in respect of interest on delayed payments in question and direct the AO to delete the additions. However, we disallow the assessee's claim of deductions in respect of interest on staff advances statutory/bank deposits. 45.1 Thus respectfully following the consistent view of Tribunal in the own case of the assessee, we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of both the parties and perused the materials available on record. At the outset we find that issue on hand is covered by the order of the Co-ordinate Bench of ITAT Mumbai and Ahmedabad for AY 2010-11 and AY 2011-12. The relevant finding of the Co-ordinate Bench for AY 2011-12 reads as under: ..50.5 On the other hand learned AR before us submitted issue is covered in favour of the assessee by the order of the tribunal in own case of the assessee for A.Y. 2010-11 bearing ITA No. 2465/Ahd/2014 51. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the issue on hand is covered in favour of the assessee by the order of the co-ordinate bench of Mumbai Tribunal in own case of the assessee for A.Y.2010-11 bearing ITA No.2465/Mum/2014. The relevant finding of the coordinate bench in ITA No. 2465/ Mum/2014 reads as under: 30. Ground No VII of the appeal pertains to adjustment in respect of R D expenditure incurred by the working partner of the firm. The ld. CIT(A) has allowed the contention of the assessee that no disallowance is called for because clause 7-B of the partnership deed specifically pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h expenditure and disallowance of such expenditure would consequently result into higher allocation of expenditure in SPI and SPS who are claiming deduction under Section 80-IB/80-IE. Based upon the detailed finding given in Assessment Order passed in the case of Sun Pharmaceutical Industries and Sun Pharma Sikkim for AY 2013-2014 wherein the AO of erstwhile firms had allocated Selling Distribution expenses in their cases out of expenditure incurred by assessee company, the AO at para 6.4.4 has made disallowance of Rs. 111,49,00,000/- under Section 37 of the Act. Aggrieved by the order of AO, the assessee filed an appeal before CIT(A) whereby the Ld. CIT(A) deleted the disallowance by placing reliance upon the decision of the Co-ordinate Bench dated 08.09.2017 vide ITA Nos. 1666 1663/Ahd/2016 A.Y. 2009-10 and directed AO to rework disallowance out of selling and distribution expenses under section 37 as directed by Hon'ble ITAT. The relevant part of such order is reproduced herein below: 11.2.1. The above order of the CIT(A) has been also followed in A.Y. 2011-12 and 2012-13 by the then CIT(As)-39 37, Mumbai, respectively, vide orders dated 24.10.16 30.03.17 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roportionate selling distribution expenses in the ratio of turnover and reduced the deduction claimed u/s 80IB by Rs. 62.56 Crs u/s 80IE by Rs. 48.93 Crs, respectively. Thus it is clear that the selling distribution expenses incurred by appellant upto 31.08.2012 allocated to the firms totaling to Rs. 111.49 Crs (Rs. 62.56+48.93Crs) have only been considered by the Assessing Officer for disallowance. 11.2.4. Now coming to the selling and distribution expenses incurred by the appellant company for the period from 01.04.2012 to 31.08.2012. During this period, the erstwhile firms viz. SPI and SPS were enjoying exempt income respectfully u/s. 80IB and 80IE. Keeping in view this aspect of the things, the Assessing Officer in the year under consideration disallowed part of selling and distribution expenses on the ground that the same were not incurred for the purposes of business of the appellant company because the selling and distribution network of the appellant company was also utilized by the above mentioned firms. The utilization of selling and distribution network by the other entities of the group has not been disputed by the appellant and rather this factual position was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer is directed to work out disallowance out of selling and distribution expenses under Rule 8D as directed by Hon'ble ITAT. Thus, appellant succeeds partly in respect of Ground No. 8. 25.1. Against the above finding of Ld. CIT(A), the Department has preferred appeal. During the course of appellate proceedings, Ld. Sr. Counsel appearing on behalf of assessee argued that as the matter is covered in favour of Assessee by the decision of Coordinate Bench in the case of SPIL as well as SPI and SPS for current year, the issue may be decided in favour of assessee. On the other hand, Ld. Sr. DR has argued that finding of AO should be restored. 26. We have heard the rival contentions of both the parties and perused the materials available on record. The undisputed facts of present ground of appeal are that AO has disallowed part of selling and distribution expenses after allocating such expenditure to SPI and SPS who have claimed deduction u/s 80-IB/80-IE of the Act. The identical issue and allocation of expenditure in the case of SPI and SPS for current assessment year is dealt with by Co-ordinate Bench in ITA No.1467 and 1468/Ahd/2018 wherein it is held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of our decision hereinabove with respect of selling and distribution expenses, the remaining disallowance of expenses of royalty (of 8% of the turnover) of Rs. 14,15,34,442/- and management fee (of 1% of the turnover) of Rs. 1,76,91805/- are also directed to be deleted, as the same has been notionally considered by the AO which in our view, is incorrect and not justified. Thus, ground No. 5 of the assessee is allowed and ground No. 2 of the Revenue is dismissed. 19. The said decision was followed by the ITAT Amritsar in assessee's own case pertaining to the subsequent assessment years 2006-07, 2007-08, 2008-09 and 2009-10. Following the said order, the ITAT Amritsar, in assessee's own case for the assessment year 2009-10, issued directions to the AO to delete the disallowance in respect of royalty, management fees and selling and distribution expenses. Therefore, we follow the decision of the ITAT Amritsar and dismiss ground No II(c) (d) of appeal of the Revenue. 41.2 Thus, respectfully following the consistent view of Amritsar Mumbai Tribunal in the own case of the assessee for A.Y. 2005-06 to A.Y. 2010-11, we do not find infirmity in the finding of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered in favour of the assessee by order of this tribunal in the own case of the assessee for AY 2007-08 bearing ITA No. 2076 2077 /Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under: 91. Aggrieved by this finding of the ld.CIT(A) both assessee and the revenue are in appeal before us. The ld. D.R. strongly stated that since the assessee has not shown any income from remuneration from the partnership firm. The assessee was not entitled for the claim of deduction. The ld. D.R. further stated that no bifurcation have been provided by the assessee to show the expenses incurred for the purpose of the business of the partnership firm and for the assessee company. The D.R. concluded by saying that there is no error in the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated the claim and stated that there is no basis for allocating the expenses pro rata. The ld. counsel further stated that the First Appellate Authority further erred in disallowing the expenditure on pro rata basis only on incremental expenses. It is the say of the ld. counsel that the disallowance is unjustifiable. 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the revenue is hereby dismissed. 26.2. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 27. Ground No. 6 of Department s appeal relates to disallowance of business/conference fee and sponsorship expenses of Rs. 6,65,79,145/-. This issue is already adjudicated in Paragraph 9 to 9.2 of this order in assessee s appeal in ITA NO.1464/Ahd/2018 and disallowance made the Ld AO is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted a detailed explanation vide letter dated 20.12.2016 which has been reproduced by the Assessing Officer in para-8.3 of the assessment order. Since similar submission is filed in the appellate proceedings, for the sake of brevity, the same is not being reproduced here again. After considering the submission of the assessee, the Assessing Officer disallowed the depreciation claimed on Solar Power Generating System after recording his findings in para-8.4 to 8.5 of the assessment order which are reproduced as under:- 13.1. During the course of appellate proceedings, the appellant has furnished a detailed written submission, summarized form of which is reproduced as under:- 13.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative including the decisions relied upon by him. Undisputedly, the solar Power Generating System was purchased and leased out by the appellant jointly with other co-owner of the group as detailed below:- In the case of first co-owner i.e. Aditya Medisales Ltd., the CIT(A)-1, Vadodara vide his order dated 12.06.2017 contained in Appeal No. CIT(A)- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with various other group entities being Aditya Medisales Limited, Sun Petrochemicals and Unimed Technologies Limited. The depreciation claimed on such assets in year under consideration was disallowed by Assessing Officer mainly on the ground that assets were not put to use by the lessee before the end of financial year 2012-13. The claim of assessee was allowed by Ld. CIT (Appeals) following the appellate order in the case of Aditya Medisales Limited as referred supra and the order of CIT (Appeals) on this ground is not challenged by the Department before the Tribunal. It is found that identical disallowance made in the case of other two entities being Sun Petrochemicals Pvt. Limited and Unimed Technologies Limited was deleted by coordinate bench in ITA No. 1636/Ahd/2018 and 1835/Ahd/2018, dated 11th May, 2020. The relevant part of such order is reproduced hereunder: 2. Revenue has taken two grounds of appeal in each case. It contained five sub-grounds, hence, grounds of appeal in both the cases are not in consonance with Rule 8 of Income Tax (Appellate Tribunal) Rules; they are descriptive and argumentative in nature. In brief, its grievance in both the appeals relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopers LLP ( RGD for short) had purchased the assets and made investment of Rs. 120 crores. It was required to establish 16 blocks. These assets were later on given on lease to AIPL . According these assessees, they have purchased these assets and later on given them on lease. The break-up of solar block numbers, ownership of various parties along with their corresponding cost, has been submitted before the ld.CIT(A) in tabular form in the submissions filed by the assessee. For the facility of reference, we take note of such details, which reads as under: Owner Block No. No. of blocks Total MW DC Cost (Rs. In Crores) Aditya Medisales Ltd Block No. 14 17 Tables of Block 10 1.33 1.85 10.50 Sun Petrochemicals Pvt Ltd Block No. 15 18 Tables of Block 10 1.33 1.87 10.65 Unimed Technologies Ltd. Block No. 16, 18 Tables of Block 10 1.33 1.87 10.65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld.AO has pointed out some discrepancies specifically, the transportation details, inspection report, installation report etc. On the other hand, the ld. CIT(A) instead of making analysis of this information observed that this very issue has been considered in the case of other assessees i.e. AMSL who is also one of the contributors to the total block of assets. The emphasis of the ld.DR was that the ld.CIT(A) has overruled the discrepancies pointed out by the AO for demonstrating the fact that assets have been acquired before the end of the accounting year, and put to use without recording any finding or rebutting the reasoning of the AO. On the other hand, the stand of the assessee was that M/s. AIPL has acquired a contract from MP Power Management Co. Ltd. for establishment of a solar power plant. It has also entered into a power purchase agreement with MPPMCL. This is a composite solar power plant consisting of 16 blocks. It was installed, and later on M/s. Real Gold Developers LLP has purchased all these assets, and these were given on lease to AIPL. Assessees along with three more assesses have purchased these total 16 blocks of solar power plant. In the case of Aditya M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not challenged before the Tribunal. There is no disparity on the facts with regard to the blocks owned by the AMSL vis- -vis of the assessee. We are of the view that there is no justification to interfere in the finding of the ld.CIT(A) in the cases of present two assessees also. Therefore, we do not find any merit in these two appeals; they are dismissed. 11. In the result, both the appeals of the Revenue are dismissed. 29.1. It is observed that claim of depreciation on assets leased to Alpha Infrapop Pvt. Limited by assessee and other group entities are identical and similar claim has been allowed by coordinate bench or not disputed in appeal in one of the entities, as discussed herein above. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in own case of assessee, we uphold the finding of the learned CIT(A). Thus, the Ground No.7 raised by the Revenue is hereby dismissed. 30. Ground No. 8 of Department s appeal relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the said expenses have been incurred for the promotion and in furtherance of the Appellant's business activities and thus, allowable as deduction u/s 37(1) of the Act. 3.3. The Ld. CIT(A)/Ld. AO grossly erred in relying on the CBDT Circular No.: 5/2012 while disallowing the said expenditure without appreciating that the departmental circulars are not binding on the tax payer, which position has been repeatedly upheld by various judicial authorities 3.4 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not increasing the deduction under section 80-18/80-IE correspondingly on account of disallowance carried out under this said ground 4. Re: Disallowance under section 14A read with Rule 8D - Rs. 60,65,076/ 4.1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in sustaining the disallowance of Rs 60,65,076/- [Consisting of Rs 14,325-/ towards interest and Rs 60,50,750/- towards administrative expenses] made by the Ld. AO u/s 14A of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating that intangibles were not revalued but were initially recorded at fair market value. In doing so, the Ld CIT(A) failed to appreciate that - (1) The accounting treatment of recording the intangibles at fair value was in accordance with the applicable accounting framework and was also sanctioned by the Hon'ble High Court of Gujarat and Bombay under the scheme of arrangement. (ii) The accounts of the Appellant, highlighting that the intangibles were initially recorded at fair value, were duly audited by the statutory auditors and approved by the shareholders alike. 5.2 The action of the Ld. CIT(A)/Ld. AO to re-characterize/ disregard the accounting of intangible assets as 'revaluation' is not in accordance with the law laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 273 (SC). 5.3 The Ld. CIT(A)/Ld. AO grossly erred, on facts and in the circumstances of the case. in holding that the Appellant has not acquired ownership of the intangible assets and hence, it is not eligible for depreciation while computing book profits under section 115JB. In the process, the Ld CIT(A)/Ld. AO failed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y allowed in favour of the assessee. 39. Additional Ground No. 7: Central excise refund receipt while computing book profit u/s. 115JB of the Act. This issue is considered by us at Paragraph Nos. 18.2 of this order. Respectfully following the same, this additional ground no. 7 is allowed 40. In the result, the appeal filed by the Assessee in ITA No. 1465/Ahd/2018 is partly allowed. 41. ITA No: 1522/Ahd/2018 relating to the Assessment Year 2014-15. The Grounds of Appeal raised by the Revenue reads as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee and in not confirming the additions made by the AO on these issues. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit without appreciating the facts and reasons mentioned by the AO in the assessment order. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IE of Rs. 1323,54,96,874/- in respect of Sikkim Unit, without appreciating the facts and reasons menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O's finding on the issue of period of use, and depreciation of plant and machinery used by Sun Pharma Industries Sun Pharma Sikkim. 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing deduction u/s 80IB/80IE in respect of receipt of interest of Rs. 26,98,26,600/- on delayed payments on sales, without appreciating the facts and reasons mentioned by the AO in the assessment order. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the assessee's ground on disallowance of deduction u/s 80IB/80IE in respect of receipt of interest on delayed payments on sales without appreciating the fact that the interest was not derived from manufacturing activity and deduction u/s 80IB/80IE was rightly disallowed by the AO. 4.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance of deduction u/s 80IB(13)/80IE(6) r.ws. 80IA(10) on apportionment of research and development expenses of Rs. 7,97,11,323/- incurred by Sun Pharmaceutical Industries Ltd. (SPIL) without appreciating the facts and reasons mentioned by the AO in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich does not require any adjudication and hence dismissed. 43. Ground No. 2: Deduction u/s. 80IE in respect of Sikkim Unit. This issue is considered by us at Paragraph Nos. 22 to 22.2 of this common order in ITA No. 1521/Ahd/2018. Respectfully following the same, thus this ground no. 2 raised by the Revenue is hereby dismissed. 44. Ground No. 3: Deduction u/s. 80IB/80IE in respect of receipt of interest on delayed payment on sales. This issue is considered by us at Paragraph Nos. 23 to 23.2 of this common order. Respectfully following the same, this ground no. 3 raised by the Revenue is hereby dismissed. 45. Ground No. 4: u/s. 80IB(13)/80IE(6) r.w.s. 80IA(10) on apportionment of R D expenses. This issue is considered by us at Paragraph Nos. 24 to 24.1 of this common order. Respectfully following the same, this ground no. 4 raised by the Revenue is hereby dismissed. 46 Ground No. 5: Disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors. This is already adjudicated in Paragraph Nos. 9 to 9.2 of this order in assessee s appeal in ITA No. 1464/Ahd/2018. Thus the disallowance made by the Assessing Officer is hereby confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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