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TMI Blog2016 (5) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to company’s Employees’Stock Option Scheme - Held that:- The issue is now squarely covered in favour of the assesse by the decision of Honourable Madras high court in CIT Vs. PVP Ventures (2012 (7) TMI 696 - MADRAS HIGH COURT ) ,where in it is held that amount of difference between the market value of the shares issue under ESOP allotted to the employees debited to the profit and loss account in accordance to SEBI guidelines is an ascertain liability and allowable as revenue expenditure u/s 37(1) of the Act. Ld. AO has further held that even otherwise this deduction is hit by provision of section 40a (ia) of the act and as no tax is deducted on this payment it is disallowable. No such provision for deduction of tax at sources on this expenditure has been brought to our notice. Therefore we hold that provisions of section 40a(ia) does not apply to ‘payment of salaries’ for the year under appeal. Hence, this argument of the revenue is also rejected. - Decided in favour of assessee Disallowance of deduction of contribution to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation u/s 35/ 37 - Held that:- We reverse the decision of the AO and direct to delete the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no change either in the facts or in law than the earlier decision taken by the revenue should be adhered to. Ld. DR did not point out any changes in the facts and/or law in the year in which deductions granted in earlier years with respect to impugned year. We have carefully considered the argument of the ld. AR and we do not see any dispute on the principle of consistency as it has already been propounded by Hon’ble Supreme Court and various other Hon’ble High Courts. Therefore, following this principal also we are of the view that deduction for the year claimed by the assesse with respect to itsGoa Unit and New Tablet Plant-I cannot be disturbed on the principle of consistency also. Further, this argument cannot be taken shelter regarding the claim of the assesse for New Tablet Plant-II, SGC Plant and New Tablet Plant-III. It is to be noted in present era of technological evolution that old age notions of the maintenance of accounts and business records do not survive and business entity today survives on real time information on each aspect of its business process. In this era when an entity maintains its accounting and business records on Enterprise Resource Planning system, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account related to acquisition of asset then to grant depreciation thereon in accordance with the provisions of law. In case if this expenditure is found to be of revenue,nature then allows the same u/s 37(1) of the Act. Adjustment made u/s 115JB to the book profit by 9853213/- on account of provision for diminution in value of current investment return back - Held that:- We fully agree with the submission of ld. AR that when the provision was made in the last year which was added back to the book profit of that assesse for that year and when the same provision is reversed in the current year the amount of reversal which is credited to the book profit for this year cannot be taxed once again as it results into double taxation. In the result, we direct the AO to reduce the book profit u/s 115JB of the Act by the amount of reversal of the provision of 98.53 lacs, which was out of provision made of 23.9 crores added to the book profit in AY 2007-08. X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted TP principles. 2.4 holding that relevant and sufficient financial data is not available for the comparable companies selected by the appellant. 2.5 not taking into cognizance the arguments put forth by the appellant in support of the fact that financial accounts of the overseas AEs need not be re-casted and ignoring the fact that the financials of the overseas comparables furnished in the TP report have similar period as that of the AEs. 3. That the Ld. AO/DRP erred in rejecting the re-casted financials of the overseas AEs, for the period April 2007 to March 2008 4. That the Ld. AO/DRP erred in not appreciating the economic analysis submitted based on single year data (year 2007 and 2008) for benchmarking the margin earned by overseas AEs 5. That the Ld. AO/DRP erred in modifying the supplementary economic analysis conducted by the appellant, taking appellant as the tested party and while doing so the Ld. AO/DRP has grossly erred by: 5.1 disregarding the ALP and the methodical benchmarking process carried out by the appellant while preparing the supplementary economic analysis as submitted before the Ld. DRP and Ld. TPO in order to meet their requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law in holding that since the appellant did not deduct any tax at source, the amount claimed was disallowable under section 40(a) (ia) of the Act. 8.3 Without prejudice, that the AO/DRP erred on facts and in law in not even allowing deduction of employees compensation relatable to options actually exercised and/ or shares allotted pursuant to ESOP. 9. That the Ld. AO/DRP erred on facts and in law in not allowing deduction of the contributions of ₹ 47,00,000 and ₹ 12,50,000 made by the appellant to Ranbaxy Community Healthcare Society (RCHS) and Ranbaxy Science Foundation (RCF) under the provisions of sections 35/37 of the Act. 9.1 That the AO/DRP erred on facts and in law in holding that the contribution made was not allowable since the recipient did not show the amount as taxable receipts. 9.2 That the AO/DRP further erred on facts and in law in holding that since the appellant did not deduct any tax at source, the amount of contribution claimed was disallowable under section 40(a) (ia) of the Act. 10. That the AO/DRP erred on facts and in law in disallowing ₹ 7,40,66,105 under section 14A of the Act, by applying the formula prescribed in Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d robust accounting system/ software. 12.3 That the AO/DRP has grossly erred in holding that the Appellant has not furnished separate report in respect of units / undertakings in the Form No.l0CCB without verifying the fact that the same were submitted during the assessment proceedings. 12.4 That the AO/ DRP exceeded jurisdiction in holding that the appellant was not eligible to claim deduction under sections 80IB & 80IC of the Act for the year under consideration, without appreciating that on identical facts deduction had been allowed in the earlier year(s). 12.5 That the AO/ DRP erred on facts and in law in leveling various baseless allegations to hold that the eligible profits computed and claimed by the appellant in respect of various units were not reliable, without judiciously appreciating the factual and legal submissions. 12.6 That the AO/ DRP erred on facts and in law in further holding that the appellant was not eligible for deduction under sections 80IB & 80IC of the Act since there were no eligible profits once: (a) other incomes are excluded from the gross business income of the appellant; (b) profit of selling and distribution function network and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssesse company. It is also engaged in trading of pharmaceuticals. During the year, it has earned profits on manufacturing activity as well as long-term capital gain on sale of land. It has also claimed deduction u/s 80 G and 80 IB & 80 IC of the Income tax Act 03. Assesse filed its return of income 29.09.2008 declaringtotal income of ₹ 1583214228/- according to the normal computation and declared book profit of ₹ 7623353938/- u/s 115JB of the Income tax Act. Assesse filed audit report in form NO. 3CEB u/s 92E and in Form no 10 CCB of the income tax act on 30 September 2008. Further the return was revised on 25.03.2010 wherein book profit u/s 115JB was shown at ₹ 7637048100/- and regular income was shown at ₹ 1968846227/-. As the book profit tax was more than the regular income tax hence, return of income was taken at book profit income as per section 115JB of the Act. 04. Assesse has entered into international transaction with its associated enterprises more than ₹ 15 crores. Therefore, ld. AO referred the matter to Transfer Pricing officer (in short hereinafter referred to as 'TPO'). Ld. TPO passed an order u/s 92CA (3) of the Act on 31.10.2011 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and written submissions carefully. 08. Ground No.2 to 7 of the appeal are related to addition of ₹ 238,16,00,000/- with respect to determination of ALP of International transactions of the assesse with its associated enterprises holding that same do not satisfy the Arm's length principal as per transfer pricing regulations. 09. The brief facts of the international business of the assesse are that assesse is in business of manufacturing of pharmaceutical for many decades and carries on research and development activities related to its business commensurate with its size and area of operation. It is engaged in the manufacture of active pharmaceutical ingredients (API) and formulations from its many manufacturing units located at multiple locations. It is engaged in multiple operations relating to research and development, manufacturing, quality control process, obtaining regulatory approvals etc. It also has substantial tangible assets and intangibles. It has wholly owned subsidiaries, joint ventures and representative liaison offices in several countries. Regarding its international transactions with AEs who purchases API, raw material, formulations from the appellant and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the tested party can be taken for which the most reliable comparables can be found. It was further held that comparability should be judged with reference to the geographical locations of the parties to the transactions. He also referred to decision of coordinate bench of ITAT in assessee's own case wherein the ITAT has rejected foreign tested parties because of single set of comparables for benchmarking international transactions entered in to with AEs across the globe were used.On this issue the ld. TPO vide order sheet entry dated 14.03.2011 asked the assesse to furnish separate TP study report taking Indian entity ( i.e. assessee) as tested party which was submitted on 11.05.2011 and further a show-cause notice was also issued on 03rd October 2011 on this issue which was replied by assesse on 24th October 2011. On consideration of reply,ld. TPO held that relevant and sufficient, reliable and accurate financialdata are not available in most of the cases and further as the accounting policy isdifferent from country to country,and as it relates to different financial years, he rejected the foreign AEs as tested parties. Ld. TPO then treated the assesse company as tested par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable since the economic conditions of two countries might not be the same even within the same continent selected. (v) Appropriate comparables for all overseas AEs are not available and therefore assessee should be selected as tested party since the most reliable data is easily and readily available. 14. Ld. AR. Strongly objected to these findingsof ld. TPO andsubmitted that for following reasons the selection of assesse cannot be made as the tested party, but AEs should be selected as 'Tested Party'. :- (a) He submitted that that on August 7, 2015, the Appellant had entered into Advance Pricing Agreement ( hereinafter in short referred to as 'APA') under Section 92CC of the Act, 1961 with Central Board of Direct Taxes ("CBDT"), Ministry of Finance, Government of India in respect of AY 2014-15. In the APA, based on the functions, asset and risk ("FAR") analysis of the Appellant and the AEs, it has been concluded that assessee is an entrepreneur manufacturer and the AEs are functioning as a distributor / secondary manufacturer. Based on the same, the CBDT has approved that for the purpose of transfer pricing analysis, AEs should be selected as the tested party with TNMM as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that assessee should be taken as tested party. In the current year, assesse has maintained the comparable with respect to various AEs keeping in view the functional and geographical similarity. Therefore, he submitted that order of ITAT was rendered because of lacuna in TP documentation that is not the case in the present year. Therefore, to the facts of the case of this year above judgment should not be applied approving assessee as tested party. However, the principle of selection of tested party is to be followed. (h) He further submitted that present year shows regional benchmarking undertaken by the appellant and reliability of data of comparables. He further submitted that in APA agreed by the assesse with CBDT December ending data have been specifically approved. Therefore, the reliable and sufficient data of the AEs are available for comparability analysis and data ending December should be accepted. (i) He further submitted that Income tax Act and Rules framed thereunder do not bar selection of foreignAEs as Tested party. (j) He also pointed out several factual errors in computation of margin of comparable companies and submitted that TP adjustment should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the TP study report and APA to show the similarities between the facts of functions performed, Assets deployedand risksassumed by the assessee and AEs. Therefore, he submitted that they are similar nature of transactions with similar FAR analysis.Ld. DR has notmentioned any difference in the Nature of transactions and FAR analysis of the transacting parties of the year of the APA and the year under appeal. 18. We have carefully considered the rival contentions. We have also perused the relevant paragraphs of the several documents relied upon before us in the form of two paper book volumes, One supplementary paper book and one decision paper book on transfer pricing issues. 19. Generally, in transfer pricing comparability analysis, the tested party is usually the party participating in a transaction for which profitability most reliably can be ascertained and for which the reliable data of comparables can be found and the tested party will typically be the party with least intangibles. 20. As per section 92C(1) of the Act, ALP of the international transact is required to be determined using any of the profit based prescribed methods, being the Most Appropriate method ( MAM) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich a financial indicator (mark-up on costs, gross margin, or net profit indicator) is tested. The choice of the tested party should be consistent with the functional analysis of the controlled transaction. Attributes of controlled transaction(s) will influence the selection of the tested party (where needed). The tested party normally should be the less complex party to the controlled transaction and should be the party in respect of which the most reliable data for comparability is available. It may be the local or the foreign party. If a taxpayer wishes to select the foreign associated enterprise as the tested party, it must ensure that the necessary relevant information about it and sufficient data on comparables is furnished to the tax administration and vice versa in order for the latter to be able to verify the selection and application of the transfer pricing method. 24. The OECD guidelines at Para no.3.18 provides as under:- "3.18 When applying a cost plus, resale price or transactional net margin method as described in Chapter II, it is necessary to choose the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in abundance. However the first step is to look at the FAR study of that party and if found to be complex than other party, then such party should be rejected as tested party and preference may be given to another entity which is least complex and is having reasonably reliable data for comparability. Therefore, the driving force in selection of tested party should be the least complex FAR of the party than the volume of comparable data. In this background, we proceed to decide the issue. 26. Appellant has entered into advance pricing agreement under section 92CC of the Act on 07 August 2015 with CBDT for AY 2014-15 . According to Para, 1(F) of that agreement tested party means associated parties as listed in Appendix 1. According to the annexure-1, it has been agreed between the parties that the TNMM with PLI of operating profit margin computed based on audited financials of AE, being the tested party, shall be the method to benchmark the covered transactions in the case. In order to select the comparables regional benchmarking shall be applied in case country-by-country benchmarking is not feasible the same shall be preferred over regional bench marking. In that appendix, CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FAR of appellant and AEs respectively are similar. The availability of data is also on the similar lines as agreed in APA.Though the critical assumptions referred to a set of taxpayer related facts, it mentions that this APA would not have any effect on other years. May that be the case, but the concept and the methodology laid down in APA can have the guidance value for the revenue authorities for the purposes of comparability analysis. The main intent of the advance pricing agreements isto protect the fair share of the revenue of the states in simple and efficient manner and to protect the tax base. Need for Advance pricing agreements are emerging out of current global complex economic situations and its impact on revenue of tax compelling governments to intensify and streamline their transfer pricing compliance efforts to reduce the disadvantage in staking their claim for tax. Higher risk of disputes may be reduced by the advance pricing agreements. On the same intentions and objects, the ld. TPO is also required to compute the ALP of the International transactions of the Assessee for this year. Therefore, the agreement entered into by CBDT with the assesse, which has considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, of the applicant as declared in the return of income of the said year. On reading above rule, it is clear that if the International transactions are same in the year of APA and the year for which roll back is applied, roll back is allowed to the assessee on certain normal condition of filing return of income, Report of accountant and a request in specified format. Off course, it has also normal revenue safeguarding exclusion clauses of income going below the returned income and where ITAT has passed an order on the subject. Therefore even the rules provide that if the International Transactions are same in the year of APA and in the past year than both the parties, assessee and CBDT may agree for applying the agreements contained in APA agreed. In the present case, it is not disputed that the international transactions in both the years are not same. Therefore, we draw support from Rule 10 MA of Income tax Rules 1962 in applying the methodologyas accepted in APA for the impugned year in appeal. 30. As the FAR Analysis of the year under APA as well as the year under appeal are similar and it is also an established fact that the tested parties selected by the AP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed those decisions and applied the same in reasoning and our findings. For the sake of brevity we refer the decision of coordinate bench in General motors India Private Limited V DCIT In ITA No3096/Ahd/2010 and 3308/Ahd/2011 where in majority of the decisions were considered on the issue of selection of 'tested party' and it held as under :- "11.1. We shall now proceed to peruse the judicial views on the issue. The case laws relied on by the assessee is as under: (i) Mastek Limited v. Addl. CIT in ITA No.3120/Ahd/2010 dt.29.02.2012: In this case, the question came up for consideration before the earlier Bench of this Tribunal was as to whether a minute examination of functional profile is necessary for the selection of comparables and the answer given was that functional profile must be first examined and after that proceed to select the comparable. In this case, the comparables chosen by the assessee were discussed by the TPO and those were discarded for the basic reason that the companies those quoted by the assessee were dealing in product distribution whereas the TPO was of the view that the AE was nothing but 'front office' of the assessee and simply engaged in market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost appropriate method for determining the arm's length price, first it is necessary to select the 'tested party' and such a selected party should be least complex and should not be unique, so that prima facie cannot be distinguished from potential uncontrolled comparables." We are in agreement with the findings of the earlier Bench (supra) that such a selected party should be least complex and should not be unique. (ii) Development Consultants (P) Ltd v. ACIT - 136 TTJ 129 & followed by Sony India (P) Ltd v. DCIT 114 ITD 448: 315 ITR 150 (Cal): The issue before the Tribunal was that the CIT (A) had confirmed the adjustments to the international transactions of the assessee with its AEs based at Bahamas, USA without considering the submissions and the financial of the AEs explaining the facts etc. In case of the merits of the case for international transactions entered by the assessee with TKC, the submission made on behalf of the assessee was as under: "26. 1……………………………………………………………………&helli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of all the facts, we conclude that the analysis undertaken by the assessee to determine the arm's length price of the international transaction with Datacore USA is correct and on the basis of the analysis it is seen that transaction undertaken by the taxpayer with Datacore US is at arm's length for both the assessment years." (iii) In the case of Ranbaxy Laboratories Limited v. Additional CIT reported in 110 ITD 428, the Hon'ble Delhi Tribunal had recorded its findings that - "58. ……………………………………………………………….. The tested party normally should be the party in respect of which reliable data for comparison is easily and readily available and fewest adjustments in computations are needed. It may be local or foreign entity, i.e., one party to the transaction. The object of transfer pricing exercise is to gather reliable data, which can be considered without difficulty by both the parties, i.e., taxpayer and the revenue. It is also true that generally least of the complex controlled taxpayer should be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations in India 10.4.1.1………………………………………………………….. 10.4.1.2……………………………………………………………… 10.4.1.3 The Indian transfer pricing administration prefers Indian comparables in most cases and also accepts foreign comparables in cases where the foreign associated enterprise is the less or least complex entity and requisite information is available about the tested party and comparables. 11.2.1. It was also vouched during the course of hearing by the learned Sr. Counsel that the financial details including operating margin of comparable companies along with the back-up computations were furnished before the TPO in the transfer pricing documentation [Source: Pages 113 to 210 of the Transfer Pricing Study]. This contradicts the assertion of the learned DR that the assessee had not furnished any financial information of the comparable companies. 11.2.2. The United Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly, in view of the directions issued by the Dispute Resolution Panel, the petitioner would not be in a position to avail of the remedy of appeal before commissioner (Appeals) against the draft assessment order; and thirdly, in the light of the observation made by the dispute Resolution Panel that the petitioner has chosen to withdraw the objections, preferring any appeal against the impugned order before any forum would be an exercise in futility, as no appeal would be entertained against an order passed on a concession. Thus, the dispute Resolution Panel has virtually closed all doors for the petitioner. In the circumstances, impugned order of the Dispute Resolution Panel suffers from the vide of being contrary to the record as well as non-application of mind, in as much as the petitioner had never sought withdrawal of the objections filed by it. The impugned order also causes immense prejudice to the petitioner as recorded hereinabove. In the circumstances, the impugned order of the Dispute Resolution Panel, therefore, cannot be sustained…." 11.3. We shall now peruse the case laws on which the learned DR had placed reliance in the findings of the Hon'ble Mumbai Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian assessee from the transaction with its foreign AE which is compared with that of the comparables. There can be no question of substituting the profit realized by the Indian enterprise from its foreign AE with the profit realized by the foreign AE from the ultimate customers for the purposes of determining the ALP of the international transaction of the Indian enterprise with its foreign AE. The scope of TP adjustment under the Indian taxation law is limited to transaction between the assessee and its foreign AE. It can neither call for also roping in and taxing in India the margin from the activities undertaken by the foreign AE nor can it curtail the profit arising out of transaction between the Indian and foreign AE at arm's length. The contention of the ld. AR in considering the profit of the foreign AE as 'profit A' for the purposes of comparison with profit or comparables, being 'profit B', to determine the ALP of transaction between the assessee and its foreign AE, misses the wood from the tree by making the substantive section 92 otiose and the definition of 'internal transaction' u/s 92B and rule 10B redundant. This is patently an unacceptable position having no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d enterprise as the tested party, it must ensure that the necessary relevant information about it and sufficient data on comparables is furnished to the tax administration…." 11.4. Considering the divergent views expressed by various Tribunals (supra) and majority of them were in favour of selecting the 'tested party' either from local or foreign party and the United Nation's Practical Manual on transfer pricing for developing countries had observed that 'It may be the local or the foreign party', we tend to agree with the same." 34. Above decision reproduced by us covers many divergent views of the coordinate benches and after considering them coordinate bench has reiterated all the principles noted by us for selection of tested party. Hence, we also draw staunch support from that decision. 35. Therefore,for the reasons stated above, ground no 2.2 of the appeal is allowed with a direction that overseas associated enterprises are accepted as 'tested party' being the least complex of the transacting entity for the year for comparability analysis of international Transactions of the assessee- appellant. 36. As we have already decided the first step of comparability anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also stated that it is in the nature of bonus commission etc. and therefore not allowable u/s 40(a)(ia) of the Act. The ld. DRP upheld the order of the AO. Before us, it was contended that the above said amount is allowable u/s 37(1) of the Act as it is in lieu of the services rendered, as issue of ESOP is a standard method of remunerating employees. This scheme is also approved by SEBI guidelines. It is also submitted that it is not a contingent liability but the actual expenditure incurred. Further, it was submitted that issue is now squarely covered in favour of the assessee by the decision Hon'ble Special Bench in case of Biocon ltd. 144 ITD 21. It was also contended that now this issue is also squarely covered in favour of the assesse by decision of Hon'ble Madras high court in case of CIT Vs. PVP Ventures ltd. 211 Taxman 554. 40. Against this ld. DR submitted that the liability is contingent in nature and also stated that in case of assesse itself in the prior years it has been held against the assesse. He relied on the orders of the AO and DRP. 41. We have carefully considered the rival contentions. The issue is now squarely covered in favour of the assesse by the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 'expenditure' in certain circumstances can also encompass 'loss' even though no amount is actually paid out. Ex consequenti, the alternative argument of the ld. DR that discount on shares is 'loss' and hence can't be covered u/s 37(1), also does not hold water in the light of the above judgment. In view of the above discussion, we, with utmost respect, are unable to concur with the view taken in Ranbaxy Laboratories Ltd. (supra)." Further whether the ESOP expenditure is a contingent loss has also been considered in the same decision as under :- "B. Is discount a Contingent liability ? 9.3.1 The learned Departmental Representative supported the impugned order by contending that the entitlement to ESOP depends upon the fulfilment of several conditions laid down under the scheme. It is only when all such conditions are fulfilled and the employees render services during the vesting period that the question of any ascertained liability can arise. He submitted that during the entire vesting period, it is only a contingent liability and no deduction is admissible under the provisions of the Act for a contingent liability. The options so granted may lapse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000] 245 ITR 428/112 Taxman 61 dealt with the deductibility or otherwise of provision for liability towards encashment of earned leave. In that case, the company floated beneficial scheme for its employees for encashment of leave. The earned leave could be accumulated up to certain days. The assessee created provision of ₹ 62.25 lakh for encashment of accrued leave and claimed deduction for the same. The Assessing Officer held it to be a contingent liability and hence not a permissible deduction. When the matter finally came up before the Hon'ble Supreme Court, it was held that the provision for meeting the liability for encashment of earned leave by the employee was an admissible deduction. In holding so, the Hon'ble Apex Court observed that : "the law is settled : if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme court, it entitled the assessee to deduction on the "accrual" concept by holding that a provision is recognized when : "(a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation : and (c) a reliable estimate can be made of the amount of the obligation". Resultantly, the provision was held to be deductible. 9.3.5 When we consider the facts of the present case in the backdrop of the ratio laid down by the Hon'ble Supreme Court in Bharat Earth Movers (supra) and Rotork Controls India (P.) Ltd. (supra), it becomes vivid that the mandate of these cases is applicable with full force to the deductibility of the discount on incurring of liability on the rendition of service by the employees. The factum of the employees becoming entitled to exercise options at the end of the vesting period and it is only then that the actual amount of discount would be determined, is akin to the quantification of the precise liability taking place at a future date, thereby not disturbing the otherwise liability which stood incurred at the end of the each year on availing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution was claimed as deduction u/s 37 of the Act. Ld. AO disallowed it holding that it was not incurred for the purposes of the business and alternatively as no tax has been deducted it was disallowable u/s 40a(ia) of the Act . Ld. DRP confirmed the findings of the AO. 44. Before us, it was contested that contributions were made in the course of the business of the appellant and therefore it resulted into advantage on business carried on by the appellant and hence incurred wholly and exclusively for the purpose of the business. It was also stated that this issue is squarely covered in favour of the appellant by the decision of the Tribunal in appellant's own case in ITA 4251 and 3925/Del/2002 for AY 1997-98. It was further submitted that this order here been further upheld by Hon'bleDelhi High Court by order dated 17.03.2011. It was further held that the tribunal has allowed the claim of the assesse for AY 2002-03, 2003-04 to 2005-06 and against which department's appeal has been dismissed by Hon'ble Delhi high Court vide order 20.11.2012.Regarding applicability of section 40a(ia) it is submitted that in absence of any service to the recipient no tax is required to be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estments, which has yielded the exempt income; if at all disallowance under Rule 8D was to be made. (b) As meager dividend of ₹ 7968/- is received and disallowance computed by Ld. AO far more in excess of dividend income which is incorrect. Assessee itself has made huge disallowance on this count which is also far more in excess of the dividend income. i.e. exempt income. (c) In absence any satisfaction with regard to suomotto disallowance already made by assessee, Rule 8D cannot be invoked automatically without recording any satisfaction by the Ld. AO that it is incorrect. For each of this contention ld. AR submitted large judicial pronouncement including that of jurisdictional high court. 50. Against this ld. DR submitted that for AY 2008-09 there is no escapement of disallowance according to Rule 8D and therefore he relied on the orders of Ld. AO and ld. DRP. 51. We have carefully considered the rival contentions. In this case assesse himself has disallowed ₹ 3311708/- which itself is far more in excess of exempt income. Honourable Delhi high court in Joint Investments (p) Limited V CIT 59 taxmann.com 295 has held that "9. In the present case, the AO has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act for such previous year, the Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of Rule 8D. We may observe that Rule 8D (1) places the provisions of Section 14A(2) and (3) in the correct perspective. As we have already seen, while discussing the provisions of Sub-sections (2) and (3) of Section 14A, the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee or with the correctness of the claim made by the assessee that no expenditure has been incurred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income not includable in total income in the manner indicated in sub-rule (2) of Rule 8D of the said Rules. It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard. If one examines s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expression "prescribed" in section 2(33), must be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income. Moreover, the satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Hence, sub-section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The Assessing Officer must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer "Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated". (M. A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249*). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub-section (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ChapterXIIB of the act and therefore no disallowance u/s 14A of the act which is restricted to chapter IV of the act can be made while computing book profit u/s 115JB of the act. He further submitted that the addition to the book profit vide clause No.(f) to explanation 1 also speaks about amount of expenditure relatable to any income to which section 10 applies whereas Rule 8D covers all expenditure including hypothetical disallowance. He submitted that disallowance u/s 14A of the act cannot be read into computation of books profit u/s 115JB of the Act. He further relied on decision of Hon'ble Delhi High Court in case of Pr. CIT Vs. Bhushan Steel Ltd in ITA no. 593/2015 dated 29.09.2015. He further relied on the decision of coordinate bench in Quippo Telecom Infrastructure vs. ACIT in ITA No, 4931/Del/2010. 54. Against this ld., DR relied on the orders of the lower authorities. 55. We have carefully considered the rival contentions. The ld. AO has imputed the addition u/s 115JB of the Act as disallowance computed u/s 14A read with Rule 8D of the Income Tax Rule 1962. As we have already deleted the disallowance as per ground No.10 of the appeal wherein we have held that the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res In respect of the previously mentioned units, the appellant submittedthat it has maintained separate books of accounts on SAP ERP, which were duly audited and report of the auditor along with the profit and loss account of the units was filed along with the return of income. The net profits of the units were computed by (i) reducing actual direct expenses incurred at respective units; and (ii) allocating and apportioning common expenses debited at head office/research center, based on sales.During the course of the assessment, the ld. AO specifically directed the appellant to justify the claim of deduction of ₹ 136.68 crores made under sections 80IB and 80IC of the Act during the previous year relevant to the assessment year 2008-09. In response to the previously mentionedquery, submissions dated 21.11.2011, 25.11.2011, 30.11.2011 and 12.12.2011 were filed before the assessing officer substantiating the claim of deduction under sections 80IB and 80IC of the Act. The assessing officer rejected the contentions of the appellant, completed the assessment vide draft order dated 23.12.2011 under section 143(3) r.w.s. 144C, inter-alia, denying the claim of deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly in context of basis of allocation of head office and research & development expenses. Further on verifying the basis of allocation of head office and research & development expenses adopted by the appellant, the assessing officer did not make any disallowance/adjustment to the claim of deduction made by the appellant under section 80IB/IC of the Act. Therefore,claim of deduction by the appellant under sections 80IB/IC of the Act has been duly examined on all relevant factors in the earlier years and on being fully satisfied, the deduction was allowed.It is, however, only in the assessment year 2008-09, that the assessing officer, for the first time, denied the claim of deduction made under section 80IB/IC of the Act on the primary ground that the appellant had failed to maintain separate books of accounts in respect of unit(s) for which deduction was claimed. In this regard, hesubmitted that it is a well settled proposition of law that where the Act provides for a deduction which is allowable to an appellant for a certain term/ period (such as a period of consecutive ten years in present case), the Revenue is required to examine the eligibility of the appellant and whether all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent years without disturbing the relief granted in the initial year. Our attention is also invited to the judgment of this court in the case of CIT vs. Paul Brothers reported in [1995] 216 ITR 548 where in court was considering the issue for the assessment year 1981-82. This court took a view that for the purpose of Section80-HH or Section80-J, there is no provision for withdrawal of deduction for the subsequent year for breach of certain conditions, unless the relief granted for the earlier year 1981-82 was withdrawn. For the reasons set out earlier, we need not consider this aspect. We find no merit in this appeal and accordingly, the same is dismissed." (v) CIT v. Western Outdoor Interactive Pvt. Ltd: 349 ITR 309, (Bom) held as under: "We have considered the submissions. We find that the submissions made by Mr. Pardiwalla on the basis of the decision of this Court in the matter of Paul Brothers (supra) and Director of Information Pvt. Ltd. (supra) merits acceptance. Therefore, in this case, it is not necessary for us to decide whether SEEPZ unit was set up/formed by splitting up of the first unit. In both the above decisions, this Court has held that where a benefit of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n claimed by the appellant calls for being allowed in the year under consideration too. c) He submitted that it is well settled proposition that if there being no change either in facts or in law, as compared to the earlier and subsequent years, the position accepted/ determined by the Department needs to be followed even on the principle of consistency. He relied on following decisions for this proposition: (i) CIT vs. Excel Industries Ltd.: 358 ITR 295 (SC) (ii) Radhasoami Satsang v. CIT: 193 ITR 321 (SC) (iii) DIT (E) v. Apparel Export Promotion Council: 244 ITR 734 (Del) (iv) CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.) (v) CIT v. Dalmia Promoters Developers (P) Ltd: 281 ITR 346 (Del.) (vi) DIT v. Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del.) (vii) CIT v. P. KhrishnaWarrier: 208 ITR 823 (Ker) (viii) CIT v Harishchandra Gupta 132 ITR 799 (Ori) (ix) CIT v. SewaBharti Haryana Pradesh: 325 ITR 599 (P&H) (x) CIT v. Rajasthan Breweries Limited.: ITA 889/2009 (Del) - SLP dismissed. Thus, he submitted that the revenue having accepted that the aforesaid units were eligible to claim deduction under section 80IB/IC of the Act in all the earlier years, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss area; (ii) Unique batch number is assigned to each batch of packed form of medicine [i.e., SKU]; (iii) Each and every production order of medicine is assigned separate and identifiable code, based on which the entire expenses incurred to produce the medicine is identifiable; (iv) Each and every item of raw material is assigned separate and identifiable code; therefore, consumption of raw-material is identifiable; (v) Each and every product manufactured is assigned unique product code starting with "8" series; (vi) Unique packaging code is assigned starting with "3" series at the time of initiating packaging; Hence all the transactions (e.g., Costs, revenues, etc.) for each of the product at every level viz., Business Area, Plant, etc., are separately identifiable. Each undertaking of the appellant is treated as independent and separate unit based on the combination of coding hierarchy in the ERP based accounts. An expenditure relating to a unit is recorded in the manner that such expenditure gets captured to the respective unit only, since each and every direct expenditure, at the time of recording is recorded based on the coding hierarchy, which identifies the Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant ultimately consolidates and prepares its financial statements. It is further submitted that based on unit wise accounts prepared, the appellant claims deduction under section 80IB/ 80-IC of the Act, which is duly supported by certificate of the Chartered Accountant. f) He submitted that ld. AO was swayed by the facts that only common thing in the entire system is that a common ERP based accounting software is installed at the company level. He also took us to production & sales process adopted by the appellant submitted in the form of a flow chart to show that based on the unique product/batch code, the details of all transactions/entries relating to each business area or its plants are distinctly identifiable by way of a separate code, as per which profits of each unit has been arrived at. In nutshell, he submitted that financial accounts are recorded separately from each of the locations into the live ERP software installed andall the transactions (e.g. costs, revenues, etc.,) for each product and each plant are separately identifiable. He further submitted that ld. AO has not disputed that each and every item of sales and direct costs are identifiable. As regards co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts to maintenance of separate books of account for each of the undertakings.He further refuted the observation of ld. AO that the appellant failed to give the true and correct profits of the undertaking merely because a trial balance was not provided when complete details of each and every transaction is maintained and profit and loss account and balance sheets are available. k) He submitted that under the provisions of section 80IB/IC of the Act, there is no provision/ requirement of maintenance of separate books of account in respect of each eligible undertaking. What is only required is that the assessee has to furnish report of a Chartered Accountant in the prescribed Form No.10CCB certifying that deduction has been rightly computed in respect of profit derived from the undertaking.Ld. AR extensively referred to provisions of section 80 IA (7) of the act, Form No 10CCB, and relevant income tax rules and submitted that it law does not prescribe maintenance of separate books of accounts for the claim of these deduction. He further relied on the following decisions: DCIT vs. SMR Builders: 54 SOT 105 (Hyd) ACIT vs Sabarkantha District Co-operative Milk producers Union Ltd: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sections 80IB/IC of the Act) clear the SKU's to the company's godown for final sale to the stockists. The godown only facilitates movement of goods from NIU's for onward sales. Hence, no stock transfer takes place from one unit to the other unit. Further NIU does not recognize any amount as 'sale' in its books of accounts, until the SKU manufactured by the respective NIU is actually sold to the stockists. The NIU books the amount of sale based on price at which SKU has been transferred to the stockists from the godown. Therefore, accordingly provisions of section 80 IA (8) do not apply to the appellant. m) Further, it was submitted without prejudice and even otherwise, even if it is presumed (without admitting) that the products are transferred to another unit, then, too, such transfer has been made at arm's length, For this he relied on the Circular No.169, dated 23.6.1975 and decision of Hinchcliff (Inspector of Taxes) v. Crabtree [1971] 81 ITR 677 (Cal) on interpretation of what is market value and submitted that the final sale price is the gross income of each unit. He also stressed up on the facts that entire selling and development costs are also allocated to each unit; f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le with the assessing officer at the time of passing the final assessment order.His further argument was that Assessee has made substantial compliance, that too before the passing of the final assessment order, thereforeit was not proper on the part of the assessing officer to deny the legitimate claim of deduction on a technical ground of non-filing of balance sheet with the return of income. For the proposition that the filing the report of the chartered accountant is mandatory but filing the same along with the return of income is directory, he relied on following decisions i. CIT vs. Nagpur Hotel Owner's Association: 247 ITR 201 (SC) ii. CIT v. Centimeters Electricals (P.) Ltd.: 317 ITR 249 (Del) iii. CIT v. Axis Computers India P. Ltd.: 178 Taxman 143 (Del) iv. CIT vs. Web Commerce (India) (P.) Ltd.: 178 Taxman 310 (Del) - SLP of revenue dismissed in SLP No. SLP (C) No. 20057 of 2009 v. CIT v. Panama Chemical Works: 245 ITR 684 (MP) vi. CIT V. Berger Paints (India) Limited: 254 ITR 503 (Cal.) vii. CIT V. Punjab Financial Corporation: 254 ITR 6 (P&H) (FB) viii. CIT v. G. Krishna Nair: 259 ITR 727 (Ker) ix. CIT V. Shiva Rice & Dal Mills: 273 ITR 265 (P&H) x. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted along with audit report. 61. He further submitted that no separate balance sheet was maintained as is evident from page 999 where the assumptions have been noted for the purpose of allocation of various expenditure. Hence, he submitted that no separate books of account are maintained for eligible units however, allocated statement of expenditure and adjusted profit and loss account and balance sheet are prepared for claiming deduction. 62. He further submitted that assesse claimed deduction also on trading profit for which deduction u/s 80IC and 80IB are not eligible. 63. He referred to Page No.51 of the assessment order where the gross taxable of the assesse 178.64 crores and if the other income from the pure trading etc. amounting to ₹ 225.83 crores is excluded it results into the loss and therefore the assesse is not eligible for any deduction, as there is no profit. He further referred to page no.58 of the assessment orders and submitted that there are four reasons given by the AO on that page namely (i) Assesse does not maintain a separate balance sheet and profit and loss account of the undertaking. (ii) Other income not eligible for deduction is more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction of tablet plant No.III is supported by audit report available at Page 1026 and further at page 1030 of the paper book the profit is quantified at ₹ 523509006/- and in the declaration it shows the balance sheet which is at page no.1031 and profit and loss account is also at page no.1032 of the paper book. He submitted that it is prepared on the same basis following the same accounting practices and adopting same methodology therefore though, deduction is claimed for the first year there is no infirmity pointed out by the revenue in the working of deduction. (e) That the four points, which have been stated at page 58 of the order, have already been replied and in rebuttal nothing has been stated by the ld. DR. as the submission of the assesse has not been controverted there is no point in referring to the four points submitted by ld. DR once again. However, he reiterated his submission. 67. On query by the bench about the first year of the claim andsubsequent status of those units a chart has been submitted by the ld. AR showing for each of the units' initial year of the assessment of claim and whether the deduction for the years was claimed in the return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 30% R&D expenditure and 75% of the head office expenses to this new undertaking. Assesse explained vide letter 02.12.2008 and after going through the submission made the assesse and based on allocation explained by the assessee, profits of the undertaking u/s 80IB/80IC were accepted by the AO. Therefore, in the initial year the claim of deduction for the unit New Tablet Plant-I was claimed, examined and allowed. 71. In case of New Tablet Plant-II which was set up in AY 2006-07, the assesse did not claim any deduction in view of provision of section 80A(2). 72. Similarly, in case of new SGC Plant which was set in AY 2007-08 the assesse did not claim any deduction for that year in view of the provision of section 80A(2) of the Act as the gross total income of the assesse was negative. 73. In case of New Tablet Plant-III, this is the first year of deduction and assesse has claimed the same in return of income and it is under dispute in this appeal. 74. It is argument of the ld. AR that it is the well settled proposition of law that where the act provides for the deduction for a certain term period the revenue is required to examine the claim of deduction and its eligibility to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act to the assessee having allowed benefit to the assessee in the preceding three years. It is contended on behalf of the assessee that it was necessary for the Assessing Officer to be consistent with the assessment for the earlier years. The question as to the qualification of Unit Nos. 2 & 3 as industrial undertakings arose in the earlier years and the Assessing Officer had accepted that Unit Nos.2 & 3 qualified for deduction under Section 80-I of the Act in the earlier years. By virtue of section 80-I(5) of the Act deduction under section 80-I of the Act was available to an assessee in the assessmentyear relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things (such assessment year being the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. This necessarily implied once the issue as to eligibility under section 80-I of the Act was examined and allowed in the initial assessment, the same was allowable in the subsequent years also unless there was any material change in the succeeding years. 70. It is well settled law that the principles of res jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these circumstances, the Supreme Court held that the view that had been settled and accepted over a period of years should not be allowed to be disturbed. 73. This court in the case of Lagan Kala Upvan (supra), following the decision of the Supreme Court in the case of Radhasoami Satsang (supra) has also held that where a particular view has been accepted by the Assessing Officer to several years the same cannot be permitted to be departed from unless there is some material facts that justified such a change. Similar view has been expressed by this court in the case of Modi Industries Ltd. (supra). In this case, while considering a claim of deduction made by an assessee under section 80J of the Act, this High Court held as under:- "The second question relates to the claim of the assessee for deduction under Section 80J of the Income Tax Act in respect of its new unit namely 10 ton Furnance Division and Steel Unit 'B'. This case pertains to the assessment year 1976-77. A perusal of the order of the Assessing Officer would reveal that for the first time, claim under Section 80J of the Act was made by the assessee in the assessment year 1973-74. The assessee was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other spheres of human activity...." 75. In the facts of the present case, where although the Assessing officer has allowed the assessee deduction under section 80-I of the Act in the preceding years, one may still have certain reservations as to whether the issue of eligibility of Unit nos. 2 and 3 fulfilling the conditions has been finally settled, since the question has not been a subject matter of any appellate proceedings in the years preceding the assessment year 1991-92. However, there is yet another aspect which needs to be considered. By virtue of section 80-I(5) of the Act, deduction under section 80-I of the Act is available to an assessee in respect of the assessment year (referred to as the initial assessment year) relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft. Such deduction is also available for the seven assessment years immediately succeeding the initial assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the conditions under 80-I(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos.2 & 3 were established. 78. This view has also been accepted by a Division Bench of Gujarat High Court in the case of Saurashtra Cement & Chemical Industries (supra). In that case, the Gujarat High Court held that where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had to be examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. The relevant extract from the decision of the Gujarat High Court in Saurashtra Cement & Chemical Industries (supra) is quoted below:- "The next question to which the Tribunal addressed itself, and no our opinion rightly, was whether the Tribunal was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue. 29. In Radhasoami Satsang Saomi Bagh v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v.Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also. Further, this argument cannot be taken shelter regarding the claim of the assesse for New Tablet Plant-II, SGC Plant and New Tablet Plant-III. 78. The third argument advanced by the assesse is that the accounts of the assesse are being maintained on SAP ERP System, which provides separate books of accounts resulting into independent balance sheet and profit and loss account of the eligible unit. For this ld., AR explained in detail how the ERP system works and how it generates individual profit and loss account and balance sheet of the Industrial units. In the present business environment and looking to the nature of the business and the size of the operation of the company, it is apparent that it is multi product, multi-location company. The assesse has made a claim of various units, which is submitted before us from Page No.974 to 1038 of Paper Book Volume No.IV. The details of this is tabulated as under:- Name of the unit Date of Audit report as per Rule 18BBB Supported by the balance sheet and profit and loss account of the unit Page No.of PB Volume IV Goa Unit 31.01.2012 Yes 974-986 New Tablet Plant-I 31.01.2012 Yes 987-999 New Tablet Plant-II 31.01.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see should maintain separate books of accounts with respect to eligible undertaking. It only provides as per provision 80IA (7) that the 'accounts' of the undertaking for the previous year for which deduction is claim should havebeen audited by an 'accountant'. The provision of the section does not talk about maintenance of 'separate books of accounts'. Provisions of section 80 IA (7) are as under :- "(7) 38[The deduction] under sub-section (1) from profits and gains derived from an 39[undertaking] shall not be admissible unless the accounts of the 39[undertaking] for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form40 duly signed and verified by such accountant." 80. Rule 18BBB of the Income tax rules governing the certificate by an accountant provides as under :- 98[Form of audit report for claiming deduction under section 80-I or 80-IA or 99[80-IB or section 80-IC]. 18BBB . (1) The report of the audit of the accounts of an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any trading activity during the year in question. On the said sum of ₹ 51,82,666/-, the assessee claimed deduction at the rate of thirty per cent under Section 80IA of the Act amounting to ₹ 15,54,800/-. The Assessing Officer found that the assessee had not maintained a separate trading and profit and loss account for the goods manufactured. In the assessment year in question, it appears that the assessee had sold raw wool, wool waste, textile, and knitting cloths. When a query was raised, the assessee contended that, business exigencies in the assessment year in question, it had sold the above items. However, according to the assessee, the sale of raw wool, wool waste, etc., would not disentitle it from claiming the benefit under Section 80IA of the Act on the total sum of ₹ 51,82,666/- at the rate of 30%. Department found that the assessee has not maintained the accounts for manufacture of yarn actually produced as a part of industrial undertaking. Consequently, the Assessing Officer worked out, on his own, the manufacturing account, as indicated in his Order, giving a bifurcation in terms of quantity of raw wool produced. On Appeal before honourable court it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42a "books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;] On reading of the above, it is apparent assessee has maintained separate books of accounts, which are on the SAP ERP system, which provides transaction-by-transaction ledgers, daybooks, cashbooks, and other books such as quantitative details and stock registers. The Ld. AO was of the view that as the books of accounts are maintained for the entity as a whole, it has not maintained separate books of accounts for the eligible industrial undertaking. It will further be appreciated that the primary purpose of maintaining separate books of account in any provision of the Act is only to enable the assessing officer to verify that deduction under any particular provision has been correctly computed. If from any system/ software, identified and separate accounts relatable to any particular unit/ undertaking are discernible and are capable of being generated, the same, in our view, is sufficient compliance with the requirement of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred for the project are known and all incomes, including indirect income arising to the project have been considered. The accounts have also been audited and a certificate, as required, has been filed. This being so, the Assessing Officer has erred in holding that separate accounts were not maintained for the eligible business and that the assessee is, therefore, not eligible for deduction u/s. 80IB(10) of the Act." 83. Addressing the next arguments of the revenue that there are certain items of other income, which are reduced from the computation of total income then the manufacturing activity results in loss. For this, propositionLD. DR drew our attention to page no 51 of the assessment order where ld. AO has stated that assessee has earned Royalty Income of ₹ 18.91 Crs, (ii) export Incentives of ₹ 78.93 crores, (iii) sundries and miscellaneous income ₹ 33.74 Cr and Income from trading activity of ₹ 94.25 Crores totaling to ₹ 225.83 Crs. . It was stated that the gross total income of the assessee is ₹ 178.64 Crores and if the above stated income are excluded i.e. of ₹ 225.83 Crores the total income of the assessee will result in to loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that it relates to costs that have been incurred on an entity level and pertains to the company as a whole. Appellant has apportioned 75% of such head office expenses to the individual undertakings based on sales. This method of allocation has been consistently followed by the assessee since commencement, whichis duly certified by the auditors and accepted in the assessments completed in the past. We do not find any irrationality in the al above allocation keys adopted by the assessee firstly and for the reason that it has been accepted by the revenue in past it cannot be disputed now in subsequent years without there being any change in the factsand / or law. Honourable Delhi high court in the case of CIT vs. EHPT India Pvt Ltd: 350 ITR 41 (Del) where in allocation of expenses based on head counts and turnover is upheld to stress that there is no bar in law for common expenses to be allocated on a scientific/ rational basis to the eligible unit has held as under :- "10. The provisions of sub-section (4) of section 10A, relied upon by the Assessing Officer, apply for the purpose of segregating the profits of the business into export profits and domestic profits. It is a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he discount on the chits should be assessed every year, taking into account the number of instalments paid and remaining to be paid. The contention of the assessee was that the method adopted by him has been consistently accepted in the past and there was no justification for any departure. Accepting the submission, the Supreme Court held as under: "As stated above, we are concerned with the assessment years 1991-92 to 1997-98. In the past, the Department had accepted the completed contract method and because of such acceptance, the assessee, in these cases, have followed the same method of accounting, particularly in the context of chit discount. Every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method. Further, in the present cases, we find from the various statements produced before us, that the entire exercise, arising out of change of method from the completed contract method to deferred revenue e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not attracted. 86. Further,it is submitted by the assessee that various units are manufacturing different products and final products are sold in the openmarket. Sales of each of the unit are accounted in the profit and loss account by the appellant of that unit. It is not pointed out before us that what is the material or services that has not been accounted for by the assseess as sales and itis not at themarket rate and what is the market rate of such product or services sold by those units. It is emphatically stated that there is no inter unit transfer of the goods or services. In view of the above,we do not have any option but to reject the objection of the revenue of invoking section 80 IA (8) of the Act on this issue. 87. It is one of the contention of revenue that selling and distribution activity is itself a separate profit center and therefore whatever services have been provided by the selling and distribution arm of the company to the eligible undertaking should have been charged and reduced from the profit of the industrial undertaking after valuing service of selling and distribution arm of the company at market rate. At present assessee has allocated it at cost. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice. The said Unit has shown high profit at ₹ 1,16,82,91,400/-. The goods manufactured by the said Unit were transferred to the marketing division of the assessee-company and the sale price was noted by the Baddi Unit as per the final sale price of the product. But the fact is that the marketing divisions and the C&F are involved, therefore the sales are realized by the main marketing division. He has thus pleaded that the profit derived from "marketing function" cannot be dragged to the manufacturing unit for the purpose of claiming deduction u/s.80IC. The Special Provision is confined to certain Undertakings, as defined in the Statute, and such eligible undertakings are entitled for the deduction of the profit of such undertakings only. He has again drawn our attention that the only source of income should be the eligible source of income and not other sources of income, such as, profits of marketing division or profits on account of established brand. For the allocation of profit of manufacturing unit the mandate is very clear because Income Tax Rule, 1962 contains Rule 18BBB wherein as per sub-rule(2) a separate report is to be furnished by each undertaking and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture. In auxiliary, as per section 2(24) 'income' includes (i) profits and gains. An 'income' has to have a component of 'profits & gains' but all type of 'profits & gains' may not be an 'income' for tax purpose under the Act. The section in controversy i.e. Sec. 80 IC of the Act is embedded with both these terminology, reproduced verbatim :- "80IC (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section(2), there shall, in accordance with and subject to the provisions of this section, be allowed , in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section(3)". 10.2 The 'business' is prescribed in sub-section (2) in the following manner : (2) This section applies to any undertaking or enterprise (a) which has begun or begins to manufacture or produce any Article or thing ……… Therefore, 'manufacturing' is the first criteria for the eligibility of the 'business' to qualify for the deduction. Hence the 'pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible to segregate the two components to determine the segregated margins. Keeping this accounting principle in mind, we revert back to the language of section 80IC which says that a deduction is permissible of such profits of a specified Undertaking engaged in manufacturing of certain article or thing. The business of the said enterprise/concern should be manufacturing of article or thing and the profit therefrom is eligible for deduction u/s.80IC if that profit is part and parcel of the gross total income. As noted hereinabove, profit is the difference between the purchase price and the cost of production along with the cost of bringing the product to market. This basic principle of accountancy, as appeared, have been adopted by Baddi Unit because as per Profit & Loss account, cost of material, personal cost and general expenses, corporate expenses were reduced from the sale price to arrive at the "profit before tax" i.e. ₹ 116,82,91,400/-. 10.3 It is not in dispute that for Baddi Unit the assessee has maintained separate books of accounts and therefore drawn a separate profit and loss account. In such a situation, whether the AO is empowered to distu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax in India. The facts of that case were altogether different and there was a finding that undisputedly there was a PE in India and as per Indo-UK DTAA the income has to be taxed in India. An another fact was that there was no separate account of the assessee's India operation and the AO had found that on the basis of global accounts the profits were determined on sales. In that case, marketing was said to be the primary activity for earning profit. The profit was directly due to operation in India. In that context the word "attributable" was considered and then it was held that such part of the income as it was reasonably attributable to the operations carried out in India is taxable. The expression "business connection" was also considered and then it was found that it will include a person acting on behalf of a non-resident and carried on certain activities is having business connection. A business connection has to be real and intimate and through which income must accrue or arise whether directly or indirectly to the non-resident. On those facts, since it was found that R&D activities were carried out by the assessee, therefore, 15% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of marketing network and brand of the product related expenses. The AO has not complained about the allocation of expenditure as made by the assessee while computing the profit of the Baddi Unit. Once the assessee has itself taken into account the related expenses to arrive at the net profit, then it was not reasonable on the part of the Revenue Department to further reallocate those expenses by curtailing the percentage of eligible profit. 10.6 From the side of the Revenue, ld. Special Counsel has argued that in terms of the provisions of section 80IA(5) the deduction is to be computed as if such eligible business is the only source of income of the assessee. According to him, the manufacturing profit was the only source of income and that alone should be accounted for in the P&L account to claim the deduction u/s.80IC of the Act. Ld. DR has explained that as per the view of the A.O. up-to 80% of the profit was the result of efficient marketing net work plus due to the brand name of the company. Only 6% was the manufacturing profit, per A.O. It is true that section 80IC does recognized the provisions of section 80IA. Refer, Sub-section (7) of section 80IC which prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open market. There is no such concept of segregation of profit. Rather, we have seen that the profit of an undertaking is always computed as a whole by taking into account the sale price of the product in the market. 10.7 The Ld. AO has suggested that the assessee should have passed entries in its books of account by recording internal transfer of the product from Baddhi Unit to the head office marketing unit and that too at arm's length price. From the side of the appellant an argument was raised that what should be the arm's length price in a situation when a product is ultimately to be sold in the open market. Whether the AO is suggesting that an imaginary line be drawn to determine the profit of the Baddi Unit at a particular stage of transfer of products. Definitely a difficulty will arise to arrive at the sale price as suggested by AO on transfer of product from Baddi to head office. What could be the reasonable profit which is to be charged by the Baddi Unit will then be a subject of dispute and shall be an issue of controversy. On the contrary, if the sale price is recorded at the market price, which is easily ascertainable, that was recorded in the Baddi Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as on that date. Though the section has its own importance but the area under which this section operates is that where one eligible business is transferred to any other business. We again want to emphasis that the word used in this section is "business" and not the word "profit". We can hence draw an inference by describing these two words and thus have precisely noted that 'eligible business' has a different connotation which is not at par or identical with the "eligible profit". The matter we are dealing is not the case where business as a whole is transferred. This is a case where manufacturing products were sold through C&F in the market. Even this is not the case that first sales were made by the Baddi Unit in favour of the head office or the marketing unit and thereupon the sales were executed by the head office to the open market. Once it was not so, then the fixation of market value of such good is out of the ambits of this section. If there is no intercorporate transfer, then the AO has no right to determine the fair market value of such goods or to compute the arm's length price of such goods. The AO has suggested two things; f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas of demarcation are business segment, geographical segment, etc. But as far as the Revenue of an enterprise is concerned while segmentation is required, then Revenue from sales to external customers are reported in the segmented statement of profit and loss. In an accounting system, an intra-company sale between divisions or units is not regarded as Revenue for the purpose of such financial reporting. As per the Accounting Standards an Enterprise Revenue ignores in house-sales that represent Revenue to one segment and Expense to another. In this connection, the AO has discussed the Hon'ble Supreme Court decision pronounced in the case of Liberty India (supra). The AO wanted to justify his attempt of segmentation on the basis of the theory that only the profits derived due to manufacturing activity can be said to be derived from eligible undertaking. It was contested by AR before us that the "segment reporting" is about the segregation of business and not about the segregation of any specific activity. In the case of Liberty India (supra) it was observed that the IT Act broadly provides two types of tax incentives, namely, investment linked incentives and profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrues or arises or which is deemed to accrue or arise to him in British India during the accounting year. If Sec. 5 of the Act stopped short at that stage, it was undoubted that in the case of the respondent who is a resident in British India all his income, no matter where it arose, within British India or without British India, would be chargeable to excess profits tax just in the same way as it chargeable to income-tax under the Indian IT Act. The whole of his income arising in Raichur has legitimately been taxed under that Act. In that decision also, the word "business" was defined, i.e. business includes any trade, commerce or manufacture. It has also been said that all businesses, to which the said law applied, carried on by the same person shall be treated as one business for the purpose of the said Act. The question was about the manufacturing activity and it was contended that if a man is a manufacturer as well as a seller of goods, then in his case the term "part of a business" means carrying on all the two activities together and therefore constitute the part of the business. One of the Hon'ble Judges has said that the activities which the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing them, and receiving the proceeds of such sales. The essence of its profit-making business is a series of operations as a whole. 10.12 We have carefully perused this decision of the Hon'ble Supreme Court as cited by the Special Counsel Mr. Srivastava. At the outset, we want to place on record that the entire issue before the Hon'ble Supreme Court was in respect of third proviso to section 5 of EPT Act. The said proviso was duly a reproduced in para-40 of the order and for ready reference typed below:- "Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State, and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business." The point for consideration was that whether on those facts the third proviso to section 5 could be invoked. The manufacturing activity of making ground-nut oil was carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to the manufacture of the said commodity which was ultimately sold in the market. The Raichur factory certainly has business connection in British India for a part of the oil manufactured by it is sold through the Bombay establishment of the assessee. That all the operations of the Raichur business are not carried on in Bombay. Therefore, the profits that would be deemed under this section to accrue or arise in Bombay will only be the profits which may reasonably be attributed to that part of the operations carried on in Bombay, that is to say, to sale of part of its oil in Bombay. In this context, an observation was made that a trade is completed at a place where a business transaction is closed. Profits of a business are undoubtedly not "received" till the commodity are sold and they are ascertained only when the sale take place. This aspect has not been doubted or challenged even in the said order. But in the said order the question was that if a part of a business consisted of manufacturing activity and that activity can be segregated so as to compute the yield profit, then whether such profit accrue only at the place where the manufacture are sold. To answer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity is eligible for this prescribed weighted deduction. The segregation as suggested by the AO has first to be brought into the Statute and then to be implemented. Without such law, in our considered opinion, it was not fair as also not justifiable on the part of the AO to disturb the method of accounting of the assessee regularly followed in the normal course of business. It is true that otherwise no fallacy or mistake was detected in the books of accounts of Baddi Unit prepared on stand alone basis through which the only source of income/profit was the manufacturing of the specified products. We therefore hold that the AO's action of segregation was merely based upon a hypothesis, hence hereby rejected. These two grounds Nos.6 & 7 are allowed." We have carefully perused this decision and note that the controversy in this ground of appeal with respect to applicability of section 80 IA (8) of the act, on marketing and other selling distribution as well as research and development services provided by the undertaking as a whole to the eligible industrial undertaking at the cost or market rate for working out the eligible profit for deduction, has been decided. Ld. DR could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the latter provisions and has held the same to be directory and not mandatory. The contention of the revenue was that unless and until the audit report is filed along with the return, the benefit of section 10A could not be available to the assessee. Recently, we have considered the identical provisions of section 80-IA(7) in the case of CIT v. Contimeters Electricals (P.) Ltd. [IT Appeal No. 1366 of 2008, decided on 2-12-2008] and held that as long as the audit report is filed before the framing of the assessment, the provisions of section 80-IA(7) would be complied with inasmuch as the same are directory and not mandatory. A similar view would have to be taken in the present case also inasmuch as the provisions are the same. Consequently, we do not find any fault with the conclusions arrived at by the Tribunal. No substantial question of law arises for our consideration. The appeal is dismissed." [Underline supplied by us] In this case, appellant has already filed the audit report and the profit and loss account of the units however; the profit and loss account was filed before ld. DRP but in any way available with ld. DRP and Ld. AO at the time of finalization of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is held as under :- "6. Now, let us examine whether the plea sought to be raised by the ld. D.R. can be admitted by the Tribunal or not. Though several authorities have been cited in the course of hearing, the basic judgment is that in the case of Hukumchand Mills Ltd. (supra). In that case, in order to arrive at the correct written down value of the assets, the Tribunal permitted the department to raise a plea to find out whether the assessee was allowed any depreciation under an enactment which was in force earlier, i.e., before the Indian Income-tax Act was made applicable to the assessee. The Court held that the subject-matter of the appeal before the Tribunal was the question as to what should be the proper written down value of the assets for calculating the depreciation allowance under the Indian Income-tax Act. It was certainly open to the department, in the appeal filed by the assessee before the Tribunal, to support the finding of the AAC with regard to the written down value on any of the grounds decided against it. In the case before the Supreme Court, earlier enactment was to be referred to, whereas in the present case only a different provision of the same enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal wishes to get at the relevant facts in order to decide the new point may be quite a different thing. The Tribunal may either remand the matter for the purpose, or proceed to investigate the facts themselves. In this part of the decision-making alone, there is scope for the play of the Tribunal's discretion. As to the very power to entertain a new plea, that is not to be ruled out, merely because a consideration thereof would call for further facts to be gone into. In Hukumchand Mills' decision [1967] 63 ITR 232, the Supreme Court laid down no fetter on the Tribunal's powers. That case, indeed, was a case where the new plea raised by the department before the Tribunal could not be considered without a further investigation into facts. Nevertheless, the Tribunal entertained the plea, and remitted the case to the ITO for the ascertainment of the relevant facts. The Supreme Court, in their decision upheld not only the Department's new plea, but also the Tribunal's order of remand based on the new plea." In the light of the above discussion, I agree with the view taken by the ld. J.M. to hold that the plea raised by the ld. D.R. is to be accepted and the matter is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in absence of any fresh plea by any of the parties we donot intend to agree with the request of revenue to set aside this issue to the fileof ld. AO. 91. In view of above ground no. 12 of the appeal of the assessee with respect to claim of deduction u/s 80IC and 80IB of the Act amounting to ₹ 1,36,68,21,506/- is allowed. 92. Ground No.13 of the appeal is against not adjudicating the claim of deduction u/s 35(2AB) of the Act on the cost of the assets provided to the employees working in approved R&D facilities and engaged in research and development activities. 93. The brief facts of this ground is that the appellant has incurred an capital expenditure amounting to ₹ 28532155/- on the assets which are provided to the employees who are working and executing R&D work of the company. According to section 35(2AB) weighted deduction on such assets @150% of expenditure is allowable. The assesse has claimed 100% deduction on this amount u/s 35(2) (ia) of the Act. The claim of the assesse was made in Note No.5(b) of the revised return filed by the assesse. Ld. AO did not consider this claim and ld. DRP has also not issued any direction. Before us ld. AR submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are stated in the notes to the computation of total income and no new material is required to be placed on record. The Ld. DR relied on the orders of lower authorities and submitted that the claim needs verification and therefore it may be sent to ld. AO for verification. 96. We have carefully perused the rival contention. Honourable Mumbai high court in case of [2014 ] 49 taxmann.com 320 (Bombay) Commissioner of Income-tax v. Geoffrey Manners & Co. Ltd has dealt with identical issue as under :- 3. It is submitted by Mr.Suresh Kumar, learned counsel appearing for the Revenue, that the Tribunal committed grave and serious error of law in allowing deduction for the provision made on account of liability towards contribution to DrugPrice Equalization Account (DPEA). This is ignoring the fact that the liability is mere provision which was contingent in nature and it has not been crystallized during the previous year because the Assessee approached the Delhi High Court challenging the stipulation in the DrugPriceControlOrder. There was interim stay in favour of the Assessee. Eventually that Writ Petition was allowed. The order of the Delhi High Court was challenged in the Honourabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s order is in consonance with the facts and circumstances of the case, so also, the statutory liability having been created in the year in question and which has no bearing on the pending proceedings initiated by the Assessee or the dispute raised therein that we find that this question cannot be termed as substantial question of law. 97. Therefore respectfully following the decision of Honourable Mumbai high court we are of the view that claim of the assessee of ₹ 22306073/- on account of amount payable under Drug price Control Equalization is prima facie allowable. Further, we also agree with the argument of ld. AR that when the claim is made by the assesse by way of note then the ld. AO as well as DRP should have considered the claim of the assesse on merits. Not considering the issue and not adjudicating thereon is an injustice to the claim to which the assesse is eligible. In view of this, we direct the Ld. AO to verify the claim and, if found in accordance with the decision of Honourable Bombay high court it may be allowed. Ground No 14 of appeal is allowed. 98. Ground no.15 of the appeal is against not adjudicating on the adjustment of exchange fluctuation on ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed the provision of ₹ 9853213 by crediting it to the profit and loss account. Ld. AO did not reduce the amount of book profit by this sum and ld. DRP directed the AO to verify the provisions made as well as the write back of that provision. In final assessment order, AO held that there is no correlation between the amounts of provision created in previous year with the amount of reversal in the current year and therefore no reduction was granted. 102. Before us ld. AR submitted that when the amount of provision was made in the last year same was added back to the book profit and same provision was partly reversed during the year, AO refused to grant the deduction. 103. Ld. DR relied on the orders of lower authorities. 104. We have carefully considered the rival contentions. We fully agree with the submission of ld. AR that when the provision was made in the last year which was added back to the book profit of that assesse for that year and when the same provision is reversed in the current year the amount of reversal which is credited to the book profit for this year cannot be taxed once again as it results into double taxation. In the result, we direct the AO to reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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