Tax(Appeals)-2, Vadodara (CIT(A) in short) dated 28/03/2018 & 30/03/2018 relevant to Assessment Years (AYs) 2011-12 & 2013-14 respectively.

2. First, we take ITA No. 1462/Ahd2018 an appeal by the assessee for the AY 2011-12.

3. The assessee has raised following grounds of appeal:

"The Appellant raises the following grounds, which are mutually exclusive, independent of and without prejudice to one another:

1. On the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income-tax (Appeals) [the 'Ld. CIT(A)'] erroneously affirming the findings of the learned Assessing Officer [the 'Ld. AO'] is unsustainable and ought to be quashed.

2. Re: Addition on account of Corporate Guarantee provided to Associated Enterprises Sun Pharmaceutical Bangladesh Ltd. - Rs 9,95,440/-.

2.1 The learned CIT(A) has grossly erred in upholding the additions of Assessing Officer/ TPO who failed to appreciate the fact the Corporate Guarantee provided on behalf of Associated Enterprises is not an international transaction.

2.2 The learned CIT(A) has grossly erred in not appreciating that the Appellant had extended the guarantee to promote its own interest and had not incurred any additional cost for the same.

2.3 Without prejudice to the above, the learned CIT(A) has grossly erred in upholding the addition made by the Assessing Officer/ TPO for benchmarking the Guarantee fees to be charged by the Appellant from its Associated Enterprise (AE).

2.4 Without prejudice to the above, the learned CIT(A) grossly erred in upholding the order of Assessing Officer / Transfer Pricing Officer who has wrongly charged an additional mark up of 25 basis points on account of currency risks without considering the factual background of the transaction.

2.5 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned CIT(A) grossly erred in upholding the order of Assessing Officer / TPO making an addition of 5.41% towards Corporate Guarantee commission which is excessive and ought to be substantially reduced.

2.6 Without prejudice to the above, if an adjustment is to be upheld, the guarantee fee should be charged at 1%, in line with the prevalent safe harbor rules.

3. Re: Deduction of Remuneration received from Partnership firms of M/s Sun Pharmaceutical Industries ('SPI') of Rs. 6.19.63,711/- & M/s Sun Pharma Sikkim ('SPS') of Rs. 67.25.69,731/- aqqreqatinq to Rs 73,45.33,442/- for determination of Book Profits under section

115JB:

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3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) / Ld. AO erred in not considering remuneration received from the partnership firms as an income to which the provisions of section 10 apply for the limited purpose of computing book profits u/s 115JB without appreciating that remuneration received from partnership firm is nothing but appropriation of profits.

3.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the entire mechanism of computing book profits is based on normal commercial profits having regard to the relevant accounting framework prescribed in Companies Act and thus, remuneration is eligible to be deducted for computing book profits as per clause (ii) to Explanation to section 115JB(2) read with Chapter III of the Income-tax Act, 1961 ('Act').

3.3 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have appreciated that the income not chargeable to tax by virtue of section 28(v) under normal provisions of the Act cannot be brought to tax by virtue of Minimum Alternate Tax ('MAT') provisions.

3.4 Without Prejudice to the above, the Ld. CIT(A) / Ld. AO grossly erred on facts, in considering remuneration received from the partnership firm of SPS while computing books profits under section 115JB without appreciating that the same is neither included in the Profit and Loss Account for the year nor covered under Explanation 1 to section 115JB(2). The action of the Ld. CIT(A) / Ld. AO is in gross contradiction to the law laid down by the Hon'ble Supreme Court in case of Apollo Tyres Ltd. vs. CIT [255 ITR 273 (2002)].

3.5 Without Prejudice to the above, the said remuneration of Rs. 67,25,69,731/- from SPS has been duly accounted and considered in determining book profits for AY 2012-13 and has already been subjected to addition in that year and hence, no addition in this regard ought to be made in the current year.

4. Disallowance of expenditure incurred on repairs treating them as capital expenditure - Rs. 35.13.250/-:

4.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in holding expenditure aggregating to Rs. 35,13,250/- to be capital in nature despite the same been incurred for meeting routine commercial necessities like maintaining operational efficacies, asset replacements in the ordinary course of business, without giving rise to any benefit in the capital field, indicating that the expenditure was revenue in nature and hence, eligible for deduction under section 37(1).

4.2. Without prejudice to the above, the Ld. CIT(A) ought to have allowed additional depreciation under section 32(1)(iia) on such capital expenditure disallowed.

5. Re: Disallowance on account of alleged Bogus Purchases Rs. 51.712/-

:

5.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in disallowing purchases made from M/s M.R. Corporation and M/s Savita International as bogus purchases based on the information received from Department of Sales Tax, Maharashtra without considering the evidences and explanations provided by the Appellant and without giving the basis for such allegations and an opportunity to cross examine the defaulting parties to the Appellant.

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5.2. The Ld. CIT(A) ought to have appreciated that non-compliance of VAT law by the sellers cannot be the sole basis for sustaining addition in case of the Appellant.

6. Re: Disallowance of expenditure incurred for doctors for promotion of business Rs. 4.75.64.950/-:

6.1. 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 rigours of Explanation 1 to section 37(1) of the Act.

6.2. On 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.

6.3. 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 same is not applicable to the year under consideration and that departmental circulars are not binding on the tax payer, which position has been repeatedly upheld by various judicial authorities."

4. The issue raised by the assessee in ground no. 1 of its appeal is general in nature and thus the same does not require any separate adjudication. Hence the same is dismissed being infructuous.

5. The next issue raised by the assessee in ground no. 2 of its appeal is that the learned CIT(A) erred in confirming the upward adjustment of Rs. 9,95,440/- under the provisions of Transfer Pricing on account of Corporate guarantee given to the AE.

6. The AO/TPO in the assessment proceeding found that that the assessee has provided Corporate Guarantee to its AE namely Sun Pharmaceutical Bangladesh Ltd to the extent of Rs. 1.84 crores without charging any guarantee fees. The TPO/AO treating the same as an international transaction made upward adjustment of Rs. 9,95,440/- by applying guarantee fee @ 5.41%.

6.1 On appeal, the learned CIT (A) found that the assessee is in appeal before Hon'ble Jurisdictional High court on the same issue in Income Tax Appeal No. 567 of 2016 and the outcome of the same is pending. Thus, the

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learned CIT (A) disposed of the issue by holding the upward adjustment on account of guarantee fee will stand confirmed or deleted subject to the order of the Hon'ble High court.

7. Being aggrieved by the order of the learned CIT(A) both the assessee and Revenue are in appeal before us. The relevant ground of appeal raised by the Revenue in ITA No. 1519/Ahd/2018 reads as under:

"4. On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in not confirming the transfer pricing addition of Rs.9,95,440/- towards corporate guarantee provided to AE on which no guarantee fee was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order."

8. The learned AR for the assesse before us file paper book running from pages 1 to 459 and submitted that identical upward adjustment was also made in A.Y. 2008-09, 2009-10 and 2010-11 and the matter travelled up-to the ITAT in all these year in ITA Nos. 3297 & 3420/Ahd/2014, 1666 & 1663/Ahd/2016 and 922 & 1234/Ahd/2016 respectively. The ITAT in all these appeal set aside the issue to the file of the learned CIT(A). Accordingly it was prayed that the issue for the year under consideration should also be set aside to the file of the

AO.

9. The ld. DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity. Both the ld. AR and DR vehemently supported the stand of the authorities below as favourable to them.

10. We have heard the rival contention of both the parties and perused the materials available on record. At the outset, we find that in the identical facts and circumstances in the own case of the assessee for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013, the ITAT has restored the issue for fresh adjudication to the file of the AO. However, the ITAT following in subsequent assessment years being A.Y. 2008-09, 2009-10 and 2010-11 restored the issue

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to the file of the learned CIT(A) after following the finding of tribunal for A.Y. 2007-08. The relevant extract of the order tribunal for A.Y. 2007-08 is reproduced as under:

30. We find that the revenue has preferred an appeal u/s. 260A of the Act before the Hon'ble High Court of Gujarat and the same has been admitted in Tax Appeal No. 567 of 2016. The relevant substantial question of law admitted by the Hon'ble High Court reads as under:-

[B] "Whether on the facts and circumstances of the case, the ITAT is right in deleting the addition (i.e. adjustment) to the arm's length price of international transaction amounting to Rs. 2,32,62,603/- as corporate guarantee not amounting to international transactions and not liable for upward adjustment ?"

31. A perusal of the above clearly shows that the rejection of the request for the constitution of larger bench was never challenged before the Hon'ble High Court. We, therefore, do not find any reason why this issue has been raised once again before us when the same has not been challenged before the Hon'ble High Court. Moreover, when a superior court is seized with a substantial question of law on this very issue, it would be improper for an inferior court to constitute a special bench to decide the same issue.

32.Considering the issue in totality in the light of the admission of the appeal before the Hon'ble High Court of Gujarat, in all fairness, in our considered view and understanding of the law, we restore this issue to the files of the A.O. with a direction that the same must be considered afresh after the decision from the Hon'ble Jurisdictional High Court of Gujarat and after giving a fresh opportunity of being heard to the assessee. Ground no. 5 is treated as allowed for statistical purpose

10.1 The facts in the case on hand are identical to the facts of the case as discussed above, therefore respectfully following the order of this tribunal in own case of the assessee in all those A.Ys which are binding on us, we restore this issue to the file of ld. CIT-A for fresh adjudication as per the outcome of appeal pending before Hon'ble High court in Tax appeal no. 567 of 2016.

10.2 Before parting we find that the Hon'ble Madras High Court in the case of PCIT vs. Redington (India) Ltd. reported in 122 taxmann.com 136 has held that corporate guarantee is covered under the limb of international transaction and having bearing on profit and loss account. The relevant finding of the Hon'ble court reads as under:

The concept of bank Guarantees and Corporate Guarantees was explained in the decision of the Hydrabad Tribunal in the case of Prolifics Corpn. Ltd v. Dy. CIT [2015] 55 taxmann.com 226/68 SOT 104 (URO). In the said case, the revenue contended that the transaction of providing Corporate Guarantee is covered by the definition of international transaction after retrospective amendment made by Finance Act, 2012. The assessee argued that the Corporate Guarantee is and additional guarantee,

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provided by the Parent company. It does not involve any cost of risk to the shareholders. Further, the retrospective amendment of section 92B does not enlarge the scope of the term 'international transaction' to include the Corporate Guarantee in the nature provided by the assessee therein. The Tribunal held that in case of default, Guarantor has to fulfil the liability and therefore, there is always an inherent risk in providing guarantees and that may be a reason that Finance provider insist on non- charging any commission from Associated Enterprise as a commercial principle. Further, it has been observed that his position indicates that provision of guarantee always involves risk and there is a service provided to the Associate enterprise in increasing its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on profit & loss account, but inherent risk cannot be ruled out in providing guarantees. U1 and adjustment are to be made on guarantee commissions on such guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise.

In the light of the above decisions, the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and the order passed by the DRP is to be restored. [Para 76]

10.3 Thus in view of the above, we hold that the bank/corporate guarantee is an international transaction. Therefore, the same has to be bench marked for determining the ALP. Thus the issue involved on hand is no longer covered as alleged by the learned AR for the assessee in view of the judgment of Hon'ble Madras High Court as discussed above.

10.4 The next aspects arises to determine the benchmarking for working out the ALP of the impugned international transaction. The TPO/AO in the case on hand has worked out the ALP at 5.41% and basis of the same has already been elaborated in TPO order. In this regard, we find that the Hon'ble Bombay High Court in case of CIT vs. Everest Kento Cylinders Ltd reported in 58 taxmann.com 254 held that while determining the ALP the rate charged by the bank or financial institution cannot be taken as comparable. The relevant finding of the Hon'ble Court reads as under:

In the present case, it is assessee-company that is issuing corporate guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which apply for issuance of a corporate guarantee are distinct and separate from that of bank guarantee and, accordingly, commission charged cannot be called in question, in the manner TPO has done. The comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion, appeal does not raise any substantial question of law and it is dismissed

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10.5 Now, the question arises what should be the ALP rate of the commission on corporate guarantee? In this regard we find that The Tribunal in several cases has considered 0.50% (of corporate guarantee given) as ALP rate of Corporate Guarantee commission. Some of these cases are as under:

(i) Videocon Industries Ltd. v. Dy. CIT [2017] 79 taxmann.com 216 (Mumbai - Trib.), Parent company charged commission at 0.25 %. The ALP was determined by the Tribunal at 0.50%.

(ii) Hindalco Industries Co. v. Commissioner Of Income-Tax [2015] 62 taxmann.com 181 (Mum.), Parent company charged commission at 0.50% which was considered as at ALP.

(iii) Manugraph India Ltd. v. Dy. CIT [2015] 62 taxmann.com 347 (Mum. - Trib.), The corporate guarantee was not treated as international transaction by the parent company but the Tribunal treated it as international transaction u/s 92B and upheld the ALP of 0.50%, following the order in the case of the assessee for the earlier year. The Tribunal followed Everest Kento Cylinder Ltd. v. Asstt. CIT [2015] 56 taxmann.com 361 (Mum-Trib). It seems that the decision in Bharti Airtel Ltd. (supra) was not referred to in this case.

(iv) Aditya Birla Money Limited v. Principal Commissioner Of Income Tax [2015] 56 taxmann.com 317/69 SOT 18 (URO) (Mum - ITAT). The assessee had not classified this transaction as international transaction. However, guarantee commission was fixed at 0.50%.

(v) Mylan Laboratories Limited v. Assistant Commissioner [2015] 155 ITD 1123/63 taxmann.com 179 (Hyd. - Trib.). The assessee admitted corporate guarantee as international transaction, then as against 2% fixed by TPO the Tribunal upheld the claim of the assessee at 0.53% following the decision in Prolifics Corpn. Ltd. v. Dy. CIT [2015] 68 SOT 104 (URO)/55 taxmann.com 226 (HYD - Trib.).

(vi) Everest Kanto Cylinder Ltd. (supra) - Assessee paid guarantee commission at rate of 0.5 per cent for obtaining guarantee. This was accepted as ALP for all corporate guarantees given by the assessee.

(vii) Godrej Consumer Products Ltd. v. Asstt. CIT [2016] 69 taxmann.com 436 (Mumbai - Trib.)- The assessee suo motu benchmarked the commission chargeable on bank guarantee @ 0.25%. It was determined at 0.50%.

10.6 Thus, in view of the above discussion and latest development, we are also of the opinion that the extension of corporate/guarantee to AEs is an international transaction and needs to be benchmark and in view of several order of the tribunal as referred above 0.5% of commission on the value of corporate/ bank guarantee will serve the justice to both the assessee and the Revenue. However in the case on hand, we have set aside the issue to the file of the AO for fresh adjudication in light of consistent view taken by the Tribunal in own case of the assessee for earlier Assessment Years with direction to decide the issue a fresh as per the outcome of appeal filed by the Revenue

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before Hon'ble Gujarat High court in own case of the assessee. But we are also conscious to latest development on the issue on hand as discussed above. Therefore, we direct the AO to also consider the judgment of Hon'ble Madras High court (Supra) at the time of fresh adjudication. Hence, the ground of appeal raised by both the assessee and Revenue is hereby allowed for statistical purposes.

11. The next issue raised by the assessee in ground no. 3 of its appeal is that the learned CIT(A) erred in confirming the order of the AO by denying the deduction of remuneration received from partnership firm while computing book profit under section 115JB of the Act.

12. The assessee is a partner in the firm namely Sun Pharma Industries (SPI) and Sun Pharma Sikkim (SPS) from where it received remuneration of Rs. 6,19,63,711/- and Rs. 67,25,69,731/- which was not taxable in hand of the assessee under normal provision of the Act. However, the assessee while computing the book profit under section 115JB also reduced the same. However, the AO added back the same to book profit by holding that remuneration received by assessee to a non-working partner is distinguishable from receipt of share from firm. On appeal learned CIT (A) also confirmed the finding of the AO.

13. Being aggrieved by the finding of the learned CIT (A) the assessee is in appeal before us.

14. The learned AR before us contended that ITAT in the own case of the assessee in the earlier years has decided the issue against it. However, there is change in the provisions of law by virtue of the judgment of Hon'ble Calcutta High Court in the case of PCIT vs. M/s Ankit Metal & Power Ltd. reported in 416 ITR 591 wherein it was held that the receipt which are not income under section 2(24) of the Act, the same cannot be made subject to tax under the provisions of MAT while calculating the book profit under section 115JB of the Act.

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14.1 It was further contended by the learned AR that the Mumbai Tribunal in the case of M/s Alok Industries Ltd. in ITA No. 7243/Mum/2017 vide order dated 26-07-2019 has also taken the same view.

14.2 As per the learned AR remuneration received by the assessee was made subject to tax in the hands of the partnership firms by virtue of the provisions of section 40(b)(i) of the Act. Thus, receipt which is not taxable hands of the assessee cannot be made subject to tax under the provisions of MAT while collecting the profit while calculating the profit under section 115 JB of the Act. Thus it was prayed by the learned AR that the order of this Tribunal in the own case of the assessee in the earlier years cannot be followed in the year under consideration by virtue of the development as discussed above.

15. On the other hand, the learned DR vehemently supported the order of the authorities below.

16. 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 against the assessee by the order of this Tribunal vide order dated 08- 09-2017 in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under:

110. We have considered the facts, circumstances, relevant provisions and rival submissions,. A harmonious reading of the provisions of section 115JB of the Act reflects that in the case of a company subject to the provisions of Section 115JB of the Act has to prepare P&L statement in accordance with the provisions of part (ii) of Schedule (vi) of the Companies Act.

111. The relevant clause of Explanation 1 reads as under:-

Explanation [1]- For the purposes of this section, "book profit" means the [profit] as shown in the [statement of profit and loss] for the relevant previous year prepared under sub-section (2), as increased by -

(f) the amount or amounts of expenditure relatable to any income to which [section 10 (other than the provisions contained in clause (38) thereof) or [***] section 11 or section 12 apply; or]

112. And as reduced by :-

(ii) the amount of income to which any of the provisions of [section 10 (other than the provisions contained in clause (38) thereof) or [***] section 11 or section 12 apply, if any such amount is credited to the [statement of profit and loss]; or

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113. And section 10(2A) of the Act says that in the case of a person being a partner of a firm which is separately assessed as such his share in the total income of the firm will not form part of total income. Explanation to Section 10(2A) provides that the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding, anything contained in any other law, to be an amount which bears to the total income of the firm, the same proportion as the amount of a share in the profits of the firm in accordance with the partners deed bears to such profits.

114. Thus, it is clear that firstly the profit and loss account of the company should be in accordance with the relevant provisions of the Companies Act. Secondly, only specified items have to be added back as provided in various clauses to Explanation 1 and reduced by specific items provided thereon. The only specific amount of income which has to be reduced is the income to which provisions of Section 10, 11 or 12 apply, if any such amount is credited to the Profit and Loss account and Section 10(2A) defines such income as the share of profit of a partner from the partnership firm, the language is clear and unambiguous and needs no other insertion or deletion. The remuneration to partner may have the color of appropriation of profit of a partnership firm as held by the Hon'ble Supreme Court and Hon'ble High Courts in various decisions relied upon by the ld. Senior Counsel but as mentioned elsewhere, Section 115JB is a complete code in itself. Therefore, if the remuneration is credited by the appellant company in its Profit and Loss account then the same could be reduced it specifically provided under the Explanation to Section 115JB of the Act which we find missing from the relevant provisions. We, therefore, do not find any merit in this claim of the assessee and accordingly we confirm the findings of the First Appellate Authority. Ground no. 9 is dismissed.

16.1 However, at the time of hearing, it was brought to the our notice that the Hon'ble Calcutta High Court in the case of Ankit Metal & Power Ltd. (supra) has held that the items of receipt which are not income under the provision of section 2(24) of the Act cannot be made subject to tax under the provisions of MAT while calculating the profit under section 115 JB of the Act. The relevant extract of the judgment is reproduced as under:

"27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961."

16.2 It is an admitted fact that amount of remuneration received by the assessee was not allowed as deduction in the hands of the partnership firm.

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Thus, the same cannot be added to the total income of the assessee by virtue of the proviso to clause (v) of section 28 of the Act which reads as under:

v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm :

Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;

16.3 At this juncture we also refer the provisions of section 2(24) of the Act where the word income has been defined. The relevant clause (ve) of section 2(24) of the Act reads as under:

(24) "income" includes— (ve) any sum chargeable to income-tax under clause (v) of section 28 ;

16.4 The definition of the income as discussed above under clause (ve) of section 2(24) of the Act has also made reference to the income chargeable to tax under clause (v) of section 28 of the Act. Thus, there remains no ambiguity to the fact that the amount of remuneration not allowed as deduction in the hands of the partnership firm cannot be made subject to tax in the hands of the partner. Thus, once the receipt is not taxable then the same cannot be made subject to tax under the provisions of MAT while calculating the profit under section 115JB of the Act. In view of the above, we do not find any reason to uphold the finding of the learned CIT -A. Accordingly we reverse the same and direct the AO to delete the addition made by him. Thus, the ground of appeal raised by the assessee is hereby allowed.

17. The next issue raised by the assessee in ground No. 4 is that the learned CIT(A) erred in confirming the order of the AO by treating the repairs and maintenance expenses amounting to Rs. 35,13,250/- as capital in nature.

18. During the assessment proceeding, the AO on examination of repair and maintenance expenses found that the amount claimed by the assessee includes certain amount aggregating to Rs. 35,29,755/- which are in nature of capital

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expenditure. On question, the assessee submitted that these expenses include amount towards installation charges, purchase of stores and consumables, purchase of glass-lined agitator, tablet filling attachment, PLC system with control panel and air sampler. The assessee made detailed submission with regard to each item but sum and substance of the same are that all these item are replacement of worm out item as normal wear and tear expenses incurred in the normal course of business and individually, these items do not create any assets but helps in maintenance of existing machine to original condition.

19. However the AO disbelieved the submission of the assessee and held that the glass lined agitator purchased by the assessee is the main part of the reactor, thus constitute capital assets. Likewise, the capsule filling machine purchased by the assessee being a special machine used for filling of tablets is capital assets. Further the purchase of PLC system with control panel with touch screen and purchase of chair type stand for outdoor AC claimed as consumable are capital assets. Thus the AO disallowed the repair and maintenance expenses of Rs. 35,29,755/- and made an addition of Rs. 26,47,073/- after providing the setoff of the depreciation for Rs. 8,82,682/- only.

20. The aggrieved assessee carried the matter before learned CIT (A) and reiterated its contention as made during assessment proceeding.

21. However, the learned CIT(A) confirmed the disallowances of repair and maintenance expenses to the extent of Rs. 35,13,250/- in part by observing as under:

"18.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative. The issue under consideration is as to whether expenditure incurred by the appellant for purchase of various items will amount to creation of new assets with an enduring benefit to the company. In this regard, it is worthwhile to refer to the ratio laid down by the Hon'ble Supreme Court in the case of Dalmia Jain & Co. Ltd. Vs. CIT (1971) 81 ITR 754 wherein it has been held that "in deciding whether a particular expenditure is a capital in nature, what the Courts have to see as to whether the expenditure in question was incurred to create any new assets or was incurred for maintaining the business of the company, if it is the former, it is capital expenditure. If it is the latter, it is revenue expenditure". In this background, the items purchased by the appellant company have to be dealt with accordingly.

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a) AirCon India of Rs.16,505/-:

The Assessing Officer stated that the assessee has purchased chair type stand for outdoor AC Unit which is basically a new capital asset. However, the assessee claimed that the same pertains to installation charges, stores and consumables. Looking to the smallness of the expenditure and its nature, in my considered view, it has to be allowed as revenue expenditure. The Assessing Officer is directed accordingly.

b) GMM Pfaudler Ltd, of Rs.5,77,500/-:

Scrutiny of Invoice No. 2735 dated 24.06.2010 reveals that the appellant has purchased a Glasslined Agitator in Panoli Unit. Since agitator is capable of independently functioning as a separate machine, the expenditure is treated as capital in nature. The action of Assessing Officer on this account is confirmed.

c) GMM Pfaudler Ltd, of Rs.3,30,000/-:

Scrutiny of Invoice No. 2711 dated 03.06.2010 reveals that appellant has purchased a Glasslined Agitator in Nagar Unit. Since agitator is capable of independently functioning as a separate machine, the expenditure is treated as capital in nature. The action of Assessing Officer on this account is confirmed.

d) ACG Pam Pharma Tech Pvt. Ltd, of Rs.16,95,000/-:

Scrutiny of Invoice dated 27.02.2011 reveals that the appellant has purchased a capsule filling machinery which is capable of independently functioning as a machine. Hence the expenditure on this account has to be treated as capital expenditure and accordingly the action of Assessing Officer is confirmed.

e) Soalce Enqi. Mktq. Pvt. Ltd, of Rs.5.80.000/- and Rs.29,000/-:

Scrutiny of invoices reveals that the assessee has purchased control pane! with PLC touch screen for Halol Unit. Since the PLC control panel is an independent machine, in my considered view, the expenditure has to be treated as capital in nature and accordingly the action of Assessing Officer is confirmed.

f) International PBI SPA of Rs.3.01,750/-:

Scrutiny of Invoice No. 438 dated 30.06.2010 reveals that the assessee has purchased Air Sampler Unit for tablet area which is an independent machine and accordingly the expenditure has to be treated as capital in nature. Accordingly, the action of Assessing Officer on this account is confirmed."

22. Being aggrieved by the order of the learned CIT(A), the assesse is in appeal before us.

22.1 The learned AR before us contended that the items classified as fixed assets by the Revenue actually represents the part of the larger machines. As these items cannot function independently and thus such expense represents the repairs and maintenance expenses. The ld. AR reiterated the submissions as made before the authorities below.

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22.2 On the other hand the learned DR vehemently supported the order of the authority below.

23. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note there was identical disallowances made by the AO in own case of the assessee in A.Y. 2010-11 where the coordinate bench of this tribunal in ITA No. 922& 1234/Ahd/2017 decided the issue against the assessee by observing as under:

73. The Ld. AR before us has also not pointed out any defect in the order of the Ld. CIT-A. Thus in the absence of any argument by the ld. AR for the assessee, we do not find any reason to disturb the finding of the ld. CIT-A. Hence the ground of appeal of the assessee is dismissed.

23.1 At the time of hearing before us for the year under consideration also the learned AR for the assessee was not able to pinpoint any defect on the finding of the learned CIT(A). As such, it was held by the CIT-A with respect to all the additions confirmed that all the fixed assets can function independently which has been controverted by the ld. AR for assessee based on cogent and documentary evidence. Accordingly, following the order of the coordinate bench, we hereby dismiss the ground of appeal of the assessee

24. The next issue raised by the assessee in ground No. 5 is that the learned CIT-A erred in confirming the order of the AO by treating the purchases of Rs. 51,712/- as bogus in nature.

25. The AO during the assessment proceedings found that the assessee has claimed certain expenses by way of purchase of the material from the parties based in Mumbai, the VAT registration of which were cancelled by the Maharashtra VAT Department. Thus the AO treated the same as bogus in nature and added to the total income of the assessee.

26. Aggrieved assessee preferred an appeal to the learned CIT-A, who also confirmed the order of the AO by observing as under:

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"25.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, the appellant has not established genuineness of the parties from whom purchases are claimed to have been made by furnishing their confirmation or by producing them before the Assessing Officer. The transportation of goods from the seller to the business premises of the appellant, has also not been proved by Delivery challan or GR, vehicle No. etc. Moreover, the appellant has also failed to establish that the material purchased from the above mentioned parties was actually used in manufacturing or trading etc. Under these circumstances, the claim of appellant cannot be accepted and accordingly disallowance made by the Assessing Officer on account of bogus purchases at Rs.51,702/- is confirmed and Ground No. 22 is dismissed.

27. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.

28. The learned AR before us contended that when the material was purchased from these parties, they were active and registered with the Maharashtra VAT department. The payment against the purchases was made through the banking channel. Furthermore, considering the total purchases shown by the assessee in the year under consideration for ₹ 945 crores, the amount of impugned purchases are of negligible value. As such, it cannot be expected that the assessee will show the bogus purchases from such parties.

29. On the other hand, the learner DR vehemently supported the order of the authorities below.

30. We have heard the rival contentions of both the parties and perused the materials available on record. It has been contended by the assessee before the AO that above parties were active at the time of purchases made by it and this fact has nowhere been doubted by the authorities below. Thus, the assessee cannot be penalized if the other parties being the seller are de-registered from the Maharashtra VAT department. There was no clue or information available with the income tax Department suggesting that the assessee has made bogus purchases. The entire thrust of the Revenue was based on the fact that the other parties were held as bogus by the Maharashtra VAT department. To our understanding, based upon the information received from the 3^rdparty, until and unless it is confronted to the assessee, no adverse inference can be drawn. There can be various reasons for the cancellation of the registration such as

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non-payment of VAT by the party, non-filing of VAT return, non-maintenance of requisite records but nothing brought on record suggesting that for what reason, the other parties registration were cancelled.

30.1. In addition to the above, the assessee has made the payment through the banking channel which can be verified from the submissions made by it before the authorities below. This fact has nowhere been doubted by the revenue. It is also significant note that considering the large volume of the business of the assessee, it is unexpected that the assessee having such high scale of business will indulge in such kind of practices for the purchase of 51,712./- only. In view of the above and after considering the facts in totality, we are not inclined to uphold the finding of the authorities below. Thus we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal raised by the assessee is hereby allowed.

31. The next issue raised by the assessee in ground No. 6 of its appeal is that the learned CIT(A) erred in confirming the disallowance of business promotion expense of Rs. 4,75,64,950/- incurred in connection with doctors.

32. The assessee during the year claimed selling & distributing expenses of Rs. 196,66,18,209/- only. The AO on the verification found that selling and distribution expenses includes gift and freebies to the doctor for an amount aggregating to Rs. 6,64,27,499/- detailed as under:

32.1 The AO was of the view that the above expenditure are not allowable under explanation 1 to section 37(1) of the Act as the same is incurred in violation of guideline issued by the Medical Council of India.

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32.2 The assessee in support of its claim contended that such expenses were incurred to gain regular development in the medical field and valuable inputs in the form of feedback from doctors. The company considers medical fraternity a very important partner in the overall drug development to retain its leadership position in the industry. Therefore, the same were incurred wholly and exclusively for the purpose of business and allowable as deduction. The assessee also submitted that IMC regulation does not apply to it as assessee is a pharmaceutical company and not a medical practitioner. Therefore, explanation 1 to section 37(1) will not apply.

32.3 However, AO disregarded the contention of the assessee and held that MCI is a statutory body which discharges its function under the Medical Council Act 1956. Therefore, any violation of the guidelines would be covered under the prohibition of law as mentioned in explanation 1 to section 37(1). Further, CBDT also in this regard issued circular No. 5/2012 dated 1-8-2012 which highlight that any expense incurred in the nature of freebies to a medical practitioner is to be disallowed. Accordingly, the AO disallowed the sum of Rs. 6,64,27,499/- and added to the total income of the assessee.

33. On appeal, the learned CIT(A) provided relief in part to the assessee by observing as under:

"27.2. I have carefully considered the facts on records and submission of the appellant. 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 their 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. I 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. Admittedly, the appellant has incurred expenditure of Rs.8,41,89,667/- as detailed above on gifts and reimbursement of lodging and boarding and conference expenses incurred by the Doctors/medical practitioners. As is evident from the written submission, the business promotion

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expenses of Rs.7,27,99,029/- are pertaining to the equipment provided to various medical practitioners as gifts. Claim of indirect business gain as a result of gifts provided to the medical practitioners is irrelevant for allowability of these expenses. The appellant has also argued that the amendment to Indian Medical Council (Professional Conduct, Etiquette & Ethics) Regulation 2002 on 10.12.2009 and CBDT Circular No. 5/2012 dated 01.08.2012 are not applicable in the case of appellant since they are applicable to the Doctors/ Medical Practitioners accepting freebies. This argument of Ld. Authorized Representative is also not acceptable. Undisputedly, Medical Council of India has amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 with effect from 10.12.2009 prohibiting from accepting of gifts, travel facility or hospitality, from any pharmaceutical company or the health care industry by the doctors/medical professionals. Thus regulation is issued by the statutory body created under the Act of Parliament i.e. Medical Council Act, 1956. CBDT has also issued a Circular No. 5 of 2012 in this regard stating that expenditure on freebies given to medical professionals and their professional associations in violation of the regulation issued by the Medical Council of India which is a regulatory body constituted under Medical Council Act, 1956, will not be allowed as expenditure in view of the Explanation below section 37(1). The validity of this circular is also been upheld by the Hon'ble High Court of Himachal Pradesh vide order dated 26.12.2012 in CWP No. 10793 of 2012. Since Medical Council of India has prohibited expenditure on freebies given to the medical professional with effect from 10.12.2009, in my considered view, the Circular No. 5 of CBDT dated 01.08.2012 only reasserts the legal position and hence the expenditure on freebies will not be allowable u/s. 37(1) being an expenditure prohibited by law. Accordingly, I hold that expenditure on gifts to the extent of Rs.7,27,99,029/- shall not be deemed to have been incurred for the purposes of business or profession and hence the disallowance to this extent is confirmed.

23.2.1. 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 reimbursement 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 hold that accommodation expenses at Rs.28,91,444/- are also deserves to be disallowed being freebies. The conference fees and sponsorship expenses since were incurred for sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines, Further they appears to be in the nature of remuneration for services rendered by the Medical Professionals in the conference and seminars. Accordingly, the disallowance to the extent of Rs.84,99,194/- being conference fees and sponsorship is directed to be deleted and balance amount of disallowance is confirmed. Thus, appellant succeeds partly in respect of Ground No. 20."

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27.2.1. In view of the above, I hold that reimbursement of the | accommodation expenses has directly benefited the medical practitioner and j doctors and hence the same is in the nature of gifts/freebies. Similarly j various equipments gifted to the doctors debited under the head business ' promotion expenses also fall under the category of freebies. Accordingly, I further hold that accommodation expenses as well as business promotion ; expenses are hit by the Circular No. 5/2012 and amended guidelines of MCI. \ Accordingly, the action of Assessing Officer in this regard is upheld. However, conference fees and sponsorship expenses since were incurred for l sharing the knowledge in the medical field which may help in improving the product and Research and Development activity of appellant, in my considered view, it is not hit by the Circular No. 5/2012 and amended MCI Guidelines. Further they appear to be in the nature of remuneration for J services rendered by the Medical Professionals in the conference and seminars.

27.2.2. The Ld. Authorized Representatives have also argued that the Circular No. 5/2012 is applicable to the Doctors/Medical practitioner only but not to the companies offering gifts/freebies. This argument is not acceptable because if accepting/demanding of illegal gratification is bad, then paying of the same is also bad. This view gets support from the ratio laid down in the following cases:-

i) CIT Vs. Kap Scan and Diagnostic Centre (P) Ltd. (2012)

344 ITR 476 (P&H) In this case, the assessee company was doing the business of CT Scan, Ultra Sound and X-rays and it had debited certain amount of expenditure 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.

ii) 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.

27.2.3 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 No. 24 is partly allowed."

34. Being aggrieved by the order of the learned CIT (A), both the assessee and Revenue are in appeal before us. The assessee is in appeal against confirmation of disallowance of Rs. 4,75,64,950/- whereas the Revenue is in appeal against deletion of disallowance of Rs. 1,88,62549/- being conference & sponsorship fee and miscellaneous expenses. The relevant ground of appeal of the Revenue in ITA No. 1519/Ahd/2018 reads as under:

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"17. On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in deleting the disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners."

35. The learned AR for the assesse before us submitted that identical disallowance was also made in the immediate previous assessment year being A.Y. 2010-11. The issue travelled to the ITAT in ITA No. 922 & 1234/Ahd/2017 where the Hon'ble bench vide order dated 29-03-2019 decided the issue in favour of the assessee. Therefore, in the year under consideration, the same needs to be deleted.

36. On the other hand, the learned DR contended that the impugned expenses are not eligible for deduction under the explanation to section 37 of the Act.

37. 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 order of this tribunal in own case of the assessee for A.Y. 2010-11 bearing ITA No. 922 & 1234/Ahd/2017. However we find that recently Hon'ble Supreme Court in case of Apex Laboratories (P.) Ltd. vs. DCIT reported in 135 taxmann.com 286 held that freebies provided to the doctor by the assessee engaged in pharmaceuticals business are covered under the explanation to section 37(1) of the Act being expenditure incurred which is prohibited by the law. The relevant observation of the Hon'ble Supreme Court is extracted as under:

"Thus, pharmaceutical companies gifting freebies to doctors, etc. is clearly "prohibited by law", and not allowed to be claimed as a deduction under section 37(1). Doing so would wholly undermine public policy. The well-established principle of interpretation of taxing statutes - that they need to be interpreted strictly - cannot sustain when it results in an absurdity contrary to the intentions of the Parliament. [Para 33]"

37.1 Thus in view of above finding of the Hon'ble supreme court, we deviate from the finding of the coordinate bench of this tribunal in own case of the assessee for earlier years and held that the assessee is not entitled to claim the

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deduction of the impugned expenses. Hence, the ground of appeal raised by the assessee for the year under consideration is hereby by dismissed.

38. The assessee vide letter dated 26-10-2020 filed additional ground of appeal which reads as under:

"1. The Appellant is a listed company engaged in the business of manufacturing, trading and marketing of pharmaceuticals products. The assessment for A.Y. 2011-12 was completed after making additions and disallowances on various items by the Deputy Commissioner of Income tax, Circle - 2(1)(1), Vadodara ('Ld. AO') vide its order dated 16.04.2015 passed under section 143(3) r. w. s. 92C r. w. s. 144C(3) of the Income-tax Act, 1961 ('the Act') in its capacity as jurisdictional Assessing Officer of the Appellant Company. Aggrieved by the order, the Appellant has preferred an appeal before Commissioner of Income- tax (Appeals) [CIT(A)]. The Hon'ble CIT(A) has also decided the appeal vide its order dated 28.03.2018. In response thereto, the Appellant has preferred the captioned appeal before the Hon'ble Income-tax Appellate Tribunal (Tribunal1) vide ITA no. 1462/Ahd/2018.

2. During the year under consideration, the Appellant has incurred expenses for education cess and secondary & higher education cess (collectively referred to as 'cess'). The amount of cess incurred as tax liability can be very well reflected in the tax computation sheet issued by the Ld. AO along with its order giving effect to order of CIT(A) dated 4.6.2018 whereas cess levied on account of payment of Dividend Distribution Tax under section 115-O of the Act is disclosed under SI No. 6(c) of Schedule DOT in the ITR 6 as "Annexure-1 "and

"Annexure-2" respectively.

3. Section 40(a)(ii) of the Act, provides, inter alia, for disallowance of any rate or tax levied on profits or gains of any business or profession in computing the total income of a taxpayer. Section 10 of the Income Tax Act, 1922 which is pari-materia with section 40(a)(ii) of the Act, provided for disallowance of "any cess, rate or tax levied on......". The word "cess" was present in the section 10(4) of the Income Tax Act, 1922. The said word was omitted from provisions of section 40(a)(ii) of the Act. In this regard, CBDT Circular No. 91/58/66- ITJ(19) dated 18-05-1967, states that the effect of the omission of the word 'cess' from section 40(a)(ii) of the Act is that only taxes paid are to be disallowed and not cess. The said position is also upheld by decisions of Hon'ble Rajasthan High Court in case of Chambal Fertilisers and Chemicals Limited vs. JCIT (D.B. Income Tax Appeal No. 52/2018) (Dated 31- 07-2018) as well as recent decision of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT [2020] 117 taxmann.com 96. Accordingly, the Appellant seeks to raise additional ground for claiming deduction of cess paid in computing total income of the Appellant.

4. In order to claim its rightful entitlement, the Appellant feels the urge to raise an additional ground before the Hon'ble Tribunal. The Appellant seeks to raise additional ground in view of the Hon'ble Supreme Court's decision in case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. v. Commissioner Of Income-Tax. [1993] 66 Taxman 27 (Bombay)."

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39. The assessee in the additional ground of appeal has claimed the deduction of the cess paid on the income tax on the reasoning that same is revenue expenditure. However, we note that there is an amendment under the provisions of section 40(a)(ii) of the Act wherein an explanation has been inserted with retrospective effect i.e. assessment year 2005-06. The amendment reads under:

[Explanation 3.—For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax;]

39.1 As per the above amendment, there remains no ambiguity to the fact that the assessee cannot claim the deduction of the cess by treating the same as revenue expenditure. Thus, we do not find any merit in the additional ground of appeal raised by the assessee. Hence, the additional ground of appeal raised by the assessee is hereby dismissed.

40. In the result, the appeal of the assessee is hereby partly allowed for statistical purposes.

41. Coming to ITA NO. 1519/Ahd/2018 an appeal by the Revenue for A.Y. 2011-12

42. The Revenue has raised the following grounds of appeal:

"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. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the transfer pricing addition of Rs.1,39,76,444/- towards interest on loans given to Associated Enterprise (AE) on which no interest was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

3. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the transfer pricing addition of Rs.27,60,411/- towards interest on 0% Optionally Fully Convertible Debentures (OFCD), without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

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4. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in not confirming the transfer pricing addition of Rs.9,95,440/- towards corporate guarantee provided to AE on which no guarantee fee was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

5. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of Pantaprazole and Para IV drugs, to Sun Pharma Global FZE, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

6. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of other products to Sun Pharma Global FZE, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

7.1 On the facts and circumstances of the case and in law, CIT(A) erred in directing the A.O. to allow weighted deduction u/s. 35(2AB) of the Act on trade mark registration charges and overseas product registration charges without appreciating the facts and reasons mentioned by the AO in the assessment order.

7.2 On the facts and circumstances of the case and in law, CIT(A) erred in directing the A.O. to allow weighted deduction u/s. 35(2AB) of the Act on trade mark registration charges and overseas product registration charges without appreciating that the trade mark registration charges and overseas product registration charges were incurred by the assessee outside India and therefore, could not be considered for the purpose of allowance of weighted deduction u/s

35(2AB).

8. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in allowing weighted deduction u/s 35(2AB) on expenses relating to building repairs and municipal taxes without appreciating the facts and reasons mentioned by the AO in the assessment order.

9. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in allowing weighted deduction u/s 35(2AB) on lunch and refreshment and brokerage expenses without appreciating the facts and reasons mentioned by the AO in the assessment order.

10.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses as they pertained to Sun Pharmaceutical Industries and Sun Pharma Sikkim, 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).

10.2 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance u/s 37(1) in respect of selling and distribution expenses as they pertained to Sun Pharmaceutical Industries and Sun Pharma Sikkim, without appreciating that this expenditure cannot be considered as incurred for promoting the business of the firm in which the assessee is partner, and it would even then not be allowable expenditure u/s 37(1). This is without prejudice to the disallowance made u/s 14A.

10.3 Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in restricting the disallowance u/s 14A and in not

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directing computation of the disallowance in terms of all the three limbs of Rule

8D.

11. On the facts and circumstances of the case and in law, the CIT(A) erred in partly deleting the disallowance u/s 14A without appreciating the facts and reasons mentioned by the AO in the assessment order, and without considering that the assessee had failed to produce any evidence to controvert the findings of the AO, and failed to demonstrate that investments were actually made out of interest free funds, and the disallowance deserved to be upheld following the decision of the Hon'ble High Court in Avon Cycles Ltd. (2015) 53 taxmann.com 297 (P&H).

12. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition to book profit u/s 115JB relating to disallowance u/s 14A without appreciating the facts and reasons mentioned by the AO in the assessment order, and without considering that this amount was required to be added to the book profit as per clause (f) to Explanation 1 of section 115JB(2).

13. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of proportionate R & D revenue expenses incurred by the assessee on behalf of Sun Pharmaceutical Industries and Sun Pharma Sikkim the firms without appreciating the facts and reasons mentioned by the AO in the assessment order.

14. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of proportionate R & D capital expenses incurred by the assessee on behalf of Sun Pharmaceutical Industries and Sun Pharma Sikkim the firms without appreciating the facts and reasons mentioned by the AO in the assessment order.

15. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.73,45,33,442/- towards recharacterization of 'remuneration' received from partnership firms Sun Pharmaceuticals Industries (SPI) and Sun Pharma Sikkim (SPS) as consideration for use of trademarks, brands, etc. without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the amount received from SPI and SPS as "exempted partnership profit" actually represents royalty from the partnership firm.

16. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition towards foreign exchange gain without appreciating the facts and reasons mentioned by the AO in the assessment order.

17. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the disallowance in respect of conference fees and sponsorship under the head gift and freebies to doctors without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating the real nature of these expenses which were actually freebies and gifts to medical practitioners.

18.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the A.O. to verify the expenses not certified by D.S.I.R. and to allow consequential relief without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that weighted deduction u/s. 35(2AB) is not allowable in excess of what has been approved by D.S.I.R. that this decision pertained to disallowance of weighted deduction u/s. 35(2AB) due to non-certification of expenditure on scientific research by the DSIR, whereas in the present case, the DSIR has specifically excluded the excess expenditure as per norms.

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19. The appellant craves leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.

43. The issues raised by the Revenue in ground No. 1 and 19 of its appeal are general in nature and thus the same do not require any separate adjudication. Hence the same are dismissed as infructuous.

44. The next issue raised by the Revenue in ground No. 2 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment under the provision of Transfer Pricing for Rs. 1,39,76,444/- on account of interest free loans to AE.

45. During the course of assessment proceedings, the TPO noticed that the assessee has provided interest free advances to the AE namely Sun Pharma Global BVI in earlier year out of which an amount of Rs. 134.4 crores was carried forward in the year consideration. The AO/TPO was of the opinion that the assessee should have charged interest at LIBOR plus basis. The assessee strongly objected to this proposition for TP adjustment stating that the amount was advanced for shares and the same has been adjusted towards allotment of equity shares in the year consideration. Therefore the amount is to be treated as advance towards share application money. However, the TPO was dissatisfied with the contention of the assessee and computed the arm length interest rate at 3.60% and accordingly made upward adjustment of Rs.1,39,76,444/- only.

46. On appeal by the assessee, the learned CIT(A) found that addition made in the year under consideration is identical to the upward adjustment made in the A.Y. 2008-09 in the own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297/Ahd/2014 where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT (A) following the order of the ITAT in own case of the assessee for A.Y. 2008-09 allowed the appeal of the assessee.

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47. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

48. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

49. On the other hand, the learned AR before us submitted that identical upward adjustment was also made in A.Y. 2008-09, 2009-10 where the matter travelled up-to ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/2016 respectively. The ITAT in all these appeal allowed the issue in favour of the assesse.

50. 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 this Tribunal in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under:

13. We have given a thoughtful consideration to the rival contentions qua the facts in issue before us.

14. The crucial fact relates to the balance as at 31st March, 2007 shown under the head advances as share application money to Sun Pharma Global Inc. BVI at Rs. 1469.7 million and the same has been reflected as on 31.03.2008 at Rs. 1007.4 million. If these figures are considered it emerges that shares worth 462.3 million were allotted to the assessee company during the year under consideration and the balance were allotted in the subsequent financial years. This means that the balance of the application money remained so pending allotment. In our considered view, relevant provisions of Indian Companies Act will not be applicable to this case and deferent countries have separate laws/ regulation on such issue. Adjustment on account of notional interest on share application money which is not disputed be to be so are not liable to be recharacterized as loans only because there was a delay in allotment of share is not justifiable, more so when assesse has given plausible reason for such delay to avoid repetitive documentation and other regulatory exigencies. There is no dispute that the AE is a 100% subsidiary of the appellant company and the appellant company in its capacity as sole owner of the subsidiary ny subscribing to share capital is beneficiary of all the gains of the subsidiary company. Merely, because allotment of shares is delayed and in books share application money is reflected as advance for share application money till the allotment would not alter the characterization to the prejudice of assessee's position anyway. In our considered view, the percentage of ownership is the only material factor which remains at 100% prior to allotment and also post allotment. As the assessee is the only shareholder in it's 100% owned subsidiary company SPG BVI it should not make any difference merely because part of the share application money is converted into equity shares and the balance were allotted in subsequent assessment years. We, therefore, do not find any merit in the submissions

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of revenue in this behalf. This proposition, is reinforced by the decision of the Coordinate Bench in the case of Sterling Oil Resources (P.) Ltd. in ITA No. 1791/Mum/2014. The relevant part reads as under:-

9. There is one more aspect of the matter. In the present case, allotment of shares does not make any change to the position of the assessee, as the subsidiary' is admittedly a wholly owned subsidiary of the assessee. A delay in allotment of shares by the subsidiary company, as long as the subsidiary is a wholly owned subsidiary, does not prejudice the interests of the assessee. It is, therefore, wrong to even allege that an assessee does not behave in a commercially rationale manner, as expected in an arm's length situation, when the assessee does not ask for payment of interest for the period of delay in allotment of shares. We have noted that the TPO's stand that since the assessee was not issued shares during the period, the assessee did not derive any benefit from this investment and, for this reason, the arm's length price adjustment has been made for notional interest for the money which should be assessee's reward for the investment. What the TPO and DRP have overlooked is that since the assessee was only shareholder of the subsidiary company, the fruits of this investment belong to the assesse only and in entirety. On giving this money to the subsidiary and on use of this money by the subsidiary, the assessee, in its capacity as sole owner of the subsidiary, is beneficiary of all the gains of the subsidiary company. Whether the assessee was allotted these shares or not, the assessee was the only shareholder of the subsidiary company and beneficial owner of all the earnings and all the assets of the company. Non allotment of these shares, during the period of payment of share application money till the actual date of allotment, did not, therefore, prejudice assessee's position anyway. All the earnings of the subsidiary company belonged to the assessee in any situation. For example, if the funds available for dividend distribution for this year were say Rs 1,00,000 and the assessee had 100 shares before new allotment of shares and 1000 shares after the allotment, the assessee would be entitled to Rs 1,00,000 only the either way- whether as Rs 1,000 per share for 100 in pre new allotment situation or whether as Rs 100 per share for 1,000 shares in post new allotment situation. In absolute terms, the dividends remain the same. Whether the assessee is allotted more shares or not is wholly academic as the assessee is a single shareholder of the subsidiary company and the face value of shares does not affect the actual benefits of the assessee, the percentage of ownership is the only material factor- which remains at 100% pre new allotment as also post new allotment. In the case of CH v, EKL Appliances Ltd. [2012] 345 ITR 241/209 Taxman 200/24 taxmann.com 199 (Delhi). Hon'ble Delhi High Court has, though in a very different context and which is materially different from a situation in which the payment is made for subscription of share capital- as in this case, held that re-characterization of a transaction is possible in only two situations - i.e. (i) where the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner. None of these conditions is satisfied in the present case. The form and substance of the transactions are the same. The assessee has behaved in a commercially rational manner inasmuch as whether the new shares are allotted at x point of time or y point of time, it does not make a difference to the position of the shareholder so far as the subsidiary is wholly owned by a single shareholder- as is the factual position in this case. The nominal value of shares, as long as all the shares are held by the assessee is entirely benefit neutral from a commercial point of view. The very foundation of the adjustment made by the Assessing Officer is, therefore, wholly devoid of legally sustainable merits and factually correct assumptions.

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15. Considering the facts in totality, we set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition of Rs. 6,56,60,828/-. Ground no. 2 is allowed.

50.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher 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 the 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.

51. The next issue raised by the Revenue in ground No. 3 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment under the provision of Transfer Pricing for Rs. 27,60,140/- on account of investment in 0% OFCD of the AE.

52. During the course of assessment proceedings, the TPO noticed that the assessee has made investment of Rs. 22,39,00,000/- in "0% Optionally Fully Convertible Debenture (OFCDs) in its AE namely Sun Pharma Global BVI. The TPO was of the opinion that OFCDs being hybrid instrument convertible at the option of the investor is in the nature of debt and required to be determined at arm length. Thus the TPO computed the arm length interest rate at 3.60% and accordingly made upward adjustment of Rs. 27,60,411/- only.

53. On appeal by the assessee, the learned CIT(A) found that the adjustment made in the year under consideration is identical to the adjustment made in the AY 2008-09 in the own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297/Ahd/2014 where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT

(A) following the order of the ITAT in the own case of the assessee for AY 2008-09 allowed the appeal of the assessee.

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54. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us.

55. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

56. On the other hand the learned AR before us submitted that identical upward adjustment was also made in AY 2008-09, 2009-10 and in 2010-11 where the matter travelled up-to ITAT in ITA No. 3297/Ahd/20154, ITA No. 1663 & 1666/Ahd/2016 and ITA No. 922 & 1234/Ahd/2017 respectively. The ITAT in all these appeal allowed the issue in favour of the assesse.

57. 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 this Tribunal in the own case of the assessee for the AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under:

19. Shri G.C. Shrivastava referred to the decision of the Hon'ble Supreme Court in the case of Sahara India Real Estate Corporation Ltd. in Civil Appeal No. 9813 of 2011. It is contended that the Hon'ble Supreme Court has explained the nature of OFCDs and have held that OFCDs are hybrid securities which remained in the nature of debentures till they are converted into equity, after which they take form of equity. Counsel further pointed out that in the earlier assessment years, the Bench has drawn support from the decision in the case of Cadila Healthcare in ITA No. 2430/Ahd/2012 without appreciating the fact that in that case, the assessee has produced comparable data to show that independent parties had entered into agreements with similar terms (benefits) and not charged any interest thereon whereas in the case in hand, the assessee has not produced comparable data to justify that OFCDs were issued at arm's length price. It is strongly contended that since these facts have not been brought on record, therefore, the Bench should not follow its earlier decision.

20. Shri Soparkar ld. senior counsel replying to the submissions of revenue stated that the decision of the Hon'ble Supreme Court in the case of Sahara India Real Estate (Civil Application) No. 9813 of 2011 relied upon by the learned DR is not applicable to the issue before the Hon'ble ITAT. Even if it is held that OFCD is a hybrid instrument as laid down by the Supreme Court, in applying the Transfer Pricing Provisions, the entire instrument has to be considered and the same cannot be re-characterized partly as loan and partly as equity so as to enable any transfer pricing adjustment for the same. In this regard, we rely on the decisions cited earlier, which have been appropriately followed by the Hon'ble ITAT in A.Y. 2007-08 and the decision of the Supreme Court (supra) cited by the ld. DR does not in any way justify any departure from the decision laid down in A.Y. 2007-08. 21. Adverting to ld. DR's contention that the terms of OFCDs and comparables have not been submitted, it is contended that the terms of OFCDs were duly submitted before the lower authorities in the form of Annexure B which is

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part of the PB. Similarly the allegation that assessee has not brought on record any comparable transactions to show that non-charging of interest was at armslength and it got compensated by favorable terms similar to that offered by uncontrolled entities is also strongly refuted. It is contended all the relevant details and comparable were furnished as Annexure B in which it has been submitted that the conversion of OFCD into equity shares at a price of USD 21- USD 51 per share as against the net asset value of the shares at the relevant point in time being USD 87 per share. Thus it is clear that the OFCDs were convertible into shares at significant discount to the prevailing book value of the shares giving rise to sizeable benefit on OFCDs. It is also submitted that the OFCDs have been converted into equity shares in the subsequent years; hence, the question of payment of any interest on the OFCDs would not arise, as the same is fully towards capital account. The Ld Senior counsel continued by saying that the Hon'ble ITAT in A.Y. 2007-08 and in earlier years has not committed any error whatsoever in coming to the conclusion, which is duly supported by other decisions and the position prevailing under Law. Hence no departure is called for much less due to the decision of Supreme Court in Sahara (supra).

22. We have given a thoughtful consideration to the rival submissions qua the issue. Adverting to the claim of revenue that in the earlier year, the bench has not considered certain facts while relying upon the decision of the Co-ordinate Bench in the case of Cadila Healthcare.

23. The Hon'ble High Court in the case of A.P.V. Kokkiliagada Meerayya, Masud Khan has laid down the following :

28. There can be no dispute with respect to the settled legal proposition that a judgment of this Court is binding, particularly, when the same is that of a coordinate Bench, or of a larger Bench. It is also correct to state that, even if a particular issue has not been agitated earlier, or a particular argument was advanced, but was not considered, the said judgment does not lose its binding effect, provided that the point with reference to which an argument is subsequently advanced, has actually been decided. The decision therefore would not lose its authority, "merely because it was badly argued, inadequately considered or fallaciously reasoned". The case must be considered taking note of the ratio decidendi of the same i.e. the general reasons, or the genera! grounds upon which the decision of the court is based, or on the test or abstract, of the specific peculiarities of the particular case, which finally gives rise to the decision. (Vide Somawanti v. State of Punjab, Ballabhadas Mathurdas Lakhani v. Municipal Committee, Matkapui, Ambika Prasad Mishra v. State of U.P and Director of Settlements v. M.R. Apparao.)

24. The Hon'ble Jurisdictional High Court of Gujarat in the case of Core Healthcare Ltd.

251 ITR 61 has observed as under:-

As laid down by the apex court in the case of Ambika Prasad Mishra v. State of U.P., AIR 1980 SC 1762 ; [1980] 3 SCC 719 (page 1764 of AIR 1980 SC):

"Every new discovery or/argumentative novelty cannot undo or compel reconsideration of a binding precedent . . .

a decision does not lose its authority 'merely because it was badly argued, inadequately considered and fallaciously reasoned' . . ."

Similarly in the case of Kesho Ram and Co. v. Union of India [1989] 3 SCC 151, it is stated by the Supreme Court thus (page 160):

"The binding effect of a decision of this court does not depend upon whether a particular argument was considered or not, provided the point with reference to which the argument is advanced subsequently was actually decided in the earlier decision …"

25. A similar view is again taken by the Hon'ble Jurisdictional High Court of Gujarat in the case of Nirma Industries Ltd. 283 ITR 402. Coming to the facts of the year under

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consideration, we do not find any distinction from the decision taken in earlier assessment year by the Bench and the relevant findings read as under:-

8. We have heard the rival contentions and have carefully perused the orders of the authorities below. At the very outset, we have to state that the revenue has no power to re-characterize the transaction. The Hon'ble High Court of Delhi in the case of Cotton Naturals India Pvt. Ltd. 276 CTR 445 at para 17 of its order has held that Chapter X and Transfer Pricing rules do not permit the Revenue authorities to step into the shoes of the assessee and decide whether or not a transaction should not be entered. It is for the assessee to take commercial decisions and decide how to conduct and carry on its business. Actual business transactions that are legitimate cannot be restructured. A similar view was taken by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd. 345 ITR 241.

9. On identical set of facts, the Co-ordinate Bench had the occasion to consider similar issue in the case of Cadila Healthcare Ltd. in ITA No. 2430/Ahd/12 with C.O. No. 242/Ahd/12 in 146 ITR 502 wherein the first ground related to the adjustment made on account of notional interest on Optionally Convertible Debenture to Foreign Subsidiary. The Tribunal considered the following facts:-

4. During the course of assessment proceedings, Assessing Officer noticed that Assessee had subscribed to Optionally Convertible Loan of U.S. $ 27 Million issued by Zydus International Pvt. Ltd., Ireland. Accordingly reference under Section 92CA of the Act for computing of arms length price in relation to the transaction was made to Transfer Pricing Officer (TPO). TPO noted that the Assessee had entered into an agreement with Zydus International Pvt. Ltd. on 09.10.2007 for a convertible loan of U.S $ 27 Million which was subsequently utilized by the Ireland Company for acquiring shares in Zydus Healthcare, Brazil. As per the terms of agreement, no interest was payable if the amount was converted into equity. However, if the same is redeemed, interest was payable at Libor Plus 290 bps and the interest was to be computed at annual rates and payable at maturity that is 5 years from the date of first disbursement. The rupee value of the amount of loan as on 31.03.2008 was Rs. 108.32 crore. It was also noticed that Assessee has not shown any income from the aforesaid loan. In response, Assessee interalia submitted that Assessee had not opted for conversion of the loan during the year and therefore it was loan for the year and as per the terms of agreement, no interest accrued to the Assessee and therefore no income was considered. The TPO did not find the contention of the Assessee acceptable. He considered the Optionally Fully Convertible loan as debt and considering the average six month Euro Libor rate for the year @ 4.48% to which he added the interest rate of 2.90 basis point as per the agreement and thereafter considered the rate of interest to be @ 7.38% and accordingly computed the interest on Rs. 108.32 Crore for 171 days at 7.38%. The aforesaid adjustment made by the TPO was considered by the Assessing Officer and the addition of Rs. 3,99,74,4267- was made to the income. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee decided the issue in favour of Assessee

10. And the Tribunal held as under:-

7. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that as per the agreement, the interest was payable only if the conversion option was

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not exercised on the expiry of 5 year period. If at any time during the 5 year period conversion option was exercised and the loan was converted into equity, no interest accrued or become payable. He further noted that the funds were provided by the Assessee as per RBI guidelines and in the immediately next year, the entire loan given to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since the Assessee has converted the loan into equity in the immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not granted interest free loan but invested in optionally convertible loan with a clause of interest in case, Conversion option was not exercised and further held the Assessee's transaction with subsidiary was at arms length. Before us, the Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. In view of these facts, we find no reason to interfere with the order of CIT(A).

11. Respectfully following the findings of the Hon'ble High court (supra) and the Co-ordinate Bench (supra), we direct the A.O to delete the impugned additions. Ground no. 2 is accordingly allowed.

26. Thus, the distinguishing facts as canvassed by the Shri Shrivastava do not culminate in to any proposition so as to convince us to take any divergence from earlier findings and the judicial discipline also guides us to follow the decision of the Co- ordinate Bench in the light of the ratio laid down by the Hon'ble Supreme Court and the Hon'ble Jurisdictional High Court of Gujarat (supra) and considering the fact that the OFCD were on beneficial terms as per facts mentioned above. Consequently, we have no hesitation to follow earlier judgment in assessee's own case as a result we delete the impugned additions. Ground No. 3 of assessee is allowed

57.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher 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 years nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in the 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.

58. The next issue raised by the Revenue in ground no. 4 of its appeal is that the learned CIT (A) erred in not confirming the upward adjustment of Rs. 9,95,440/- under the provision of Transfer Pricing on account of corporate guarantee.

59. At the outset we note issue raised by the Revenue in its ground of appeal has been adjudicated along with the assessee's ground of appeal in ITA

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No. 1462/Ahd/2018, where we have vide paragraph no. 10 to 10.6 of this order in set aside the issue to the file of the AO for fresh adjudication as per law. Thus ground of appeal raised by the Revenue is hereby allowed for statistical purposes.

60. The next issue raised by the Revenue in ground No. 5 and 6 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment under the provision of Transfer Pricing made on account profit attributed to the product "Pantoprazole" and other product.

61. The assessee company claimed to have manufactured the medicine namely "Pantoprazole Sodium Delayed Release" and other medicine on contract basis for its AE namely Sun Pharma Global BVI (SPG-BVI) until December 2008 and thereafter for Sun Pharma Global FZE (SPG-FZE) a 100% subsidiary of SPG-BVI. As per the assessee SPG-BVI from 2009 onward SPG-FZE is the owner of the technology of the impugned drug and undertaking. The functions like marketing, distribution, credit risk, product litigation liability, inventory holding cost, sales return, charges back etc. As such it (the assessee) has only manufactured the medicine at its US-FDA plant on contract manufacturing basis and earned profit margin of 36.05% which is far more than the ALP of 4.06% determined using TNMM.

61.1 However, the AO/TPO disagreed with the contention of the assessee and held that the drugs was originally developed by assessee and transferred to its AE indirectly which amount to transfer of unique intangibles. Therefore, the profit split method will be appropriate method to determine ALP because assessee was not just manufacturer of the product. The AO/TPO further found that learned CIT(A) for AY 2008-09 while upholding the Profit Split Method taken the profit sharing ratio at 80:20 between assessee and AE. Accordingly the AO made upward adjustment of Rs. 88,67,09,657/- only by adding to the total income of the assessee.

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62. On appeal by the assessee, the learned CIT(A) found that addition made in the year under consideration is identical to the addition made in the AY 2008- 09 in own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297/Ahd/2014 where the Hon'ble ITAT decided the issue in favour of the assessee by holding the assessee as contract manufacturer only. Thus the learned CIT (A) following the order of the ITAT in own case of the assessee for A.Y. 2008-09 allowed the appeal of the assessee.

63. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

64. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

65. On the other hand the learned AR before us and submitted that identical upward adjustment was also made in AY 2008-09, 2009-10 and in 2010-11 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154, ITA No. 1663 & 1666/Ahd/2016 and ITA No. 922 & 1234/Ahd/2017 respectively. The ITAT in all these appeal allowed the issue in favour of the assesse.

66. 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 this tribunal in the own case of the assessee for AY 2008-09 bearing ITA No. 3297/Ahd/2014. The relevant finding of the coordinate bench reads as under:

76. SPG BVI purchased the Technology to manufacture Pantoprazole Sodium from Sun Pharma Advance Research Company Ltd. (SPARC). SPARC was incorporated on 01.03.2006 as a research company. With effect from 28.02.2007, the appellant company demerged its Innovative Research and Development business to SPARC. This is supported by the order of the Hon'ble High Court of Gujarat exhibited at pages 475 to 518 of the paper book. On 28.10.2007, SPARC sold a basket of 38 Technologies to SPG including ANDA for Pantoprazole Tablet, the consideration of which was USD 3 million for U.S. Market and USD 1.4 million for Europe Market. This is supported by the agreement for sale exhibited at pages 519 to 536 of the paper book.

77. By virtue of this agreement for sale, the Technology was purchased by SPG in the month of October, 2007 and immediately thereafter in the month of November, 2007, SPG enters into an agreement with appellant for manufacturing. Copy of supply

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agreement between SPG and SPIL is exhibited at pages 648 to 659 of the paper book. Relevant clauses of the supply agreement read as under:-

AND WHEREAS SPGI is the owner of the various abbreviated new drug applications and is interested to market the products in United States of America and in Europe and is therefore interested to buy various products from side approved by US FDA.

1. SUPPLY AND PURCHASE ARRANGEMENTS.

SPIL hereby agrees to sell and supply the Products to SGI and SPGI hereby agrees to Purchase the Products from SPIL with the terms and conditions of this Agreement. It is understood by the parties that this Agreement in no way obliges SPGI to purchase or take any or all the said products or any part of SPGI's requirements thereof, manufactured. Processed and/or packed by SPIL only and does not preclude SPGI from making similar or alternative arrangements with one or more other parties at its sole discretion.

2.1 SPIL agrees to sell and supply the product to SPGI at prices as agreed to between the parties. SUN will dispatch consignment of the PRODUCT within 45 (forty-five) days of acceptance by SUN of purchase order from SPGI or within such other time as may be mutually agreed upon. SPGI shall not be entitled to cancel any order placed by it and accepted by SPIL unless other wise agreed upon by the parties.

2.2 SPGI agrees to provide a forecast on agreed format to SPIL so as to facilitated SPIL to carry out production planning of the Products for sale and supply as per terms of this Agreement.

2.3 SPGI will be required to make payments in US Dollars against supplies of the PRODUCT within 75 days of the receipt of goods for the invoices raised by SPIL in this regard or within such other time as may be mutually agreed upon in this regard.

2.4 At the request of SPGI, SPIL shall supply the product ordered by SPGI by such carrier or carriers as SPGI may designate. Such delivery instructions shall be submitted by SPGI to SPIL well in advance SPIL agrees to dispatch at the cost of SPGI, the finished Product to SPGI or to its nominees within the time frames stipulated by SPGI from time to time as per the orders placed by SPGI and accepted by SPIL. SPIL further undertakes to supply the product with adequate packing and coverage to ensure that the Product reaches SPGI or its nominee adequately packed and acceptable as per CGMP guidelines.

3.1 SPGI's Technical Assistance,, SPGI shall supply on a continuing basis all necessary information relating to the manufacturing of the Products, including, but not limited to product specifications, packaging and labeling practices and processes regarding the production of Products, and such other information as SPGI deems to be reasonable and necessary, From time to time, SPGI at its own expense may send a representative to visit SPIL to provide such technical knowledge as shall be mutually agreed to by SPGI and SPIL.

3.2 Intellectual Property Representation: Except for the rights expressly under the terms of the Agreement this Agreement does not transfer any intellectual property rights, specifically with respect to the Products from SPGI to SPIL. SPGI represents and warrants that, to the best of the knowledge and belief of SPI , SPIL's fulfillment of the terms of this agreement to the' manufacturing of the Products will not infringe any third party intellectual property rights. Nevertheless, in case SPIL would be or named as a formal party by reason of an infringement of third party rights for the Products, SPIL shall promptly inform SPGI thereof. SPGI shall conduct any defense of such suit at its own expense and SPGI shad indemnify and hold SPIL harmless from and against any loss, claim, damage, expense or liability if any resulting from any such suit in accordance with Section 5. However, in any such litigation suit SPIL agrees to assist SPGI, without assuming any monetary obligation.

4.3 Legal Compliance. SPIL hereby undertakes to comply with all requirements of law for obtaining various licenses, approvals, permissions and no objection certificates for meeting all legal obligations in respect of any matter

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whatsoever, enabling it lawfully, to properly manufacture the Products Vibe execution, delivery and performance of this agreement by SPIL does not and will not violate any provision of applicable law or of any regulation, order decree of any court, arbitration or/.governmental authority or any other agreement to which SPIL Is a party, SPIL hereby indemnifies SPGI from any consequences whatsoever of any failure or lapses, or gross neglect or damage etc. on its part on account of legal liabilities or otherwise. SPGI hereby also undertakes to indemnify SPIL wherever found appropriate, on account of any failure or lapses, or neglect or damage etc. on its part on account of legal liabilities or otherwise arising out of non meeting its all legal obligation in respect of any matter whatsoever.

4.4 Quality control. If mutually agreed in writing, SPIL may conduct itself quality control tests pursuant to specifications, policies and/or procedures provided by SPGI in writing No production batch shall be released for sale unless it conforms to the SPGI specifications, practices and stipulations referred to in Section 4.1. SPGI will facilitate SPIL in curing deficiencies, to the extent acceptable to SPGI, of lots or batches of Product not meeting with SPGI specifications, practices or stipulations.

4.5 SPIL Warranty, SPIL warrants that the Finished Products manufactured and delivered to SPGI hereunder shall conform to the product specifications communicated by SPGI to SPIL. SPGI shall notify SPIL of any non-conforming manufactured Products within sixty days after receipt of Products or within sixty

(60) days after any hidden defects are discovered. Any notification or nonconformance under this section shall include proof of non- conformity/defect. SPIL may, at its discretion, have the defective Product tested at any other reputable laboratory and SPGI shall accept the report thereof. In case of a disputed result by such laboratory, the Product will be tested with an independent laboratory reasonably acceptable to both parties whose result shall be binding on both parties. SPIL shall replace all non- attributable to SPIL. SPIL shall also bear & reimburse to SPGI the cost of freight and insurance for such non-conforming Products Upon SPIL's instructions, SPGI shall destroy or return to SPIL at SPIL's cost, all non-conforming Finished Products.

4.6.4 SPIL agrees to invoice and dispatch at SPGI's cost and risk, the finished products to SPGI or its nominees as specified by SPGI according to the orders placed by SPGI and instructions given by SPGI and accepted by SPIL.

5.1 SPGI Indemnification. SPGI shall indemnify and hold SPIL harmless from and against any loss, claim, damage, expense or liability, resulting from any misrepresentation, negligence, or intentional misconduct by SPGI in performing this agreement including for any claim, demand or suit alleging that the Product infringes any third party's patent, copyright, trademark, trade secret or other intellectual property right or any product liability. Notwithstanding anything to the contrary in this Agreement, in no event shall SPGI be liable to SPIL for any incidental, indirect, exemplary, special or consequential damages whatsoever (including, but not limited to, lost profits, loss of goodwill, or interruption of business) that may be suffered or incurred by SPIL as a result of SPGI's violation of this representation.

5.2 SPIL Indemnification. SPIL shall indemnify- and hold SPGI harmless from and against any loss, claim, damage, expense or liability resulting from any misrepresentation, negligence or intentional misconduct by SPIL in performing this Agreement; provided however, that SPIL's obligation of indemnification shall not extend to any loss, claim, damage or expense or liability, resulting from SPGI's gross negligence or misconduct. Notwithstanding anything to the contrary in this Agreement, in no event shall SPIL be liable to SPGI for any incidental indirect, exemplary, special or consequential damages whatsoever (including but not limited to, lost profits, loss of goodwill, any patent/trademark infringement or interruption of business) that may be suffered or incurred by SPGI as a result of SPIL's violation of this representation. Notwithstanding anything to the contrary in this Agreement, it is agreed that SPIL's liability for

37

indemnification under this Agreement will be limited for the Product containing manufacturing defect or the Product fist conforming to the product specifications communicated by SPGI to SPIL under this Agreement. 7.1.6 SPIL Shall not claim any right, title, or interest to the Products, product names and the rights attached with them under any of the trademarks, or patent laws, SPIL shall not manufacture and/or sell for sale in the market of United States of America and in Europe during the term of this Agreement any Products under a trademark connected with the Products or under a name phonetically or otherwise similar to trade names connected with the products as mentioned in Appendix A.

78. Appendix-A of this agreement reads as under;-

79. Copy of Orange Book reflected title of ANDA of Pantoprazole Sodium with SPG BVI is exhibited at pages 569 & 570 of the paper book which conclusively proves that the ANDA rights were with SPG BVI.

80. Adverting to the allegations of Ld Shri Shrivastava that these arrangements by the assessee is a brutal form of tax evasion , the Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. vs. Union of India and Another reported in 341 ITR 1 has laid down the ratio :

"It is the task of the court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not adopt a dissecting approach. All tax planning is not illegal or illegitimate or impermissible".

81.The Hon'ble Supreme Court further held. :-

(iv)The Income-tax Act, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies as economic entities with legal independence vis-a-vis their shareholders or participants. Consequently, the entities subject to income-tax are taxed on profits derived by them on standalone basis, irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to the shareholders or participants. Furthermore, shareholders or participants, that are subject to (personal or corporate) income-tax, are generally taxed on profits derived in consideration of their shareholding or participations, such as capital gains. It is fairly well settled that for tax treaty purposes a subsidiary and its parent are also totally separate and distinct taxpayers. The fact that a parent company exercises a shareholder's influence on its subsidiaries does not generally imply that the subsidiaries are to be deemed residents of the State in which the parent company resides. Where the subsidiary's executive directors' competences are transferred to other persons or bodies or where the subsidiary's executive directors' decisionmaking has become fully subordinate to the holding company with the consequence that the subsidiary's executive directors are no more than puppets then the turning point in respect of the subsidiary's place of residence comes about. Whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction.

(v) Holding structures are recognized in corporate as well as tax laws. Special purpose vehicles and holding companies have a place in legal structures in India, be it in company law, the takeover code under the Securities and Exchange Board of India or even under the income-tax law. When it comes to taxation of a holding structure, at the threshold, the burden is on the Revenue to allege and establish abuse, in the sense of tax avoidance in the creation

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and/or use of such structures. In the application of a judicial anti-avoidance rule, the Revenue may invoke the "substance over form" principle or "piercing the corporate veil" test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the transaction in question is a sham or tax avoidant.

(vi) The legal position of any company incorporated abroad is that its powers, functions and responsibilities are governed by the law of its incorporation. Though it may be advantageous for parent and subsidiary companies to work as a group, each subsidiary will look to see whether there are separate commercial interests which should be guarded. Whether the parent company has "power" over the subsidiary depends on the facts of each case. In the case of multinationals their subsidiaries have a great deal of autonomy in the country concerned except where subsidiaries are created or used as a sham. The directors of the subsidiary under their articles are the managers of the companies. They are not to be dictated by the parent company if it is not in the interests of those companies (subsidiaries). The fact that the parent company exercises shareholder's influence on its subsidiaries cannot obliterate the decision-making power or authority of its (subsidiary's) directors. The decisive criteria is whether the parent company's management has such steering interference with the subsidiary's core activities that the subsidiary can no longer be regarded to perform those activities on the authority of its own executive directors.

(vii) A typical large business corporation consists of sub-incorporates. Such division is legal and recognized by company law, laws of taxation, takeover codes. The parent is the only group member that normally discloses financial results. Below the parent company are the subsidiaries which hold operational assets of the business and which often have their own subordinate entities that can extend layers. Subsidiaries are often created for tax or regulatory reasons. They at times come into existence from mergers and acquisitions. As group member, subsidiaries are financially interlinked. Such grouping is based on the principle of internal correlation.

82. A thought full consideration of the aforementioned decision of the Hon'ble Supreme Court would show that even the Apex court have recognized that multinationals and multi entities group companies constitute subsidiaries in furtherance to their objects and to carry on their business smoothly in a competitive world . Moreover no person would arrange its affairs in such a manner which would culminate into huge losses to the extent of USD 506 millions as was suffered by the assessee group in this transaction.

83. Having established that the ownership of IPR/ANDA rights of Pantoprazole Sodium was with SPG BVI, now let us examine the applicability of the most appropriate method for determining the arm's length price.

84. OFCD guidelines for profits spilt method (PSM) states as under:-

C. Transactional profit split method

C.1 In general

2.108 The transactional profit split method seeks to eliminate the effect on profits of special conditions made or imposed in a controlled transaction (or in controlled transactions that are appropriate to aggregate under the principles of paragraphs 3.9- 3.12) by determining the division of profits that independent enterprises would have expected to realise from engaging in the transaction or transactions. The transactional profit split method first identifies the profits to be split for the associated enterprises from the controlled transactions in which the associated enterprises are engaged (the

"combined profits"). References to "profits" should be taken as applying equally to losses. See paragraphs 2.124- 2.131 for a discussion of how to measure the profits to be split. It then splits those combined profits between the associated enterprises on an economically valid basis that approximates the division of profits that would have been anticipated and reflected in an agreement made at arm's length. See paragraphs 2.132 -2.145 for a discussion/6f how to split the combined profits. C.2 Strengths and weaknesses

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2.109 The main strength of the transactional profit split method is that it can offer a solution for highly integrated operations for which a one-sided method would not be appropriate. For example, see the discussion of the appropriateness and application of profit split methods to the global trading of financial instruments between associated enterprises in Part III, Section C of the Report on the Attribution of Profits to Permanent Establishments.2 A transactional profit split method may also be found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions (e.g. contribute unique intangibles) to the transaction, because in such a case independent parties might wish to share the profits of the transaction in proportion to their respective contributions and a two-sided method might be more appropriate in these circumstances than a one-sided method. In addition, in the presence of unique and valuable contributions, reliable comparables information might be insufficient to apply another method. On the other hand, a transactional profit split method would ordinarily not be used in cases where one party to the transaction performs only simple functions and does not make any significant unique contribution (e.g. contract manufacturing or contract service activities in relevant circumstances), as in such cases a transactional profit split method typically would not be appropriate In view of the functional analysis of that party. See paragraphs 3.38-3.39 for a discussion of limitations in available comparables.

85. United Nations practical manual on transfer pricing states as under:-

6.3.13. Profit Split Method

6.3.13.1. The Profit Split Method is typically applied when both sides of the controlled transaction contribute significant intangible property. The profit is to be divided such as is expected in a joint venture relationship.

6.3.13.2. The Profit Split Method seeks to eliminate the effect on profits of special conditions made or imposed in a controlled transaction (or in controlled transactions that it is appropriate to aggregate) by determining the division of profits that independent enterprises would have expected to realize from engaging in the transaction or transactions.

86. A perusal of the aforementioned guidelines shows that PSM can offer a solution for highly integrated operations for which a one sided method would not be appropriate. PSM may also found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions to the transaction. Considering the functions performed by the appellant company to SPG BVI, it is clear that SPIL has performed only one simple function and that is manufacturing of Pantoprazole Tablets. Except for this, there is no significant unique contribution by SPIL. For such simple functions as per OECD guidelines for transaction profit spilt method typically would not be appropriate of the functional analysis of that party.

87. The relevant agreement which is placed on record and has been dealt elsewhere clearly establishes that the appellant company SPIL is nothing but a contract manufacturer of SPG BVI. Now let us examine the relevant provisions of the Act read with Rules.

Determination of arm's length price under section 92C.

10B. (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction —[or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely:-

(d) profit split method, which may be applicable mainly in international transactions — [or specified domestic transactions]involving transfer or unique intangibles or in multiple international transactions [or specified domestic transactions] which are so interrelated that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction, by which-

(i) the combined net profit of the associated enterprises arising from the international transaction —[or the specified domestic transaction] in which they are engaged, is determined;

(ii) the relative contribution made by each of the associated enterprises to the earning of such combined net profit, is then evaluated on the basis of the functions performed, assets employed or to be employed and risks assumed by each enterprise and on the basis of reliable external market data which indicates how such contribution would be

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evaluated by unrelated enterprises performing comparable functions in similar circumstances;

(iii) the combined net profit is then split amongst the enterprises in proportion to their relative contributions, as evaluated under sub-clause (ii);

(iv) the profit thus apportioned to the assessee is taken into account to arrive at an arm's length price in relation to the international transaction [or the specified domestic transaction] :

Provided that the combined net profit referred to in sub-clause (i) may, in the first instance, be partially allocated to each enterprise so as to provide it with a basic return appropriate for the type of international transaction —[or specified domestic transaction] in which it is engaged, with reference to market returns achieved for similar types of transactions by independent enterprises, and thereafter, the residual net profit remaining after such allocation may be split amongst the enterprises in proportion to their relative contribution in the manner specified under sub-clauses (ii) and (iii), and in such a case the aggregate of the net profit allocated to the enterprise in the first instance together with the residual net profit apportioned to that enterprise on the basis of its relative contribution shall be taken to be the net profit arising to that enterprise from the international transaction —[or the specified domestic transaction];

(e) Transactional net margin method, by which,—

(i) the net profit margin realized by the enterprise from an international transaction [or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base;

(ii) the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base;

(iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market;

(iv) the net profit margin realized by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii);

(v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction [or the specified domestic transaction];

88. PSM is applicable when the international transaction involved transfer of unique intangibles (in the case in hand there is no such transfer from SPG BVI to SPIL), or in multiple international transaction which are so inter related that they cannot be evaluated separately for the purpose of determining the arm's length price of any one transaction. This is also absent (in the case in hand as the appellant company has done only manufacturing of Pantoprazole Tablets for SPG BVI).

89. Coming to the application of TNMM, we find that the profit margin benchmark by the assessee at 21.57% on sales transactions is much higher than the margin shown by the assessee with Eli Lily.

90. The revenue authorities have compared the agreements of SPIL with Eli Lily and SPIL with SPG BVI and have come to the conclusion that a conspectus reading of the relevant clauses show that the assessee is not a contract manufacturer in the case of SPG BVI. This finding of the revenue authorities is not acceptable for the simple reason that they have compared the clauses of the respective agreements without considering the nature of work done by SPIL. It may be possible that certain terms and conditions may be absent in the agreement between the assessee and SPG BVI but that itself would not deny the assessee, the status of contract manufacturer. In our considered opinion, the assessee has performed only one function and that is manufacturing of Pantoprazole Sodium and for this, the demonstrative evidence is exhibited at pages 569 and 570 of the paper book, and as mentioned elsewhere, clearly establishes the ownership of ANDA with Sun Pharma Global. For the sake of completeness, it would not

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be out of place to mention that the print out of these documents were taken from the Website on 28.09.2011 and 27.09.2011 and the order of the First Appellate Authority is 14.10.2014 and yet the FAA has observed that the assessee did not furnish ANDA related documents filed by SPG. SPG may not have done any filing related to Pantoprazole Sodium patent to US FDA but the fact of the matter and which have been demonstrated successfully by the appellant company is that the IPR/ANDA rights became the property of SPG BVI by virtue of the agreement for sale between SPARC and SPG.

91. Adverting to assessee's alternate and without prejudice contention that even if PSM is held to be the most appropriate method for a moment than also the same has to be considered in the light of the sequence of events starting from the manufacturing and sales of the drug Pantoprazole and ending with the out of court settlement and the payment of settlement compensation of USD 506 million. The settlement is based on the cumulative profits earned by the AE till the date of settlement. here is no dispute and it has been accepted by both the lower authorities that after the out of court settlement of the litigation the assessee group has suffered losses which were based on the aggregate of profits earned by the group over all the year. With the settlement based on aggregate of yearly profits then even if the Profit Split Method is applied than the set off of each year losses has to be given for the corresponding year. The undisputed compensation being settled on the base of all yearly profits made by the AE during the exclusivity period PSM cannot be worked by divorcing the business realities. The contention of revenue that it is not concerned with the settlement which is pass event is untenable. Even if the PSM is applied the relatable losses which were so apparent by the time assessment was framed cannot be given a go by on unsustainable revenue stand. In such eventuality even the ALP offered by assesse as a contract manufacturer also will be wiped out. The PSM application may actually result in reduction of returned ALP working. Thus, considering the issues from all possible angles, the assessee has, undisputedly and as accepted by revenue, ultimately suffered losses which are not claimed in its books or tax purposes. Even the alternative application of PSM fails and would do no good to the Revenue.

92. To summarize in nutshell , by the order of the Hon'ble High Court Innovative Research and Development /division of the appellant company was demerged and given to Sun Pharma Advance Research company (SPARC) subsequently SPARC transferred ANDA rights to SPG BVI. SPG BVI has been entered into an agreement with the appellant company SPIL for the manufacturing of Pantoprazole. Pursuant to this agreement assessee manufactured Pantoprazole and sold the same to Caraco Ltd on the directions of SPG BVI. On such sale transaction, the appellant company had shown a net margin of 21.57% bench mark the same on transactional net margin method which was dismissed by the revenue authorities questioning firstly, the ANDA rights with SPG BVI and secondly, comparing the contract manufacturing agreement of SPIL with SPG BVI and SPIL with ELI Lily. The revenue authorities ultimately applied profit spilt method and made the upward adjustment.

93. As demonstrated elsewhere, the IPR/ANDA rights were very much with SPG BVI who entered into an agreement with the appellant company for the manufacturing of the said drug. The application of Transactional Net Margin Method is the most appropriate method in such sale transaction and has been benchmarked by the assessee by showing it to be higher than the margin earned from the sales made to Eli Lily.

94. Considering the facts in totality in the light of the decision of the Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. (supra) and on conspectus understanding of the facts as discussed elsewhere, we do not find any merit in the findings of the First Appellate Authority in accepting the application of PSM as the MAM , in our understanding of the facts TNMM is the MAM on the given facts and the same is accepted as such. We set aside the findings of the ld. CIT(A) and direct to delete the addition of Rs. 612,03,39,468/-. Ground no. 5 of the assesse is allowed.

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66.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher 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.

67. The next issue raised by the Revenue in ground No. 7, 8 and 9 is that the learned CIT(A) erred in deleting the disallowance of weighted deduction under section 35(2AB) of Act.

67.1 The assessee in the year under consideration claimed weighted average deduction @ 200% on certain R&D expenditure detailed as under:

67.2 The AO was of the view that benefit under section 35(2AB) is only available for the expenditure incurred in product registration in India whereas assessee incurred Trademark registration and overseas product registration charges outside India. Hence disallowed the weighted deduction of Rs. 4,22,57,443/- on the same.

67.3 The AO further disallowed the weighted of Rs. 54,58,900/- and Rs. 19,93,648/- claimed on building repair expenses and municipal tax respectively by holding as under:

"I have carefully gone through the reply of the assessee but I do not find it convincing and satisfactory. Regarding Repairs to Building and [Municipal Taxes incurred for R & D facility, it is specifically stated in section |35(2AB) of the Income Tax Act, 1961 that " ..... any expenditure on scientific research ( not being expenditure in the nature of cost of any land or building in-house research and development facility as

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approved " . Since such repairs and municipal taxes were pertaining to building which is utilized for R D activity, the weighted deduction claimed by the assessee on " Repairs - Building " and "Municipal Taxes" is disallowed and only 100% of the same is allowed as revenue expenditure."

67.4 The AO similarly disallowed the weighted deduction on lunch & refreshment expenses and property brokerage expenses for Rs. 8,92,819/- and Rs. 19,500/- by holding these expenses were either incurred outside the approved facility or having no relation with R&D activity.

68. On appeal by the assessee, the learned CIT(A) found that addition made in the year under consideration is identical to the addition made in the AY 2008- 09 in the own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297/Ahd/2014 where the Hon'ble ITAT decided the issue in favour of the assessee and same was also followed in A.Y. 2009-10. Thus the learned CIT (A) following the order of the ITAT in own case of the assessee for A.Y. 2008-09 and 2009-10 allowed the appeal of the assessee.

69. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

70. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

71. On the other hand, the learned AR before us submitted that identical disallowance was also made in AY 2008-09 and 2009-10 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assesse.

72. 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 of eligibility of weighted deduction under section 35(2AB) of the Act, on trade mark registration charges and overseas product registration charges is covered in favour of the assessee by order of this tribunal in the own case of the assessee

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for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under:

34. We find that an identical issue was considered by the Co-ordinate Bench in assessee's own case in ITA No. 1589/Ahd/2011 qua ground no. 3 wherein the Bench has followed its earlier decision in ITA No. 2430/Ahd/2009. The findings thereon read as under:-

Ground no. 4 relates to the disallowance of trade mark registration and overseas product registration charges u/s. 35(2AB).

11. On perusing the details of R & D expenditure, the A.O found that the assessee has claimed weighted deduction @ 150% on -

(a) Trade Mark Registration Charges : 2,42,56,296/-

(b) Overseas Product Registration Charges : 2,00,00,508/-

12. The assessee was asked to justify its claim. Assessee filed a detailed reply justifying its claim of weighted deduction. It was explained that the expenditure incurred for product registration although named as Product Registration Expenditure is not merely an expenditure for registration of the product, but in large measure constitutes expenditure for validation and confirmation of the Research carried out. The A.O did not accept the claim of the assessee holding that these expenses were incurred for registration of drug patents in foreign countries. The A.O accordingly withdrew the weighted deduction and allowed only 100% of the same as revenue expenditure.

13. Assessee carried the matter before the ld. CIT(A) but without any success. While dismissing the grievance of the assessee, the ld. CIT(A) followed the findings of his predecessor given in A.Y. 2002-03 to 2004-05. Before us, the ld. counsel for the assessee stated that the Tribunal in assessee's own case in earlier years has decided this issue in favour of the assessee and against the revenue in ITA No. 1558/Ahd/2006. The ld. D.R. could not bring any distinguishing decision in favour of the revenue.

14. We have given a thoughtful consideration to the order of the Tribunal in earlier years; we find that the Tribunal while deciding the issue in favour of the assessee has followed the decision of the Co-ordinate Bench, Mumbai in the case of USV Ltd. 54 SOT 615. Findings of the Tribunal read as under:-

24. We have carefully perused the orders of the authorities below. We find that the ld. CIT(A) has simply followed the findings of his predecessor for A.Y. 2000-01. We also find that the assessment order for A.Y. 2000-01 has been quashed by the Tribunal vide a ITA Nos. 1199 & 1279/Ahd/2006, which means that the basis for upholding the disallowance has been removed. We further find that on identical set of facts, the Mumbai Bench in the case of USV Ltd. (supra) has allowed the claim of the assessee in respect of expenditure incurred in respect of patent application. Respectfully, following the findings of the co- ordinate Bench (supra), we direct the A.O to delete the disallowance of Rs. 44,71,906/-. Ground no. 10 is accordingly allowed.

15. Respectfully following the detailed findings given, we direct the A.O to allow the impugned weighted deduction. Ground no. 3 is accordingly allowed. 35.We direct accordingly. Ground no. 6 is allowed.

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72.1 Similarly the issue of eligibility of weighted deduction under section 35(2AB) of the Act, on expenses related to building repair, municipal tax, brokerage expenses and lunch and refreshment expenses is also covered in favour of the assessee by the order of this tribunal in own case of the assessee for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013. The relevant observation of the co-ordinate bench reads as under:

72.Ground no. 2 relates to the deletion of the disallowance of Rs. 42,46,000/- claimed u/s. 35(2AB) of the Act on repairs and municipal taxes paid for building utilized for R & D activity.

73.An identical issue was considered by the Co-ordinate Bench in ITA No. 1592/Ahd/2011 qua ground nos. 2 & 3 of that appeal. In ground no. 1 of the present appeal, we have extracted the relevant part of the decision of the Co-ordinate Bench. For the reasons given therein, ground no. 2 is also dismissed. 74.Ground no. 3 relates to the deletion of the disallowance of Rs. 7,91,222/- claimed u/s. 35(2AB) of the Act incurred for lunch, refreshment and brokerage paid for property used by R & D unit employees.

75.This issue is identical to the issues covered by ground nos. 1 & 2 hereinabove. For the reasons given therein, ground no. 3 is dismissed.

72.2 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher 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.

73. The next issue raised by the Revenue in ground No. 10 of its appeal is that the learned CIT(A) erred in deleting the disallowances of selling and distribution expenses pertaining to sister concerns i.e. Sun Pharmaceutical Industries and Sun Pharma Sikkim.

74. The assessee is a partner in the firm namely Sun Pharmaceutical Industries (SPI) and Sun Pharma Sikkim (SPS) for 97.5% of share of profit. The

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assessee is looking after the marketing of product on behalf of firm, providing advice on technical matter and product stability and position to firms for which assessee was entitled to withdraw 5% of net profit earned by the firm in form of partner remuneration.

74.1 Based on the above the AO was of the view that assessee is incurring marketing, distribution and other technical expenses on behalf of the firm and against which receiving remuneration which is exempt in its hand. Therefore, such expenses incurred by the assessee on behalf of firm needs to be disallowed. Accordingly, the AO disallowed the selling and distributing expenses along with salary & allowances of filed staff in proportion of turnover of the firms which has resulted an addition of Rs. 286,63,09,571/- to the total income of the assessee.

75. On appeal by the assessee, the learned CIT (A) found that addition made in the year under consideration is identical to the addition made in the AY 2008-09 in the own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297/Ahd/2014 where the Hon'ble ITAT decided the issue in favour of the assessee. Thus the learned CIT (A) following the order of the ITAT in own case of the assessee for A.Y. 2008-09 allowed the appeal of the assessee.

76. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

77. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

78. On the other hand, the learned AR before us submitted that identical disallowance was also made in AY 2008-09 and 2009-10 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assesse.

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79. 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 order of this tribunal in the own case of the assessee for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under:

50. After giving a thoughtful consideration to the orders of the authorities below, in our considered opinion, so far as the disallowance made by the Assessing Officer is concerned, we find that this issue has been decided in favour of the assessee and against the revenue by the Co-ordinate Bench in assessee's own case in ITA No. 2430 & 2400/Ahd/2009 wherein the bench has followed the decision of the Tribunal in earlier assessment years in ITA No. 1193/Ahd/2008. The relevant part in ITA No. 1193/Ahd/2008 is as under:-

Ground no. 13 relates to the disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries.

88. This issue has been discussed by the A.O at para 13 of his order wherein he has mentioned that during the course of survey operations. A copy of partnership deed between the assessee and Sun Pharmaceutical Industries (SPI) was found along with a copy of supplementary partnership deed. The A.O further observed that as per the partnership deed, the assessee was entitled to draw yearly remuneration of 15% of the net profits of the partnership firm. The A.O further observed that the assessee had received 15% of net profits of SPI Rs. 15,75,55,219/- as per the agreement of partnership. However, the A.O noticed that the partnership firm has not debited this remuneration paid to the assessee by taking recourse to the provisions of section 40(b) wherein remuneration is allowed to a working partner who is an individual.

89. The A.O further noticed that though the remuneration was not offered for taxation by the assessee but it has debited the expenditure incurred on behalf of the partnership firm in its books of account. The A.O was of the firm belief that these expenditures are not related to the earning of income and accordingly disallowed - (a) selling and distribution expenses 25,68,21,928/- salary and allowance to field staff 24,12,98,724/- totaling to Rs. 49,81,20,652/-

. The A.O proceeded by disallowing Rs. 8,49,79,383/- based on the ratio of the total turnover of the assessee and the partnership firm SPI.

90. Aggrieved by this, the assessee carried the matter before the ld. CIT(A). Ld. CIT(A) has considered this grievance at para 26 vide ground no. 25 before him. After considering the facts and the submissions, the ld. CIT(A) was of the opinion that the assessee already had an existing sales and distribution network in the form of C & F agent, etc. Therefore the assessee was not required to incur any additional/extra expenses for undertaking the marketing function for and on behalf of partnership firm. The ld. CIT(A) further observed that most of the expenses incurred by the assessee for the sales were in the nature of fixed expenses. However, there were similar additional expenses incurred by the assessee for carrying out the sales for and on behalf of the partnership firm. The ld. CIT(A) finally concluded by holding that the incremental expenses incurred by the assessee in excess what was incurred in the preceding year towards the marketing and distribution should be allocated and accordingly directed the A.O to recalculate the disallowance.

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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. We have carefully perused the orders of the authorities below. We have also given a thoughtful consideration to the rival submissions. There is no denying that the partnership deed has a provision for the payment of remuneration to the whole time working partner by virtue of which the assessee was entitled for the remuneration. There is also no denying that as per the provisions of section 40(b) of the act, the remuneration is payable to a whole time working partner who is an individual and the assessee is a limited company. Therefore the assessee could not have shown this remuneration as part of its computation of income. It is also a fact that the partnership firm has also not debited this remuneration to its Profit and Loss account. However, the 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. Thus, 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 of business. Be it assessee's business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition of Rs. 8,49,79,383/-.

51.Respectfully following the findings of the Co-ordinate Bench (supra), no disallowance should be made u/s. 37 (1) of the Act.

79.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher 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

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the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed.

80. The next issue raised by the Revenue in ground No. 11 & 12 is that the learned CIT (A) erred in partly deleting the addition made under section 14A instead of confirming in full under normal provisions of the Act and MAT provision specified under S.115JB of the Act.

81. The assessee during the year claimed exempted income on account of share of profit from the partnership firm and dividend income amounting to Rs. 1099,81,09,217/- and Rs. 2,820/- respectively. Thus, the AO invoked the provision of section 14A read with rule 8D of Income Tax Rule and worked out the disallowances of Rs. 3,71,89,198/- consisting of Rs. 6,15,128/- on account of interest expenditure and Rs. 3,65,74,067/- on account of administrative expenses.

82. On appeal by the assessee, the learned CIT(A) found that the addition made in the year under consideration is identical to the addition made in the AY 2008-09 and 2009-10 in the own case of the assessee which was agitated before the ITAT where the Hon'ble ITAT decided the issue in partly in favour of the assessee by confirming the disallowances of administrative expenses as per rule 8D(iii) whereas deleted the other disallowances made under section 14A r.w. rule 8D of the Act. Thus the learned CIT (A) following the order of the ITAT in own case of the assessee for A.Y. 2008-09 and 2009-10 deleted the disallowances made by the AO on account of direct expenses under rule 8(i) and interest expenses under rule 8D(ii) of income tax rule.

83. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

84. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

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85. On the other hand, the learned AR before us submitted that identical disallowance was also made in AY 2008-09 and 2009-10 and the matter travelled up-to the ITAT in ITA No. 3297/Ahd/20154 and ITA No. 1663 & 1666/Ahd/2016 respectively. The ITAT in all these appeals allowed the issue in favour of the assesse.

86. 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 of disallowances under section 14A read with rule 8D of income tax rule is covered partly in favour of the assessee by order of this tribunal in the own case of the assessee for A.Y. 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013 and the same was also followed in subsequent years. The relevant finding of the coordinate bench reads as under:

52. Coming to the disallowance made u/s. 14A by the First Appellate Authority, it is an undisputed fact that the assessee was having sufficient own funds for making the investment in the partnership firm. It is also true that the assessee was on a contractual obligation to look after the marketing and distribution activities of the firm SPI as per the partnership deed read along with the supplementary deed to earn remuneration from the partnership firm. However, it is equally true that a reasonable disallowance of expenditure should be made for earning the exempt income so far as the share of profit from the partnership firm SPI is concerned. We are conscious about the fact that Rule 8D is not applicable for the year under consideration but at the same time for the computation of disallowance for administrative expenditures, the formula given under Rule 8D is the most appropriate method for the computation of the disallowance. We accordingly direct the A.O. to compute the disallowance so far as administrative expenditures are concerned as per Rule 8D of the ITAT Rules r.w.s. 14A of the Act. We accordingly set aside the disallowance of Rs. 27,55,18,783/- made by the First Appellate Authority and direct the A.O. to re- compute the disallowance as directed hereinabove. Ground no. 8 is allowed in part for statistical purpose.

86.1 Thus in view of finding of the coordinate bench we are of the view that the only disallowances of administrative expenses need to be made as per rule 8D(iii) which has already been done. Hence we do not find any infirmity in the order of the learned CIT (A) as far as issue of disallowances under section 14A is concern.

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86.2 Coming to next controversy where the AO while computing the book profit under section 115JB of the Act made addition by the amount of disallowances made under section 14A of the Act in pursuance to the clause (f) of explanation 1 to section 115JB of the Act.

86.3 However, we note that in the recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below:

"In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962."

86.4 The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act.

86.5 However, it is also clear that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:-

"We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal.

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We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act."

86.6 Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra).

86.7 Now the question arises to determine the disallowance as per the clause

(f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore, in the given facts & circumstances, we feel that ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the adhoc disallowance of Rs. 20 lacs as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restricted the disallowance 1% of the exempted income in other cases involving identical facts and circumstances in order to comply the clause (f) to Explanation-1 of Sec. 115JB of the Act. But we note that the assessee in the present case has earned exempted income more than Rs. 1000 crores and the disallowance will be worked out at ₹10 crores which appears not in commensurate as per the mandate provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore, we are of the view that the ad hoc disallowance as discussed above will render justice to the assessee and the revenue. Thus the ground of appeal of the Revenue is partly allowed.

87. The next issue raised by the Revenue in ground No. 13 & 14 of its appeal is that the learned CIT (A) erred in deleting the disallowances of R & D expenditure incurred on behalf of partnership firm.

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88. The AO found that the assessee is partner in the firm namely Sun Pharmaceutical Industries (SPI) and Sun Pharma Sikkim (SPS) in ratio 97.5% and drawing huge exempted profit. The AO also found that both the firm are eligible for exemption under section 80IC/80IB of the Act but both the firm has not debited R&D expenses. Therefore, the AO was of the view that the entire R&D activity was carried out by the assessee for both firm and proposed to allocate the R&D expenses in the ratio of turnover to the assessee and firm. The proposition of allocation of R&D expenses was opposed by the assessee at length. However the AO disregarded the contention of the assessee and made disallowances of Rs. 87,56,00,900/- on account of allocation of R&D expenses being revenue in nature and further an amount of Rs. 15,63,71,515/- being capital expenditure to the Firm SPI and SPS after giving detailed reasoning.

89. On appeal by the assessee, the learned CIT(A) found that the addition made in the year under consideration is identical to the addition made in the AY 2009-10 in the own case of the assessee against which assessee was in appeal before ITAT in ITA No. 1666 & 1663/Ahd/2014, where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT (A) following the order of the ITAT in the own case of the assessee for AY 2009-10 allowed the appeal of the assessee.

90. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

91. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

92. On the other hand the learned AR before us and submitted that identical disallowance was also made in AY 2009-10 and the matter travelled upto the ITAT in ITA No. 1663 & 1666/Ahd/2016 where the issue was allowed in favour of the assesse.

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93. 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 this Tribunal in the own case of the assessee for AY 2009-10 bearing ITA No. 1663 & 1666/Ahd/2016. The relevant finding of the coordinate bench reads as under:

58.We have given a thoughtful consideration to the facts in issue before us. There is no dispute that the assessee did incurred expenditure under the head "Research & Development" activity. The only dispute relates to the allegation that part of such expenditure belong to the business activity of the partnership firm SPI. There is also no denying by the lower authorities that the entire Research and Development activities are done by the appellant company only being the flagship company of Sun Pharma Group. In our understanding of the facts, the appellant company had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Since the assessee is holding 97.5% of share in the partnership firm, SPI it becomes the duty of the assessee to promote the business of the partnership firm in the capacity of the majority stake holders. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee's business or the business of the partnership firm where the assessee is a majority stake holder. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee. Finding that the assessee is having 97.5% share in the profits of the firm SPI, we do not find any merit in the disallowance made by the A.O. and confirmed by the First Appellate Authority. We, accordingly, direct the A.O. to delete the addition of Rs. 5,30,29,5255/-. Ground no. 12 is accordingly allowed.

93.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher 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 years nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the 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.

94. The next issue raised by the Revenue vide ground no. 15 of its appeal is that the learned CIT(A) erred in deleting the addition of Rs. 73,45,33,442/- made on account of re-characterization of remuneration received from the firm.

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95. The AO found that the assessee has permitted the partnership namely SPI and SPS to use its all the patents, trademark and brand for a period of 5 years which are eligible entities under section 80IC/80IB of the Act. The firm was also utilizing the managerial services of the key person of the assessee without paying managerial fee. On the other hand, the assessee was receiving partner's remuneration from both the firm which was claimed as exempt as the firm was not claiming the deduction of the partner remuneration paid to the assessee. Therefore the AO taking leaf out of the order of the learned CIT(A) in own case of the assessee for A.Y. 2008-09 and 2009-10 held that royalty fee was paid in lieu of permitting the use of trademark and brand which was received by the assessee in guise of partner's remuneration exempted in its hand. Thus, the AO made the addition of Rs. 73,45,33,442/- by re- characterization of partner's remuneration.

96. On appeal by the assessee, the learned CIT(A) found that the addition made in the year under consideration is identical to the addition made in the AY 2008-09 and AY 2009-10 in own case of the assessee against which assessee was in appeal before ITAT in ITA No. 3297Ahd/ 2014 and ITA No. 1666 & 1663/Ahd/2014, where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT (A) following the order of the ITAT in own case of the assessee for AY 2008-09 and 2009-10 allowed the appeal of the assessee.

97. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us.

98. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

99. On the other hand the learned AR before us submitted that identical addition was also made in A.Y. 2008-09 by the AO and the matter travelled up- to the ITAT in ITA No. 3297 & 3240/Ahd/2014 where the issue was allowed in favour of the assessee.

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100. 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 this Tribunal in the own case of the assessee for AY 2008-09 bearing ITA Nos. 3297 & 3240/Ahd/2014. The relevant finding of the coordinate bench reads as under:

128. We have given a thoughtful consideration to the facts in issue. It is an undisputed fact that the remuneration has been paid by the firm SPI as per the partnership deed read with supplementary partnership deed. It is also an undisputed fact that the said partnership deed read with supplementary deed has not been treated as sham or unlawful deeds. The First Appellate Authority emphasized on the entire transaction as a device of tax evasion. The partnership firm SPI has claimed Rs. 40.12 crores as remuneration to the assessee company but at the same time, it did not claim the same as deduction as it was not paid to a whole time partner as provided in the Act. It is true that the appellant company has also not offered the same for taxation taking a shelter behind the provisions of Section 28(v) of the Act. No doubt, the profits of the partnership firm are exempt u/s. 80IB(4) of the Act. Even, if the partnership firm had not charged Rs. 40.12 crores as remuneration to the appellant company, the profits of the firm would have increased by this amount. Since the assessee is holding 97.5% share in the profits of the partnership firm, this amount of 40.12 crores would have otherwise come to the assessee in the firm of share of profit which again is exempt from taxation u/s. 10(2A) of the Act. Therefore, in our considered opinion, the allegation that it is a case of tax evasion is ill-founded. The fact of the matter is that such payments were never re-characterized as royalty in earlier assessment years and the action of the First Appellate Authority in the year under consideration is nothing but based upon assumptions and presumptions. No addition can be sustained which are based upon assumptions, surmises or conjectures. We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the amount of Rs. 40.12 crores re- characterized by the First Appellate Authority. Ground no. 13 is allowed.

100.1. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher 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 years nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the 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.

101. The next issue raised by the Revenue in ground No. 16 of its appeal is that the learned CIT (A) erred in deleting the addition made on account of foreign exchange gain.

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102. The assessee while computing the income reversed the amount of gain on foreign currency exchange of Rs. 14,87,19,890/- only. The assessee contended that this gain was pertaining to the assets/liabilities being part of fixed capital assets and therefore was not liable to be taxed. The AO was not convinced with the contention of the assessee and treated the gain of Rs. 14,87,19,890/- as taxable income on the reasoning that loan to AE or investment are made in course of business. Therefore, the same is in nature of revenue.

103. On appeal by the assessee the learned CIT(A) found that addition made in the year under consideration is identical to the addition made in the A.Y. 2007-08 and A.Y. 2009-10 in own case of the assessee and the matter travelled up-to ITAT where the Hon'ble ITAT decided the issue in favour of the assessee. Thus, the learned CIT (A) following the order of the ITAT in the own case of the assessee for A.Y. 2007-08 and 2009-10 allowed the appeal of the assessee.

104. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.

105. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

106. On the other hand, the learned AR before us submitted that the identical addition was also made in AY 2009-10 which was deleted the ITAT in ITA No. 1663 & 1666/Ahd/2016 and thus the issue was allowed in favour of the assesse.

107. 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 this Tribunal in the own case of the assessee for AY the 2007-08 bearing ITA No. 2076 & 2067/Ahd/2013. The relevant finding of the coordinate bench reads as under:

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61. In our considered opinion profits accrued to the assessee is not in the course of any trading activity but on account of appreciation on account of hedging in forex even if the same has been held for investment purposes. Therefore, such gains have to be treated as capital receipt. For this proposition, we draw support from the decision of the Hon'ble High Court of Bombay in the case of Homi Mehta Sons Pvt. Ltd. 222 ITR

528. We find that the forward contract in respect of investment in Caraco and OFCD in Global are on capital account and any profits received by assessee on cancellation of forward contract would not change its character same being in connection with a capital asset and, therefore, has to be treated as capital receipt. For this proposition, we draw support from the decision given in the case of Mahindra & Mahindra Ltd. 5 SOT 217 (Mum.).

62. Considering the facts in totality in the light of the nature of contract entered into by the assessee, we do not find any merit in the findings of the First Appellate Authority. We set aside the same and direct for the deletion of the addition of Rs. 14,33,80,289/-. Ground no. 9 is allowed.

107.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher 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 the 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.

108. The next issue raised by the Revenue vide ground No. 17 of its appeal is that the learned CIT(A) erred in deleting the disallowances of Freebies to doctor.

109. At the outset we note issue raised by the Revenue in its ground of appeal has been adjudicated along with the assessee's ground of appeal in ITA No. 1462/Ahd/2018, where we have decided the issue vide paragraph no. 37 to

37.1 of this order in favour of the Revenue and against the assessee. Thus ground of appeal raised by the Revenue is hereby allowed.

110. The next issue raised by the Revenue vide ground No. 18 of its appeal is that the learned CIT(A) erred in deleting the disallowance made the AO for the weighted deduction claimed under section 35(2AB) of the Act on account of expenses not approved by the DSIR.

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111. The assessee during the year under consideration claimed weighted deduction under section 35(2AB) of the Act on account of Revenue R&D expenditure of Rs. 13548.51 lakh and on account of capital expenditure of Rs. 2303.34 lakh. However, the DSIR approved the Revenue expenses of Rs. 11973.91/- only and capital expenses of Rs. 2278/- lakh only. The assessee submitted that as per the order of the jurisdiction High court of Gujarat in case of Claris Lifescience Ltd (326 ITR 251) where it was held that entire expenditure incurred in connection with the approved in-house facility of R&D will be eligible for weighted deduction under section 35(2AB) of the Act irrespective of expenses approved by the DSIR in form 3CL.

111.1 The AO disagreed with the contention of the assessee and held that from the plain reading of the provisions of section 35(2AB) of the Act it is clear that the assessee will be eligible for weighted deduction on the amount of expenditure approved by the prescribed authority i.e. DSIR. Further, the Hon'ble Gujarat High Court in case of Claris Life-science Ltd (326 ITR 251) have only held that the entire expenditure incurred on R&D will be available for weighted deduction. As such the Hon'ble High Court nowhere held that deduction is available for the amount over or above the amount approved by the DSIR. Thus, the AO disallowed the weighted deduction claimed by the AO on amount of expenditure which were not approved by the DSIR for Rs. 2767.66 Lakh.

112. On appeal by the assessee, the learned CIT(A) by following the order of predecessor in the own case of the assessee for AY 2009-10 and further following the order of the Hon'ble Gujarat High in case Sun Pharmaceutical Industries Ltd (Erstwhile Known as Ranbaxy Laboratories Ltd) in Tax appeal no. 541 of 2017 allowed the appeal of the assessee.

113. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us.

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114. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order.

115. On the other hand, the learned AR before us submitted that the issue on hand is covered by the order of the Tribunal in favour of the assessee in its own case bearing ITA No. 1390/Ahd/2016 which was also confirmed by the Hon'ble Gujarat high court on appeal by the revenue in Tax appeal No 541 of 2017 reported in 85 taxmann.com 80.

116. 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 this tribunal in own of the assessee bearing ITA No. 1390/Ahd/2016. The relevant finding of the coordinate bench reads as under:

7. We have given our thoughtful consideration to rival contentions as well as ld. PCIT's concern expressed in order revising the above regular assessment. We deem its appropriate at this stage to throw some light on the nature and ambit of Form 3CL. The same comes under Rule 6(7A) of the Income Tax Rules, 1962 framed under the provisions of the Act. The above sub-rule is relevant for approval of expenditure incurred on in house research & development facility by a company u/s. 35(2AB). Sub- clause (b) thereof is the specific provision thereto stipulating that the prescribed authority shall submit its report in relation to the approval of in house Research & Development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within 60 days of its granting approval. The same is merely in the form of intimation to be sent from prescribed authority's end to the department. An assessee engaged in such Research & Development activity having already obtained Form 3CM approval of its facility has no role to play in such correspondence. We notice that a co-ordinate bench of this tribunal in ACIT v. Torrent Pharmaceuticals [IT Appeal No. 3569/AHD/2004, dated 13.11.2009] holds that the impugned weighteddeduction is not to be restricted to the extent of the amount of the necessary expenditure incurred stated in such Form 3CL. We further find that hon'ble jurisdictional High court's decision in CIT v. Claris Lifesciences Ltd. [2010] 326 ITR 251/[2008] 174 Taxman 113 (Guj.) upholds this tribunal's decision in the very assessee's case observing that expenses incurred before Form 3CM approval cannot be denied for the purpose of Section35(2AB) weighteddeduction. We follow the very reasoning to opine that facts of the instant case rather go a step further wherein the appellant has only claimed those expenses which relate to the time period as approved in the Form 3CM. We accordingly hold that the assessee is very much entitled for claiming the above capital and revenue expenses incurred on in house research and development amounting to Rs. 237,77,05,310/-.

116.1 The above finding of the coordinate bench of this tribunal challenged by the Revenue before the Hon'ble Gujarat high court in tax appeal no. 5541 of

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2017 reported in 85 taxmann.com 80. Where the Hon'ble high court confirmed the finding of the tribunal by observing as under:

5. Having heard learned counsel for the parties and having perused the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in Form 3CM was thereafter, between the prescribed authority and the department. If the same was not so, surely, the assessee cannot be made to suffer. To this extent, the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under section 35(2AB) was not allowable. However, neither the prescribed authority nor the Assessing Officer has applied the mind as to the expenditure, be it revenue or or capital in nature, actually incurred in developing the in-house research and development facility. To the limited extent, the Commissioner desired the Assessing Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee.

116.2 Therefore respectfully following the above finding of the coordinate bench in own case of the assessee and subsequent confirmation by the Hon'ble high court we do not find any infirmity in the order of the AO. Hence the ground of appeal raised by the Revenue is hereby dismissed.

117. In the result appeal of the Revenue is hereby partly allowed for statistical purposes.

118. Coming to ITA No. 1463/Ahd/2018 an appeal by the Assessee or A.Y. 2013-14

119. The assessee has raised the following grounds of appeal:

"The Appellant raises the following grounds, which are mutually exclusive, independent of and without prejudice to one another:

1. On the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income-tax (Appeals) [the 'Ld. CIT(A)'] erroneously affirming the findings of the learned Assessing Officer [the 'Ld. AO'] is unsustainable and ought to be quashed.

2. Re: Addition on account of Product Development Services given to AE - Rs. 99,88,000/-:

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2.1. The Ld. CIT(A) has grossly erred in upholding the order of AO/TPO who rejected benchmarking carried out by Appellant and considered Cost Plus Method ("CPM") as most appropriate method inspite of there being direct comparable consideration methodology for Product Development rendered by the other JV partner Merck to MSD Sun FZ LLC (JV) on same terms as 10% markup on cost.

2.2. The Ld. CIT(A) has grossly erred in considering that the services rendered by SPIL to MSD Sun FZ LLC and Taro are similar in nature.

2.3. The Ld. CIT(A) has grossly erred in not appreciating that it would be difficult for one of the JV partner to influence complete control as the other JV partner will perform a balancing act and bring it to a reasonable commercial basis.

2.4. The Ld. CIT (A) has grossly erred in upholding the order of AO/TPO who erred in benchmarking the transaction by taking external comparables which did not perform functions similar to the Appellant.

2.5. The Ld. CIT(A) has erred in sustaining the method followed by AO/TPO who has grossly erred in considering external comparable as it is for the purpose of benchmarking without adjusting for the differences on account of nature of services, geographical area, timing of transaction, intangible property involved, contractual terms, associated risks, cost of labour, functions performed, etc.

2.6. Without prejudice to the above, the Ld. CIT(A) failed to appreciate that the TPO should have benchmarked the transaction by taking comparable pharmaceutical companies engaged in rendering of services similar to that of the Appellant.

3. Re: Addition on account of transfer of electricity by Captive Power Plant ("CPP") - Rs. 13,08,07,000/-:

3.1 The CIT(A) has grossly erred in upholding the order of the AO/TPO who grossly erred in rejecting the benchmarking carried out the Appellant and determined the Arm's Length Price by taking average of two rates i.e. rate fixed by GERC and the market clearing price (as per I EX).

3.2 Without prejudice to the above, the Ld. AO/TPO grossly erred in adopting the rate at which distribution entity purchases power from CPP unit without appreciating that the power was generated by the Appellant for captive consumption and not for sale to any distribution entity.

3.3 Without prejudice to the above, the Ld. AO/TPO grossly erred in ignoring the fact that there is only one prime seller in Appellant's region i.e. GEB, therefore, the open market rate for such power at which all these buyers are paying to GEB/Distribution Companies should be considered.

4. Re: Deduction of Remuneration received from Partnership firm for determination of Book Profits under section. 115JB - Rs 8.29.23.691/-

:

3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering remuneration received from the partnership firms of M/s Sun Pharmaceutical Industries ('SPI') and M/s Sun Pharma Sikkim ('SPS') as an income to which the provisions of section 10 apply for the limited purpose of computing book profits u/s 115JB without appreciating that remuneration received from partnership firm is nothing but appropriation of profits.

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3.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the entire mechanism of computing book profits is based on normal commercial profits having regard to the relevant accounting framework prescribed in Companies Act and thus, remuneration is eligible to be deducted for computing book profits as per clause (ii) to Explanation to section 115JB (2) read with Chapter III of the Income-tax Act, 1961 ('Act').

3.3 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have appreciated that the income not chargeable to tax by virtue of section 28(v) under normal provisions of the Act cannot be brought to tax by virtue of Minimum Alternate Tax ('MAT') provisions.

5. Disallowance of expenditure incurred on repairs treating them as capital expenditure - Rs. 45,77,088/-:

5.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in holding expenditure aggregating to Rs. 45,77,088/- to be capital in nature despite the same been incurred for meeting routine commercial necessities like maintaining operational efficacies, asset replacements in the ordinary course of business, without giving rise to any benefit in the capital field, indicating that the expenditure was revenue in nature and hence, eligible for deduction under section

37(1).

5.2. Without prejudice to the above, the Ld. CIT(A) ought to have allowed additional depreciation under section 32(1)(iia) on such capital expenditure disallowed."

120. The issue raised by the assessee in ground no. 1 of its appeal is general in nature and not requiring separate adjudication. Hence the same is dismissed being infructuous.

121. The next issue raised by the assessee in ground no. 2 of its appeal is that the learned CIT (A) erred in confirming the upward adjustment in TP for Rs. 99,88,000/- on account of on account of product development services to AEs.

122. The assessee was providing product development services to its AE namely MSD Sun FZ LLC (MSD). The AE is a joint venture (JV) of Sun Pharma Group and Merck Group (MSD Group) and as per the joint venture agreement both group were providing product development services to JV and charging fee at cost plus 10% markup.

122.1 The TPO from the TP report of the assessee observed that in similar transaction of pilot pivotal study done for TARO USA was benchmarked by the assessee under TNMM with average margin of comparable at cost plus 13.54%.

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Accordingly TPO proposes to benchmark the impugned transaction at cost plus 13.54%.

122.2 The assessee in response submitted that the margin rate of cost plus 10% markup was decided at the initial stage of JV between two independent parties being assessee group and MSD group, therefore ALP should be taken at cost plus 10% only. It was further submitted that pivotal study done for TARO USA are different from product development services provided to JV.

122.3 However, the TPO found that assessee has not submitted independent comparables, therefore taking the margin rate worked out for TARO USA i.e. cost plus 13.54% made upward adjustment of Rs. 99,88,000/-

123. On appeal by the assessee, the learned CIT(A) confirmed the finding of the AO/TPO by observing as under:

"6.2 I have carefully considered the facts on records and submission of the Ld. Authorized Representative. Undisputedly, the appellant company has provided Product Development Services to MSD Sun FZ LLC, a JV between Sun Pharma Group and Merck Group, and received a payment of Rs.3103,71 lakhs. In its transfer pricing study, the appellant has stated that the payment for service charge has been received following Cost Plus Method with 10% markup. In the same TP report, it has been also mentioned that the appellant has also carried out Pilot Pivotal Study for TARO USA and benchmarked the transaction under TNMM with an average margin of comparables at 14.56%. Since the transaction and nature of work was similar in both the transactions being contact research, the TPO was of the view that the same margin should have been marked up in the transaction with MSD. Accordingly, the TPO held that the correct margin in the comparables submitted by the appellant for benchmarking of transaction with TARO USA is 13.54%, which was wrongly mentioned in show cause notice at 14.56%. Accordingly, the TPO has worked out the cost of transaction with MSD at Rs.2821.55 crores and then marked up ALP at 13.54% resulting into addition of Rs.99,88,000/-. From the discussion by the TPO, it is crystal clear that although he has adopted benchmark margin of 13.54% under TNMM, but in fact, he has worked out the upward adjustment simply by adding the same to the cost. Thus, effectively, the TPO has worked out upward adjustment by following Cost Plus Method. Accordingly, the arguments of Ld. Authorized Representative that TNMM is not most appropriate method, are of no significance under the facts and circumstances discussed above. Since for the similar services, the appellant has benchmarked the margin at 13.54% for the transaction carried out with TARO USA, in my considered view, the margin marked up at 10% over the cost was not at Arm's Length Price (ALP). It may also be noted that any agreement between the appellant and its AE for charging Cost Plus Mark up of 10% is a self serving document only and to plug the revenue erosion by such agreement, the provisions of transfer pricing adjustment have been brought in the law book. Accordingly, the arguments of the Ld. Authorized Representative on this account are also rejected.

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6.2.1. It is also worthwhile to mention that under TNMM margin are calculated on gross sales and if such margins are converted into Cost Plus Mark up, then the percentage will be even higher. For example, 25% margin under TNMM is equivalent to 33.33% in Cost Plus Method. Therefore, by adopting 13.54% margin of TNMM under Cost Plus Method, the TPO has not over estimated the upward adjustment in any manner. Thus, considering the above mentioned factual and legal position, I uphold upward adjustment of . Rs.99,88,000/- made in respect of transaction of Product Development / Services with AE. Hence Ground No. 3 is dismissed."

124. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.

125. The learned AR before us submitted that the other partner in the JV being M/s Merck was also charging the markup of 10% on cost on the same terms as provided in the agreement. The learned AR also filed the copy of the JV agreement which is available on record. According to the learned AR cost +10% markup can be taken as one of the internal comparable for the purpose of benchmarking.

125.1 The learned AR further contended that the rate adopted by the authorities below at 13.54% is not correct. It is for the reason that the services rendered by the assessee to Taro USA are different than the services rendered to the JV. Therefore, the same cannot be adopted as comparable to benchmark the transaction. The learned AR in support of his contention has drawn our attention about the different services rendered to Taro USA and to the joint- venture which are placed on pages 362 to 364 of the paper book.

125.2 The learned AR further contended that the assessee has adopted cost plus method for determining the ALP which has been substituted by the AO/TPO to TNMM without assigning any reason.

126. On the other hand, the learned DR vehemently supported the order of the authorities below.

127. We have heard the rival contentions and perused the materials available on record. The assessee along with the other party has made JV as detailed in

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the preceding paragraph. Both the assessee and other party of the joint- venture are rendering services relating to the development of the project at the cost +10% markup. The issue arises in the present case whether the markup charged by the assessee is at the arm length price. Before we dwell upon the issue arising from the order of the authorities below, we note that the assessee has carried out the identical transaction with its associated enterprise as discussed above in the immediate preceding assessment year 2012-13 which was reported by the assessee in the transfer pricing report in form 3 CEB as evident from the details available on record. There was the assessment under section 92CA(3) of the Act wherein such transaction was accepted by the revenue. There was no change in the facts and circumstances of the earlier year viz a viz the year under consideration. Therefore, to our understanding the principles of consistency should be adopted. At the time of hearing, the learned DR has also not brought anything contrary to the arguments advanced by the learned AR for the assessee. Accordingly, we hold that the price charged by the assessee from the associated enterprises at cost +10% is treated as at arm length price and therefore no adjustment is warranted. Hence, we reverse the order of the authorities below and direct the AO/TPO to delete the addition made by him considering the principles of consistency. Hence, the ground of appeal of the assessee is allowed.

128. The next issue raised by the assessee is that the learned CIT-A erred in confirming the downward adjustment for Rs. 13,08,07,000/- in TP on account of power supplied to domestic AE.

129. The assessee is having a power generating undertaking which is eligible for deduction under section 80IC of the Act. The electricity generated form from captive power plant was also supplied to domestic AE and the assessee in the year under consideration has shown the sale price of the power generated by it at Rs. 7 per unit to its domestic AE. However, the AO/TPO found that the assessee is charging excessive rate for the electricity generated by it despite the fact that it is used for captive consumption and there is no cost for its

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transmission/distribution of the electricity. Thus the AO reduced the sale price of the electricity generated by the assessee by observing as under:

"47. In view of the above discussion the ALP of the transaction is determined in line with the reasoning given in the show cause. The assessee company has failed to submit any agreement between the CPP and the distribution / transmission company for the, evacuation of excess power produced by the CPP. In view of this the ALP rate of power is determined to the mean of the two external CUPs proposed in the .show cause notice i.e. Rs.3.64 and Rs.3.07 i.e Rs.3.36. The ALP adjustment is computed as under:

SN Particulars Units Rs. Lacs Rate ALP Rate ALP Rs.

Lacs

1 Ankleshwar BD 6690018 468.00 7.00 3.36 224. 7S

2 Holol 20562045 1438.33 7.00 3.36 690.99

3 Panoli BD-CPP 1(125) 2230545 156.38 7.01 3.36 74.956

4 Panoli BD-CPP 2 (131) 6252618 445.76 7.13 3.36 210.09 Grand Total 2508.77 1200.70

ADJUSTMENT 1308.07

48. Thus the transactions of sale of electricity by CPP to manufacturing units are revised down by Rs. 13,08,07,000. Being an inter Unit captive sale the Total Income of the assessee company is not impacted. However the AO should take into account this revision in the computation of losses of CPP in AY 2013-14 and on computation of deduction in the years ahead.

130. Aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the order of the AO/TPO by observing as under:

"8.2. I have carefully considered the facts on records and submission of the Ld. Authorized Representative, I find that the appellant has benchmarked the transaction of power supply by CPP at Rs.7.00 to 7.13 per unit without any comparable instances. However, the TPO has worked out the ALP on the basis of two external CUP applicable to State of Gujarat where CPP Units of appellant are operating. Under these circumstances, I am of the considered view that the TPO has rightly benchmarked the transaction at ALP of Rs.3.36/- per unit resulting into downward adjustment in the profit of CPP by Rs.13,08,07,000/-. The profits of CPP although do not affect the gross profit of the appellant, but the same are eligible for deduction u/s. 80IA. However, since there was gross loss in CPP units, the appellant has not claimed any deduction u/s. 80IA and accordingly no addition/disallowance is called for during the year under consideration. Accordingly, the Assessing Officer is directed to delete the addition made on this account and hence appellant succeeds in respect of Ground No. 5. However, the downward adjustment worked out by the TPO in profit of CPP has to be considered while carrying forward loss for the adjustment against profit of these units in the following assessment years. The Assessing Officer is directed accordingly."

131. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.

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132. The learned AR before us contended that the Tribunal in the case of Gujarat Fluorochemicals Ltd in ITA No. 805/Ahd/2017 has held that the price at which Gujarat electricity Board (GEB) is charging from customer would be taken at market rate for captive power plant also.

133. On the other hand, the learned DR vehemently supported the order of the authorities below.

134. We have heard the rival contentions of both the parties and perused the materials available on record. The controversy in the present set of facts relates what should be the rate of the electricity generated by the assessee and supply for captive consumption. In this regard we note that the ITAT in the case of Gujarat Fluorochemicals Ltd. v. Deputy Commissioner of Income tax, reported in 97 taxmann.com 10 vide order dated 13-08-2018 has held as under:

This was followed in case of CIT v. Shah Alloys Ltd. in Tax Appeal No. 2093/2010. This was reiterated in Tax Appeal No.1646/2010 in case of ACIT v. Pragati Glass Works (P.) Ltd. (order dated 30.1.2012), in which following observations were made :

"7. To our mind, Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs. 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) in terms recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs. 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed."

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134.1 The facts of the case on hand are identical to the facts of the case as discussed above. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to delete the downward adjustment in transfer pricing report in pursuance to the finding of this ITAT in the case of Gujarat Fluorochemicals Ltd. (supra). The ld. DR at the time of hearing has not brought anything on record contrary to the arguments advanced by the ld. AR for the assessee. Thus the ground of appeal of the assessee is allowed.

135. The next issue raised by the assessee in ground no. 4 of its appeal is that the learned CIT(A) erred in confirming the order of the AO by not allowing the deduction of remuneration received from partnership firm while computing book profit under section 115JB of the Act.

136. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 1462/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1462/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 16 to

16.4 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the assessee is hereby allowed.

137. The next issue raised by the assessee in ground no. 5 of its appeal is that the learned CIT(A) erred in confirming the disallowances of repair and maintenance expenses by treating the same as capital expenditure.

138. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 1462/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1462/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee

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for the assessment 2011-12 has been decided by us vide paragraph Nos. 23 to

23.1 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the assessee is hereby dismissed.

139. The assessee vide letter dated 26-10-2020 filed additional ground of appeal which reads as under:

"1. The Appellant is a listed company engaged in the business of manufacturing, trading and marketing of pharmaceuticals products. The assessment for A.Y. 2011-12 was completed after making additions and disallowances on various items by the Deputy Commissioner of Income tax, Circle - 2(1)(1), Vadodara ('Ld. AO') vide its order dated 31.01.2017 passed under section 143(3) r.w.s. 92CA r.w.s. 144C(3) of the Income-tax Act, 1961 ('the Act') in its capacity as jurisdictional Assessing Officer of the Appellant Company. Aggrieved by the order, the Appellant has preferred an appeal before Commissioner of Income- tax (Appeals) [CIT(A)]. The Hon'ble CIT(A) has also decided the appeal vide its order dated 30.03.2018. In response thereto, the Appellant has preferred the captioned appeal before the Hon'ble Income-tax Appellate Tribunal (Tribunal') vide ITA no. 1463/Ahd/2018.

2. During the year under consideration, the Appellant has incurred expenses for education cess and secondary & higher education cess (collectively referred to as 'cess'). The amount of cess incurred as tax liability can be very well reflected in the tax computation sheet issued by the Ld. AO along with its order giving effect to order of CIT(A) dated 31.07.2018 whereas cess levied on account of payment of Dividend Distribution Tax under section 115-O of the Act is disclosed [ included in total payment ] in clause 29 in the FORM 3CD as

"Annexure-1" and "Annexure-2" respectively .

3. Section 40(a)(ii) of the Act, provides, inter alia, for disallowance of any rate or tax levied on profits or gains of any business or profession in computing the total income of a taxpayer. Section 10 of the Income Tax Act, 1922 which is pari-materia with section 40(a)(ii) of the Act, provided for disallowance of "any cess, rate or tax levied on......".

The word "cess" was present in the section 10(4) of the Income Tax Act, 1922. The said word was omitted from provisions of section 40(a)(ii) of the Act. In this regard, CBDT Circular No. 91/58/66-ITJ(19) dated 18-05-1967, states that the effect of the omission of the word 'cess' from section 40(a)(ii) of the Act is that only taxes paid are to be disallowed and not cess. The said position is also upheld by decisions of Hon'ble Rajasthan High Court in case of Chambal Fertilisers and Chemicals Limited vs. JCIT (D.B. Income Tax Appeal No. 52/2018) (Dated 31-07-2018) as well as recent decision of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT [2020] 117 taxmann.com 96. Accordingly, the Appellant seeks to raise additional ground for claiming deduction of cess paid in computing total income of the Appellant.

4. In order to claim its rightful entitlement, the Appellant feels the urge to raise an additional ground before the Hon'ble Tribunal. The Appellant seeks to raise additional ground in view of the Hon'ble Supreme Court's decision in case of

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National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. v. Commissioner Of Income-Tax. [1993] 66 Taxman 27 (Bombay)."

140. The assessee in the additional ground of appeal has claimed the deduction of the cess paid on the income tax on the reasoning that same is revenue expenditure. However, we note that there is an amendment under the provisions of section 40(a)(ii) of the Act wherein an explanation has been inserted with retrospective effect i.e. assessment year 2005-06. The amendment reads under:

[Explanation 3.—For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax;]

140.1 As per the above amendment, there remains no ambiguity to the fact that the assessee cannot claim the deduction of the cess by treating the same as revenue expenditure. Thus, we do not find any merit in the additional ground of appeal raised by the assessee. Hence, the additional ground of appeal raised by the assessee is hereby dismissed.

141. In the result, the appeal of the assessee is hereby partly allowed.

142. Coming to ITA No. 1520/Ahd/2018 an appeal by the Revenue for AY 2013-14

143. The Revenue has raised the following grounds of appeal:

"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. On the facts and circumstances of the case and in law, the Ld, C.I.T. (A) erred in deleting the transfer pricing addition of Rs.17,72,09,7937- towards interest on loans given to Associated Enterprise (AE) on which no interest was charged, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

3. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of Pantaprazole and Para IV drugs, to Sun Pharma Global FZE, without

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appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

4. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the Transfer Pricing adjustment made on account of sale of other drugs to Sun Pharma Global FZE, without appreciating the facts and reasons mentioned by the AO in the assessment order, and by the TPO in his order.

5.1 On the facts and circumstances of the case and in law, CIT(A) erred in directing the A.O. to allow weighted deduction u/s. 35(2AB) of the Act on trade mark registration charges and overseas product registration charges without appreciating the facts and reasons mentioned by the AO in the assessment order.

5.2 On the facts and circumstances of the case and in law, CIT(A) erred in directing the A.O. to allow weighted deduction u/s. 35(2AB) of the Act on trade mark registration charges and overseas product registration charges without appreciating that the trade mark registration charges and overseas product registration charges were incurred by the assessee outside India and therefore, could not be considered for the purpose of allowance of weighted deduction u/s 35(2AB).

6. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in allowing weighted deduction u/s 35(2AB) on expenses relating to building repairs and municipal taxes without appreciating the facts and reasons mentioned by the AO in the assessment order.

7. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in allowing weighted deduction u/s 35(2AB) on lunch and refreshment and brokerage expenses without appreciating the facts and reasons mentioned by the AO in the assessment order.

8. On the facts and circumstances of the case and in law, the CIT(A) erred in partly deleting the disallowance u/s 14A without appreciating the facts and reasons mentioned by the AO in the assessment order, and without considering that the assessee had failed to produce any evidence to controvert the findings of the AO, and failed to demonstrate that investments were actually made out of interest free funds, and the disallowance deserved to be upheld following the decision of the Hon'ble High Court in Avon Cycles Ltd. (2015) 53 taxmann.com 297 (P&H).

9. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition to book profit u/s 115JB relating to disallowance u/s 14A without appreciating the facts and reasons mentioned by the AO in the assessment order, and without considering that this amount was required to be added to the book profit as per clause (f) to Explanation 1 of section

115JB(2).

10. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of proportionate R & D revenue expenses incurred by the assessee on behalf of Sun Pharmaceutical Industries, Sun Pharma Sikkim, the firms, and Sun Pharma Laboratories Ltd. without appreciating the facts and reasons mentioned by the AO in the assessment order.

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11. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of proportionate R & D capital expenses incurred by the assessee on behalf Sun Pharmaceutical Industries, Sun Pharma Sikkim, the firms, and Sun Pharma Laboratories Ltd. without appreciating the facts and reasons mentioned by the AO in the assessment order,

12. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition made towards recharacterization of 'remuneration' received from partnership firms Sun Pharmaceuticals Industries (SPI) and Sun Pharma Sikkim (SPS) as consideration for use of trademarks, brands, etc. without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that the amount received from SPI and SPS as "exempted partnership profit" actually represents royalty from the partnership firm.

13.1 On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the A.O. to verify the expenses not certified by D.S.I.R. and to allow consequential relief without appreciating the facts and reasons mentioned by the AO in the assessment order, and without appreciating that weighted deduction u/s. 35(2AB) is not allowable in excess of what has been approved by D.S.I.R.

13.2 That on the facts and circumstances of the case and in law the CIT(A) erred in directing the A.O. to verify the expenses not certified by D.S.I.R. and to allow consequential relief by relying on a decision of the Hon'ble Gujarat High Court, without appreciating that this decision pertained to disallowance of weighted deduction u/s. 35(2AB) due to non-certification of expenditure on scientific research by the DSIR, whereas in the present case, the DSIR has specifically excluded the excess expenditure as per norms.

14. The appellant craves leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal."

144. The issue raised by the Revenue in ground no. 1 of its appeal is general in nature and not requiring separate adjudication. Hence the same is dismissed being infructuous.

145. The next issue raised by the Revenue in ground no. 2 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment under the provisions of Transfer Pricing for Rs. 17,72,09,793/- on account of interest free loan to AE.

146. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable

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for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 50 to

50.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

147. The next issue raised by the Revenue in ground no. 3 and 4 of its appeal is that the learned CIT (A) erred in deleting the upward adjustment in TP made on account profit attribution of product "Pantoprazole" and other product.

148. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 66 to

66.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of appeal filed by the Revenue is hereby dismissed.

149. The next issue raised by the Revenue in ground Nos. 5, 6 and 7 are that the learned CIT(A) erred in deleting the disallowances of weighted deduction under section 35(2AB) of Act.

150. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 72 to

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72.2 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

151. The next issue raised by the Revenue in ground Nos. 8 and 9 are that the learned CIT(A) erred in deleting the disallowances made under section 14A and further addition under 115JB of the Act.

152. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the A.Y. 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 86 to

86.7 of this order partly in favour of the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby partly allowed.

153. The next issue raised by the Revenue in ground Nos. 10 & 11 of its appeal is that the learned CIT (A) erred in deleting the disallowance of R & D expenditure incurred on behalf of partnership firm.

154. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the A.Y. 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 93 to

93.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be

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applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

155. The next issue raised by the assessee vide ground no. 12 of its appeal is that the learned CIT(A) erred in deleting the addition made on account of re- characterization of remuneration received from firm.

156. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 100 to

100.1 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

157. The next issue raised by the Revenue vide ground No. 13 of its appeal is that the learned CIT(A) erred in deleting the disallowance made for the weighted deduction claimed under section 35(2AB) made on account of expenses not approved by the DSIR.

158. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the A.Y. 2013-14 are identical to the issues raised by the Revenue in ITA No. 1519/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 1519/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2011-12 has been decided by us vide paragraph Nos. 116 to

116.2 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

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159. The issue raised by the Revenue in ground no. 14 of its appeal is general in nature and not requiring separate adjudication. Hence the same is dismissed being infructuous.

160. In the result, the appeal of the Revenue is partly allowed.

161. In the combined result, ITA Nos. 1463/Ahd/2018 & 1520/Ahd/2018 are partly allowed and ITA Nos. 1462/Ahd/2018 & 1519/Ahd/2018 are partly allowed for statistical purposes.

This Order pronounced in Open Court on 24/08/2022

Sd/- Sd/-

(MAHAVIR PRASAD) (WASEEM AHMED)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad: Dated 24/08/2022 True Copy

S.K.SINHA

आदेश क त!ल"प अ#े"षत / Copy of Order Forwarded to:-

1. राजव / Revenue

2. आवेदक / Assessee

3. सबं ं)धत आयकर आयु+त / Concerned CIT

4. आयकर आयु+त- अपील / CIT (A)

5. /वभागीय 2त2न)ध, आयकर अपीलय अ)धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड 8 फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार

आयकर अपीलय अ)धकरण, अहमदाबाद ।

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