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2025 (1) TMI 1108 - AT - Income TaxTP Adjustment - adjustments in respect of international transactions made with M/s. Northstar Health Care - TPO had treated the said entity as a deemed AE - HELD THAT - As in respectful compliance to the decisions of the Hon ble Coordinate Bench in assessee s own case 2016 (12) TMI 236 - ITAT CHENNAI we direct the Ld. AO to delete the addition made on account of adjustment made by the Ld. TPO in respect of M/s.Northstar Health Care TP Upward adjustments made by the Ld. TPO on account of sale of cephalexin and Levetiracetam Drugs - HELD THAT - .Accordingly in the line of decision in assessee s own case qua AY-2017- 18 2018-19 supra the Ld. TPO is directed to recompute the ALP following the ratio laid down in 2024 (9) TMI 1688 - ITAT CHENNAI . TPO would be required to give all opportunities of being heard to the assessee who shall comply with all the notices issued to him in this regard. Addition qua provisions u/s 36(1)(vii) - provision for rebates and discounts written back - HELD THAT - A benefit accruing to a tax payer on account of a statutory stipulations cannot be taken away by the assessing authority on account of mere adverse presumption. In support of its contentions assessee has placed reliance upon the decision of Banyan and Berry 1995 (12) TMI 12 - GUJARAT HIGH COURT and Walfort share and stock broker private limited 2010 (7) TMI 15 - SUPREME COURT We have also noted that the Ld. DRP has also not confirmed the order of the Ld. AO with any detailed findings and has only confirmed Ld. AO s findings in a summary manner. Accordingly we are of the view that the addition made by the Ld. AO is not correct. We therefore set aside the order of the lower authorities and direct the Ld. AO to delete the addition Adding back the impugned provisions the assessee had calculated tax at 20% whereas while reversing the same it has claimed the benefit at 30% - Addition of provision pertaining to AY-2010-11 and the assessee has reversed the transaction in AY-2012-13 - HELD THAT - At any take over / restructuring of business a contractual condition exists that the new party will take over all the assets and liabilities of the old party. Thus the new entity namely Hospira Health Care India Private Limited which had taken over assessee s generic injectable finished dosage business also become entitled to all the assets and liabilities of the of the assessee. To this extent we find force in the arguments of the Ld. AO that the said amount cannot be claimed by the assessee. We have also noted the concerns of the Ld. AO that assessee had calculated tax at 20% whereas while reversing the same it has claimed the benefit at 30%. We are therefore of the view that there is no merit in the case of the claim of the assessee when viewed in the light of peculiar facts of the present case. The Judicial Pronouncements also cited by the assessee would not come to his rescue given the existence of peculiar facts of the present case. Accordingly the addition made by the Ld. AO is confirmed Addition by invoking provisions of section 37(1) - provisions were created at the end of the year and no party account was credited. - HELD THAT - The genuineness of the impugned job work charges is not in dispute. It is also not in dispute that the assessee has offered the corresponding sales attributable to the job work during the said year. We have also found that there is no dispute qua regarding any benefit accruing to the tax payer on account of differential tax rates. It is also not a case of a provision being created qua an unascertained liability. This being the case we do not find any infirmity in the demand of the assessee regarding the allowance of the impugned expenses. Accordingly we direct the Ld. AO to delete the impugned addition Disallowing claim of deduction u/s. 35(2AB) - According to AO the assessee had not filed supporting evidence as well as the required Form 3CL and therefore he proceeded to add the impugned addition - HELD THAT - Form 3CL is a mandatory requirement for claiming deduction u/s 35(2AB). Non-availability thereof would preclude the assessee from rightfully claiming the statutory deduction. where law is unambiguously candid there is no scope for any different interpretation by the courts than the one specified therein. We have however found sufficient force in the alternate argument of the appellant that in the event of denial of weighted deduction u/s 35(2AB) for want of prescribed Form 3CL the assessee would be eligible to at least the deduction u/s 37 / section 32 of the act. As stated that within the meanings of provisions of 37 a part of the same would be classified as capital expenditure and the balance as revenue expenditure. As also urged that on the component of capital expenditure the assessee would be entitled for depreciation u/s 32. Accordingly the order of lower authorities on this issue is set aside. AO is directed to read judicate the matter de novo and consider allowing assessee s claim of deduction u/s 37 / 32 in accordance with law after giving opportunity of being heard to the assessee. Assessee shall provide the AO bifurcation of the capital and revenue expenditure as available in its records. AO would then allow the assessee the impugned expenses u/s 37 and 32 in accordance with law. Accordingly ground of appeal no.11 is dismissed and 12 is allowed for statistical purposes. Non deduction of TDS u/s 40(a)(i) - Disallowing of deduction in respect of FCCB issued which was redeemed during the previous year under consideration at a premium - HELD THAT - It is an undisputed fact of the case that the assessee has issued FCCB during 2006-07 and which have been redeemed by incurring a premium expenditure during the year under consideration. As undisputed and rather admitted fact on records that no TDS deduction u/s 40(a)(i) was done by the assessee. To this extent the disallowance made by the Ld. AO has been found to be in order. We have also noted that no adverse findings have been given by the Ld. AO as regards to commercial expediency of the impugned expenditure on premium or regarding the genuineness of the said expenditure. The argument of the Ld. AO about amortization also does not find favour with us since even though he argued for amortization he has himself chosen not to allow the assessee 1/5th of Rs. 246.87 Crs and proceeded to add the entire figure. In the absence of any adverse findings qua commercial expediency of the impugned expenditure on premium or regarding the genuineness of the said expenditure brought on records we are unable to concur with the findings of the lower authorities. The order of Ld. Lower authorities is therefore set aside. The impugned expenditure cannot be allowed as deduction in the year under consideration on account of the same not being exposed to any TDS deduction u/s 40(a)(i). Accordingly we direct the AO to allow the impugned expenses in the year when TDS deduction u/s 40(a)(i) is made by the assessee. 1. ISSUES PRESENTED and CONSIDERED The legal judgment addresses several core issues:
2. ISSUE-WISE DETAILED ANALYSIS Adjustment with Northstar Health Care
Upward Adjustments with Karalex Pharma LLC USA
Disallowance of Community Development Expenses
Provision for Rebates and Discounts
Addition under Section 37(1)
Disallowance under Section 35(2AB)
Disallowance Related to FCCB Redemption Premium
3. SIGNIFICANT HOLDINGS
The Tribunal's judgment reflects a detailed examination of transfer pricing issues, corporate tax deductions, and procedural compliance, ensuring adherence to established legal principles and fairness in tax assessments.
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