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Issues Involved:
1. Deferred Employees Compensation. 2. Provision for Pension to Employees. 3. Contributions to RCHS and RSF. 4. Deduction under Section 80HHC. 5. Demand Raised by NPPA. 6. Weighted Deduction under Section 35(2AB). 7. Demand Raised by Department of Chemicals & Petrochemicals. Issue-wise Detailed Analysis: 1. Deferred Employees Compensation: The Tribunal addressed the common issue raised in both the Revenue's and Assessee's appeals regarding the deduction of Rs. 4,28,43,984/- as deferred employees compensation under the ESOP scheme. The Tribunal referred to its earlier decision for AYs 02-03 and 03-04, where it was held that the difference between the market price and the grant price of shares under the ESOP scheme did not constitute an actual expenditure but a notional loss due to the short receipt of share premium. Consequently, the Tribunal decided against the Assessee, dismissing their ground and allowing the Revenue's ground. 2. Provision for Pension to Employees: The Revenue's appeal on the disallowance of Rs. 28,76,76,167/- for provision for pension was dismissed by the Tribunal. The Tribunal followed its earlier decisions for AYs 01-02, 02-03, and 03-04, where it was held that the provision for pension, computed on an actuarial basis, was allowable as a deductible expense even though no pension trust was constituted. The Tribunal affirmed the CIT(A)'s decision in favor of the Assessee. 3. Contributions to RCHS and RSF: The Revenue's appeal against the CIT(A)'s decision to treat contributions of Rs. 35 lakhs to Ranbaxy Community Health Care Society and Rs. 6 lakhs to Ranbaxy Science Foundation as revenue expenditure was dismissed. The Tribunal referred to its earlier decisions where similar contributions were allowed as business expenditure under Section 37(1) of the Act, as these contributions were aimed at promoting the business and earning goodwill for the Assessee. 4. Deduction under Section 80HHC: The Tribunal upheld the CIT(A)'s direction to exclude excise duty from total turnover and include foreign exchange gain in export turnover for computing deduction under Section 80HHC. The Tribunal relied on the Supreme Court's decision in CIT vs. Laxmi Machine Works, which held that excise duty and sales tax are not includible in total turnover. Additionally, the Tribunal followed its earlier decisions and other case laws to include foreign exchange gain as part of export turnover. 5. Demand Raised by NPPA: The Tribunal dismissed the Revenue's appeal against the deletion of additions of Rs. 1,88,06,077/- and Rs. 46,94,01,495/- made on account of demands raised by NPPA. The Tribunal followed its earlier decision for AY 03-04, where it was held that such statutory demands, crystallized during the year and enforceable by law, were allowable as deductions. The Tribunal emphasized that disputing the liability by filing a writ petition does not disentitle the Assessee from claiming the deduction. 6. Weighted Deduction under Section 35(2AB): The Tribunal dismissed the Revenue's appeal against the CIT(A)'s decision to allow weighted deduction under Section 35(2AB) on the cost of computers, motor-cars, and other assets provided to R&D employees. The Tribunal followed its earlier decisions, where it was consistently held that the Assessee was entitled to weighted deduction for capital expenditure incurred on assets used in approved R&D facilities. 7. Demand Raised by Department of Chemicals & Petrochemicals: The Assessee's appeal regarding the disallowance of Rs. 4,16,84,678/- on account of demand raised by the Department of Chemicals and Petrochemicals was dismissed. The Tribunal held that the liability crystallized only when the demand notice was issued on 15th April 2004, which fell outside the relevant financial year. The Tribunal emphasized that each year is a self-contained accounting period, and liabilities arising after the close of the year cannot be considered for computing income/profits for that year. The Tribunal also noted that the Assessee could claim the deduction in the appropriate year when the liability arose.
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